SCIPR: Petrella v. MGM

Posted on September 12, 2014 by rtushnet
Petrella v. MGM (Can laches bar a copyright claim within the 3 year statute of limitations?)
Moderator: Scott McBride, Shareholder, McAndrews Held & Malloy Ltd.
Panelists: Paula Petrella, Petitioner and owner of rights to the screenplay (only individual plaintiff in these IP cases). Would never wish anyone the necessity of this trip, but it was surreal and wonderful. 
McBridge: MGM said that it hadn’t made money on Raging Bull, but in late 2000s it (perhaps) became profitable based on sales of DVDs etc. (details of the income stream are still subject to litigation).  MGM argued laches including the most recent 3 years before suit was filed, but SCt held that this equitable defense couldn’t bar the legal remedy of damages.
Professor Stephanos Bibas, Counsel to Petrella, University of Pennsylvania Law School Supreme Court Clinic:
Professor Tyler Ochoa, Santa Clara University School of Law: The statute does refer to the equitable doctrine of tolling.  Legislative history says “we won’t say anything about tolling, dcts do that anyway.” J. Ginsburg is right in that the legislative history doesn’t say anything about laches one way or another. J. Breyer is probably right that Congress didn’t consider laches one way or another. But the Lanham Act does specifically refer to laches; if you assume they gave roughly the same attention to both, maybe that’s meaningful.
Q: Lanham Act doesn’t have a statute of limitations and borrows/uses laches; does that matter?
Ochoa: general principle that if no SOL is specified federal courts will borrow from states, which suggests that limitations are so important that we don’t tolerate their absence. Federal SOL: Check on what otherwise might be nonuniformity/inequities from states. Here, for the first time, SCt says no laches if there’s a SOL, arguably inconsistent w/ previous cases despite J. Ginsburg’s distinctions.
Q: patent has slightly different situation—6 year statute of repose precluding recovery of damages. How will this impact Fed. Cir. in laches in patent?
Mark Perry, Counsel to MGM, Partner, Gibson Dunn LLP: Bad news for defendants.  Decision has greater potential impact for patent than for copyright. Laches has always been a bit of a sport for ©, only for the most egregious cases.  © has statutory damages, and economic nature of © tends to lessen value of cases in overall context of IP litigation—compared to the volume of $ in patent litigation.  In patent, laches has played an important role to cut off those kinds of sneaky claims that are the most problematic—very vague patents that lie there like alligators under the water.
Bibas: not an impact on TM, but in patent there’s a real question.  SCt says they haven’t had occasion to review the Fed. Cir. rule, which is not a ringing endorsement.  Patent Act has a particular phrase about “unenforceability,” a word that’s not present in the © Act.  Drafter of Act wrote a report saying it was supposed to carry forward the defense of laches. 
Ochoa: only applies to equitable relief unless there’s something very specific in the legislative history, and even then some textualists won’t like it.  In patent world, that isn’t the worst thing in the world—6 years is 2x as long as the © SOL, and the patent only lasts for 20 years.  © lasts a really long time, and so there’s a really long period where an action could come up 20, 40, 50 years after an allegedly infringing release. Has a really great impact in reviving what otherwise would be very stale claims.
Q: court brought up “separate accrual” rule. New cause of action created each time there’s a copying or dissemination of © work. So she could recover (if successful) for 2006 on. 
Ochoa: says w/o a separate accrual rule you force initiation of suit for relatively minor infringement immediately even if it’s not really worth doing so.  If people are allowed to wait until there’s something worth fighting over, we might have less litigation.  That’s an empirical question.  Watch out for the impact of this on joint authorship!  If you sue for dj, courts often say you knew about contested authorship 10-15 years ago, so the SOL has passed.  But if you sue for a share of the money through an accounting and say you’re a joint author, that’s something that will perhaps allow you to recover for the last 3 years. Or there will be an inconsistency.
Bibas: noteworthy that MGM didn’t dispute the separate accrual rule in general.  MPAA testified in legislative history that each showing of a movie would be a separate violation with its own 3-year period. The only Q was whether laches ought to truncate that.  US’s argument: laches implicitly moves the triggering event from the violation being sued on now (separate accrual) to the initial violation, which is in tension w/the principle that each violation is discrete.
Perry: sauce for the goose has to be sauce for the gander: the studios bring more copyright claims than we get sued for. Separate accrual makes sense for pirated video on YT.  If it goes viral after ten years, you may not be barred. But what laches did was to check the abusive cases.  He accepts the SCt’s ruling but just wants to make the point that you can have both laches and separate accrual.
Ochoa: SCt did help because circuits were all over the map in what they were doing. 9th Circuit was far more generous than any other circuit, and others were irrevocably split on what constituted laches.  Certain rule outweighs bad effects on a few damages cases; apportionment of profits is equitable for these purposes, so actual damages will be the rule for these cases.
Perry: Why can’t estoppel bar a damages claim now? It’s an equitable doctrine too.  But the SCt said that was different.
Bibas: Estoppel, tolling and discovery were established background principles in 1957 but it was clear then that laches couldn’t bar damages.  Those considerations can come into tailoring the scope of injunctive relief and its duration.  Court leaves open a few exceptional cases in which laches could bar equitable relief—retrospective rather than prospective equitable relief, e.g. when an architect asked for a condo constructed from infringing plans to be torn down. That’s not classic equitable relief anyway, but the Court says you can prevent the destruction of the infringing article.  Clear rule is a good idea.
Q: dissent talks about strategic waiting to file claims. This is an allegation in patent claims as well.  Is J. Breyer right?
Perry: yes.
Ochoa: classic situation: P is aware of cause of action, but D is not.  Here, as soon as Stewart v. Abend was decided, MGM was aware of the issue and knew she’d asserted rights in 1992.  MGM could’ve brought a declaratory judgment to resolve this issue. Not sympathetic here.  Surprised that none of the justices went for laches as a backstop even if inappropriate here.  Discovery doesn’t play a role here.  Extraordinary delays are often because of lack of discovery, and so those claims can pop up a long time after infringement began regardless. It’s extraordinary length of © + renewal provisions that create the most harm.
Perry: Philosophical core of this case—entities strive to get power and don’t relinquish it voluntarily. SCt considers centuries-old equitable doctrine that was a power of judges unfettered by legislators.  Majority decided to give up power the judges had, which is a fascinating aspect of the decision.
Bibas: separation of powers analysis has something to say. If Congress has registration provisions to deal with evidentiary concerns, limitations on damages reachback, then Congress has addressed this issue.  Not a flood of stale claims because most people bring them early, when the value of the work tends to be highest. Congress chose the long term and the Stewart v. Abend result.
Perry: footnote 13—The SCt creates the idea of a “cost-free royalty” as the consequence of a successful defense.  (“Assuming Petrella had a winning case on the merits, the Court of Appeals’ ruling on laches would effectively give MGM a cost-free license to exploit Raging Bull throughout the long term of the copyright. The value to MGM of such a free, compulsory license could exceed by far MGM’s expenditures on the film.”)  This framing is a bonus for plaintiffs.
Bibas: my client has a property right. The practical effect of denying her right to exclude MGM would be disastrous. MGM conceded it couldn’t make a remake; just wanted to continue its existing use. 
Ochoa: if as a factual matter LaMotta was a coauthor, MGM can continue to use it—he survived to the vesting period so Steward v. Abend didn’t divest MGM of any rights it had through LaMotta.  Also, if apportionment of profits is an equitable remedy, that has effects on jury award.
Petrella: big copyright owners have armies of lawyers watching expiration.  You should know you own something.
Ochoa: injunction, impoundment, apportionment of profits: delay can be taken into account.  Only damages are affected.
Perry: laches is still available at the remedial stage of the case.
Bibas: that does make a difference. If it’s part of the balance of injunctive equitable factors, it allows you to balance the equities between D and P, which you can’t do for a threshold defense.  (That’s not my understanding of laches, FWIW, but then I mostly see Lanham Act cases.)

