Bend it like Apple

Posted on September 29, 2014 by rtushnet

Via firstmemes, consider the extent to which (1) a reference to a famous mark can be indirect and still trigger dilution law; (2) the tweets from competitors are explicitly protected by federal dilution law’s exemption for comparative advertising, but the tweets from noncompetitors might not be; (3) the tweets from competitors might be dilutive under state law, but the tweets from noncompetitors might not be (Deere v. MTD and Hormel v. Jim Henson Productions) (and remember, there’s no preemption because none of these folks have registered Apple or iPhone).

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litigation grab bag includes another nail in IIC coffin

Posted on September 26, 2014 by rtushnet

EarthCam, Inc. v. OxBlue Corp., 2014 WL 4702200, No. 1:11–cv–02278 (N.D. Ga. Sept. 22, 2014)
Mostly a trade secret case where EarthCam alleged that every scrap of information about it was a trade secret.  The parties compete in the market for high-end web-based camera systems, though OxBlue’s primary client base is the construction industries.  One of EarthCam’s product technicians/camera installers, Hermann, departed to become an independent contractor for OxBlue.  Also, OxBlue’s chief technology officer wrote a script that collected information from EarthCam customers’ webpages.  The script used over 400,000 URL combinations to estimate the current URL combination and location of an EarthCam’s customer’s webpage.  EarthCam alleged that this gathered confidential information, including customer names, camera names, images from customer cameras, the URL to the image for each camera, and the date and time stamped on the last image taken from a camera. The script didn’t involve decrypting a password or otherwise breaking into any secure server.
OxBlue also received a username and password from an EarthCam client, FCR, which gave its login credentials to OxBlue to see if OxBlue could solve certain issues it had encountered with EarthCam’s cameras. FCR first provided a series of screenshots from FCR’s EarthCam, and a screenshot from one of FCR’s cameras, but that wasn’t enough, so it provided its credentials.  OxBlue offered three possible solutions, two of which didn’t involve using OxBlue’s services. FCR continued to do business with EarthCam.  After logging in, OxBlue took screenshots from FCR’s customer webpage; there was no evidence that these shots were used to develop product or market anything.
EarthCam’s EULA didn’t ban customers from sharing their passwords with a third party, and there was no evidence OxBlue knew of any EULA provisions when they logged in. EarthCam also didn’t require customers to make their pages private.  And it had a live demo on its website showing how cameras appear on a customer account.
EarthCam also alleged that Hermann provided OxBlue with detailed information about EarthCam’s cameras, customers, suppliers, and pricing information.
Separately, OxBlue created a construction specification “to assist individuals and organizations in the construction industry to prepare for use of OxBlue’s equipment on construction projects.”  Such specifications provide directions on the methods and materials to be used on a construction project, and OxBlue’s was “modeled” on the Construction Specification Institute’s MasterFormat, 2004 Edition. This is a standardized system of indexing and organizing construction specifications.  
OxBlue applied to register its specification in March 2012, and alleged that EarthCam infringed by copying the numerical code sequence (or title) for the OxBlue specification–013234.01–and by copying portions of the OxBlue specification.  For example, OxBlue’s specification states: “The indoor/outdoor camera system shall consist of a tamper and impact resistant, discreet, fixed [wall] [and][or] [pole] mount enclosure with integrated fixed camera, lens and controller,” while EarthCam’s states “The indoor/outdoor camera system shall consist of a tamper and impact resistant enclosure with integrated camera and heavy-duty robotic pedestal to be mounted as a fixed pole, wall, parapet or nonpenetrating roof mount.”  (The court doesn’t appear to resolve this part of the case on this motion, but given what it says about the other copyright infringement claim at issue I wouldn’t be optimistic.)
Wait, there’s more.  An EarthCam subsidiary bought search engine keywords including “earthcam,” “earth cam,” “webcam” and “oxblue.” Searching for “oxblue” would produce a link to the EarthCam subsidiary’s website in the “Sponsored Links” section, though it did not use the term “OxBlue” on its website, or in the metadata for its website, unless there was a news article that mentioned the subsidiary and OxBlue. Some years previously, OxBlue had bought “earthcam” as a Google keyword for its own ads.  OxBlue nonetheless argued that EarthCam’s subsidiary’s purchase infringed OxBlue trademark.
Also false advertising: OxBlue hired two people to call EarthCam pretending to be customers looking for a camera solution. They secretly recorded their conversations with an EarthCam sales representative. The rep told them that EarthCam’s competitors used experimental server technology, exposed their customers to copyright infringement lawsuits, and that EarthCam has more employees in its customer service department than its competitors have in their entire company.  Also, OxBlue sued over a comparative EarthCam chart, which stated that OxBlue’s cameras didn’t offer, on all camera systems, detailed archived weather data, in-house 24/7 monitoring of cameras and in-house technical support, and professionally designed and integrated surge protection. This was sent to one customer, but there was no evidence about further dissemination of the chart or of statements made in the chart.
OK: EarthCam’s trade secret claims failed because EarthCam failed to show that the matters at issue were trade secrets (for example, customers weren’t required to keep their websites secret), or that OxBlue misappropriated them.  Even the script that scraped the EarthCam site didn’t collect information that derived economic value from being a secret, since the information collected wasn’t a secret nor was it subject to reasonable efforts to protect it.  The court also emphasized that, under the relevant New Jersey law, trade secrets “cannot merely be the facility, skill or experience learned or developed during an employee’s tenure with an employer,” so Hermann’s switch didn’t reveal confidential information.
CFAA claims: The Eleventh Circuit hasn’t addressed whether using someone else’s login credentials can violate the CFAA, but other cases are instructive.  Secureinfo Corp. v. Telos Corp., 387 F. Supp. 2d 593 (E.D. Va. 2005), held that permission from an authorized licensee defeated a CFAA claim even if the defendants were provided with access in violation of a licensing agreement.  State Analysis Inc. v. American Fin. Serv. Assoc., 621 F. Supp. 2d 309 (E.D.Va. 2009), by contrast, allowed a similar claim to proceed where the defendant, who had previous ties to the plaintiff, “was presumably familiar with the terms of [plaintiff’s] agreement and with the scope of authority granted to licensees.”
The situation here differed from State Analysis because the relevant EULA didn’t bar sharing passwords with third parties. Also, there was no evidence OxBlue knew about EarthCam’s licensing terms. “State Analysis applies where the defendant uses subterfuge to gain access to a plaintiff’s website, computers, and servers, or otherwise engages in fraudulent conduct.” There was no evidence of subterfuge or fraud here.  Instead, OxBlue “received an unsolicited request from an EarthCam client that was unsatisfied with EarthCam’s services to provide a business solution, and the OxBlue Defendants accessed FCR’s account with FCR’s permission.”  The CFAA could not apply.
EarthCam alleged that OxBlue infringed its copyright in its software by capturing screenshots of FCR’s customer account.  The court, which seems to have been pretty annoyed by this litigation deathmatch, cited Sony Computer Entertainment America, Inc. v. Bleem, LLC, 214 F.3d 1022 (9th Cir. 2000), a fair use case, for the proposition that a screenshot is “merely an inanimate sliver of the [program] … of little substance to the overall copyrighted work.” Here, the use was de minimis, and EarthCam failed in its burden to show copying significant enough to constitute infringement.
As for OxBlue’s copyright infringement claim against EarthCam, the infringement occurred before the registration; OxBlue’s argument that it was entitled to statutory damages for infringement after the registration was obviously precluded by settled law.
OxBlue also argued that EarthCam infringed the OxBlue trademark through initial interest confusion.  And here this case perhaps justifies its existence, if not to the weary district judge then to us: the Eleventh Circuit doesn’t have any IIC cases, but other circuits have accepted an IIC theory in keyword search engine cases.  Still, the standard they’ve adopted has made liability essentially impossible even if available in theory.  Both the Ninth and Tenth Circuits have held that the labeling and appearance of the ads and the surrounding context of the screen displaying the results page are the most critical considerations.  OxBlue didn’t show any evidence about this, or about any other confusion factor.  Nor was there any record evidence of how often consumers were “lured” to EarthCam’s site when they searched for OxBlue, and under 1-800-Contacts, a low conversion rate shows that confusion is unlikely.  IIC claim dismissed.
False advertising: there was no evidence that EarthCam’s alleged misrepresentations had a material impact on a purchase decision, so EarthCam was entitled to summary judgment.  (Here the much-burdened court is a bit sloppy; actual deception isn’t required if a statement is false or likely to mislead.)  The sales rep’s allegedly false representations were isolated and not sufficiently disseminated to the relevant buying public.  EarthCam’s Vice President testified that he didn’t know how many times reps told potential customers these things.  He agreed with a leading question from counsel that asked “it could be one time, it could be hundreds of time, is that fair?” but that just meant he didn’t know.  The rest was just speculation. Likewise, the comparative chart was only shown to have been sent to one prospective customer. In a particularly small market, one customer might be enough, but OxBlue didn’t show the size of the market for high-end, megapixel construction cameras and webcams.  In the absence of such evidence, distribution to one customer wasn’t commercial advertising or promotion.

