Reading list: music copyright and similarity judgments

Posted on August 25, 2014 by rtushnet

Carys J. Craig & Guillaume Laroche, Out of Tune: Why Copyright Law Needs Music Lessons.  Well worth reading in full.  Here’s some choice bits:
[Lucy Pollard-Gott] found that, as listeners became more familiar with a given theme and listened to varied versions of that theme, both musicians and non-musicians were more able to identify elements of “theme structure” in variations. In plain language, the better someone knows a musical theme, and in a context where she is asked to compare that theme to another, the more likely it is she will draw a link between the two themes and deem them to be related, even when the two themes are somewhat dissimilar yet loosely share some common musical features.
This finding has tremendous implications for the lay listener test. First, it suggests that the recognition of similarity is an acquired skill, not a stable binary yes/no response. Rather, nocan become yes over time and repeated listenings, to a point where the two themes need not be particularly alike in order for connections to be drawn between them. Second, it suggests this process is unidirectional; while no can become yes over time, yes cannot become no. Once points of similarity are drawn, a listener cannot go back to a state of mind in which those connections do not exist. … It is all too simple to create the conditions that favour a finding of recognizable similarity.
Thus, the question of “recognizability” of one work in another is not has objective as the lay listener test purports to be; quite the contrary, one can train people to hear connections between melodies, given sufficient time. This does not bode well for composers falsely accused of infringement where there is merely coincidental similarity, even where there are notable differences in the musical themes or expressive details that the composer might point to as evidence of independent creation.

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Coffee’s for classes: 7th Cir. reinstates class action over instant coffee

Posted on August 25, 2014 by rtushnet
Suchanek v. Sturm Foods, Inc., No. 13-3843, 2014 WL 4116493 (7th Cir. Aug. 22, 2014)
Sturm entered the market for Keurig-compatible individual coffee pods (K-Cups) once patent protection expired, but according to plaintiffs they jumped the gun. The Seventh Circuit reversed the district court’s denial of class certification as an abuse of discretion, reasoning that under its approach consumer class actions could never be certified.  (This is a feature not a bug of the basid defense-side arguments, of course.)
Sturm’s own marketing studies indicated that users consider coffee brewed in Keurig machines to be high-quality, contributing to the high price of both the machine and the K-Cups.  Until 2012, Keurig held a patent over the K-Cup filter technology, so Sturm turned to a substitute in 2010 that used the external K–Cup design “but whose innards were entirely different.”  Among other things, it didn’t have a filter.  Sturm, selling as Grove Square Coffee (GSC), intended to gain a first-mover advantage in the post-patent landscape.
But without a filter, Sturm couldn’t use fresh coffee grounds, so it decided to use instant coffee instead.  That’s “essentially, small chunks of freeze-dried brewed coffee that dissolve and are reconstituted when hot water is added to them.”  Keurig customers didn’t expect instant coffee, and Sturm’s consultants warned that “use of the word ‘instant’ is a real nono” and should be avoided “if at all possible” in marketing the product to Keurig owners. The packaging stated in small font that it contained “naturally roasted soluble and microground Arabica coffee,” but did not use the better-known name for soluble coffee, instant coffee. The packaging didn’t say that the contents over 95% instant coffee with only a tiny bit of microground coffee mixed in.
Front of package: “Naturally roasted soluble & microground Arabica coffee”

“Great Coffee. Plain and Simple.” with neighborhood coffee shop narrative

Coffee Lover’s Bill of Rights/”highest quality Aribica beans, roasted and ground to ensure peak flavor”

