The Next Great Copyright Act Conference, part 2

Posted on April 3, 2014 by rtushnet

Exclusive Rights and Infringement

Moderator: Kristen McCallion, Fish & Richardson

Gerard Lewis, Comcast

Courts have enshrined various business models—is that a good model going forward?  Public performance: relatively new right. History of figuring out whether communication to the public was a public performance.  Move of radio and then TV from foreground experience to background/pervasive. Change in technological limitations—innovation to improve the experience. Court initially said that cable TV wasn’t a public performance, just an enhancement of the transmission.  Congress acted: framed exclusive right broadly, definition of public performance broadly. Exemption for homestyle receivers in public places was framed very narrowly.  Made a number of assumptions about tech: tech available for private homes would remain distinct from that available to commercial establishments, an assumption no longer as valid now.  Technical and detailed factors—number of receivers, length of wires, money taken in by establishment; contrast to broad definition of exclusive rights.  Result: Fairness in Music Licensing Act, expanding the exemption, nearly 600 words.  Next copyright act: don’t want to count bytes or other technical factors; that doesn’t seem to work.

Predictability and certainty are desirable, but worry about purpose built and specific provisions, such as AHRA model, where tech quickly becomes obsolete and doesn’t provide guidance.

Felix Wu, Cardozo Law School

Judge Chin in Aereo: Courts should resist the temptation to look under the hood.  Aereo feels a lot like a cable system—functionally, is it the equivalent?  A different case: ReDigi: tried to create a market for digital first sale. SDNY said there was no digital first sale, because there was reproduction and not distribution. If you didn’t look under the hood, the result might have been different.   Not obviously a principle that favors owners/nonowners.

So what should we do going forward? Not clear that Congress has led/signalled at all. One key question to answer in the next formulation of exclusive rights: how much will we look under the hood and how much define in functional terms.  (Why not go all the way to making available?)

We need to know the underlying goals of © law to have a functional definition.  So his concept might be access. Reproduction might have been an attempt to mediate access to a work. Counting the number of books printed gave you some idea of how many would have access, though there’s not a pure 1-to-1 correspondence.  But access is now potentially on both sides of the equation, not just incentives v. access.  Consumptive/productive access. Is there a better way to split consumptive from productive uses? Though of course those categories are tied up.

Neil Netanel, UCLA Law School

Conducting empirical study of infringement/substantial similarity cases.  Trying to figure out what the tests are, whether there’s any correlation with outcomes, types of work, identity of parties, etc.  Paul Goldstein said the most important rule is that Disney never loses; wants to test that empirically (now that it has Lucasfilm, it at least inherited a loss or two!).  Do courts filter out unprotectable elements, and how do they define those? For which issues do they rely on expert testimony? How often do defendants admit copying or access? When there’s an exact copy, a prima facie case has been made: defenses will either be ownership, noncopyrightability, or another affirmative defense. Most interesting/troublesome cases involve comprehensive nonliteral similarity (like the recent Disney/Snowman case, which may also provide a data point).  Second Circuit and Ninth Circuit offer the major approaches. 9thCircuit’s extrinsic test seems to cover both “copying in fact” and “wrongful copying,” and then its intrinsic test seems similar to the 2d Circuit’s test.  There are lots of variations on these themes even within the circuit.  Students invariably ask whether the tests make a difference.  We don’t yet know, and that’s why we need a study.

Lots of criticisms of these tests; Pam Samuelson & Mark Lemley prominent among them.  Both argue for some version of inverting the stages, or bringing more objectivity from first stage to second.  Initial results suggests it’s even more a mess than we thought.  Initial survey was developed based in part on Second Circuit’s distinction between copying in fact and wrongful copying, and we asked if courts actually made that distinction, or applied the inverse ratio rule.  We found out in the pilot that our RAs had no idea what we were talking about because even in the 2d Circuit courts often make no distinction whatsoever between copying in fact and wrongful copying; they just talk about “copying” or “unauthorized copying” w/o making it clear whether that meant license or authorized by law, or “protectable expression” without saying how much or what that meant. Redesign: ask RAs to identify statements about what would support a finding of infringement, and then determine which statements go to copying in fact/wrongful copying.

What should be the locus of reform?  Preliminary experience suggests that some clear pronouncement of the test and the relevant factors is needed, whether from Congress or the SCt.

Christopher Sprigman, NYU Law School

To an antitrust lawyer, much about copyright seems odd, including the prima facie structure of a copyright case.  On one end of spectrum, massive commercial infringement—copies of recent blockbuster. At heart of copyright law: consumptive, compete with originals in market, displace demand otherwise satisfied by legitimate work.  At other end: parents post video of toddler dancing to a Prince song—not displacing, not a valid licensing market. Yet copyright law prescribes the same sort of prima facie case for either, despite the different effects on authors/markets.  For an antitrust lawyer, this seems odd.  Antitrust is based on the view that competition is efficient; copyright holds that unrestrained competition among copyists results in market failure. Sprigman has no quarrel with this more pessimistic account of competition in some ways, but different acts pose different risks, and the law should deal with it better.