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serial infringement may justify liability under Tiffany v. eBay

Posted on September 26, 2014 by rtushnet
Mori Lee, LLC v. Sears Holdings Corp., 2014 WL 4680739, No. 13cv3656 (S.D.N.Y. Sept. 8, 2014)
Mori Lee, a dressmaker, sued Sears for trademark infringement and unfair competition.  In 2010, Sears opened an online marketplace at Sears.com where third-party merchants could sell directly to consumers.  Defendants UiMobile and Better Deals sold allegedly counterfeit goods on the marketplace. They allegedly used photographs of Mori Lee dresses, falsely associated Mori Lee’s name and marks with their dresses, and sold inferior imitations of Mori Lee attire.
On May 3, 2013, Sears got two emails charging that several of UiMobile’s counterfeit dresses infringed Mori Lee’s marks.  “Sears investigated those complaints promptly and banned the UiMobile listings identified in the emails, as well as all listings advertised by UiMobile that mentioned a Mori Lee product or dresses made by Siris.”  On May 31, Sears learned of this lawsuit, which listed UiMobile Marketplace advertisements as well as a Better Deals advertisement, though the dress in that ad was not identified as a Mori Lee.
Sears took no additional action against UiMobile because its ban on all UiMobile bridal dress-related listings continued in place. Sears investigated the allegations about Better Deals but didn’t find any Better Deals listings using the Mori Lee name; Better Deals primarily advertised electronic goods. On June 18, 2013, Sears discovered a Better Deals ad using a Mori Lee photograph, and Sears banned that ad, as well as any other Better Deals advertisements with “Mori Lee” or “Siris” in their product listing. Mori Lee identified an additional infringing Better Deals ad, which Sears took down promptly.
Contributory infringement required Mori Lee to show either intentional inducement to infringe or continuing supply of services “to one whom it knows or has reason to know is engaging in trademark infringement.” More than general knowledge or reason to know is required.  Under Tiffany v. eBay, “[s]ome contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.”  When a service provider reacts promptly to notice of infringing activity by a user, there’s no contributory liability.
Here, Sears got notice of UiMobile’s infringing activity in two emails.  It investigated, removed the ads promptly, and banned UiMobile from posting new ads for bridal dresses or using “Mori Lee.” It also promptly reacted to notice of Better Deals’ infringing ads.  Mori Lee argued that Sears’ policing was less sophisticated than eBay’s.  But Tiffanydidn’t impose an affirmative duty to investigate, and Sears didn’t turn a blind eye to infringement. 
“If that was all, then no contributory liability could be found.”  (Ruh-roh.)  Sears also “had specific information that UiMobile was a serial infringer of bridal dress’ copyrights before UiMobile infringed Mori Lee’s rights.” In March, a different company sent Sears a takedown notice identifying 32 infringing UiMobile advertisements, found under “wedding gowns” and “prom gowns.”  Sears then purported to ban the offending UiMobile ads and informed that company’s counsel that “[i]f you search the web site for ‘bridal gowns,’ you will see there are currently no bridal gowns being sold online by UiMobile.”  Then, that same month, another company sent a takedown notice identifying infringing UiMobile ads.  Whatever the scope of Sears’ ban, it was ineffective, because by May, UiMobile had switched to listing Mori Lee dresses. 
These events raised a genuine issue of fact as to whether “the notice” (unfortunately, it’s not clear whether this is a typo and the court meant to say “the notices” [from the other dressmakers]) “sufficiently informed Sears that UiMobile [was] engaged in trademark infringement.”  In addition, whether Sears was an innocent infringer also turned on these facts. “If Sears is an innocent infringer, Mori Lee is only entitled to injunctive relief—which would likely be moot since Sears has taken down the infringing advertisements.”
False advertising: “In various post-sale emails, Sears represented to purchasers that the dresses bought from the Marketplace were from, for example, the ‘OEM New MoriLee Design Hot Sell Evening Dresses.’”  Sears argued that these emails weren’t commercial advertising because they weren’t made for the purpose of influencing consumers to buy a particular product and they weren’t disseminated to the public, but only to buyers for post-sale shipping confirmation.  The court agreed with Gillette Co. v. Norelco Consumer Products Co., 946, F.Supp. 115 (D. Mass. 1996), which held that a packaging insert accompanying a product and available only after the purchase was made was not “commercial advertising or promotion” because it was inside the package and did not affect the purchase decision. So too here.  Summary judgment for Sears.
Mori Lee’s unfair competition claims were dismissed because they required likely confusion aobut origin or sponsorship.  First, Mori Lee failed to establish rights in  “OEM,” “ML,” and “Ml,” the former of which just means original equipment manufacturer and the latter two of which could refer to other haute couture manufacturers, such as Monique Lhuillier.  Sears did use Mori Lee’s “marks” in post-sale emails, e.g. a shipping confirmation of “OEM New MoriLee Design Hot Sell Evening Dresses BL357” and “OEM New Intricately Beaded Embroidery on Venice Lace Ivory Wedding Dress ML1911.” But this “merely aped” UiMobile’s use of the words in ads by reproducing the product name in the confirmation email.  (Why isn’t this just contributory liability too?)  Sears didn’t make any “independent representation that the product is an authentic Mori Lee dress.” Thus, these acts didn’t cause likely confusion.