The packaging, as indicated by images included in the opinion (yay!), showed that “like many of the premium Keurig coffee products shelved nearby, the front of the GSC package contained an image of K–Cups with fresh roasted coffee beans and the admonition that the GSC product was intended ‘[f ]or use by owners of Keurig© coffee makers.’” Sturm’s objective was to make the product “look like the Keurig product in box style.”  The package included a “quality promise” indicating that the coffee was “made with some of the world’s highest quality Arabica beans, roasted and ground to ensure peak flavor, then packaged to lock in optimum freshness.”  But it didn’t disclose that, except for a trivial amount of microground coffee “dusting the instant chunks,” it was not ground beans.  One version of the package stated that its contents “recaptured [the] rich, traditional cup” that is “savored … in neighborhood coffee shops.”  At some point, Sturm added “instant” to the packaging, but the record didn’t clarify whether this new packaging was ever distributed or how widely.  In addition, the package included a warning: “DO NOT REMOVE the foil seal as the cup will not work properly in the coffee maker and could result in hot water burns.”  But this warning didn’t seem designed to protect consumers: “Except as a measure designed to ensure that the user did not view the true contents of the pod, this makes no sense: the presence or absence of a foil seal on top would have no effect on the risk of burns or the use of the cup.”
What result did this packaging have? “Numerous expert surveys in the record concluded that few consumers understood the true nature of the GSC product.” One survey showed participants photos of the GSC product on shelves near other Keurig-related products, then allowed them to look over images of the box for 30 seconds.  Only 14% of participants said the product contained instant coffee. Sturm’s own expert using another methodology found that only one in 151 test participants equated the term “soluble and microground” with the term “instant and microground.” A third expert asked survey participants to score the product on a scale of 1 to 10 on various measures based on its packaging, with “1” being least likely and “10” being most likely. “When asked whether participants expected GSC to contain instant coffee, the mean answer was 1.61. Asked whether the GSC product filtered ground coffee just as other Keurig-compatible coffee products did, participants essentially said yes, recording an average score of 9.26.” And that didn’t even get to the percentageof instant in the blend. Comment: Basically, if this wasn’t deceptive, then nothing short of a black-is-white untruth—tea in there instead of coffee—would qualify.
Sturm was not casual in marketing GSC.  It heeded its consultants’ warning not to use “instant,” and conducted focus group testing to see if participants would notice anything funny.  One test reported that participants didn’t notice differences between Keurig-licensed K-Cups and GSC in terms of weight or the fact that the GSC cup “emitted a distinct rattle when shaken.” Even when these differences were pointed out, participants “did not equate [those differences] with quality.”  Sturm sold GSC at “near-premium” prices, about 10% less than Keurig products.  “This had the dual benefit of reaping a high profit and forestalling consumer suspicions. As one executive admitted candidly, ‘If you actually got the price too low, people would perceive it as poor quality.’”  Comment: This is an excellent example of the misleading nature of the price signal in many circumstances!   The GSC cup was 3-4x as expensive as typical instant coffee, which can just be spooned into hot water.  Plaintiffs’ expert concluded that “only a very ‘price insensitive’ consumer, or one who was misled, would use a $100 brewer [the Keurig machine] to heat water to make instant coffee.”
The public reaction to GSC was “awful.”  The day after the product launched in Wal-Mart, Sturm sent around an email directing that the legal department, not quality control or sales, be immediately informed about any complaints about it.  More:
One retailer, Discount Coffee, informed Sturm that “[GSC] has been the poorest performing introductory product that we have had in our 12 year history.” Several purchasers brought their complaints to the Better Business Bureau. Although a few comments were favorable, the vast majority were negative and many “extremely negative,” according to [defendant] Treehouse’s general counsel…. To mitigate the negative reviews, Sturm encouraged employees to write fictitious favorable reviews online; the marketing department even offered to supply the language.
When customers—including one of the named plaintiffs—complained, Sturm told them that GSC wasn’t instant coffee, but rather “a high quality coffee bean pulverized into a powder so fine that [it] will dissolve.”  This was false except for the “microground” coffee that constituted less than 5% of GSC.  Plus, it falsely implied that coffee is made by dissolving ground beans in water, but actually coffee is made when hot water extracts oils and other solids from the ground coffee bean.  (Given all this, you can see why, even setting aside the legal implications of the district court’s rulings, the court of appeals thought that, if any consumer protection class action could succeed, it would have to be this one.  If not, fraud in general consumer goods has simply been legalized.)
All this resulted in four separate lawsuits consolidated into one, seeking classes covering a total of eight states.  The district court was concerned that online purchasers wouldn’t be similarly situated to in-store purchasers; the plaintiffs offered to exclude online purchasers and the court proceeded on that assumption (but see below).
The district court erred in two primary ways: first, it failed to recognize that a common question was whether the GSC packaging was likely to mislead a reasonable consumer. Second, it applied too strict a test for predominance.
Commonality: a single common question will do, though a mere violation of the same provision of law at the defendant’s hands isn’t enough (Wal-Mart).  Conduct common to members of the class is critical.  Not every question must be common: “It is routine in class actions to have a final phase in which individualized proof must be submitted. … [I]f commonality of damages were also essential, ‘then class actions about consumer products are impossible.’”  Here, the class claims derive from a single course of conduct by Sturm: GSC’s marketing and packaging. Also, the same legal standards governed every class member’s claim: the relevant state laws all require proof that a statement is either literally false or likely to mislead a reasonable consumer.
The district court, when it found that there were no common questions, “overlooked the fact that the question whether the GSC packaging was likely to deceive a reasonable consumer is common. The claims of every class member will rise or fall on the resolution of that question.” (Citing Amgen Inc. v. Conn. Ret. Plans & Trust Funds, ––– U.S. ––––, ––––, 133 S.Ct. 1184, 1191, 185 L.Ed.2d 308 (2013), in the continued saga of “securities cases affecting other class action law despite the big differences between them.”) 
Some of the district court’s wrong turns included its holding that the class lacked commonality because some class members might have purchased the later package that used “instant.”  Yet “many others purchased and allegedly were deceived by the old package. Tens (perhaps hundreds) of thousands of the original packaging units already had been distributed by the time the packaging was altered.”  Plus, the record was unclear about how widely the new packaging was distributed.  Minor overbreadth problems justify amending the class definition, not denying certification.