Antitrust has the same problem and does deal with it better. Some conduct is highly likely to be harmful, like cartels. Exclusive deals may sometimes harm competition, sometimes be irrelevant, and sometimes help competition. Antitrust marks out a category for per se violation of the law: Ps need not prove market power or harm to competition; such harm is conclusively presumed. For all other conduct, antitrust uses a rule of reason. P is required to show market power and likely harm to competition. Makes sense: where we believe that conduct is very likely to do damage and very unlikely to produce benefit, we give P a cause of action that is essentially strict liability. For other conduct, we put P to the proof that the P ought to be in a position to produce.  What’s in the category changes over time—minimum resale price maintenance has been moved into rule of reason.

Contrast with ©, where no P is required to show harm as an element of the prima facie case, even when the conduct seems unlikely to cause harm.  Castle Rock: never showed that they wanted to enter the quiz book market, but court just hypothesized that they could and thus hypothesized harm. 

Could we import this mechanism into the next great copyright act? Yes, we could have a category of per se copyright infringement—current liability structure should be for this category. Everything else should be rule of reason and P should be required to show harm as part of the prima facie case.  He has suggestions, but they are a first cut—copyright litigation should be an engine of learning, which allows Ps to provide evidence about what causes harm (and what doesn’t), so the categories’ content can change over time.

(1)   Only registered works should be in the per se category. Registration is a signal about potential harm.  Registration should produce a bigger difference in treatment.

(2)   In addition, use of work must also be consumptive/likely to displace demand. Thus it must be exact or near exact copy/performance.

Everything else should be rule of reason: derivative works, unregistered works, licensing markets not involving exact copies.  Sprigman’s article on this proposal covers this in more detail.

Q: what about antitrust power of large aggregations of copyrights? ASCAP/BMI consent decrees ended up in pretty workable licensing scheme. Is there any point in looking at major film companies, etc. for something like that?

Sprigman: antitrust consent decrees are example of antitrust’s ability to learn. Price-fixing is possible, but blanket licenses also lower the cost of licensing, which requires ingathering copyrights. Blanket licenses are procompetitive, plus safeguards to prevent abuse. Safety valve: resort to court determination of rate; rules against exclusive licensing.  SESAC is now under antitrust attack from private plaintiffs, and got past the motion to dismiss case because SESAC has struck exclusive deals for what Ps say are must-have categories of music and raised prices substantially. Conduct comes in various forms—antitrust can look at this as copyright hasn’t except a bit in fair use analysis.  Need more because fair use is subject to a chilling effect.

Q: isn’t this too expensive to prove market harm, as in antitrust?

Sprigman: doesn’t think so, but we can learn over time.  Could have various presumptions to help Ps.  Antitrust has a sunny view of markets—tends to see them as resilient to anticompetitive conduct, while copyright doesn’t, and he thinks the empirics suggest copyright is wrong—markets adjust to piracy. May not adjust optimally, but we don’t actually know what the optimum is.

Q: could fair use get us to that world? How would a rule of reason reduce chilling effects more than fair use?

Sprigman: fair use has gotten more capacious relatively more recently. We’re seeing some market harm principles enter through the back door, but that’s not efficient. Channel litigation according to whether market harm can be shown.

Q: format shifting is becoming more relevant—backups, Kindle to hard drive, etc. Is there a way to bring this into formalization?  (Private copying exceptions that plenty of other countries have, maybe?) 

Wu: that’s an example of figuring out what we mean by access. Why would format shifting even be a problem? Because we’re focused on reproduction. If instead we focused on access, that would suggest that format shifting isn’t something we would care too much about.

Glynn Lunney: public performance right used to be against competitors; there used to be natural monopolies, with only one large theater in town, one or two TV stations. How should we structure public performance now that’s not true?

Lewis: transmit clause tries to deal with that, but doesn’t necessarily do it well. Physical natural monopolies are largely past (RT: um, at the content level maybe, not at the Comcast level!).  Cloud services—can rent space on Amazon and be as much of a cloud provider as Netflix or Dropbox.  Wu’s point about looking under the hood: we might not like what we see, or we might need to figure out what counts as a hood.  Need to know the problem we’re trying to solve.

Q: of the various tests for nonliteral infringement, do any adequately address software?

Netanel: Typically in software cases the test is much more abstraction and filtration based.  Merger, etc.

Sprigman: the way they vary it has to do with competition. Filtration is a decision about competition.
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The Next Great Copyright Act Conference, Berkeley: part 1

Posted on April 3, 2014 by rtushnet

Copyright Subject Matter and Formalities

Moderator: Daralyn Durie, Durie Tangri

Tony Reese, UC Irvine Law School

Revising the © Act will require defining the scope of subject matter; not recently controversial but important threshold question—hard to evaluate rights and remedies w/o subject matter. Represents Congress’s decision about which types of authors’ creations need © protection. No major controversies now, as sound recordings were in the 70s, but wants to propose principles for drafting.

How we got here: gradual expansion of © subject matter over time.  1909 approach: “all the writings of an author,” plus a list of classes in which works can be registered—familiar list.  Courts/© Office generally treated the list as comprehensive.  1976: extends © to all “works of authorship,” expressly undefined, but another list of categories included. 1990: added architectural works.