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Advertising dysfunction: claim against male sexual enhancement pill proceeds

Posted on September 25, 2014 by rtushnet
Dorsey v. Rockhard Laboratories, LLC, 2014 WL 4678969, No. CV 13–07557 (C.D. Cal. Sept. 19, 2014)
 
Dorsey sued over Rockhard Weekend (RHW), “a male sexual enhancement product,” primarily promoted by labeling on the packaging. The chemical formulation and packaging have changed several times over the years, but Dorsey alleged that the name, purported use, and overall message remained the same.  There are multiple packages (one-capsule retailing at around $5, 3-capsule around $15, and 8-capsule around $30).  RHW called itself a “sexual performance enhancer for men” or “the 72–hour sexual performance pill for men.” The packaging also promised “Doctor Tested,” “Doctor Approved,” “Fast & Effective,” and “Rockhard Results.”  Further, Rockhard advertised RHW as “All Natural,” even though some of the ingredients of RHW were allegedly “synthetic, chemically reduced and/or have carcinogenic properties.”  Dorsey alleged that he relied on these claims to his detriment, and that they were false because none of the ingredients in any version of RHW enhanced male sexual performance.  Also, he alleged that the labeling was unlawful because it is a “new drug” unapproved by the FDA in making claims to be an aphrodisiac.  The usual California claims resulted.
 

Rockhard Weekend package with challenged claims
Rockhard argued that Dorsey hadn’t pled reliance because he didn’t specify which iteration of RHW he bought, and the packaging changed over time.  However, “it is clear from looking at the packaging of various iterations of the product that the same messages were conveyed to all potential purchasers of RHW.”  Given that RHW was a single-use/limited-use product, it was unsurprising that Dorsey no longer had the packaging; given the similarities among the iterations, it was also unsurprising that he couldn’t differentiate among them.  The allegations sufficed to show his reliance.
 
Although Dorsey could have been more specific about how or why RHW didn’t perform as advertised, he still alleged that “[n]one of the ingredients in any iteration of RHW … will enhance male sexual performance.”  Even without “specifics regarding what happened when Plaintiff took RHW,” this demonstrated an injury in fact: the product allegedly contained no ingredient that had the effect that the packaging represented the product to have.  And he alleged that he wouldn’t have bought RHW but for the misrepresentations, a highly plausible allegation given that there’s really only one reason to buy a product that purports to enhance male sexual performance.
 
As for iterations he didn’t purchase, his ability to represent purchasers thereof would be better decided at the class certification stage. At this stage, Dorsey’s claims were sufficiently similar to those of putative class members who purchased a different iteration of the RHW product to potentially allow him to represent them in this class action.  The various versions of the packaging attached to the complaint showed very similar phrasing on every version and a consistent marketing scheme persisting through formula and packaging changes.  And the name never changed.
 
Then the court found that the complaint satsified Rule 9(b), alleging the specific language of the false statements (and attaching images of the packaging), when and where he bought RHW, and that the ingredients didn’t work; he alleged “what consumers would understand the statements to mean and how that understanding is misleading”  He made similar allegations about “All Natural” and “Doctor Tested, Doctor Approved”: he alleged that “a reasonable consumer would expect an ‘all-natural’ product to contain ingredients found in nature, derived from natural sources, absent of manmade processes, and which are wholesome and safe,” and that a reasonable consumer was likely to believe that RHW was “used, endorsed, or recommended by doctors practicing medicine in clinical settings.”
 