The district court also concluded, based on no cited evidence in the record, that the proposed class included a “great number of members who for some reason could not have been harmed by the defendant’s allegedly unlawful conduct.”  Certification does not require proof that every class member has been harmed.  If very few were harmed, that’s not an argument for refusing certification; it’s an argument for certifying the class and then entering a judgment exonerating Sturm.  The cases on which the district court relied were different: they involved classes defined to include as members people who could not have been harmed, not weren’t harmed.  For example, an antitrust plaintiff class can’t include people who bought the product at issue before the defendant possessed market power, because they couldn’t have been harmed by the alleged abuse of market power.  Online purchasers might properly be excluded if they couldn’t have been deceived by the packaging—but the court noted that “[o]ften the online ‘store’ shows an image of the package that the customer can examine in detail; if that was done here, then the online group may be in essentially the same position as those who bought in physical stores.”  (Indeed, often the online store doesn’t allow you to read words on the packaging very well; similarity to familiar K-Cups and their ground coffee might well have loomed even larger in consumers’ understanding of what was inside these pods.)  Purchasers exposed to the allegedly deceptive packaging could have been injured by it, “even if it turns out later that a few were not.”
On the record, “it is apparent that this is not a case where few, if any, of the putative class members share the named representative’s grievance against the defendant. If it were, things would be different. A person whose claim is idiosyncratic or possibly unique is an unsuitable class representative.”  But here, the named representatives suffered the same injury as members of the proposed class, given the evidence of the overwhelmingly negative response to the GSC pods, including complaints and surveys.  Whether the packaging was likely to mislead a reasonable consumer is an objective question, and therefore a common one.
Rule 23(b)(3) also requires predominance and superiority; the court assessed those issues against the common question it identified (though there might be more, like Sturm’s scienter).  The district court had concluded that individual issues predominated because each class member’s claim could require individualized inquiries on causation (or reliance).  That was legal error:  
Every consumer fraud case involves individual elements of reliance or causation. As we commented in IKO Roofing, a rule requiring 100% commonality would eviscerate consumer-fraud class actions. And because few if any injured parties would bring suit to recover the paltry individual damages available in most consumer fraud cases, such a rule would undermine enforcement against “tortious harms of enormous aggregate magnitude but so widely distributed as not to be remediable in individual suits,” in direct contradiction of Rule 23(b)(3)’s purpose. The importance of the class action device in vindicating the rights of consumers is one reason why the Supreme Court held that “[p]redominance is a test readily met in certain cases alleging consumer … fraud,” among others.
For consumer fraud class certification, a court should first rigorously analyze whether the plaintiffs’ damages can be measured across the entire class.  Here, they can be: “for example, plaintiff’s damages might be computed by taking the difference between the actual value of the package she purchased (instant coffee) and the inflated price she paid (thinking the pods contained real coffee grounds).” 
After damages, the court should turn to Rule 23(b)(3), which deals with class members’ interests in controlling individual litigations.  The court should compare the difficulty and complexity of the class-wide issues to those of the individual issues. “The class issues often will be the most complex and costly to prove, while the individual issues and the information needed to prove them will be simpler and more accessible to individual litigants.”  Where technical expertise and costly expert testimony, as well as extensive discovery, is important to the first stage of liability (whether a product was defective or a representation misleading), class treatment can be appropriate, with individual issues “readily determined” in individualized follow-on proceedings.  On remand, the district court could find superiority “because no rational individual plaintiff would be willing to bear the costs of this lawsuit.”  Given that reality, a class action has to be pretty bad before it can be inferior to no litigation at all.  If the class prevails on the common issue, reliance and causation could be straightforwardly assessed for each purchaser—or more realistically, a settlement would quickly ensue.
After superiority, the court should assess whether the class allegations are “satisf[ied] through evidentiary proof.”  This can include “survey or other evidence suggesting the relevant common traits of the class members, expert testimony supporting the classwide allegations, or analysis of the relative costs of prosecuting the class and individual issues in the case.”  The ultimate issue is whether classwide resolution would substantially advance the case.
Here, the plaintiffs alleged that Sturm deceived consumers by telling them that the GSC pods contained freshly ground coffee, when at most 5% of the pod did so, and by concealing the fact that the product was overwhelmingly instant coffee.  This was a lot like the facts of Pom Wonderful.  However, the court of appeals wasn’t directing the district court to certify the class on remand; that decision was for the district court in the first instance.  (But will the district court take the hint?)
Finally, the court of appeals reversed the district court’s grant of summary judgment against the eight putative class representatives. The district court found that the GSC packaging wasn’t likely to mislead a reasonable consumer and that none of the individual plaintiffs put forth evidence that he or she was deceived. The district court’s analysis of misleadingness was wanting.  It said only: “The Court has seen the packaging at issue—Plaintiffs bring it to each hearing—and finds that it is not designed to mislead consumers. It says what it is.”  That bare conclusion apparently assumed that only literal falsity can be misleading, which is not so (and, RT here, apparently assumed that intent is required to violate consumer protection law, also not so).  “Moreover—ironically—it appears the district court itself was confused about the product: the court’s analysis reveals that it failed to understand that ‘soluble’ coffee and ‘microground’ coffee are not the same thing.”
There were genuine issues of material fact for each of the individual plaintiffs on whether the packaging was likely to mislead a reasonable consumer, given Sturm’s conscious avoidance of the word “instant” and package design resembling Keurig products; testimony from several plaintiffs that they were misled; many statements on the package implying that the product was premium fresh (unbrewed) coffee; failure to disclose that the product was little more than instant coffee; and at least three independent expert surveys, all employing different methodologies, that found consumer confusion. The district court also didn’t take each individual plaintiff’s claims seriously enough:
For example, the court emphasized that Suchanek admitted that she understood the word “soluble” to mean that something is capable of dissolving. But the fact that Suchanek correctly understood the definition of that English word is not enough to throw out her entire consumer-fraud claim. Did she know that soluble coffee is instant coffee? Did she understand that the GSC product was over 95% instant? Suchanek says not. As she stated, “Keurig brews coffee…. If I was going to buy a k-cup of instant coffee, I would have used my hot water tap that has boiling water at the sink instead of buying an expensive Keurig machine.” Taking all disputed facts in the light most favorable to Suchanek, a reasonable juror could conclude that Suchanek was deceived.
Other plaintiffs who shouldn’t have been tossed out included a plaintiff who admitted that she hadn’t read the text on the packages, but testified that she was misled because of the attractiveness of the package and the picture of a K-Cup on the box.