(1)   Statute should expressly enumerate all of the categories of subject matter that Congress intends to protect. Current statute doesn’t do that.  Given the substantial, long-lasting exclusive rights given to anyone who fixes a minimally creative work of authorship, many people might want to claim statutory protection. Recent controversies: yoga poses; artistically planted flowerbeds.  Perfume/fragrance (controversy in Europe); culinary dishes; fireworks displays; typography; digitally recorded smells; golf course design; invented languages; tactile sensory enhancement for books. We should avoid these undefined, open-ended, residual claims. Whether we protect a work with © is a policy question Congress should answer: is protection needed for perfume to encourage sufficient production/dissemination, and do the benefits of protection outweigh the costs? Constitution commits the Q to Congress and is better positioned to answer in general rather than facing one copier and one copied claimant.  Restitutionary impulse of courts fights against the empirical/policy analysis needed for whether protection is generally justified. Congress can also tailor protection if/when necessary. Congress could choose sui generis regime for perfume if something is needed.  (E.g., no derivative work right for perfumes, as the rules differ for sound recordings/architectural works.) Otherwise, © will be binary: if perfume is protected, there is a derivative works right. If perfume is protected, anyone who’s copied w/in the statute of limitations is on the hook; but Congress typically adds subject matter on a forward-looking basis, and can deal better w/timing and retroactivity. Given all this, it’s unsurprising that courts and the © Office have generally declined to take up the statute’s invitation to discover new categories.  1960s: when Office registered computer programs, it did so as books (like how-to books).

(2)   Statute should protect compilations and derivative works only if they fall within one of the enumerated categories; current statute is ambiguous. Consider a zoo: current definition says the collection and assembling of preexisting materials. If it’s original and the collection is stable enough to count as fixed, then a zoo is a compilation even though it’s outside all the enumerated categories. A menu could be protectable; disc of digitally recorded smells.  No clear need to protect such compilations outside the categories; the Act should be clear. The Office so interprets the Act but it should be clearer.

(3)   Statute should define each enumerated category; currently define only 5 of 8, and definitions could help.  Choreographic work: would help know whether yoga, sports routines, bicycle ballet count as choreographic works. Definition of dramatic works might help in Garciawhether an actor’s individual performance counts as a dramatic work.

(4)   Congress shouldn’t just punt by going to the constitutional power. 

Wendy Gordon, Boston University Law School

Subject matter and exclusive rights can be reformulated so each means the other; useful articles are a good example.  Reese’s suggestion about compilations/collective works is great and should be adopted.

Problem: historic division between patent and copyright. Patent’s negative pregnant: things that aren’t patentable/patented but functional—therefore in the public domain, at least as far as in rem exclusive rights are concerned.  This preserves competition/incentive for people to pursue patents for patentable subject matter. Patent wants to secure progress; we don’t want © with its long term and broad scope to get in the way, but there are a lot of beautiful objects that aren’t functional.  So it feels wasteful to deny © to pretty things that aren’t inventive enough to patent.  However sad that fact might be, © isn’t the place for expansive protection, though she has no objection to a narrow sui generis design right (or design patent, which needs improvement but does exist).

Ok, so we have this bifurcation into © and patent subject matter.  Ordinarily, other IP laws defer to patent and its negative pregnant.  But there’s a struggle to keep finding some compromise to allow the aesthetic aspects to be sheltered by some sort of exclusive claim when no real harm to patent would occur.  Baker v. Selden was right to focus not on the intangible itself but the purpose it served.

What are the appropriate subjects of ©?  Educate, enthrall, allow us to dance—none of these belong in patent. When these functions are served, no special scrutiny need apply.  Current statute describes useful article for items whose creativity resides in shape and line: intrinsic utilitarian function not merely to portray appearance/convey information.  This works for visual works, but not for things like dance, music—need a slightly different definition. Drassinower: © is about communication and works that don’t communicate shouldn’t be protected, but CONTU turned its back on that some time ago. Whether or not we adopt © as communication or something more visual and shape oriented, some conception of object- or purpose-limited definitions of subject matter makes sense.

What of a musical tone that releases your phone messages? Vocalization that encodes an encrypted file that is unlocked by voiceprint?  Those are things we wouldn’t want copyright to protect: they are functional.  Visually pleasing pattern of notes made into wallpaper: likewise.

Separability has caused much heartburn, caused not just by inevitable differences in perspective but by awkward drafting of test: whether features can exist independently of utility has very little to do with the policy at issue, which is to keep things that help utilitarian progress stay public domain or governed by patent law. Test should be switched to make that point more clearly. Has statutory amendments to propose.  Copyright in a picture of a object doesn’t extend to any right to control making the object. And rights in the object don’t extend to rights that would impair the public’s ability to copy the utilitarian aspects.

Rob Kasunic, U.S. Copyright Office

Time for big revision instead of legislating on margins, according to Register Pallante. Hearings on copyright issues have begun.  Many roundtables at Office and PTO/NTIA have begun. Hearing on subject matter was an eclectic mix.

Encouraging provision of standardized unique identifiers of works/authors/owners could foster a more efficient market and reduce orphan works. Lots of recent press on UK’s Copyright Hub as central source for info collection/provision. We have 150 years of data on this through public registry/recorded documents.  That is our Copyright Hub, which we need to improve and modernize. This needs funding! Invest in unique attributes of public registry, which can then interact with private registries that serve specific communities/needs. We can be a model for the international community if we make it happen. 