Rockhard argued that many of the representations on its packaging were mere puffery (no pun intended?), such as “Sexual Performance Enhancer for Men,” “Fast & Effective,” and “Rockhard Results.”  Taken as a whole and in context, these weren’t puffery, but instead specific claims about the benefits of taking RHW. “These statements create the impression that, by taking the product, a consumer will have enhanced sexual performance, that the effect will happen quickly, and that the consumer can expect to have a ‘Rockhard’ erection.”
 
Rockhard also argued that reasonable consumers wouldn’t be deceived by “All Natural.” Though some cases so conclude, each statement must be evaluated in context and consumers don’t need to search the ingredient list for disconfirming evidence.  Dorsey alleged a plausible interpretation of what the phrase would mean to a reasonable consumer, and identified the ingredients that didn’t fit this interpretation. Plus, nothing but the small type nutrition facts panel on the back would lead a consumer to question “All Natural,” and there was no indication that Dorsey would have had reason to read the nutrition facts. Under Williams, “[s]imply listing the actual ingredients of the product does not absolve Defendants of all potential liability for making false statements that contradict the ingredient list.”
 
Rockhard also argued that Dorsey’s claim against “Doctor Tested, Doctor Approved” was an improper lack of substantiation claim, based on Dorsey’s allegation that “Defendants have not and cannot cite any research studies or unsolicited endorsements of RHW by medical doctors, nor is RHW used in clinical settings for the treatment of male impotence or any other condition.”  The complaint sufficiently alleged false advertising, not just lack of substantiation.  Dorsey alleged what “Doctor Tested, Doctor Approved” would mean to a reasonable consumer, and then alleged that RHW wasn’t used in any clinical setting to treat any condition, which sufficiently alleged falsity.
 
The court did dismiss claims under the “unfair” prong of the UCL; the allegations went to “unlawful” and “fraudulent” conduct.
 
The “unlawful” claim was based, in part, on allegedly unlawful labels purportedly advertising RHW as an aphrodisiac in violation of the FDCA’s new drug rules.  Rockhard alleged that RHW was a dietary supplement, not a drug, and thus not required to seek preapproval.  Under the FDCA, a drug is an “article [ ] intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals.”A dietary supplement is “a product … intended to supplement the diet [that has certain ingredients].”  RHW’s label said it was a dietary supplement.  And, although the packaging as a whole might convey that RHW would improve male sexual performance, there was no statement that RHW was designed to cure erectile dysfunction, impotence, or any other “disease.” “Aphrodisiac” didn’t appear on any of the packaging. Thus, Dorsey didn’t plausibly allege that RHW was a “drug,” requiring prior approval of its labeling by the FDA.  Claims dismissed to the extent they were based on FDCA violations.
 
Warranty claims: Presuit notice isn’t required in California where the defendant is a manufacturer with whom the purchaser didn’t deal, as here.  Nor were the claims puffery—see above.  So express and implied warranty claims survived.
 
Magnuson-Moss Warranty Act (MMWA) claims: Under the MMWA, a warranty “relates to the nature of the material or workmanship and affirms or promises that such material or workmanship is defect free or will meet a specified level of performance over a specified period of time.” But a product description isn’t a warranty under the MMWA.  For “Sexual Performance Enhancer for Men” and “Fast & Effective,” Dorsey stated a plausible claim under the MMWA. These related to the nature of the product and weren’t mere product descriptions.  But “Doctor Tested, Doctor Approved” was; the statement contributed to the message that RHW contained an active, effective ingredient but didn’t relate directly to the “material or workmanship” of the RHW pill.
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Paid spokesperson engaged in "advertising or promotion" for Lanham Act purposes

Posted on September 25, 2014 by rtushnet
Underground Solutions, Inc. v. Palermo, 2014 WL 4703925, No. 13 C 8407  (N.D. Ill. Sept. 22, 2014)
 
UGSI sued Palermo for trade libel, interference with prospective economic advantage, interference with contract, false advertising under the Lanham Act, and violation of the Illinois Uniform Deceptive Trade Practices Act (IUDTPA).  UGSI sells fusible polyvinyl chloride (PVC) pipe, which is used “in water and wastewater pipeline applications, as well as for conduit for electrical and fiber optic applications.” Indeed, it is “the sole supplier of thermally buttfused PVC pipe in the United States.”  Palermo was allegedly hired as a paid spokesperson for UGSI’s competitor, Performance Pipe, which makes high-density polyethylene (HDPE) pipe. (More on previous litigation between the parties.)
 
USGI alleged that, since October 2010, Palermo presented false and misleading information about USGI’s products (albeit without using USGI’s name) at multiple industry conferences and on his website.  He allegedly didn’t disclose his affiliation with Performance, which misled audiences into believing that his conclusions were “based on objective scientific evidence and valid third party investigation.”  UGSI also alleged that Palermo “contacted UGSI’s customers following pipeline incidents involving Fusible PVCTM pipe and told the customers that the Fusible PVCTM pipe and/or thermally butt fused PVC joints caused the incident, despite Palermo’s failure to conduct a thorough and complete investigation of the cause of such pipeline incidents.”
 
USGI alleged harm to existing and prospective business relations, including that its pipes were excluded from consideration by at least two consulting engineering firms that design systems for clients. The complaint quoted e-mails from two consulting engineers who expressed hesitation about using UGSI’s pipes after reading Palermo’s reports. As a result of Palermo’s misrepresentations, engineers and municipalities that “had previously specified Fusible PVCTM pipe as the only acceptable material for their projects changed the specifications to include an alternate product, such as HDPE.”
 
Palermo sought to have the complaint dismissed on the ground that the statute of limitations expired before UGSI sued on November 21, 2013.  A one-year limitations period applied to the trade libel claim, and three years to the Lanham Act and IUDTPA claims.  The court found that California’s two-year limitations period applied to the tortious interference claims.
 