RT: It says a lot that a district court could toss out a case with this much evidence of deceptive conduct.  I don’t think this signals an especially expansive view of class actions from the 7th Circuit; rather, as the court says, if this isn’t actionable then there is no such thing as a consumer class action.

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Lexmark applied to false association claims under 43(a)(1)(A)

Posted on August 22, 2014 by rtushnet

Lundgren v. Ameristar Credit Solutions, Inc., 2014 WL 4079962, No. 3:12–263 (W.D. Pa. Aug. 18, 2014)
Ameristar is a “debt settlement and tax resolution business,” while Lundgren “was previously in the mortgage service industry and began offering tax resolution services in July 2010.”  (There is an untold story here about the economic crisis and eating all the parts of the pig up to and including the squeal.)  Lundgren is an enrolled agent with the IRS, which makes him authorized to represent taxpayers before the IRS.  Before his Ameristar employment, he was employed by another tax relief firm.  He signed an at-will employment agreement and a covenant not to compete for or solicit any of Ameristar’s customers, clients, or accounts either dirctly or indirectly.  Lundgren alleged that this wasn’t the entire agreement, because he had his own tax relief business with 6-8 clients before he joined; he maintained that Ameristar agreed that he could continue to serve these clients, though Ameristar disagreed and said he was just allowed to finish up a few clients.
When Lundgren began at Ameristar, he was the only enrolled agent, though others were then added, along with case workers.  At one point he had responsibility for 183 case files; files were expected to close within 12 months though that could vary.  Lundgren agreed to participate in Ameristar’s advertising and executed a “Talent Release Form” allowing Ameristar to use his name, title, likeness, image, and voice for a TV ad, though his ad was, according to Ameristar, not that successful.
Lundgren’s employment was terminated in 2012.  He sued for violations of the Lanham Act, state law privacy rights, wrongful termination, and breach of an implied contract for employment.  The court declined to exercise jurisdiction over the state law claims because it dismissed the Lanham Act claims.
Lundgren alleged both false association under §43(a)(1)(A) and false advertising: Ameristar allegedly misrepresented that he was an employee after he was terminated and used his name and likeness in an ad endorsing Ameristar’s services.  Under Lexmark, “a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.”  The court assumed, without deciding, that Lexmark stated the proper standard for both parts of §43(a), and that Lundgren’s claims failed.  (I’m not a civil procedure expert, but how can this really be true?  If Lexmark doesn’t provide the proper standard for false association claims, on what basis does the court kick Lundgren’s out?  The court also noted that Conte Bros. said there was no difference between the two prongs for standing purposes, and that part of the Third Circuit’s holding wasn’t addressed by Lexmark.)
The only damages Lundgren alleged with any specificity related to his wrongful termination, not from a Lanham Act violation.  In his deposition, he testified that his injury as the result of the ads was to “my reputation, particularly the guy here in Johnstown who saw me and was questioning me about that. Other people, colleagues who saw me. It just seems to … impede or whatever my image and who my alliance is with…. [It i]nfluences whether or not they can trust, I believe, what I say if they see me in other places, yet I’m practicing or trying to practice on my own.”  The court found these claims for “damage to his reputation” and/or “lost reputation and goodwill” vague and conclusory.  (And yet, how much do these statements differ from what courts routinely say about goodwill in trademark cases?)  He also cited no evidence that the ads featuring him were successful or affected Ameristar’s receipts positively.  Thus, at the summary judgment stage, he didn’t provide evidence raising a material issue of fact as to injury to a commercial interest in his reputation or sales.

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Dastar-ing about architecture: 7th Circuit reverses dismissal of credit claim