Registration is the foundation of the Office and the national copyright system as a whole. We must teach people what registration is and does. Most © text books only spend a few pages on this, and most law profs don’t know just how great a role registration plays.  But enormous effect on litigation.  Practitioners are well aware of registration questions. On an average day a registration employee does the equivalent of 5-6 copyright final exams.  Issues w/useful articles and compilations are both significant questions for the Office. We are required to examine claims/deposits and issue or refuse certificates.  Has recommended creating a registry of refusals, which would be useful to the public. We also require claims to be amended/clarified/unsupported statements to be removed; we annotate certificates to clarify their scope.  Claims depicting useful articles will be annotated with §113 language; claims that seem to talk about an idea will be annotated with §102 language; we may register under a rule of doubt—expects rulemaking on computer programs/intersection of copyright and trade secret.  It’s troublesome if there’s an infringement action based on something no one at the Office ever reviewed/redaction for trade secret, and claims are on the rise.

We serve as a check on overreaching, and help courts when they give us a chance.  Kasunic drafted policy statement on compilations that don’t result in copyrightable subject matter—not just the Office’s whim, but following from legislative history. This allowed court to resolve a lawsuit on Bikram yoga that was pending for years; court quoted heavily from policy statement. Compilation authorship must be perceptible in the deposit, which matters for things like numbers, putting us at odds with two courts of appeals. We’ve defined choreography for rejecting social dance/end zone dances. We’ve rejected synthetic DNA claims. We’ve stuck to our useful articles/separability analysis, and the 9th Circuit has given us deference in the recent hookah case.

Registration system has had significant victories in the last years: Proline, court agreed it had no authority to order issuance of certifications of registration.  Court deferred on what info has to be in an application. Brownstein: 9thCircuit found no authority to order Office to cancel registration. We get deference if we are reasoned and logical and show our work.

Threats: private registries will not fulfill these goals; they may provide info, but they do not provide a filter.  Second threat: the application approach that some courts follow, allowing jurisdiction before issuance of registration; undermines registration/national copyright system.

Solidify and invest in this role through the revision process.

Carl Malamud, Public.resource.org

Public.resource.org puts public databases on the internet, when unavailable perhaps because of misguided fee structure or agency says it’s too hard to do or nobody cares about info (that’s what we heard from SEC and PTO, even though patent database is specifically called out on Constitution). We are suing IRS to get e-file data online. We put video online—14,000 hours of congressional hearings; 6000 videos on YouTube and Internet Archive, with 50 million views.

We do the law. All courts of appeals—many times retyped.  Court documents, with full privacy audit.  One of our most important tools is “government works” clause, which must be reaffirmed. Unique to US and very important tool for online info.

Another doctrine, not explicit in the law: “edicts of gov’t”—the law has no ©.  Wheaton v. Peters, reaffermed over and over, e.g. in Veeck. But: Mississippi AG has threatened us with $1000/day fine per law, claiming under state law.  In Georgia, the head of judiciary committee in Senate has sent us multiple takedowns for posting the only official code of Georgia—© is asserted by the state. Delaware Code: says that anyone who uses code w/out authority of secretary of state shall be fined or imprisoned.  Harvard law students sought a license to speak the law.

Half the cities in California asserted copyright, but we’ve found cities remarkably cooperative.  Volunteers have gone in and taken codes, and made dramatically better versions: dccode.org is a dramatically better product. It’s partly democracy and partly innovation: better tools for citizens and lawyers.

Legally mandated public safety codes and tech documents: building, fire, elevator, boiler, etc. codes. In some ways the most important laws, and when ignored you get a 1000 foot wall of flame in a gas refinery explosion. These laws are typically enacted at state level, but we also have many in the CFR—hazmat transfer, pipeline safety, workplace safety. We’ve begun posting these in 2008. We redraw graphics so that they can be resized; we recode the formulas so they can be read by accessible readers. 19,000 public safety codes for the country of India.  Train safety; food processing; water testing; toy safety; etc.

This isn’t a theoretical issue—we’re being sued in DC for having posted the national electrical code mandated in all 50 states. We’re being sued in Germany for having posted the standard of safety in Europe for baby pacifiers. We have 28,000 documents: theoretically could be billions in statutory damages. But the concept that the law is not copyrightable because it is owned by the people is crystal clear in the common law. Requiring a license to speak the law is fundamentally undemocratic, but this muddled state has a huge chilling effect on innovation. Codify “edicts of law” exclusion. Breyer: if the law isn’t public, it isn’t the law.

Durie: the world is changing; there will be new things we can’t imagine—why should we make an exclusive list?

Reese: there’s been no case made that any of the examples I mentioned are underproduced without copyright protection.  We certainly don’t want to exclude blog posts because they’re not books, but of course the broad interpretation of “book” in the 1909 act would have allowed that.  We have broad categories now, and they can take care of new technologies. To the extent really new tech comes along, like digitally recorded smells, or changing your heart rate with a character in a book as you read, it seems fine to say that judicial or administrative interpretation shouldn’t let that in and Congress should act.

Durie: should we reject copyright protection for unfixed performances, or rethink that?

Gordon: we don’t have constitutional freedom to do that. Main thing needing clarification: unfixed works look like they can be protected by state law, but the §301 kind of saving clause shouldn’t be read literally, and protection for unfixed works should be preempted when it would interfere with the objectives of federal copyright.