The complaint didn’t plead facts sufficient to conclude that the claims were time-barred. The court assumed for these purposes that the single publication rule applied to Lanham Act claims as well as libel claims, but that only applies to copies of “any one presentation to an audience.” UGSI alleged that Palermo made multiple presentations and published “variations” of his slide show on his website.  Each new presentation could trigger liability, so USGI’s claims weren’t time barred as to Palermo’s live presentations within the limitations periods.  The limitations period begins to run when a website is first published, but the complaint alleged that different versions of the slideshow were posted online, including one during or after 2012, so the single publication rule didn’t bar the claim on the pleadings.  Nor could the court determine whether the discovery rule tolled the statute of limitations on the pleadings.  UGSI also argued that its trade libel action accrued only after it suffered special damages (making its cause of action complete); this too prevented dismissal.
 
As for the Lanham Act and IUDTPA claims, the majority of the accused presentations apparently took place after the November 21, 2010 accrual date.  Courts have applied “continuing wrong” principles to Lanham Act claims, allowing plaintiffs to pursue relief for time-barred acts linked to acts within the limitations period. This too might apply.
 
Palermo then argued that UGSI insufficiently alleged special damages for its trade libel claim.  To prevail, UGSI would have to identify specific lost sales, but on a motion to dismiss it was enough to identify a concrete loss.  Though the plaintiff must allege “some actual pecuniary loss,” “an estimation of final total dollar amounts lost is unnecessary.” UGSI’s allegations that it was “required to expend extensive time and effort to address customers’ and prospective customers’ questions about Fusible PVCTM pipe and assuage their concerns” and that it received e-mails from consulting engineers expressing concern about Palermo’s reports sufficiently alleged special damages.
 
Palermo then argued that there could be no trade libel because the allegedly defamatory statements were about fused PVC in general, not UGSI.  UGSI rejoined that it was the only seller of butt-fused PVC pipe in North America and thus identified by implication.  California cases suggested that the “of and concerning” requirement allowed a plaintiff to be identified by clear implication, so that theory survived a motion to dismiss.
 
Intentional interference with prospective economic advantage: Palermo argued that Noerr–Pennington immunized him because his statements were directed at municipal customers and non-profit associations that set pipe standards for municipalities.  Outside the antitrust context, Noerr-Pennington hasn’t been applied to fraud and misrepresentation claims.  Also, even in the absence of intentional falsity, it didn’t seem that Palermo directly petitioned any government official.  Statements in communications between private parties don’t have much to do with the right to petition the government.
 
As for harm, plaintiffs should allege a lost contract, failed negotiation, or ongoing business relationship to state a claim for intentional interference under California law.  UGSI’s allegations that its products “were being considered by several municipalities for upcoming projects” and that potential customers “were dissuaded” based on Palermo’s statements were insufficient.  Though engineers expressed concerns and UGSI’s pipes were allegedly excluded from consideration by at least two firms, that still didn’t identify any pending contract or negotiations that were ended by the alleged misrepresentations. Thus, the claim was dismissed with leave to amend.  Similarly for the tortious interference with contract claim.
 
Lanham Act false advertising: Lexmark undercut Palermo’s argument about lack of competition.  He argued, however, that he hadn’t engaged in “commercial advertising or promotion.” UGSI contended that Palermo engaged in promotion by giving speeches and posting reports as a paid spokesperson for Performance.  True, courts have refused to allow Lanham Act claims based on face-to-face meetings with a small number of people. But the distinction rests on whether a communication is a “generalized solicitation rather than an individualized communication.” Fortunately, the Seventh Circuit has “clarified” its previous exclusion of communications at trade shows from the Lanham Act, Sanderson v. Culligan International Co., 415 F.3d 620 (7th Cir. 2005), and has held that advertising or promotion need not be published or broadcast to the general public, Neuros Co. v. KTurbo, Inc., 698 F.3d 514 (7th Cir. 2012), where promotion in the relevant industry takes other forms.  Palermo’s presentations to a large group of industry members for the purpose of directing customers to select Performance Pipe’s products were “advertising or promotion,” as were material published online.
 
Illinois deceptive trade practices: Palermo argued that there wasn’t a sufficient nexus to Illinois. IUDTPA claims only apply “if the circumstances that relate to the disputed transaction occur primarily and substantially in Illinois.”  Factors that determine this include the plaintiff’s residence, where the deception occurred, where the damage to the plaintiff occurred, and whether the plaintiff communicated with the defendant or its agents in Illinois.  UGSI didn’t allege that Palermo’s misrepresentations “occurred primarily and substantially in Illinois.” All it alleged was that a Performance Pipe sales manager presented Palermo’s materials at an Illinois conference and that Palermo contacted an Illinois customer after a pipeline incident, and that two emails from Illinois engineers expressed concerns about his reports.  Claim dismissed with leave to amend if UGSI could show a better nexus to Illinois.
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Mark Lemley is our king

Posted on September 24, 2014 by rtushnet

But then, you knew that anyway.  Here, have a list of the most cited IP articles over the past ten years, compiled with diligent effort by Ted Sichelman. 

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Oh No They Didn’t infringe: Livejournal gets DMCA safe harbor

Posted on September 24, 2014 by rtushnet
Eric Goldman on Mavrix Photographs LLC v. LiveJournal, Inc., No. 8:13-cv-00517-CJC-JPR (C.D. Cal. Sept. 19, 2014): plaintiff refuses to send DMCA notices to host website, sues instead.  As Eric says, this is a great case for a fee-shift, since (1) it was unreasonable not to send DMCA notices here, and (2) Mavrix’s arguments are rehashes of already-rejected legal theories.
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Ascertain this: All Natural liability class certified