Posted on August 22, 2014 by rtushnet

M. Arthur Gensler Jr. & Associates, Inc. v. Strabala, No. 12-2256 (7th Cir. Aug. 21, 2014)
Previous coverage, wherein I was not enthusiastic about the district court decision finding that there couldn’t be a §43(a) claim based on an allegedly false claim to have designed a building.  Here, the Seventh Circuit reverses in an opinion by Judge Easterbrook, but I’m not sure it gives us a better view of Dastar, because it avoids the head of liability the Supreme Court told everyone to use in such cases (that no one uses), §43(a)(1)(B) false advertising.  The real issue I see in this case is Rule 9(b): is the application of Rule 9(b) to §43(a)(1)(A) claims supposed to be standard now?  Most courts don’t do that, and it would be useful to be clear about the answer to this question.
Strabala left Gensler, where he’d been a Design Director, to open his own architectural firm, 2Define Architecture.  He stated (either on the firm’s website or on his personal Flickr or both) that he’d designed five projects for which Gensler is the architect of record: Shanghai Tower, Hess Tower, Three Eldridge Place, the Houston Ballet Center for Dance, and the headquarters of Tesoro Corporation.  Gensler alleged that this was reverse passing off, and the district court dismissed the complaint on the ground that Strabala didn’t claim to have provided the physical origin of the structures (Dastar).
The court of appeals characterized the district court’s opinion as limiting §43(a) to false designations of goods’ origin (which I think is an odd characterization), and thus as holding that Gensler couldn’t invoke the Lanham Act because its claim concerned services.  This, Judge Easterbrook said, misread Dastar, which didn’t read “services” out of the Lanham Act.  Nor did Dastar hold that false designation of origin is the only way to violate §43(a); if it had done so, Pom Wonderful would have come out the other way.  (The weirdest thing about this statement about Pom is its complete failure to acknowledge §43(a)(1)(B), or the words (nature, qualities, characteristics) that are important in providing Pom’s claim but aren’t included in §43(a)(1)(A).)
In Dastar, the court of appeals continued, Fox didn’t contend that Dastar falsely identified itself as the videos’ creator “or made any other false claim.”  (Actually, yes, that is exactly what Fox contended; the Supreme Court just determined that what Dastar said couldn’t count as false.)  Here, by contrast, Gensler did assert there’d been a false claim of origin.  (As did Fox.)  But the claim here was for false designation of origin of services, not of goods.  (This doesn’t seem to deal with Dastar’s definition of “origin” as physical origin—which for services would mean the physical provision of the services.)  Gensler’s allegation was that Strabala falsely claimed to have been the creator of intellectual property: the building designs.  “Architects’ success in winning clients depends on what they have accomplished; Gensler has a strong interest in defending its reputation for creativity and preventing a false claim that someone else did the design work.”  (True.  But also true of authors of other creative works, and the Court explicitly said that the materiality of authorship to audiences didn’t matter in Dastarbecause the statute didn’t cover this conduct in §43(a)(1)(A).)
So, the court of appeals concluded, “Gensler contends that Strabala made a ‘false or misleading representation of fact’ (his role in designing the five buildings) that is ‘likely to … deceive as to the … connection[] or association of such person [Strabala] with another person [Gensler]’ and to deceive clients about the ‘origin’ of the designs. Nothing in Dastar forecloses such a claim.”  (Except for Dastar’s holding about what “origin” means.  I don’t see why you can’t replace “role in designing” with “putting its name on the cassettes” and get [Dastar] and [Fox] exactly here.  I think this failure of understanding might have something to do with the Seventh Circuit’s extremely confused understanding of what it means for something to be implicitly false.) 
There was no copyright claim implicated here—Strabala didn’t make any copies of plans in which Gensler claimed copyright.  “A false claim of authorship, without the making of copies (or some other act covered by 17 U.S.C. §106), is outside the scope of copyright law. Gensler’s only plausible federal claim rests on §43(a).”  (We are in complete agreement here!)
Now, the court of appeals continued, the question was whether Gensler had a tenable claim:
It charges Strabala with a form of fraud, so we would expect its complaint to allege with particularity the nature of the grievance—what Strabala said and why it is false. See Fed. R. Civ. P. 9(b). Yet the complaint contains only a few quotations and does little to explain what part of each is false. For example, it quotes this from Strabala’s Flickr site: “Shanghai Tower was designed by American architect Marshall Strabala.” But it does not say why the statement that he “designed” the building is false.
For all that this case thinks it’s about Dastar, this is the most significant part of the holding.  Because the court is writing about §43(a)(1)(A), the reference to Rule 9(b) is in fact extremely unusual, as most courts refuse to require trademark plaintiffs to plead with particularity.  (They’re more willing to require it of false advertising plaintiffs, even though there’s no warrant in the statutory language for the difference; the problem is that most courts don’t even seem to realize that there is any question, whether they’re applying Rule 8 or Rule 9(b), and don’t cite contrary cases.)
Back to the specifics: the court of appeals could think of three ways in which an architect’s claim to have designed a building could be false: (1) the architect didn’t work on the project at all; (2) the architect worked on the project but overstated his/her role (designed the details, but not basic appearance or attributes); or (3) the architect “worked on the project and contributed some or even all important features, but the project was so complex that no one person bore full responsibility.”  (Pause for obligatory acknowledgement that §43(a)(1)(B) jurisprudence has many cases dealing with similar questions as matters of puffery and materiality.)  Gensler’s complaint didn’t allege (1) or (2), but apparently relied on (3): “that big buildings are team jobs that no one designs.”  The complaint alleged, for example, that the Shanghai Tower team included approximately 100 people, and Strabala was only one of many members, making Gensler and not Strabala the source of the architectural and design services at issue.
The court of appeals wasn’t impressed.  “It is as if Warner Bros. wanted Michael Curtiz, who directed Casablanca, to keep silent about his role because the film could not have succeeded without Humphrey Bogart’s and Ingrid Bergman’s acting, Max Steiner’s music, Arthur Edeson’s cinematography, Murray Burnett’s and Joan Alison’s play, Julius and Philip Epstein’s screenplay, and the contributions of a hundred others—or at least to append to any claim of directorship something along the lines of ‘many persons in addition to directors bear credit for a film’s success or blame for its failure.’”  The court of appeals thought Gensler sought to make the auteur approach “legally impermissible” in architecture.
But if Gensler was really contending that “big projects require big teams, … where’s the falsity?”  Maybe if Strabala designed houses for unsophisticated clients, there might be a problem, though Gensler would have trouble proving damages.  But the parties’ websites and the complaint indicated that both parties specialized in large products with sophisticated clients. “People who pay millions for substantial projects (Shanghai Tower will cost more than $4 billion by the time it is finished in 2015) know full well that it takes an architectural team to design and execute the plans. They also know that teams have leaders—and Gensler has not alleged that Strabala said anything false by implying that he was the (or a) leader of the teams on these five projects.”  (I suppose it’s futile to say anything about appellate factfinding in the Seventh or Ninth Circuits particularly; Twiqbal at least provides some cover for this kind of plausibility determination, as the court will suggest below.)
Indeed, if sophisticated clients wouldn’t be misled, then Gensler is not just wrong but in the wrong: attempting to conceal the fact that a designer of big projects has flown the coop.  “[I]f Gensler wins this case other architects who leave will be required to keep mum about their accomplishments—and then it will be Gensler, not the departing architect, that is in a position to make a misleading presentation to a future client.”  If no real person designs a building, then Gensler never loses from the departure of talented designers.  The lawsuit could also be understood “as an effort to impair competition by imposing costs on a departing architect, even though setting up a new firm does not violate any contract (and the old employer does not allege a theft of trade secrets).”  But competition by “people who leave large firms to set up small rivals” is good for consumers.  (Given what the Seventh Circuit has said about awarding attorneys’ fees to defendants in cases brought for anticompetitive reasons, this commentary should make Gensler quite nervous.) 
As a result, the court of appeals was tempted to affirm the district court on alternate grounds, but Strabala hadn’t argued Rule 9(b) or Twiqbal.  “Nor does Gensler’s complaint rule out the possibility that it competes with Strabala to build some smaller projects with less sophisticated clients.”  The possibility that a tenable legal theory might fail on the facts was for the parties to argue at the district court in the first instance.

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Today in parody shirts

Posted on August 22, 2014 by rtushnet

I just acquired the Black Labour, White Guilt T-shirt from the Laugh It Off case, and I’m taking the opportunity to share some other parody shirts as well.

Black Labour, White Guilt

From my vacation:

Spider-Moose, New Hampshire

Then, continuing the moose theme:

John Moose, Calgary Canada, with moose in John Deere pose

Which let me, through a series of joke T-shirts, to:

“She wants the D” T-shirts with Disney D

That’s probably the most offensive variant I saw; the others were all sports teams.  My search also took me to:

Just Shoot It shirt with Nike logo curving into duck head

That one was, in my opinion, the most artistically successful of the Just Shoot It shirts, with the Nike logo curving nicely into the duck’s head.

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When should TM claimants use the Madrid system?

Posted on August 21, 2014 by rtushnet

Also via Lexology, Baker & McKenzie has an article setting out the pros and cons.  Highlights include the information that central attack leads to 2% of international registrations being withdrawn, and a handy checklist to determine whether Madrid is a good option (for marks central to a business or new marks not variants on old one, they recommend no).