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Dastar and design patent

Posted on September 12, 2014 by rtushnet

Deckers Outdoor Corp. v. J.C. Penney Co., No. 2:14-cv-02565 (C.D. Cal. Sept. 8, 2014)
This is going to sound bigger than it is: the court grants JCP’s motion to dismiss a false designation of origin claim under Dastar because JCP, and not Deckers, was actually the origin of the allegedly too-Ugg-like boots at issue. But the court doesn’t dismiss trade dress/unfair competition claims based on the same conduct. Mark McKenna has been talking about this Dastarissue for a while (avoiding Dastar by pleading that the content at issue has secondary meaning and thus causes confusion), but we haven’t really seen it in operation, and it only really becomes a problem when things like characters or whole works in the public domain are claimed to have secondary meaning.
Deckers makes Uggs and has two design patents on its Bailey Button design. Deckers sued JCP for trade dress infringement, unfair competition, and false designation of origin under the Lanham Act, as well as patent infringement and state-law unfair competition. “The Bailey Button boots are made of suede and feature overlapping front and rear panels, curved top edges on the overlapping panels, exposed fleece-type lining, and one or more buttons depending on the height of the boot placed on the lateral side of the boot shaft.”
JCP argued that, because it actually produced the goods at issue, there could be no false designation of origin under Dastar even if the goods allegedly embodied Deckers’ ideas or concepts. Deckers rejoined that it was bringing a passing-off claim, not a reverse passing-off claim. But that didn’t change the meaning of “origin,” on which Dastar turned; the Lanham Act can’t be used to create perpetual copyright or patent.
Deckers wasn’t alleging that JCP sold Uggs as its own products, but rather that JCP appropriated its trade dress and then caused consumer confusion as to the “origin” of JCP’s boots. “Regardless of whether Deckers accurately characterizes this scenario as passing off, it is crucial that the origin of the boots JC Penney has sold is JC Penney—not Deckers.” Trade dress misappropriation was immaterial, since Dastar made clear that “the phrase ‘origin of goods’ is . . . incapable of connoting the person or entity that originated the ideas or communications that ‘goods’ embody or contain.” Deckers couldn’t get a variety of perpetual patent protection from the Lanham Act. (Interesting effect of the design patent here: it apparently triggered the court’s caution about Deckers’ Lanham Act claims.)
As for design patent infringement, JCP argued that Deckers didn’t explain the alleged infringement and identified design differences. The court found that Deckers properly pleaded infringement, a question of fact. Comparison of the designs was improper. Plus, comparison of the designs with the accused products “demonstrates a sufficient visual similarity to at least render infringement of the ’189 Patent plausible.” That was enough.
As for willful infringement, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” The patentee must then show that the objective risk was either known or so obvious that it should have been known to the accused infringer.” California courts further hold that a plaintiff must plead presuit knowledge in order to adequately plead willful infringement.
JCP argued that Deckers only conclusorily alleged willfulness, but didn’t allege any supporting facts about JCP’s advance knowledge. Deckers only alleged widespread popularity and recognition of the Bailey Button boot style and the patent notice on the boots themselves. Deckers alleged that popularity plus patent notice on the products itself sufficed to show presuit knowledge. Not so. Deckers didn’t allege actual presuit awareness. Other cases involve allegations of actual knowledge, “not some form of bootstrapped constructive knowledge.” This claim was dismissed with leave to amend.
Finally, the court dismissed the California UCL claim as preempted, since there was no extra element that distinguished it from Deckers’ federal claims. Deckers alleged that its allegations of bad faith could avoid preemption, and that the UCL provided additional remedies such as punitive damages that weren’t available under the Lanham or Patent Acts. But alleging more elements or factual information than necessary isn’t enough; state claims must have an element not shared by the federal law. Deckers’ decision to plead bad faith didn’t make it an element of a UCL claim, since the UCL allows for liability in the absence of bad faith. And extra remedies are irrelevant (indeed, they may be a reason preemption is important if Congress has decided what the remedies for infringement should be).
Comment: Here too I think we’re seeing a side effect of the intervention of the design patent claim into what even a few years ago might’ve been just a Lanham Act claim. The Lanham Act, of course, doesn’t preempt most state laws, and trade dress confusion allegations should have distinguished the UCL claim from the patent infringement claim, but Deckers apparently didn’t argue that. Plus, it’s standard doctrine that bad faith isn’t an extra element that avoids preemption when the state claim is based on the acts that allegedly constitute infringement; bad faith narrows the set of copying/infringing activities that trigger state law, but that’s not enough.

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SCIPR, patents (Limelight/Medtronic)

Posted on September 12, 2014 by rtushnet

(Ed. note: as is clear from my notes, I have a somewhat Gingerly approach to patent law. My apologies for any inaccuracies.)

Limelight Networks v. Akamai Technologies (Induced infringement when defendants have not directly infringed.)