Kasunic: in many cases the question comes down to “what is the work?”  Fireworks, food on a plate—the images thereof could be a work, but sometimes people get confused about what’s protected. Portrayal of uncopyrightable subject matter can sometimes be copyrighted; this causes enormous problems in registration system, and we’re trying to at least separate the issues. People don’t send parks to us in the mail, or fireworks.  We get ID material, and that material is always some other kind of work, and getting clarity there is important.  Same with unfixed works. In order to talk about infringement, you have to fix the work!

Durie: magic tricks—Office’s view?

Kasunic: Teller’s magic trick was registered, very thorough description with step by step description and drawings. The question is the scope: §102(a)/§102(b)—at some point you always reach an idea, system or process.  We could ask Congress to resolve this, but Learned Hand said it well: nobody will ever fully define that line.

Reese: Congress could give some help by defining pantomime or dramatic work, but left us at sea.
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mandatory disclosure doesn’t have to correct deception

Posted on April 2, 2014 by rtushnet

American Meat Institute v. United States Department of Agriculture, No. 13-5281 (D.C. Cir. Mar. 28, 2014)

The court rejects challenges to meat labeling rules that demonstrate once again that commercial speech regulation and the post-Lochner settlement are inextricably linked. Here, the Department of Agriculture’s Agricultural Marketing Service adopted a rule implementing Congress’s requirement of country of origin labeling (COOL) for meat. Under the relevant statute, a US label is reserved for animals exclusively born, raised, and slaughtered in the US, while animals from multiple countries have to be labeled with their countries of origin.  The rule requires retailers of “muscle cuts” (meat other than ground meat) to list the countries of origin in which the source animals were born, raised, and slaughtered, distinguishing among those acts where required. The previous rule merely required the phrase “Product of” followed by a list of the countries of origin, and allowed commingling (in which cuts from animals of different origins, but processed on the same day, could all bear identical labels).  Canada and Mexico filed a WTO complaint against the previous rule, and a panel found against the US, apparently based on “an objection to the relative imprecision of the information required by the 2009 rule.”

Under the new rule, acceptable labels (assuming the truth of the statements) are “Born, Raised, and Slaughtered in the United States,” “Born in X, Raised and Slaughtered in the United States,” “Born and Raised in X, Slaughtered in the United States,” etc.  There’s no longer an exception for commingling.  The court of appeals first affirmed the district court’s ruling that the regulation didn’t unlawfully ban commingling.  The rule doesn’t ban any element of the production process; it just requires accurate labeling.  Under current practices, meat packers can’t provide accurate labels if they are engaged in commingled production.  The necessary changes may be costly, but that doesn’t “force segregation” as the plaintiff complained, “except in the sense that compliance with any regulation may induce changes in unregulated production techniques that a profit-seeking producer would not otherwise make.”  Here, the objection isn’t a First Amendment objection—it’s more in the nature of substantive due process.

The court turned to the First Amendment argument.  First, the plaintiff argued that Central Hudson ought to apply, not Zauderer, because this wasn’t an anti-deception regulation.  The court held that the disclosure was “purely factual and non-controversial,” and, unlike the challengers in United States v. United Foods, Inc., 533 U.S. 405 (2001), or R.J. Reynolds Tobacco Co. v. FDA, 696 F.3d 1205, 1212, 1216-17 (D.C. Cir. 2012), the plaintiff didn’t object to the content of the mandatory message.  It objected to the term “slaughtered,” but retailers are allowed to substitute the euphemism “harvested.”  (Harrumph.  The court recognizes that this is a euphemism; slaughtered is the factual and noncontroversial term—the animals’ lives are deliberately ended in a systematic way.  Producers may fear that consumers will be squeamished if reminded in any way that their meal once had a face, but that just shows how misguided the idea that disclosures should be “noncontroversial” is.  It’s a manipulable and ultimately meaningless standard.)

The plaintiff relied on International Dairy Foods Association v. Amestoy, 92 F.3d 67 (2d Cir. 1996), which invalidated a Vermont law requiring dairy manufacturers to put a blue dot on milk products from cows treated with recombinant Bovine Somatotropin (rBST), which the FDA had found to have no significant effect on the milk.  The government disagreed with Amestoy(yes!) but also distinguished it since the dot might have been seen by consumers “as a concession that the treatment might affect the quality of the milk.”  And here we get some lovely casual empiricism based on the court’s guesses about what consumers are like:

Although the government later seeks to justify the COOL requirements as possibly reassuring consumers who are anxious about potentially lax foreign practices, it seems a good deal less likely that consumers would draw negative hints from COOL information than from the required declarations about use of rBST. Reference to an apparently novel additive on milk cartons might well lead to an inference that the additive might have a dangerous effect, whereas the appearance of countries of origin on packages of meat seems susceptible to quite benign inferences, including simply that the retailers take pride in identifying the source of their products.   

So, without agreeing or disagreeing with Amestoy, the court found it distinguishable. 