Posted on September 24, 2014 by rtushnet
Lilly v. Jamba Juice Company, No. 13-cv-02998, 2014 WL 4652283 (N.D. Cal. Sept. 18, 2014)
Earlier Jamba Juice proceeding.  Plaintiffs moved to certify a California class of purchasers of certain frozen Jamba Juice Smoothie Kit products using “All Natural” prominently on the front of the package. These kits contain ascorbic acid, xanthan gum, steviol glycosides, modified corn starch, and gelatin, which are allegedly not “natural.”  This opinion is notable both for certifying an “all natural” class action and for dealing extensively with ascertainability, the latest defendant-side argument.
Jamba Juice argued that the class wasn’t ascertainable because nobody would have receipts.  The Ninth Circuit and the Supreme Court haven’t specifically required “ascertainability” or “definiteness” over and above the enumerated Rule 23 factors, though those concepts can be relevant to certification, and ascertainability is an inherent requirement of at least Rule 23(b)(3) class actions. “A class definition is sufficient if the description of the class is ‘definite enough so that it is administratively feasible for the court to ascertain whether an individual is a member.’” This must be a manageable process that doesn’t require much individual factual inquiry, but not every member need be identified at the outset.
Courts have looked at three types of ascertainability concerns. First, an identifiable class exists if its members can be determined by reference to objective criteria, rather than subjective standards like state of mind or merits determinations like whether they personally were discriminated against.  The class definition here was based on objective criteria.  Second, some courts deny certification if the class includes any members who will not be able to recover. The court found this an inappropriate standard.  Third, some courts require plaintiffs to show they can locate absent class members.  The Third Circuit has adopted this view.  Carrera v. Bayer Corp., 727 F.3d 300, 308 (3d Cir. 2013).  Since no one has records demonstrating which specific individuals bought the challenged smoothie kits, Jamba Juice argued that the class wasn’t ascertainable.
It’s not the law in the Ninth Circuit that if consumers don’t have receipts and manufacturers don’t have records of end consumers, there can’t be certification.  Carrera’s approach would substantially impair consumers’ ability to obtain redress for their injuries.  “Few people retain receipts for low-priced goods.”  (Great footnote: See Mitch Hedberg, Minibar, on Strategic Grill Locations (Comedy Central Records, 2003) (“I bought a doughnut, and they gave me a receipt for the doughnut. I don’t need a receipt for the doughnut, man. … I just cannot imagine a scenario where I would have to prove that I got a doughnut. Some skeptical friend? ‘Don’t even act like I didn’t get that doughnut. I got the documentation right here.’”)  But “it is precisely in circumstances like these, where the injury to any individual consumer is small, but the cumulative injury to consumers as a group is substantial, that the class action mechanism provides one of its most important social benefits.”  Without the class action, there’d be no redress for the injury.  Though difficulties identifying class members can frustrate compensation, class actions also deter misconduct.
But, the court continued, it would look more deeply at the reasoning behind Carrera.  First, there seems to be a concern that if you can’t find class members and give them notice, it’s unfair to bind them to any final judgment.  “This concern is legitimate, but our law has long recognized that direct notice to every class member is not always possible.”  All that’s required is the best notice practicable under the circumstances.  Here, plaintiffs submitted a detailed plan for notice prepared by an expert, including direct notice where contact information is on file with the retailer (for example, when they bought using store membership cards) as well as a targeted internet and print campaign.  The court saw no reason this would conflict with due process.
Second, Carrera expressed concern with the defendant’s due process right to challenge individual class members.  But plaintiffs weren’t trying to establish the “fact or extent” of Jamba Juice’s liability through the notice and claim administration process.  “[T]he amount of liability will be proven at trial.”  There’d be a problem if a non-judicial administrator determined class membership based only on self-identification, with no opportunity to challenge that determination, and then enhanced the defendant’s bill each time a form was submitted.  But Jamba Juice’s liability “will be proven by admissible evidence submitted at summary judgment or at trial, or it will not be proven at all.”  Plaintiffs had the burden of producing evidence of the total damages to which the class would be entitled; responses to the class notice couldn’t lighten that burden unless they were admissible evidence.  But neither could Jamba Juice avoid a class action by claiming that those responses would affect its liability. 
The Third Circuit reasoned that “[i]f fraudulent or inaccurate claims materially reduce true class members’ relief,” those true class members might be able to succeed in challenging the adequacy of the named plaintiff’s representation.  The court commented that this concern was “at best, premature at this stage of the litigation.” The court could revisit the issue if it looked to be a problem.  But that’s no reason to refuse certification entirely.  “If the problem is that some absent class members may get less relief than they are entitled to, it would be a strange solution to deprive absent class members of any relief at all.”
Typicality, adequacy, numerosity, and superiority were all present.  Jamba Juice argued that the named plaintiffs were unrepresentative and atypical because they sometimes consumed other products that contain the ingredients they complain of here.  But when they did so, they knew what they were eating, because the ingredients were disclosed.  Their consumption “does not harm their case any more than a person who sometimes eats ice cream would be deprived of her legal ability to challenge a product falsely labeled to contain no sugar.”
Commonality was present because of the common questions: whether Jamba Juice’s “All Natural” representations were false and misleading, whether the challenged ingredients could legally be included in a product labeled “All Natural,” and whether the representations constitute “unfair” or “unlawful” practices under the UCL, constitute a breach of warranty, or are likely to deceive reasonable consumers in violation of the FAL, CLRA, and UCL.
Predominance: For CLRA claims, “an inference of common reliance arises if representations are material, and materiality is judged by an objective standard rather than any understandings specific to the individual consumer.”  So too with the FAL and UCL fraudulent clams, as well as the unfair/unlawful UCL claims.
Jamba Juice argued that there was no common definition of “All Natural,” since there was no regulation defining the term and different consumers understand it to mean different things. Thus, there could be no objective materiality, and reliance would have to be shown individually, defeating predominance.  But cases refusing to certify misrepresentation class actions “generally involve representations that differ for each proposed class member or unique individual decisions.” In this case, only one representation was at issue – “All Natural” on five products with substantially the same challenged ingredients.
Jamba Juice also argued that plaintiffs failed to provide a damages model that could measure damages on a classwide basis.  Plaintiffs offered three methods: (1) restitution of the full purchase price, (2) restitution from Jamba Juice’s net profits, and (3) restitution from the portion of revenue attributed to the challenged ingredient.  But plaintiffs didn’t submit any “evidence, expert reports, or even detailed explanation, about how those damages models can be fairly determined or at least estimated.”  Jamba Juice also argued that any damages model had to address differences in damages among individual class members, as a matter of predominance.  But Comcast didn’t impose that high of a burden.  Even after Comcast, “[i]n this circuit … damage calculations alone cannot defeat certification.”
Still, after Comcast, Jamba Juice’s argument that plaintiffs failed to provide evidence that damages could be feasibly and efficiently calculated had “considerable force.”  Where, as here, a defendant could make at least a prima facie showing that damage calculations are likely to be complex, “expert reports or at least some evidentiary foundation may have to be laid to establish the feasibility and fairness of damage assessments.”  Though plaintiffs were seeking full refunds, restitution can require the court to take into account the benefit consumers received even from a mislabeled product.  Likewise, disgorgement might require plaintiffs to demonstrate what portion of Jamba Juice’s revenue stemmed from its purportedly unlawful conduct.  Without evidence in the record showing the feasibility and efficiency of the damages models, a damages class couldn’t be certified.  However, liability could still be established on a class-wide basis; some of the difficulties in determining individual damages might be removed after a liability determination.  Thus, the court certified a liability-only class.