Medtronic v. Mirowski Family Ventures, LLC (Whether licensee or patentee has burden of proof in licensee’s declaratory judgment action.)
Moderator: Grantland Drutchas, Partner, McDonnell Boehnen Hulbert & Berghoff LLP
Panelists: J.C. Rozendaal, Counsel to Limelight Networks; Partner, Kellogg Huber Hansen PLLC: Remand: The Fed. Cir.’s actions indicated to him (personally, not his client) that the Fed. Cir. is not particularly interested in resolving the 271(a) issue, and sent it back to the panel, which just heard argument. 
Thomas Saunders, Counsel to Medtronic, Inc. (and Akamai); Partner, WilmerHale LLP: Two judges from original majority were pretty silent in the argument; new judge, Judge Moore, was quite active.  J. Moore expressed concern with a 271(a) rule that would leave patentee defenseless if people joined forces to perform separate steps, but much focused on the unique procedural posture of this case.
Professor Timothy Holbrook, Emory University School of Law, who filed an amici brief on behalf of 10 IP Professors in support of Petitioner Limelight on the issue of extraterritoriality: single party rule will come back to SCt. Fed. Cir. knows it’s already split; SCt is interested in the issue but realized it couldn’t get to the question on this procedural posture.  Believes we’ll get a vague rule drawn from common law on joint tortfeasors.
Professor Cynthia Ho, Loyola University Chicago School of Law: agrees it will be back. Usually SCt just makes more of a mess—gives a general rule and then doesn’t like what the Fed. Cir. does with it.
Rozendaal: not sure it’s going back because the law is not unclear.  At the en banc level, 10 of 11 judges en banc agreed with current rule of Muniauction and weren’t willing to change it.
Saunders: not sure they’re agreed, but they didn’t want to disturb it given the procedural posture they had. Lots of amici and the SG told the Court that this was an important issue.
Q: is it too simplistic to say no indirect infringement without direct?
Rozendaal: follows more or less inevitably from the all elements rule plus the fact that infringement is strict liability.  Prior art can be improved by adding steps; it would be wrong to have people doing parts of methods to suddenly face liability for standard activity. One of the activities in the patent is “serving a webpage.”  But people have been doing that as long as there have been webpages. That conduct is not wrongful on its own. Liability requires legal responsibility for all the steps: are they all attributable to a single individual? That rule at common law has always been determined by vicarious liability.
Saunders: no one disputes the all elements rule.  Fundamental dispute here is the contours of what the common law allowed.  In strict liability circumstances, there are still rules that don’t allow you to act in concert w/ another to divide up the steps or take action knowing that what you’re doing in conjunction w/ another is going to cause the ultimate harm.  Clever planning should not allow circumvention of property right. 
Ho: SCt may be attracted to simple rule.  Basically ignoring policy issues.  In other cases, they’ve looked to policy: e.g., Grokster.
Holbrook: SCt oral argument showed substantial concern for policy/destruction of enforceability of certain patents.  But a lot of joint tortfeasor common law principles say they have to know they’re causing a harm: how can you know that without knowing there’s a patent?  That’s the tension of going to joint tortfeasor concepts.  Is that intent/knowledge through the back door via 271(a), which hasn’t been and he thinks shouldn’t be there?
Rozendaal: Court is clear that direct infringement is required for inducement.  Why did the Fed. Cir. use 271(b) instead of 271(a)? The fact that they found themselves pushed to (b) shows it’s very hard to come up with any rule other than Muniauction that avoids a number of collateral problems with joint liability.
This is special for methods, since the last person who touches a complete apparatus is an infringer and others may be jointly liable. The person who completes the last step of a method is not in the same position.
Holbrook: but “use” may be a different issue. We could blend it together, though there are problems w/ control and beneficial use test, but it is a way to get around divided infringement.
Q: is this a claim drafting issue?  Can this be addressed and corrected by proper drafting?
Saunders: nope.  Hits especially hard on innovations that are drafted to have more than one person working together, but the loophole isn’t so limited.  Any method for which the steps can be divided is vulnerable.
Rozendaal: could have rewritten claims so they didn’t require two people: write from single actor’s POV (e.g., receiving a message X instead of sending and receiving it).
Ho: sometimes, but what’s controlled by one entity today may be multiple tomorrow. Help at the margins.
Holbrook: Agrees.  Shocked if anyone’s drafting a claim like these today given the litigation. But can’t completely solve it.
Saunders: example: method of coadministering two drugs as therapeutic.  Can be drafted as one person, but can always be performed by two.
Q: should Congress act?
Holbrook: not yet. Not as easy to fix.  Congress is bad at predicting weird situations, and we should let the case law develop.
Saunders: what’s missing from the SCt’s opinion is the right to exclude. He understands why the situation seems unaddressed in 271, but the right to exclude use of those steps to perform the method is important. Even if you narrow who’s held liable, there’s still a property right and the person who induces it causes the same harm—with inducement you have someone who’s clearly a driving force. The SCt just didn’t address that.
Holbrook: correct statutorily.  You now have an ambiguous term “infringement” in 271(b) that isn’t defined w/o reference to 271(a).  “All elements” doesn’t come from 271.  Courts aren’t free to create new forms of infringement.  If we have to give 271(b) meaning, it has to be based on the statute.  Doesn’t think you can refer back to the right to exclude, given the explicit wording of 271.
Q: On to Medtronic!
Holbrook: this is a blip.
Ho: Agrees, doubts it will make a big impact. Most licensees will not challenge solely validity.
Rozendaal: Reflects residual hostility to Lear v. Adkins rule: policy message from Supreme Court was that there’s a public interest in getting rid of bad patents, and sometimes the licensee is in the best position to do that. Fed. Cir. has been digging in its heels ever since.
Q: any change in bargaining power of licensees?
Ho: no.
Saunders: may increase incentive to get into settlement, with a better shot at a no-challenge provision.  Otherwise the license doesn’t prevent a challenge.
Rozendaal: if people try to contract around this through settlement, see if that flies under antitrust law.
Saunders: brewing division in circuits about no-challenge clauses: see Judge Lynch’s decision in 2d Cir., looking at Fed. Cir. and expressing skepticism.  If litigation didn’t get very far, skeptical of no-challenge clauses.
Ho: arbitration instead.  SCt has deferred to arbitration clauses even w/unequal bargaining power.
Holbrook: SCt likes settlement in every other context. Would suggest channeling to arbitration, but Lear and Medimmune emphasize great public value in having invalid patents knocked out.  Challenge clauses sometimes provide for penalty—license fee triples if you challenge—and Fed. Cir. is more sympathetic. 
Q: Fed. Cir. has upheld no-challenge clauses as part of settlements. Will we see more suits designed to reach this result?
Saunders: if one of the lines recognized is initiation of suit, then sophisticated entities will understand this. Prudent course for no-challenge clause may then be to start litigation, not just C&D and then negotiation.  People may agree to no-challenge clause if they think they won’t have a good challenge, or if the license fee is good.  If the patent claim is weak, they may want to keep their options open, and they may use negotiating leverage to reject the clause since ability to challenge is now the default.

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Supreme Court IP Review, Chicago-Kent: Patents