Under Zauderer, a commercial speaker has only a minimal First Amendment interest in not providing purely factual information with which it does not disagree, as long as disclosure is reasonably related to the state’s interest in preventing deception.  Plaintiff argued that this meant that non-deception-related interests weren’t subject to relaxed Zauderer scrutiny, but rather to Central Hudson. But the court found that Zauderer extended to factual disclosures that did something other than correcting deception.  Other circuits have similarly extended it to, for example, “government interests in telling buyers that mercury-containing light bulbs do contain mercury and may not be disposed of until steps have been taken to ‘ensure that [the mercury] does not become part of solid waste or wastewater,’ and in alerting health benefit providers of the background decisions made by pharmacy benefit managers in their sales to the providers.”  Zauderer’s characterization of the speaker’s minimal interest in avoiding disclosure was “inherently applicable beyond the problem of deception.” To the extent that previous DC Circuit decisions seemed to say otherwise, they didn’t because they didn’t involve purely factual and uncontroversial information, though the panel suggested that the court go en banc to provide a clear ruling on the issue.

So what are the government’s interest in COOL?  Plaintiff argued that, as in Amestoy, disclosure was just a matter of consumers’ curiousity.  But the court found non-frivolous values advanced by the disclosure: “Obviously it enables a consumer to apply patriotic or protectionist criteria in the choice of meat. And it enables one who believes that United States practices and regulation are better at assuring food safety than those of other countries, or indeed the reverse, to act on that premise.” These interests weren’t so trivial or misguided as to fall below the threshold that would sustain a minimal intrusion on commercial speakers’ First Amendment interests.

Without likely success on the merits, the rule couldn’t be enjoined.  “There is, moreover, a public interest factor that we did not consider in our constitutional analysis, that of allowing the United States’s effort to comply with the WTO ruling to take effect. We are clearly in a poor position to assess the effects of any noncompliance.”  (But does this really matter? If the First Amendment barred the law had Congress adopted it on its own, could WTO compliance change the calculus?)
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It’s an ex-competitor: plaintiff whose service shuffled off this mortal coil lacks standing

Posted on April 1, 2014 by rtushnet

Think Computer Corp. v. Dwolla, Inc., No. 13–CV–02054, 2014 WL 1266213 (N.D. Cal. Mar. 24, 2014)

Think is a money service business (MSB) and developer of a mobile payment system platform called FaceCash, launched in April 2010.  Defendants were money transmitters (MSB defendants) and venture capital funds and individual investors (investor defendants). MSB defendants included Airbnb, ActBlue, Facebook, Square, and Stanford.  Think alleged that the MSB defendants hold and transmit funds on behalf of third parties and were its direct competitors.  Think alleged that they operated without required money transmitter licenses in violation of a California law that became effective in mid-2011 and that imposed various capital and other requirements on money transmitters. The investor defendants allegedly helped/directed the MSB defendants. 

Think didn’t acquire the necessary license and voluntarily stopped running FaceCash when the California law went into effect.  Think had no paying customers for payment services. It alleged violations of California Unfair Competition law, the Lanham Act, and unjust enrichment. The court only analyzed the federal claim, finding no Article III standing (this may be a misnomer, though the result seems foreordained to be the same under Lexmark).

Under now-probably-superseded 9th Circuit precedent, Lanham Act standing requires “(1) a commercial injury based upon a misrepresentation about a product; and (2) that the injury is ‘competitive,’ or harmful to the plaintiff’s ability to compete with the defendant.” This requires some kind of competition for the same dollars from the same consumer group.  Think shut down FaceCash, so it can’t have had diverted sales after the California law went into effect.  Plus, to the extent Think alleged that statements in certain defendants’ terms of service before mid-2011 were deceptive, Think didn’t allege that Think suffered commercial injury as a result. Once Think voluntarily shut down FaceCash, it couldn’t show that it competed or suffered commercial injury, so the complaint had to be dismissed.

A bit of a wrinkle: the UCL “unlawful” claims were based on both state and federal law. But the Ninth Circuit has held that, “where there is no federal private right of action, federal courts may not entertain a claim that depends on the presence of federal question jurisdiction under 28 U.S.C. § 1331.”  The alleged federal violations concerned laws criminalizing unlicensed money transmission businesses and mandating record-keeping, neither of which created a federal private right of action. As a result, the state law claims didn’t involve substantial questions of federal law, and the court declined to exercise supplemental jurisdiction.
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Knockout (fruit) punch: Pom class decertified

Posted on April 1, 2014 by rtushnet

In re Pom Wonderful LLC Marketing and Sales Practices Litigation, No. ML 10–02199, 2014 WL 1225184 (C.D. Cal. Mar. 25, 2014)

In what defendants doubtless hope is a winning trend, the court decertified a class on the ground that it’s impossible to prove that you bought a low-value general consumer product, which means that there will be no more consumer class actions for such products (the very products for which the class action mechanism is the only direct relief imaginable) and only competitors and government regulators will be able to take action against falsehoods used to sell such products. 

Plaintiffs brought the usual California claims against Pom’s marketing of its juice products, as challenged by the FTC.  The court initially certified a damages class of all buyers from Oct. 2005 to Sept. 2010.  Pom argued that Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), changed the analysis.  In Comcast, the Court emphasized that certification requirements, especially predominance, require “rigorous analysis” that will often overlap with the merits.  It concluded that the Comcastplaintiffs’ damages model didn’t show a valid methodology suitable to class treatment, and that this prevented predominance.  The court didn’t adopt the very broad reading of Comcast urged by Pom (that the damages model must not only prove classwide damages but distinguish the injured from the uninjured and calculate the amount of individual damages).  But, applying rigorous analysis, “plaintiffs must be able to show that their damages stemmed from the defendant’s actions that created the legal liability.”