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News for storage jars, Thai military coup edition

Posted on August 21, 2014 by rtushnet

Via Lexology, Rouse Legal penned The IP Upside of Thailand’s Military Coup.  Law enforcement priorities!

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Dastar and karaoke

Posted on August 21, 2014 by rtushnet
Slep-Tone Entertainment Corp. v. America’s Bar & Grill, LLC, No. 13 C 8526, 2014 WL 4057442 (N.D. Ill. Aug. 15, 2014)
Slep-Tone sued defendants for violations of the Lanham Act.  Slep-Tone makes karaoke accompaniment tracks sold under the trademark “SOUND CHOICE.” It also alleged a distinctive and protectable trade dress, which includes (a) the use of a particular typeface, style, and visual arrangement in displaying lyrics; (b) the Sound Choice marks; and (c) the use of particular styles in displaying entry cues for singers, namely a series of vanishing rectangles to indicate the cue. [As an aside, I would be interested to see the proof of these allegations with respect to karaoke audiences, as opposed to operators of establishments that host karaoke, who are the alleged wrongdoers in these cases and thus presumably unconfused.]
Slep-Tone originally released CDs encoded in a special format known as “CD+G” (“compact disc plus graphics”) allowing for synchronized playback of audio and video suitable for prompting singers with lyrics cues. These tracks can now easily be ripped to a computer hard drive and format-shifted to MP3+G or WAV+G.  Slep-Tone’s media-shifting policy attempts to impose rules on media-shifting karaoke operators.
Defendants provide  karaoke services through karaoke accompaniment tracks, stored on hard drives.  Slep-Tone alleged that they used “counterfeit” tracks displaying the Sound Choice marks and trade dress without authorization, likely causing users [who?] to believe that Slep-Tone created the tracks or authorized the services.  [We’ll hear more about Dastarbelow, but since our focus has to be on physical origin, I wonder whether consumers would have any opinion at all about physical origin here.]
Defendants argued that Dastarbarred these claims, since Slep-Tone’s marks and trade dress were inherent, indivisible parts of its copyrightable karaoke tracks.  Thus, allowing Slep-Tone’s claims would improperly create a “species of mutant copyright law.”  Slep-Tone alleged that the marks and trade dress were completely separable from the copyrightable content.  A prior case, Zuffa v. Justin.tv, rejected a trademark claim by an organizer of pay-per-view MMA fighting against a website that allowed users to upload and share video streams.  The trademark claim was based on the defendant’s display of trademarks, including the eightsided ring where championship bouts took place, when the video was streamed from defendant’s site.  Zuffa held that extending protection over marks inherent to the video, such as the ring, would prevent display of the video even after the copyright expired.  However, the court didn’t dismiss claims relating to the display of trademarks which were not an inherent part of the video broadcast.
At this stage, the court found that Slep-Tone adequately alleged that it was not impossible to display the copyrightable material without the mark.  [I think this is an interesting attempt to make Dastar work, but I’m not sure it succeeds.  Much depends on the facts; arguably this is just the “Scylla and Charybdis” problem discussed in Dastar, where the Supreme Court attempted to solve the problem by removing Scylla (no liability for nonattribution) but not necessarily removing Charybdis (possible liability for attribution, where attribution consists of something more than copying the expressive work).  Consider: the title of a work alone is uncopyrightable.  That implies that work-title = work for copyright purposes. But it must be the case that a trademark claimant can’t require a copier of a public domain work to use a different title for it.  Is the work separable from its title for Dastar purposes?  An additional wrinkle is that Slep-Tone isn’t claiming copyright infringement because, as I understand it, it doesn’t have the rights to do so; under other circumstances, its selection, coordination, and arrangement of the visuals might well themselves qualify as a copyrightable derivative work of the lyrics.  The Dastar problem, then, could be much deeper.]
Defendants also argued that first sale protected them because media-shifted tracks weren’t materially different from the original.  This is a version of my question about what consumers would think about source, though I wouldn’t frame it as first sale—and neither would this court.  While defendants argued that there was “no discernable difference in the bar patron’s experience in seeing, hearing, and perhaps singing along to a media-shifted karaoke track within the bar’s premises,” Slep-Tone alleged that the media-shifted tracks were unlawful counterfeit copies.  First sale doesn’t include copied items “merely because they may ‘pass’ for the original item,” and Slep-Tone alleged more than resale of original goods.

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Trademark question of the day

Posted on August 21, 2014 by rtushnet
Timesify makes any website look like the New York Times, so that your neighbors don’t know you’re reading something junky.  “In a matter of seconds, the article on how ‘Miley Cyrus Peed on a Tree’ will appear on a page that looks like The New York Times — and with a headline and photo from a bonafide, recent New York Times piece, like ‘Iraqi Relief Flights Rescue Dozens, but Leave Thousands Behind.’” What are the trademark implications?  Dilution?  There’s no sale, so can there be post-sale confusion?  Post-browse confusion?  Or should that be Times-browse confusion?  (I couldn’t help myself.)  There are even internet classic copyright issues: the pictures on the original site are swapped out for Times pictures—it’s not clear whether this is done through direct image linking or some other way.

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Is porn generic for pornography?

Posted on August 20, 2014 by rtushnet

Hey, it’s a porn case and not a Pom case!