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Gratuitous promises: Uber class action continues

Posted on September 19, 2014 by rtushnet
Ehret v. Uber Technologies, Inc., No. C-14-0113 (N.D. Cal. Sept. 17, 2014) 
Ehret’s putative nationwide class action alleged that Uber customers had been charged a 20% fee above the metered fare for each ride, misrepresented as a “gratuity” automatically added “for the driver.”  Instead, a substantial portion was allegedly retained by Uber for its own benefit. Ehret alleged that this was deceptive, misrepresenting the actual fare.  Ehret, who took an Uber trip in Chicago, sued under the California UCL and CLRA, and for breach of contract.  Uber managed to kick out the breach of contract claims, but not the statutory consumer protection claims.
Rule 9(b): because Ehret alleged when and where she took a ride, and that she relied on the “gratuity” representation, she’d done enough. She didn’t have to allege the precise web pages she viewed or the precise date she viewed the representation, since she alleged the date she relied on it.  “To so require would be unrealistic and needlessly impede access to an important remedial statute.” Though she didn’t allege how much was “substantial” in terms of what Uber kept for itself, her allegations were sufficient on a motion to dismiss; they were specific enough to give Uber notice of the alleged misconduct.
Uber argued that she failed to state a claim because (1) the UCL does not apply to non-California residents alleging non-California conduct; and (2) she failed to allege standing under either statute.
However, the court found that Ehret’s claims didn’t require extraterritorial application of the UCL or CLRA.  It’s true that those statutes don’t apply to conduct outside California, but multiple courts—including the California Supreme Court—have found the statutes implicated where the plaintiffs’ claims were based on alleged misrepresentations disseminated from California, as was the case here. This is also consistent with Tobacco II, in which the Supreme Court instructed that the UCL’s focus is on the defendant’s conduct, not the plaintiff’s damages, “in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices.”  Ehret alleged that Uber, a Delaware corporation, had its headquarters in San Francisco, and that the deceptive practices alleged were “conceived, reviewed, approved and otherwise controlled from Defendant’s headquarters.”  Moreover, the misrepresentations were contained on Uber’s website and app, maintained in California.  The billing and payment for Uber’s services were processed in California. These allegations, if true, created a sufficient nexus between California and the misrepresentations.
Standing: Uber argued that Ehret suffered no economic harm (lost money or property) because she’d pay the “gratuity” anyway: she received a taxi ride at the stated price. How Uber distributed the “gratuity” was a matter of mere curiosity to Ehret, according to Uber.  Under Kwikset, however, it sufficed to allege that she wouldn’t have agreed to or paid Uber the full amount Uber charged her if the truth had been disclosed.  If the misrepresentation was material, then she didn’t get the benefit of her bargain.  And materiality is generally a question of fact. 
The court cited Kasky v. Nike, Inc., 27 Cal. 4th 939 (2002): “For a significant segment of the buying public, labor practices do matter in making consumer choices.”  (I know this will make many eyes roll, but there is good evidence that consumers engage in mental accounting that is not purely additive and would see a tip differently from a base charge in determining whether to take an offer.  And certainly whether Uber helps or furthers the immiseration of drivers is a hotly debated issue, which the amount of the gratuity might reasonably seem relevant to.)  Materiality under the UCL doesn’t require but-for causation; it merely requires that a reasonable person would attach importance to the fact at issue.  It didn’t matter that the “gratuity” was mandatory.  There’s a “longstanding rule that under the UCL even a mandatory charge can be deceptive if it is labeled as something it is not.” 
Nor did Ehret have to allege that she wouldn’t have engaged in the transaction at all if not for the representation.  Otherwise, many people who didn’t get the benefit of their bargains would be unable to recover.  “Allowing standing in the case at bar – where a false representation is made to raise the price of a service which the plaintiff would not have agreed to pay had the truth been told, does not frustrate the purpose of Proposition 64; rather, it furthers it.”  The court commented that “it is also plausible that had Uber not made the alleged misrepresentation, the total fee it charged would have been less than what it charged with the misrepresentation.”  So, plausibly, consumers paid more than they would have but for the misrepresentation.  (Mental accounting again: consumers will pay more if you tell them the money is going somewhere they approve of.)
Ehret also stated a claim under the UCL’s fraud and unfairness prongs.  Given that Uber allegedly advertises that there’s no need to tip the driver, reasonable consumers plausibly would expect drivers to receive the whole gratuity, making its representations misleading. As for unfairness, California balances “the ‘impact on the its alleged victim’ against ‘the reasons, justifications, and motives of the alleged wrongdoer.’” At the pleading stage, the court couldn’t conclude that the costs of the alleged misrepresentation were justified.  The “unlawful” prong of the UCL also applied: see the immediately forthcoming CLRA analysis.
If Uber represented that it remitted a 20% gratuity to drivers and didn’t, then plausibly its service was advertised as having a characteristic it didn’t have within the meaning of the CLRA’s prohibition on such conduct.  California law also bars a defendant from “[r]epresenting that a transaction confers or involves rights , remedies, or obligations which it does not have or involve, or which are prohibited by law.”  Ehret sufficiently alleged a violation of this provision as well, since Uber allegedly misrepresented the “obligation” arising from the charged fee. However, Ehret didn’t state a claim based on the statute’s prohibition of “false or misleading statements of fact concerning reasons for, existence of, or amounts of price reductions.” 
Ehret did fail to state a breach of contract claim because she wasn’t contractually bound to leave the driver any tip, and so as to customers, drivers were donee beneficiaries with no legal rights. She didn’t suffer any damages for contract purposes (aimed at placing plaintiffs in the position they’d have been in had defendants performed their contractual obligations). 
The UCL, by contrast, isn’t so limited. “Stated another way, the breach of contract claim looks at the 20% gratuity statement and asks how Plaintiffs can be put in the same situation they would be in had Defendants performed.  The UCL claim looks at the 20% gratuity statement and asks how Plaintiffs would be positioned had the misrepresentation not been made.”