Posted on September 12, 2014 by rtushnet
Ed Timberlake: most IP cases in a term ever, 8 or 10 depending on whether you count the Lanham Act cases.
Octane Fitness v. Icon Health & Fitness Inc. (When is a case “exceptional” for award of fees under 35 U.S.C. § 285, when a defendant prevails in a patent infringement action?)
Highmark Inc. v. Allcare Health Management System (Standard of review of a court’s fee award pursuant to “objectively baseless” patent claims is abuse of discretion.)
Moderator: David Clough, Partner, Morgan Lewis & Bockius LLP
Dominic Perella, Counsel to Highmark Inc.; Partner, Hogan Lovells LLP: SCt didn’t have to delve too deeply into policy considerations to resolve this; Fed. Cir. was so obviously wrong.
Rudolph Telscher, Counsel to Octane Fitness; Principal, Harness Dickey PLC: the statute says “exceptional” and you start with the plain meaning, as it was when enacted. Dictionary: Out of the ordinary: a far cry from frivolous and subjective bad faith.  The latter was essentially an impossible standard. From 2005-2011 not a single fee award that related to the merits of the case was upheld, during a time when we all know that lawsuits were getting weaker.  Since Octane, 10 awards of fees in those few months. Already a litigation impact.
Constantine Trela, Jr., Counsel to Icon Health, Partner, Sidley Austin LLP: Statutory question: This was in the SCt’s view an instance where the Fed. Cir. treated patent as somehow different than regular law and reading statutes as you wouldn’t read them in other areas. Very similar to eBay.  Publicity/concern over patent trolls has had an impact.  Whether that’s true is another issue but that concern has gotten through to the Court.
Q: what effect on NPEs?
Professor David Schwartz, IIT Chicago-Kent College of Law: On balance, made it easier to affirm findings of fee awards.  Immediate narrative on NPEs is that those with weak claims, with cost of defense settlements, would encourage defendants to litigate rather than settle.  But the standard is not fee-shifting. Still has to be outlier/uncommon.  So still a lot of pressure on accused infringers if settlement offer is well under cost of litigation.
Perella: True, change only at the margins.
Telscher: legislative prospects?  Doesn’t see loser pays legislation going anywhere. Chilling effect on patent system of going up against a large company.  75% are small companies.  Other legislation possibility: fee shifting for NPEs unless NPE could show reasonability.  That in his view is basically no different from SCt’s standard: case has to stand out in substantive strength/weakness.
Trela: whether SCt intended to/did obviate need for legislation, Congress will see it as at least partial solution and will take a wait and see approach, so he wouldn’t expect a legislative return for a while.
Schwartz: not sure he agrees. Politically, proponents of reform made fee shifting central, and these cases took some wind from sails. But reform sought was much broader than these cases allowed. Proposal on table: default that fees shifted unless positions were reasonably justified. Proponents of patent reform think that’s important and will re-raise it soon.
Because of the way sj and trial are set up, there are more opportunities for accused infringers to be the prevailing party.
Trela: Agrees: likely that courts will view Ds and Ps a bit differently. Lack of meritorious defenses: dcts may think of willful infringement as the solution, but no counterpart for assessing fees against P.  (Also the case before.)
Telscher: if you win at sj, for Ps and Ds it will apply equally, but for a P who proves your case and a jury finds willful infringement, that emboldens the judge to feel more comfortable awarding fees.  It’s far easier to get a jury to buy into willful infringement than a judge, so that’s a P edge at actual trial.
Discussion over whether one could get fees without a sj motion: general agreement that you could, depending on how the expert opinions shook out, but that winning at sj was helpful.  Trela noted that Judge Dyk had said that failure to move for sj is a factor counseling against a fee award.
Q: what counts as exceptional?
Telscher: start with merits of the case. Abuse comes in two areas: big company suing small; NPE cases.  Not a troll-hater: a legit tech legitimately used in the marketplace can justify. But in the past 10 years the goods (patents) got picked over and the cases got weaker and weaker.  More like extortion.  Cases dragged out until defendants pay. Look at economics to explain motivation to judges.
Trela: ought to turn on weakness, not motivation.
Schwartz: district courts aren’t equally situated to evaluate merits v. litigation misconduct.  In some jurisdictions, judges see lots of patent cases, but in others, judge might not have a sense of ordinariness.  Litigation behavior is easier to evaluate for generally experienced judges.
Trela: if the standard is whether the case stands out, what does a new judge do? 
Q: if you’re in EDTex., where many of the cases are very weak, how could a case stand out?
Telscher: reasonable litigants. It’s not numerical.  EDTex. is separate issue: pro-plaintiff jurisdiction; you can expect it to be harder to get a fee award there.  Expect more forum shopping.  Has seen plaintiffs move to EDTex. to avoid transfer.
Q: recent findings by dcts that two prominent firms had abusive deposition practices: 198 objections/case.  Take a lesson!
Telscher: NDCal case from June, where judge found p had acted unreasonably in merits and litigation conduct; ds also acted unreasonably so judge denied fees. So be aware of your own conduct.
Schwartz: deference to dct judges in Highmark makes fee denial likely to be affirmed. Once there are differences in districts emerging from the data, ps will move there quickly.
Trela: if there’s variation among the judges in the district you’re taking a chance!
Telscher: reminder that the conduct doesn’t have to be independently sanctionable to affect the fee determination.  You can say: these lawyers were smart, they didn’t cross any line, but overall their conduct merits a fee award.
Trela: judges will be looking at conduct & litigation tactics of the other side, not necessarily to say a pox on both houses but to see whether effort put on other side is appropriate. If you really believe case is weak from the outset, do you need 10 lawyers and 5 experts?  Those arguments will sway some judges.
Telscher: judge doesn’t have to go all or nothing. Can award fees for one aspect of the case.  Keep billing records in condition to separate those out.
Peter Menell: may have effect on what cases are brought.  You might not be able to fund exploratory litigation. If the issues are tied together—you have a bad validity case, why not award fees on the infringement portion too?
Telscher: dct will always have discretion to decide whether one issue is fatal and affects the whole case, or whether it’s just one issue.
Schwartz: treble/enhanced damages: willfulness isn’t required by the statute. The Fed. Cir. has held that willfulness is required.  Not clear how this rule can survive after these cases.
Q: many of these rules were promulgated a while back. Would they be different with more former dct judges on the bench?
Trela: ct app judges sometimes lose sight of what happens in a trial court. Fed. Cir. has that problem in spades.  New judges may make a difference.  But some of the problems we see come from appellate judges w/out a good feel for trial court litigation.
Q: has a D recovered fees by killing a patent in reexamination?  If case is stayed in the interim, judge may perceive there’s not much in fees accrued/behavior in court so how could it be exceptional?
Telscher: If you go right to reexamination, hard to get fees.  But Octane may make the argument plausible if the case is more mature. 
Q: can you get fees for P not knowing of prior art?
Telscher: once you’re in litigation D will do a much bigger search for prior art; unreasonable to expect P to find it all for purposes of fees.
Q: well, has been involved in case where 30-minute search produced 35 pieces of prior art.
Q from audience: effect on declaratory judgment P?
Telscher: same rule.  3d Cir. just applied Octane to TM cases.

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Not the NAD: court won’t stop plaintiff from publicizing preliminary injunction

Posted on September 12, 2014 by rtushnet
Homeland Housewares, LLC v. Euro-Pro Operating LLC, No. 14-cv-03954 (C.D. Cal. Sept. 10, 2014)
Euro-Pro sought to keep Homeland from publicizing the court’s preliminary injunction against it (granted on Lanham Act false advertising grounds). Shortly after the preliminary injunction issued, Homeland sent letters to a number of retailers carrying Euro-Pro products. It notified retailers of the injunction, stated that retailers with notice of the injunction “must also comply,” and said that Homeland would bring contempt proceedings against violators. The letters also said that the injunction was based on a “finding” of literal falsity, said that the litigation was ongoing, and asserted that “[Plaintiff] will likely be entitled to monetary damages for every sale” and that “[i]f Euro Pro is unable to pay the damages, then any company in the sales chain can be held liable for the damages.” The letters also referenced another recent case in which a federal court in Pennsylvania also issued a preliminary injunction against Euro-Pro for false advertising.
Euro-Pro wanted this stopped, as well as a court-approved corrective notice. Euro-Pro didn’t bring a separate claim (e.g., defamation), but the court considered its inherent equitable power to protect its own orders from “evasion, abuse and misuse.” Here, the court found, justice and the public interest might require some sort of order if Homeland misrepresented the content of the injunctive order, “asserting unlikely or spurious claims in terrorem in order to chill market demand for Defendant’s products.” Euro-Pro argued that this was occurring.
Tthe court found that Homeland’s letter “accords, in at least a narrow sense, with the language of the injunctive order” in that the court did find literal falsity. Taken in isolation, however, the language about the court’s “finding” could create the impression that there was a final judgment on the merits. Yet Homeland’s letter didn’t fall into this trap. Before talking about the “findings,” the letter stated correctly that the injunction at issue was a “preliminary injunction.” The language wasn’t “a model of absolute clarity on this point—it might more advisably have included words like ‘ongoing’ or ‘pending’”—but it conveyed the procedural posture of the case. There was still some danger of misleading the unsophisticated, but “the facts presented seem to show that many of the retailers who have expressed concern following the letters are represented by competent, cautious counsel,” for example a letter from Costco mentioning discussions with in-house counsel and that Costco understood that a “preliminary” finding had been made.
Euro-Pro argued that Homeland misrepresented the scope of the injunction by advising retailers that those with notice had to comply with the court’s order. Euro-Pro contended that retailers were not bound, because they were neither parties nor nonparties who have notice of the injunction and were “in active concert or participation with” the enjoined party. But whether this was so was not clear. The Ninth Circuit had no precedent on retailers who sell a party’s enjoined product, while other circuits were split. Aevoe Corp. v. AE Tech Co., 727 F.3d 1375, 1384 (Fed. Cir. 2013) (yes); Paramount Pictures Corp. v. Carol Pub. Grp., Inc., 25 F. Supp. 2d 2, 376 (S.D.N.Y. 1998) (no). But the facts also differed: Aevoe involved a retailer’s exclusive distribution agreement with the enjoined party, while in Paramount retailers completed their purchases of the enjoined products prior to the injunction. “And in general the inquiry is likely to always be fact-intensive.”
Given the fact-specificity of the cases and the unsettled state of the law, the court couldn’t say for certain that Homeland misrepresented the scope of the injunction. Its liability theory might not be sustained in an actual contempt hearing, but lots of letters warning of potential legal action have that characteristic. “This does not mean that courts should enjoin or constrain such letters, where the party’s legal theory is at least plausible and the potential action is not purely frivolous or harassing.”
Finally, congressional policy providing for injunctive relief in Lanham Act cases didn’t favor relief here. Given that the purpose of the Lanham Act is to “protect[] persons engaged in [commerce within the control of Congress] against unfair competition,” Pom Wonderful, then the finding of likely success and entitlement to a preliminary injunction allows Homeland to “aggressively assert the injunction’s protection in the marketplace in order not to be subject to unfair competition.”
However, Euro-Pro had a point. “Plaintiff’s reference in its letters to an unrelated case in the Western District of Pennsylvania, involving a different plaintiff and different facts, served no purpose in asserting its theory of nonparty liability for contempt in this case. That portion of the letter strayed far beyond what was necessary to put retailers on notice of the injunction in this case.” The court wasn’t going to order Homeland to stop referring to this case “out of deference to potential speech concerns.” But if Homeland didn’t immediately delete the reference, the court would set a hearing on whether the preliminary injunction should be vacated. (… I’m not sure that avoids free speech issues.) Other than that, the preferred remedy was more speech. The court wouldn’t approve a Euro-Pro notice calling Homeland’s characterization of the injunction “erroneous” and stating that “retailers are not subject to the injunction.” But Euro-Pro was free to explain the lawsuit, the scope of the injunction, and its own theory of “active concert or participation” to retailers.