Calista Enterprises Ltd. v. Tenza Trading Ltd., — F.Supp.2d —-, No. 3:13–cv–01045, 2014 WL 3896076 (D. Ore. Aug. 8, 2014)
Calista and Tenza (porntube.com) compete in the adult entertainment industry to stream videos.  This case involves trademark claims and counterclaims, including counterfeiting (more evidence for Mark McKenna’s concerns that infringement is collapsing into counterfeiting).
Porntube.com is operated by non-party DreamStar, which is managed by a person who is also a shareholder of a company (FUX) that is a shareholder of Tenza.  Content producers upload content to Porntube.com; Tenza makes its money through (1) third-party ads on Porntube.com and (2) payments from content producers when visitors click through and make a purchase.  Tenza uses “search engine placement services” to promote its content, but its primary marketing tool is its affiliate program.  Operators of other adult sites include links to Porntube.com, and Tenza compensates affiliates on a per-clickthrough basis.  Tenza has registered PORNTUBE for its services.
Calista, working with several other corporations, runs websites that that “categorize” and link to third-party websites that stream pornographic videos.  In 2009, DreamStar invited Calista to participate in an affiliate program for an adult site, 4tube.com, and then invited it to join a similar program for fux.com.  In 2011, DreamStar asked Calista to join the affiliate program for Porntube.com, and was one of the most productive affiliates in the Tenza affiliate program. Calista registered a number of domains containing the words “porn,” “tube,” or “porn” and “tube” in various combinations. Some were used as part of Calista’s participation in these affiliate programs.
Calista’s first registration of a domain name including “porntube,”freshporntube.com, was in 2009. After that until January 2011, Calista had 15 websites with domain names containing both “porn” and “tube” in various combinations. After that August of 2013, Calista used at least an additional 17 domain names containing some permutation of “porntube.”  There were at least 14 domain names including “porntube” verbatim, also including goldporntube.com, bookporntube.com (my personal favorite), and cubeporntube.com.
In 2013, Tenza used the UDRP to challenge 13 Calista domain names; a panel ruled in Tenza’s favor, triggering this suit by Calista.
The court denied summary judgment to both parties on whether Porntube was a valid mark.  Calista argued that “porn” and “tube” are both generic, making “porntube” generic.  Calista’s expert stated that “What most consumers refer to categorically as ‘tube sites’ represents the largest segment (by popularity and traffic counts) of all known adult entertainment streaming video web sites online.”  Tube sites, he said, are video aggregation sites. 
Tenza argued that “tube” alone wasn’t generic, and that “porn” was merely suggestive because one expert called “porn” a term that was “a fun word” and “a bit tongue in cheek” compared to “pornography.”  (“Mommy” is a bit tongue in cheek for a child who’s reached a certain age, but it’s still generic for mother.) Calista’s expert Marc Randazza also said that “porn” is used in phrases such as “food porn and nature porn,” phrases that have “nothing to do with sexuality,” indicating that “porn” is a more socially acceptable term than pornography.  (“Brain food” isn’t food; I don’t see how that’s relevant to whether porn is generic for porn, nor do I think the existence of casual and more formal words for the same thing means that either word is non-generic—compare “pub” and “restaurant” and “eatery” or “refrigerator” and “fridge”; not to mention the fact that casualness could be a big part of why a term might be competitively necessary, a key justification for genericness doctrine.  None of this is to say I think “Porntube” is obviously generic, but “porn” plainly is.)  But the court concluded that the parties’ “conflicting explanations of the meaning of the words ‘porn’ and ‘tube’” prevented it from finding the composite term generic on the ground that both components were generic.
More generally, “generic individual terms can be combined to form valid composite marks.”  Dictionary definitions aren’t determinative of public understanding.  The key inquiry is whether there is evidence that to the consuming public the primary significance of the term is to identify the service or product and not its source.  There was a genuine dispute of material fact about whether the terms “tube” and “porn” are, in isolation, generic terms, and an additional question about their composite use.
On the composite question in particular, Calista pointed to over 3200 registered domain names uisng “porntube,” with more using the variant “porn-tube” and “tubeporn.”  Tenza’s own expert explained his “conservative” belief that one-quarter to one-third of all free adult-entertainment websites describe themselves as being a “porn tube.”  Tenza argued that there was no evidence of use of these domain names.  Of the “porntube”-using domain names listed by Calista in response to an interrogatory, there were at most 45 unique registrants. Tenza’s argument that this potential use was de minimis presented a question of fact, as did Tenza’s criticism of using Google search as a mechanism of determining use.
Calista argued that Tenza itself used “porn tube” generically to describe a type of video. Tenza’s website title description says: “Watch FREE porn videos at PornTube.com with new porn tube videos added daily.” Tenza also used “porn tube” in various captions of videos, though it wasn’t clear whether the references were to material on the website or external material.  Tenza’s expert described this as an attempt to describe the content of videos, “written with the widest variety of high traffic catch phrase and search terms.”  Tenza argued that although these references should have been capitalized, used as one word, and followed by ®, these small errors do not mean that Tenza meant to use the phrase “porn tube” to indicate the type of product rather than the source.  The court found this to be a jury question.
Dictionary definitions were also not dispositive, as the parties disagreed about which dictionaries to use, and Tenza maintained that Webster’s Third was more appropriate; it didn’t mention “television” as a definition for “tube.”  (Really?)  Again, there was a genuine dispute of material fact.
Generic use in media:  Calista argued that it identified several dozen generic uses of the phrase “porn tube” in adult-entertainment news sources and magazines, television news shows, and academic journals. Tenza’s expert conceded that with some media sources, the phrases “tube site” and “porn tube” were used interchangeably.  Tenza argued that these references were “hearsay” (no, they weren’t, because they weren’t offered for the truth of the matter asserted), and offered articles that didn’t use “porn tube” generically but instead used “tube site.” This question was again better left for a factfinder, which could use the media evidence to find either for or against genericity.  Likewise with testimony about the opinions of people in the trade.
Consumer surveys: The court first resolved some evidentiary disputes: consumer surveys were relevant here because the legal standard required the court to look at the composite mark as a whole; combinations of old words to create new phrases can be nongeneric.  Tenza’s survey might be excludable because the expert defined “adult streaming video” wrongly (he thought it meant live interaction), but that didn’t matter because even if the survey were excluded summary judgment for Calista would be inappropriate.  Other weaknesses in the survey universe (e.g., failure to exclude respondents who were part of the adult entertainment industry) went only to weight, not admissibility. 