The model here fell short.  Plaintiffs’ expert used two alternatives. The first was the “Full Refund” model, assuming that consumers wouldn’t have bought Pom juices if not for the misrepresentations, resulting in a total of $450 million in spending during the class period. The court agreed that the Full Refund model was invalid because it didn’t account for any value consumers received, at least in the form of hydration, vitamins, and minerals, even if they didn’t receive health benefits.  Restitution is an available remedy, but it has to measure the difference between the value of what the plaintiff paid and what she received. Plaintiffs argued that if consumers wouldn’t have bought the juices absent the misrepresentations, a full refund would be appropriate, but that’s not how restitution is calculated. Thus, the Full Refund model couldn’t accurately measure classwide damages.

The alternative was a Price Premium model, looking for the premium over other refrigerated juices allowed by the alleged misrepresentations.  This yielded damages of about $290 million.  This model depended on a fraud on the market theory, analogizing from securities law.  “Frauds on the market are only possible in efficient markets, where the price of (in most cases) a stock is determined by openly disseminated information about a business.”  Fraud on the market affects price regardless of whether a particular investor is exposed to the misrepresentation. Plaintiffs argued that a presumption of reliance would show the existence of fraud on the market, causing damage to every consumer regardless of purchase motivation or satisfaction with the product because of the across-the-board higher price. 

The court held that the facts alleged here could support a presumption of reliance for liability purposes. But that didn’t make the damages model adequate.  A plaintiff alleging fraud on the market must show that the relevant market is efficient, but there wasn’t evidence that the market for Pom’s high-end refrigerated juice products operated efficiently.

Plaintiffs appear to suggest that, given a presumption of reliance, materiality of a misrepresentation is a substitute for market efficiency. This reasoning has some superficial appeal, as universal reliance upon a material fact might have some ultimate effect on demand and prices. If information had no effect on demand, the argument goes, it would not be material in the first instance. Efficiency, however, is not demonstrated simply by any change in price, but rather, in large part, by a change in price that has some empirically demonstrable relationship to a piece of information. In an inefficient market, in contrast, some information is not reflected in the price of an item. In such a market, even a material misrepresentation might not necessarily have any effect on prices. Absent such traceable market-wide influence, and where, as here, consumers buy a product for myriad reasons, damages resulting from the alleged misrepresentations will not possibly be uniform or amenable to class proof.

In a footnote, the court rejected the relevance of cy pres/fluid recovery; that’s a means of paying damages, not of determining the amount of damages.

Even if fraud on the market was relevant to consumer fraud claims, plaintiffs would still have to show “that their damages stemmed from the defendant’s actions that created the legal liability”: that the misrepresentations caused plaintiffs to pay a price premium.  “Without any survey or other evidence of what consumers’ behavior might otherwise have been, and after excluding a series of products for various reasons of varying persuasive power, the Price Premium model uses an average of refrigerated orange, grape, apple, and grapefruit juice prices as a benchmark.”  While the price premium might be caused by something, and health benefits could be logical, there was no survey addressing consumer motivations.  The court saw no basis to believe that fully informed consumers would choose these juices instead.  (After Pom’s FTC loss, was there any price change as the market absorbed—or didn’t absorb—the information? What’s the relevance of the fact that Pom vigorously contends even today that the FTC is wrong?) Without evidence of “the critical question why that price difference existed, or to what extent it was a result of Pom’s actions,” the expert’s reasoning was insufficient.  He couldn’t just assume that not a single consumer would still have chosen Pom over other juices if not for the deceptive ads. The court commented, though, that matters would be different for different products: “Single use products, such as, for example, an expensive pill claiming to cure baldness, likely require less rigorous methodologies and models than do consumables such as Defendant’s juices, which consumers presumably purchase for a wide variety of reasons.”  (Why expensive?  What’s expense got to do with single use?)

Separately, the court found the class not ascertainable.  Ascertainability rests on a number of factors, including the price of the product, the range of potential or intended uses of a product, and the availability of purchase records. “In situations where purported class members purchase an inexpensive product for a variety of reasons, and are unlikely to retain receipts or other transaction records, class actions may present such daunting administrative challenges that class treatment is not feasible.” So here.  Based on the volume sold, every adult is a potential class member—realistically, 10-15 million people, who probably purchased for a variety of reasons without keeping records, and the bottles/labels themselves didn’t contain the alleged misrepresentations.  “Here, at the close of discovery and despite Plaintiffs’ best efforts, there is no way to reliably determine who purchased Defendant’s products or when they did so.”
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The PTO for children

Posted on April 1, 2014 by rtushnet

I recently attended an event at which the PTO had a children’s booth.  Highlights from the Oct. 2012 Trademark Activity Book we received:

The PTO has Kleenex and Band-Aid’s back against the threat of genericity.

The PTO is not worried about self-dilution the way Sara Stadler is.  (See Sara K. Stadler, The Wages of Ubiquity in Trademark Law.)
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TM issues, you get what you pay for edition

Posted on April 1, 2014 by rtushnet

Marty Schwimmer reports on the Orthodox Jewish Congregations’ lawsuit against Urban Tortilla for the latter’s new U-in-a-circle logo. Schwimmer continues that Urban Tortilla paid $299 for its logo, from a contest among designers.  (See also: continuing immiseration of many creative workers.)  Did Urban Tortilla do a trademark search?  How much in savings was un-saved from this lawsuit?