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internet regulation event in DC

Posted on September 10, 2014 by rtushnet

Internet Regulation in 2020
Keck Center, Room 100 * Washington, D.C. * October 17, 2014
Space is limited; register now at http://law.duke.edu/innovationpolicy/internetregulation/
8:00am            Registration
8:30am            Welcome and Introduction
Stuart Benjamin, Douglas B. Maggs Professor of Law and Faculty Co-Director, Center for Innovation Policy, Duke Law School
Arti Rai, Elvin R. Latty Professor of Law and Faculty Co-Director, Center for Innovation Policy, Duke Law School
8:40am            Keynote Address
                        Vinton G. Cerf, Vice President and Chief Internet Evangelist, Google, Inc.
9:40am            Operation and Engineering
What are the most significant realistic changes in network architecture, capacity, and connectivity by 2020? In what ways might these developments be affected, perhaps even precluded, by regulatory policy? In what ways might these developments in turn affect regulatory policy? What are the costs and benefits of these developments and their possible regulation?
Panelists:
Tim Berners-Lee, 3Com Founders Professor of Engineering, MIT; Professor, University of Southampton (UK); Director, World Wide Web Consortium; Director, World Wide Web Foundation
KC Claffy, Director, Center for Applied Internet Data Analysis (CAIDA)
Henning Schulzrinne, Julian Clarence Levi Professor of Mathematical Methods and Computer Science, Columbia University; Technology Advisor, Federal Communications Commission
Daniel Weitzner, Principal Research Scientist & Director of the Computer Science and Artificial Intelligence Laboratory (CSAIL) Decentralized Information Group, MIT
Moderator: Arti Rai
11:25am          Industry Structure and Business Models
Beyond the current pending mergers, what changes to the business of data delivery over the Internet are important and reasonably likely by 2020? What new categories of providers might arise, and which might diminish, with what consequences? How will these developments affect, and be affected by, regulatory policy? What are the costs and benefits of these developments and their possible regulation?
Panelists:
Paul de Sa, Senior Analyst, Bernstein Research
Sharon Gillett, Principal Technology Policy Strategist, Microsoft Corporation
William Lehr, Economist, CSAIL, Massachusetts Institute of Technology
Moderator:James Speta, Class of 1940 Research Professor of Law, Northwestern Law School
12:35pm          Lunch Break
1:50pm            Address: “The Relationship Between Law and Competition: A New FCC Perspective”
Jonathan Sallet, General Counsel, Federal Communications Commission
2:30pm            Regulatory Approaches
What metrics or modes of analysis should policymakers use to determine what sorts of regulatory decisions should be made in the near future, and which can and should await future developments? How should policymakers balance regulatory certainty and flexibility in a manner that allows innovation to advance effectively and minimizes administrative costs and delays?
Panelists:
Ruth Milkman, Chief of Staff, Federal Communications Commission
Jonathan Nuechterlein, General Counsel, Federal Trade Commission
Howard Shelanski, Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget of the Executive Office of the President of the United States
Moderator: Stuart Benjamin
3:40pm            Reception
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Eyes on the fair use prize: TV news clip service is fair