Calista also challenged the survey’s reliability because, immediately after asking, “Would you say PORNTUBE is a brand name or a common name,” the survey asked “Which of the following are names of adult entertainment streaming video websites of which you have heard?”  While Calista argued that this would inflate the number of respondents claiming to recognize Porntube, the court didn’t find it enough to doom the survey.  The survey first asked about several different names or terms, with “Porntube” the fifth listed. Then the survey listed ten adult-entertainment streaming websites, including listing “porntube” last.  Calista’s criticisms might carry weight, but the survey questionnaire didn’t suggest its own answer.  “[T]he first question, about recognizing certain words as brand names or common names, is not directly related to the next question, which asks survey participants if they are aware of certain adult-entertainment streaming video websites.” Thus, Calista’s objections went to weight and not admissibility at this stage.
Tenza argued that its survey plus that of Calista’s expert proved nongenericity.  Calista’s expert surveyed 247 qualified respondents and found that 49% of the respondents recognized “porn tube” as a brand name, while the remainder called it common or weren’t sure. Tenza’s expert by contrast found that 79% of the 840 qualified respondents identified “PORNTUBE” as a brand name, and 51% said yes when asked if “PORNTUBE” was as an adult-entertainment website they had heard of.
Ultimately, the overall question of genericity was for a finder of fact.
So too with infringement. Although Calista used “porntube,” it also added arbitrary and suggestive words, which might or might not be enough to change the sight and sound of the domain names enough to distinguish its use.  The difference between the parties’ services—an affiliate site that categorizes videos and directs viewers to other sites, versus a destination site that provides content—also might or might not matter.  For actual confusion, Tenza’s survey found that “for Calista’s prefixed websites using the phrase ‘PORNTUBE,’ between 24 and 34 percent of the consumers believed that the sites were associated with ‘the PORNTUBE brand.’” Tenza was also served with a DMCA takedown for largeporntube.com, owned by Calista.  Again, this wasn’t enough—a jury could find it more than de minimis, but the court wasn’t going to do so at this stage.  Marketing channels were the same, but that doesn’t matter because everyone uses the internet, per Network Automation.
On consumer care, blessedly the court didn’t treat Playboy’s assertions about the easy divertability of adult entertainment consumers as binding, deeming it “dicta.”  Neither party presented evidence on “the psychology or ‘divertability’ of a consumer of adult-entertainment streaming videos on the Internet, thus Playboyis not particularly helpful to either party on this issue.”  However, since the content on both parties’ sites was free, that tipped in favor of finding likely confusion.
Intent: because of the debate over genericity, Calista’s intent was also ambiguous.  As for likely expansion into other markets, “[t]he Court finds, and both parties agree, that given the identity of the parties’ respective services, this factor is unimportant,” which seems to contradict the court’s earlier, more uncertain holding on the relatedness of the services (not to mention its counterfeiting reasoning, up next).  Regardless, there was a genuine dispute of fact on likely confusion as a whole.
Counterfeiting: A counterfeit is “a spurious designation that is identical with, or substantially indistinguishable from,” a registered mark and that is applied to the goods (or services) covered by the registration.  The court found a genuine dispute about whether Calista’s domain names were “identical with” or “substantially indistinguishable from” the registration, given the dispute over the validity and strength of Tenza’s mark.  A mere “colorable imitation” is not counterfeiting. 
Plus, it was disputed whether PORNTUBE “was registered for use on the same goods to which the infringer applied the mark,” since proximity of the goods was in dispute.  The parties disagreed about the relationship of an affiliate website to a destination site.  “Although both websites offer clips of adult-entertainment streaming videos, there may be a meaningful distinction between the way in which these clips are offered to consumers.”  Summary judgment denied to both sides.
Comment: Missing here is any discussion of what the registration says, which ought to be dispositive, but may have been overlooked because of the increasing identity between infringement (which supposedly just looks at consumer confusion) and counterfeiting.  FYI: “Entertainment services, namely, providing a website featuring adult entertainment; Entertainment services, namely, providing a website featuring photographs, videos, related film clips, and other multimedia materials in the field of adult entertainment.”  I don’t see a limitation to destination sites.
Cybersquatting:  Again, there was a genuine dispute on whether Calista’s domain names were “confusingly similar” to Porntube.  Some of the statutory bad faith factors were also debatable, especially given the genericity dispute.
Calista argued laches.  The Lanham Act has no explicit statute of limitations, so the court borrowed—here from fraud, which it thought was the most analogous state claim (2 years); going past the limitations period would trigger a presumption of laches.  Calista argued that Tenza’s principle knew of Calista’s tubepornmix.com website as early as October 2009 and knew about Calista’s goldporntube.com in June 2010, while he was working with Calista through the 4tube.com and fux.com affiliate programs.  He sent Calista an error log report that referenced goldporntube.com in March 2011, and Calista was one of Tenza’s top affiliates for more than two years, so Calista argued that Tenza should’ve known about the domain names.
Tenza argued that it didn’t have constructive knowledge, because the early communications occurred before its principal actually became involved with Tenza.  It also argued that the error log wasn’t sufficient notice, and that even assuming it was on notice then, it filed its UDRP action on March 25, 2013, only 17 days past the two-year laches time period. This created a genuine dispute of material fact on when Tenza knew or should have known.
Laches also requires prejudice.  Calista argued that it expanded its business during the time Tenza should have acted to protect the mark, and that Tenza’s delay caused Calista prejudice because it was building a valuable business around the disputed domains.  This would depend on when Tenza was on constructive knowledge, so it didn’t allow summary judgment for Tenza.
Tenza did win summary judgment on Calista’s claim for damages for loss of revenue it otherwise would’ve received for being a Tenza affiliate, legal fees, and lost domain name value. Calista didn’t identify evidence in response to Tenza’s motion for summary judgment. As a matter of law, Calista wasn’t entitled to money damages, though if it ultimately prevailed on its Lanham Act claims it could still move for an attorney’s fees award.

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