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A hologram and a straight-up application of Dastar

Posted on September 19, 2014 by rtushnet
Pulse Entertainment Corp. v. David, No. CV 14-4732 (C.D. Cal. Sept. 17, 2014) 
This case concerns a lifelike animation of Michael Jackson performing a previously unreleased song that appeared during the 2014 Billboard Music Awards and a related CNN interview segment.  Pulse alleged that its team developed the animation over eight months, and that the animation was meant to coincide with and publicize its launch as a new company.  “David owns Hologram USA—Pulse’s competitor in the field of human animation.”  Pulse alleged that defendants had no involvement with the creation of the animation, and that they didn’t own or control the technology used to create it.  In May, Hologram sued Pulse for patent infringement for creating the animation.
Also in May, David gave a CNN interview that aired with the caption “MICHAEL JACKSON HOLOGRAM: HOW’D THEY DO IT?  Company behind hologram gives CNN demonstration.”  In the interview, David allegedly said that he and Hologram created and produced the animation and the underlying animation techniques and technology.  He also used “we” while describing the process employed to create the animation.  While the animation played on screen, the interviewer stated that “[t]his MJ likeness used at the Billboard Music Awards was created by Hologram USA.”  CNN took the interview segment down from its website after it was informed that neither David nor Hologram was involved in the creation of the animation. But David allegedly republished the segment on his companies’ websites and on his Twitter account.
Pulse’s §43(a)(1)(A) claim failed because of Dastar.  §43(a)(1)(A) doesn’t ban false designations of “the author of any idea, concept, or communication embodied” in goods.  Pulse didn’t allege physical reverse passing off.  The animation here, as Pulse alleged, “exists wholly separate and apart from any projection technique. . . [It] is not dependent on a method of projection, and it can be displayed in a variety of ways.  In that regard, it may be likened to a cartoon animation or a CG character in a feature film or television program.” So, the complaint alleged false designation of authorship status, which is exactly what happened in Dastar. The dismissal was with leave to amend, though the court expressed skepticism that this could successfully be done.
On to §43(a)(1)(B).  The court used the standard definition of “commercial advertising or promotion” (obligatory note that Lexmarkought to affect the “defendant in commercial competition with plaintiff” aspect), and asked whether the speech at issue was commercial speech. Relevant considerations include “(1) whether the statements are in a typical advertising format; (2) whether the statements refer to a commercial product; and (3) whether the defendant had an economic or commercial motivation for making the statements.”   Also, false advertising claims are grounded in fraud and thus must be pled with particularity.
Pulse didn’t specify David’s exact statements, but alleged that he falsely took credit for the animation.  Pulse also alleged the following allegedly misleading statements: (1) “What you saw at the Billboard, you saw a digital head connected to an actor.  We capture the body and the head in real time.  And, we have the sync marks and we can attach the two together”; (2) “What you saw at the Billboard was ‘Super Michael.’  You saw Michael beyond the controversy, beyond the problems that he faced in his real life”; (3) that the animation could be adapted for “education, military, politics—it can apply—be applied across the board”; and (4) that “there is no end to how you can apply this, all we really need to do is apply our imagination.”  In addition, Pulse alleged that the interviewer stated that “[t]his MJ likeness used at the Billboard Music Awards was created by Hologram USA.”  Further, Pulse alleged that after the segment was removed from CNN’s website, Hologram republished the segment, with the complained-of caption and interviewer’s statements, on their websites and on David’s Twitter account. 
To the extent the complaint relied on the original CNN broadcast, it failed to satisfy Rule 9(b):
Most of the obviously false and deceptive statements were made by CNN (or its interviewer) rather than by Defendants. Even though Defendants participated in the interview, Pulse fails to plead sufficient facts to show that Defendants either knew of the false caption and interviewer’s statement before the broadcast aired or otherwise participated in their creation. 
The only specific statements attributed to David weren’t materially deceptive.  They were just descriptions of the animation and the technology’s potential uses.  In a footnote, the court also noted that CNN’s initial broadcast wouldn’t qualify as “commercial advertising or promotion.” “David’s statements were made in an ordinary interview format on a national news program regarding an event that received widespread publicity. There are no facts alleged indicating that Defendants had an economic motivation or that the statements were intended to influence consumers to buy defendants’ goods or services.” 
The allegations of republication came closer to stating a claim, since reposting “arguably” adopted the false statements.  (I’d go much further—beyond arguably.  There are a number of cases, including the foundational Gordon & Breach, finding that use of someone else’s noncommercial speech in one’s own commercial speech is subject to Lanham Act false advertising claims.)
However, here Pulse didn’t specify “exactly when the segment was reposted, all of the websites to which it was reposted, for how long it was made available, or provide any other contextual facts that would allow Defendants to prepare a responsive pleading.”  Again, dismissal was with leave to amend—and here I suspect that’s possible.

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