Posted on September 10, 2014 by rtushnet
Fox News Network, LLC v. TVEyes, Inc, No. 13 Civ. 5315 (S.D.N.Y. Sept. 9, 2014)
See if you can tell how this case will come out from reading a chunk of the first sentence: TVEyes “monitors and records all content broadcast by more than 1,400 television and radio stations twenty-four hours per day, seven days per week, and transforms the content into a searchable database for its subscribers.”  Subscribers use search terms to find out “when, where, and how those search terms have been used, and obtain transcripts and video clips of the portions of the television show that used the search term.  TVEyes serves a world that is as much interested in what the television commentators say, as in the news they report.”  Fox sued.
The court found that, with the exception of certain features, TVEyes was entitled to summary judgment on its fair use defense.  The court also declined to keep any material on which it relied confidential.  “The interest of the public in the full basis of the fair use defense outweighs any interest in confidentiality.”
TVEyes’ subscribers use the service to track news coverage of particular events.  TVEyes is available only to businesses (or similar entities), not to the public. Subscribers include the United States Army and Marines, the White House, “numerous members” of the United States Congress, the Department of Defense, the United States House Committee on the Budget, the Associated Press, MSNBC, Reuters, the American Red Cross, AARP, Bloomberg, Cantor Fitzgerald, Goldman Sachs, ABC Television Group, CBS Television Network, the Association of Trial Lawyers, the judge’s former law firm Stroock & Stroock & Lavan, and local and state police departments. 
What do they do with this service?  “[P]olice departments use TVEyes to track television coverage of public safety messages across different stations and locations, and to adjust outreach efforts accordingly.”  Without TVEyes, the only way the police departments could do that would be to have individuals watching every news program 24/7, taking notes.  “An Internet search of a recent amber alert for a missing child, for example, would not yield the same results as would a TVEyes search result, because using the internet search results would provide only the segments of content that the television networks made available to the Internet.”  TVEyes, by contrast, is reliable and authoritative.
Subscribers have Watch List Pages, which monitor the subscriber’s chosen keywords and terms and organize search results by day (for 32 days).  A user can also run a Google News search on the Watch List Page for comparison.  Subscribers can tabulate a term’s use in a customized time period and compare its relative frequency to other terms.  They can set up email alerts and be notified 1-5 minutes after the keyword or term is mentioned on any of the 1,400 television and radio stations TVEyes monitors.  Subscribers get “a thumbnail image of the show, a snippet of transcript, and a short video clip beginning 14 seconds before the word was used.” 
Subscribers who click on a link showing how many times a term was mentioned on a particular day get a Results List Page, which displays each mention of the keyword or term in reverse chronological order, with a portion of transcript highlighting the keyword and a thumbnail image of the particular show that used the term. Clicking the thumbnail makes the short video clip play alongside the transcript on the Transcript Page, beginning 14 seconds before the keyword is mentioned.  The Transcript page provides program title, day/time of the clip, a transcript, the name and location of the channel, Nielsen Ratings data for the clip, the publicity value of the clip according to data from a television research company, and an address for the website of the channel that features the program or for the program itself if it exists.
TVEyes also creates pages that present the data in different ways: The Media Stats page provides a graphic showing the number of times a term has been mentioned over a given time period.
The Marketshare page displays a “heatmap” graphic that shows the geographic locations where the term is most used, and the frequency of the mentions. The Broadcast Network page generates a pie chart depicting the breakdown of broadcast stations on which the watch term was used. TVEyes also features a Power Search tool that allows users to run ad-hoc keyword search queries; clicking the thumbnail image will bring the user to the clip’s corresponding transcript page. Subscribers also can organize searches according to dates and times, by broadcast. The “Date and Time Search” feature enables subscribers to play a video clip starting at a specific time and date on a specific television station, rather than entering a search term.
As for subscribers, they can save and download an unlimited number of clips.  But the clips can only be ten minutes, and most are under two minutes.  A subscriber can email a link to the clip from the TVEyes website to anyone, whether or not they’re a subscriber.  Of course, once the user has downloaded a clip, she can share it with anyone (a result the court rather puzzlingly describes as the ability to share the clip or a link to it “on any and all social media platforms and by email”); links also go to TVEyes’ website and allow recipients to watch the video in HD.  After 32 days, the clip disappears from TVEyes unless saved or downloaded by a user.
All subscribers must sign a contract limiting use of clips to internal purposes, and a notice reminding users of the limits appears with every download.  When people ask how to get rights to post clips publicly, TVEyes refers them to the broadcaster.  It recently added a feature to block users from trying to play more than 25 minutes of sequential content from a single station.
Subscribers pay $500/month, more than the cost of cable service, earning TVEyes more than $8 million in revenue in 2013.  Its marketing touts users’ ability to “watch live TV, 24/7;” “monitor Breaking News;” “download unlimited clips” of television programming in HD; play unlimited clips from television broadcasts, “email unlimited clips to unlimited recipients”; “post an unlimited number of clips” to social media; and enjoy “unlimited storage [of clips] on TVEyes servers,” which gives it advantages over “the traditional clipping services.”  TVEyes also advertises that subscribers can edit unlimited radio and television clips and download edited clips. It states that Media Snapshot feature “allows you to watch live-streams of everything we are recording. This is great for Crisis Communications, monitoring Breaking News, as well as for Press Conferences.”
Fox spends a lot on producing news.  It makes about 16% of its television broadcast content available online, “and is concerned that a broader dissemination beyond that will result in a weakening of its viewer-base or create a substitute for viewing Fox News on television cable and satellite.” Its online clips show up within an hour of airing, but they don’t show exactly what aired—the news ticker is absent, and sometimes the clips are “corrected” versions of stories rather than the aired version. 
Monetization: Fox shows pre-reel ads before clips on its sites to make money, and also lets visitors search its video clips by keywod and share links to video (by copying and pasting) on social media. Visitors can’t download clips.  Fox further licenses third party websites, including Yahoo!, Hulu, and YouTube, to host video clips, for about $1 million in the past three years. “Fox News licensees must covenant that they will not show the clips in a way that is derogatory or critical of Fox News.”  (Insert your own joke about that.)  In addition, Fox distributes clips through its clip licensing agent, ITN Source, which allows companies and governmental organizations to use over 80,000 Fox clips in many ways, including posting them on a website “or social media platform” or to create digital archives.  This has made Fox about $2 million in licensing fees.  ITN’s partner Executive Interviews markets copies of video clips to Fox guests. However, the vast majority of Fox News revenues comes from cable fees. 
Here, Fox didn’t dispute TVEyes’ use of its broadcasts to create an analytical database. Instead, it sued over TVEyes’ provision of subscribers with video clips.
The use was transformative.  “Transformation almost always occurs when the new work
does something more than repackage or republish the original copyrighted work.’”  Authors Guild, Inc. v. HathiTrust, 755 F.3d 87 (2d Cir. 2014).  And transformation can occur without physical alterations to the original. Swatch Group Mgmt. Servs. v. Bloomberg LP, 2014 WL 2219162 (2d Cir. May 30, 2014). 
Against HathiTrustand Authors Guild v. Google, Fox pointed to Nihon Keizai Shimbun, inc. v. Comline Business Data, Inc., 166 F.3d 65 (2d Cir. 1999) (ruling that abstracts and rough translations of Japanese copyrighted content were not transformative), Infinity Broadcast Corp. v. Kirkwood, 150 F.3d 104 (2d Cir. 1998) (allowing dial-in subscribers to listen to live radio over the phone wasn’t fair use), and Associated Press v. Meltwater US Holdings, Inc., 931 F. Supp. 2d 537 (S.D.N.Y. 2013) (news monitoring service that downloaded articles from the internet and allowed keyword searching was not transformative because it “uses its computer programs to automatically capture and republish designated segments of text from news articles, without adding any commentary or insight in its New Reports.”). 
Meltwater was the only case in which the defendants weren’t just “copying the plaintiff s work and then selling it for the very same purpose as plaintiff,” a quintessential infringement situation that shed little light on the present dispute.  Meltwateracknowledged that allowing users “to sift through the deluge of data available through the Internet and to direct them to the original source … would appear to be a transformative purpose.” But Meltwater didn’t offer “evidence that Meltwater News customers actually use[d] its service to improve their access to the underlying news stories that are excerpted in its news feed,” and thus failed to show that its service was actually used by subscribers for research or to transform the original news story into a datapoint that told a broader story about the overall news reporting industry.  
TVEyes was different, because video was different:  Print is “fixed in form” and readily available from publishing sources and archives.  A clipping service thus “provides essentially the same service as could be provided by the content provider itself.” But TVEyes’ search results provide a combination of visuals and text in a way that makes the commentary in the clips news itself.  “The focus of certain programs and talk shows on President Obama’s recent golf vacation, for example, was as much the news as the beheading of an American reporter.” In addition, the actual images and sounds “are as important as the news information itself –the tone of voice, arch of an eyebrow, or upturn of a lip can color the entire story, powerfully modifying the content.”  TVEyes’ indexing and collection of video allows subscribers to do more than categorize content—it allows them access to “information [that] may be just as valuable to [subscribers] as the [content], since a speaker’s demeanor, tone, and cadence can often elucidate his or her true beliefs far beyond what a stale transcript or summary can show” (Swatch).  So, “[u]nlike the indexing and excerpting of news articles, where the printed word conveys the same meaning no matter the forum or medium in which it is viewed, the service provided by TVEyes is transformative.”
And none of that was really necessary to the next step, since it’s also true of text: “By indexing and excerpting all content appearing in television, every hour of the day and every day of the week, month, and year, TVEyes provides a service that no content provider provides.” By its nature, TVEyes doesn’t report on the news. It gives subscribers access to how the news is reported.  Meltwater, by contrast, “aggregated content already available to the individual user who was willing to perform enough searches and cull enough results on the Internet.”  (So would the individual user infringe?  Unless the individual user’s purpose there is the same as the content provider’s, which seems implausible, the individual user also has a different purpose than the source, and that wouldn’t change when a third party helped.)  TVEyes was the only source for a database of everything that TV channels broadcast 24/7.  It wasn’t all on the internet.  TVEyes brought it together made it searchable.  “That, in and of itself, makes TVEyes’ purpose transformative  and different in kind from Meltwater’s, which simply amalgamated extant content that a dedicated researcher could piece together with enough time, effort, and Internet searches.”  (These attempts to distinguish Meltwater are strained, but then Meltwater didn’t have the benefit of HathiTrust.)
Plus, the clips were important to provide “the full spectrum of information identified by an index, for the excerpt discloses, not only what was said, but also how it was said, with subtext body language, tone of voice, and facial expression –all crucial aspects of the presentation of, and commentary on, the news.”  Fox contended that a TVEyes subscriber could watch sequential 10-minute clips end to end, seeing all of Fox’s programs 2-5 minutes after airing.  This was unrealistic, given the cost and trouble. 
Ultimately, TVEyes’ search engine and display of result clips was transformative, serving a new and different function from the original. TVEyes’ message, “‘this is what they said’ -is a very different message from [Fox News’] –‘this is what you should [know or] believe’” (Swatch).  TVEyes’ evidence that its subscribers used the service for “research, criticism, and comment,” was undisputed, and these purposes are favored explicitly in §107’s preamble, making them weigh in favor of fair use.
I’m going to rush past what you all know about the effect of TVEyes’ commerciality, the nature of the work (greater scope for fair use because the news is factual), and the amount taken (no more than necessary for the purpose, since its value and reliability depends on being all-inclusive), given the transformativeness finding.  The court still said the third factor didn’t weigh for either side, though it seems that means “helps TVEyes,” “since ‘the extent of permissible copying varies with the purpose and character of the use,’ and TVEyes’ service requires complete copying twenty-four hours a day, seven days a week.”
Market harm must come from substitution, not from transformative markets.  Fox argued that TVEyes’ service decreased the per-subscriber fees advertisers, cable providers, and satellite providers were willing to pay by allowing people to watch copies on TVEyes.  But that assumed substitution, and the facts contradicted this speculation.
While the 19 programs in suit were available, only 560 clips were played, with an average length of play of 53.4 seconds and a maximum of 362 seconds or just over 6 minutes. “85.5% of the clips that were played were played for less than one minute; 76% were played for less than 30 seconds; and 51% were played for less than 10 seconds.” One program wasn’t excerpted at all.  TVEyes’ general statistics were consistent with these specifics:
From 2003 to 2014, only 5.6% of all TVEyes users have ever seen any Fox News content on TVEyes. Between March 31, 2003 and December 31, 2013, in only three instances did a TVEyes subscriber access 30 minutes or more of any sequential content on FNC, and no TVEyes subscriber ever accessed any sequential content on FBN. Not one of the works in suit was ever accessed to watch clips sequentially.
Thus Fox failed to show that TVEyes caused, or was likely to cause, any adverse effect to Fox News’ revenues or income from advertisers or cable or satellite providers.  More generally, in a typical month, “fewer than 1% of TVEyes’ users play a video clip that resulted from a keyword search of its watch terms.”  They play clips on average for 41 seconds, with a median duration of 12 seconds.  “95% of all video clips played on TVEyes are three minutes or shorter; 91% are two minutes or shorter; and 82% are a minute or shorter. Fewer than .08% of clips are ever played for the maximum clip time of ten minutes.”  Moreover, most clips come from keyword search; “fewer than 5.5% of all plays originate from a Date and Time Search.”   “No reasonable juror could find that people are using TVEyes as a substitute for watching Fox News broadcasts on television. There is no history of any such use, and there is no realistic danger of any potential harm to the overall market of television watching from an ‘unrestricted and widespread conduct of the sort engaged in by defendant.’”
What about the derivative market for video clips with YouTube, ITN Source, etc.?  Fox couldn’t show any lost customers from Executive Interviews (the closest match).  And its entire revenue over one year was $212,145 from syndication partners and $246,875 from clip licensing, “a very small fraction of its overall revenue.”  Given this small possible impact, any cognizable harm was outweighed by the public benefit of TVEyes’ service.
Turning to that public benefit: “Without TVEyes, there is no other way to sift through more than 27,000 hours of programming broadcast on television daily, most of which is not available online or anywhere else, to track and discover information.”  Subscribers use the service to “comment on and criticize broadcast news channels”:
Government bodies use it to monitor the accuracy of facts reported by the media so they can make timely corrections when necessary. Political campaigns use it to monitor political advertising and appearances of candidates in election years.  Financial firms use it to track and archive public statements made by their employees for regulatory compliance.  The White House uses TVEyes to evaluate news stories and give feedback to the press corps.  The United States Army uses TVEyes to track media coverage of military operations in remote locations, to ensure national security and the safety of American troops.  Journalists use TVEyes to research, report on, compare, and criticize broadcast news coverage.  Elected officials use TVEyes to confirm the accuracy of information reported on the news and seek timely corrections of misinformation.
This provided substantial benefit to the public.  Subject to possible exceptions discussed below, “this factor does not weigh against a finding of fair use, especially when the de minimis nature of any possible competition is considered in comparison to the substantial public service TVEyes provides.”  
Weighing the factors, TVEyes’ service had an entirely different purpose and function than the original broadcasts. “TVEyes captures and indexes broadcasts that otherwise would be largely unavailable once they aired.”  (Preservation as transformative purpose!)  Users’ purposes were also different: “monitoring television is simply not the same as watching it.” 
However, TVEyes didn’t receive summary judgment on all parts of its service.  For the portion of the service that allowed subscribers to save, archive, download, email, and share clips of television programs, the parties didn’t provide sufficient evidence showing these features’ relationship to the transformative purpose of indexing and providing clips and snippets, or instead “threatening to Fox News’ derivative businesses.”  Nor were the parties entitled to summary judgment on “whether the date and time search function was integral to the transformative purpose of TVEyes.  “While the evidence shows that this feature does not pose any threat of market harm to Fox News, the record fails to show that it is crucial or integral to TVEyes’ transformative purpose.”  (Feature by feature fair use litigation has the potential to get pretty ugly.)
The court then dismissed Fox’s hot news misappropriation claim.  Is there any extra element here that would allow it to survive §301 preemption?  Fox argued that the extra element was the free riding, as in INS v. AP. But for these purposes, the term “free-riding” means “taking material that has been acquired by complainant as the result of organization and the expenditure of labor, skill, and money, and which is salable by complainant for money, and … appropriating it and selling it as the [defendant’s] own …” (Barclays Capital, Inc. v. Theflyonthewall.com, Inc., 650 F.3d 876 (2d Cir. 2011)).
Barclays found a similar claim preempted.  There, the aggregator defendants weren’t free riding, but collating and disseminating information: plaintiff and others’ financial recommendations, which were news, and attributing the recommendations to their sources. “Similarly, TVEyes is not a valuable service because its subscribers credit it as a reliable news outlet, it is valuable because it reports what the news outlets and commentators are saying and therefore does not ‘scoop’ or free-ride on the news services.”  (Still have no idea what the extra element could be for hot news, but ok.)
A generalized state law misappropriation claim also failed. Such a claim must be “grounded in either deception or appropriation of the exclusive property of the plaintiff.” Thus, it was preempted by §301.  Fox argued that bad faith was an extra element, but it’s not, since bad faith alters the action’s scope but not its nature.

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"German Quality" could mislead as to German origin

Posted on September 9, 2014 by rtushnet
Marty v. Anheuser-Busch Companies, LLC, — F. Supp. 2d —-, 2014 WL 4388415, No. 13–23656 (S.D. Fla. Sept. 5, 2014) (magistrate judge)
AB brews Beck’s Beer, which originated from and was brewed in Germany from 1873 until 2012 when AB began brewing Beck’s in St. Louis, Missouri.  Plaintiffs, Florida, New York, and California consumers, bought Beck’s allegedly in reliance on misrepresentations of Beck’s German origin. 
The judge ruled that a reasonable consumer could have been deceived by AB’s representations. The complaint alleged that the marketing touted Beck’s as “Originated in Germany” with “German Quality” while “Brewed Under the German Purity Law of 1516.”  However, there’s a “Product of USA, Brauerei Beck & Co., St. Louis, MO” statement on the label as well as “BRAUEREI BECK & CO., BECK’S © BEER, ST. LOUIS, MO” on the bottom of the carton.

At AB’s invitation, the court examined demonstrative samples of 12-ounce bottles and cans.  The judge found that the “Product of USA” disclaimer as printed on the actual cans and bottles themselves was difficult to read.  It could be obscured by overhead lighting “because the disclaimer is printed in a white font against a shiny, metallic silver background.”  However, the “Product of USA” disclaimer printed on the label appearing on AB’s Alcohol and Tobacco Tax and Trade Bureau (TTB) certification for Beck’s was visible at any angle: the words were printed on a gray, matte background. There was thus a “discernable difference in legibility” between the disclaimer on the actual product and the disclaimer approved by the TTB. More importantly, the disclaimer was blocked by the carton.  Consumers would have to open cartons/lift bottles from a six-pack to see it.  “A reasonable consumer is not required to open a carton or remove a product from its outer packaging in order to ascertain whether representations made on the face of the packaging are misleading” (citing Williams v. Gerber Prods. Co., 552 F.3d 934, 939 (9th Cir. 2008)).
In addition, “BRAUEREI BECK & CO., BECK’S © BEER, ST. LOUIS, MO” might not be sufficiently descriptive to alert a reasonable consumer as to the location where Beck’s is brewed. Nothing says that Beck’s is brewed in Missouri, and anyway it was underneath the carton.  “A reasonable consumer may not necessarily look at the underside of the carton in deciding whether to purchase a product.”
AB argued that “Brewed under the German Purity Law of 1516” was true because “German Purity Law has nothing to do with place of production or source of ingredients. This law simply concerns the type of ingredients used to brew beer (water, hops, barley, and yeast).”  However, plaintiffs alleged that AB violated the German Purity Law because that law allowed onlybarley, hops and water in beer, and Beck’s contained yeast and other ingredients and additives. This couldn’t be resolved on a motion to dismiss.  More importantly, even if the statement were true, “a reasonable consumer may not know what compliance with the German Purity Law means.”  A reasonable consumer could be misled, especially in conjunction with other statements on the carton; an alleged overall marketing campaing to maintain a German brand identity; and Beck’s German heritage, including 139 years of being brewed in Germany.
The court also determined that “German Quality” was not mere puffery as a matter of law, if it contributed to the deceptive context of the packaging as a whole.
Then, AB argued that it was eligible for safe harbor protection from consumer claims because the TTB approved the labels. Florida law provides that FDUTPA does not apply to “[a]n act or practice required or specifically permitted by federal or state law,” New York has a similar provision, and California doesn’t expressly have a safe harbor but implies its existence.  A defendant bears the burden of establishing a safe harbor. While the TTB approved the labels, plaintiffs alleged that part of the label including “Product of the USA” wasn’t visible at the time of purchase.  Thus, AB didn’t show entitlement to the safe harbor. 
Also, the claims here weren’t based on the labels approved by the TTB, but rather on representations on cartons and other representations and omissions. True, there was some overlap between the TTB-approved labels and the statements on Beck’s cartons, but the fact that the key disclosure on the TTB-approved labels wasn’t visible until after purchase was important, as was the ready legibility of the disclaimer on the TTB certificate compared to on the actual bottles.  Plus, the carton prominently displayed “German Quality,” which was not contained in the TTB approved labels.
The court then accepted plaintiffs’ price premium theory of harm, even though AB doesn’t sell directly to consumers and doesn’t set prices.  The complaint that alleged that consumers were willing to pay, and did pay, a premium for high quality, imported beer.
The court also declined to dismiss unjust enrichment claims. While some cases say California doesn’t recognize an independent unjust enrichment case of action, others do, and unjust enrichment could be an available theory if plaintiffs lacked a remedy at law; at least pleading in the alternative was acceptable. The price premium theory also precluded AB’s argument that plaintiffs received the benefit of their bargain by paying for and receiving Beck’s.
Then the court found that plaintiffs lacked standing to seek injunctive relief because they didn’t plead they were likely to buy Beck’s again if it were appropriately labeled.  The court responded to policy concerns (this precludes an order stopping false advertising in consumer protection cases) by reasoning that (1) Article III trumps policy, and (2) it’s possible to plead entitlement to injunctive relief in consumer protection cases by pleading willingness to buy the product again if the false advertising stops.
Comment: I don’t really know why such willingness is enough to count for Article III standing if the threat of future injury has to be “real and immediate—as opposed to a merely conjectural or hypothetical.”  (As the court even says, “The permissive word ‘may’ seems at odds with Supreme Court precedent which requires a real and immediate threat of future injury.”)  What’s the injury?  Not being able to buy Beck’s at an acceptable price?  I think you have to bite the bullet and say yes, no injunctions in consumer protection cases if you follow this reasoning.  (However, I don’t know why, having demonstrated standing for damages, a class representative couldn’t ask for injunctive relief on behalf of the still-deceived members of the class who do indeed have standing even under this limited interpretation; the court here said that at least one named plaintiff has to have standing, but I don’t see why standing for one remedy wouldn’t be enough.)  The court would, however, allow an amended complaint, which could test the theory that plaintiffs could plead that they’d be willing to buy properly labeled Beck’s (which, by their harm theory, would be cheaper Beck’s).

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Jotwell post: Seeing Like a Copyright Lawyer

Posted on September 9, 2014 by rtushnet

My review of Shyamkrishna Balganesh, Irina D. Manta, & Tess Wilkinson‐Ryan, Judging Similarity, 100 Iowa L. Rev. (forthcoming 2014). Kate Klonick, Comparing Apples to Applejacks: Cognitive Science Concepts of Similarity Judgment and Derivative Works, 64 J. Copyright Soc’y USA 365 (2013), and Kate Klonick, Comparing Apples to Applejacks: Cognitive Science Concepts of Similarity Judgment and Derivative Works, 64 J. Copyright Soc’y USA 365 (2013).

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Careers in Copyright event in DC

Posted on September 8, 2014 by rtushnet
Careers in Copyright: A Panel Discussion and Networking Reception
The Washington, DC Chapter of the Copyright Society of the United States will be holding a copyright career panel and networking event, on September 18, 2014 from 6pm to 8:30 pm in the Faculty Conference Center of The George Washington University Law School.  A career in copyright law provides opportunities to practice in a number of industries that have become integral to our lives.  Copyright attorneys work in areas such as film, television, music, media, and in government.  Many attorneys and students who wish to practice in these areas want to know two things: what are my options and how do I get there?  Please join us for a panel discussion with a diverse and distinguished group in the public and private sectors to answer those very questions.  A reception with light snacks and refreshments will follow.
Date: Thursday, September 18
Time: 6:00 pm – 8:30 pm
Location: Faculty Conference Center – Burns 505, The George Washington University Law School, 716 20th Street, NW
Cost: Free
Our distinguished panel:
Troy Dow, Vice President and Counsel at Walt Disney
Alec Rosenberg, Partner, Arent Fox
Danielle M. Aguirre, SVP, Business and Legal Affairs, National Music Publishers’ Association
Kevin Amer, Counsel for the Office Policy and International Affairs at the U.S. Copyright Office
Rick Marshall, Attorney-Advisor for the Office of General Counsel at the U.S. Copyright Office
Ann Chaitovitz, Attorney-Advisor for the Office of Policy and International Affairs at the U.S. Patent and Trademark Office
Greg Olaniran, Partner at Mitchell Silberberg & Knupp LLP
Admission is free, but please register in advance on the Copyright Society’s website .  Students will also have an opportunity at the event to join the Copyright Society of the USA for $25 . 
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