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tuna surprise: undisclosed slack fill was plausibly misleading

Posted on March 31, 2014 by rtushnet

Hendricks v. StarKist Co., No. 13–cv–729, 2014 WL 1244770 (N.D. Cal. Mar. 25, 2014)

Hendricks brought the usual California claims against Starkist alleging that its canned tuna products were underfilled (anywhere from 1.1% to 17.3% less tuna than there was supposed to be), as confirmed by independent lab testing using the weighing methodology and standard of fill set forth in the referenced federal regulations. The FDA has the power to promulgate regulations establishing reasonable standards of container fill for any food, and the FDA has done so for canned tuna.  Filling a container in a manner that is misleading is considered “misbranding.”

Starkist argued preemption. The claims weren’t expressly preempted because they relied on FDA standards.  And they weren’t impliedly preempted because Hendricks wasn’t suing to enforce the FDCA directly (he can’t); he was suing to enforce identical state law, threading the “narrow” gap allowed. Pom Wonderful doesn’t change that; it was limited to the Lanham Act.  Though Starkist argued that it and other tuna manufacturers had petitioned the FDA to change the standard of fill, that wasn’t relevant to whether the claims here were preempted.

Starkist also argued that the claims should be dismissed/stayed based on primary jurisdiction.  “Given that the applicable FDA standard here is clear, detailed, and long-standing, the Court sees no reason to stay or dismiss the complaint pending any resolution of the issue before the FDA.” Though canned tuna manufacturers filed a citizen’s petition requesting that the FDA amend or suspend the regulation, the FDA hasn’t done anything.  “Unless and until there is some indication beyond mere speculation that the FDA may change the regulation, the Court sees no need to defer under the primary jurisdiction doctrine.”

Deception: StarKist argued that the FDA standard of fill didn’t require any information be communicated to consumers or that the products be labeled in any particular way. Starkist isn’t required to, and doesn’t, include pressed weight on the can, but rather says “NET WT 5 OZ (142g)” and “Serv[ing] Size: 2oz drained (56g—about 1/4 cup); Servings about 2.” Hendricks didn’t allege that these were false or how they misled him.  But that missed the point of the allegations: he alleged that the cans contained less tuna than would be expected from a 5-ounce can.  The reasons the feds regulate fill is so that tiny amounts don’t get misleadingly placed in large containers.  If fill is substandard, the label has to say so.  Starkist argued that injury wasn’t plausible; the court disagreed.

As a result, various warranty and consumer protection claims survived, though the unjust enrichment claim was dismissed as duplicative. Fraud was sufficiently pled with particularity, given the allegations above.

Starkist also sought to dismiss claims based on products Hendricks didn’t buy. He bought Chunk Light Tuna in Water, but not Solid White Albacore Tuna in Water, Solid White Albacore Tuna in Vegetable Oil, and Chunk Light Tuna in Vegetable Oil.  Whether these products should be included depends on whether common misrepresentations were the crux of his case and whether there was sufficient similarity between purchased and unpurchased products.  Starkist argued that solid tuna was governed by different pressed weight standards from the product Hendricks bought. The court disagreed that this mattered—there was sufficient similarity, given that he alleged the same misrepresentation as to all four varieties.
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"I wouldn’t have bought it if I’d known" is enough for standing, 9th Circuit says again

Posted on March 31, 2014 by rtushnet

Galope v. Deutsche Bank National Trust Co., No. 12–56892, 2014 WL 1244279 (9th Cir. Mar. 27, 2014)

The court of appeals reversed a grant of summary judgment in favor of Deutsche Bank and other defendants.  Galope adequately alleged that she had standing to sue on her LIBOR-based consumer protection and related claims: she alleged that she wouldn’t have taken her loan had she known of defendants’ manipulation of LIBOR.  Her cognizable injury occurred when she bought the loan, not when she paid manipulation-affected interest.  The sale of her house was rescinded, but that didn’t moot her claims for damages.  (Certain defendants apparently sold her house in violation of the automatic stay in bankruptcy; Galope sufficiently alleged a violation of the covenant of good faith and fair dealing because there was sufficient evidence to support a reasonable inference that they had notice of the automatic stay when they executed the trustee’s sale of the home.)

Judge Nguyen dissented in part on standing grounds.  Galope didn’t allege loss from deceptive conduct because her payments were never affected—“she paid a fixed interest rate and defaulted before the allegedly manipulated LIBOR rate went into effect on her loan; she then was granted a loan modification with a (lower) fixed interest rate that likewise was unrelated to the LIBOR rate and defaulted again.”  She might have alleged but-for causation, but she didn’t allege loss from the manipulation, so her injury was too attenuated for Article III standing.
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promotion of expensive device for off-label uses not shown likely to deceive

Posted on March 31, 2014 by rtushnet

Zeltiq Aesthetics, Inc. v. BTL Industries, Inc., No. 13–cv–05473, 2014 WL 1245222 (N.D. Cal. Mar. 25, 2014) (magistrate judge)

Zeltiq sued defendants for allegedly falsely advertising that a BTL medical device was FDA approved for fat reduction and body contouring.  The court denied a preliminary injunction.

Class I and II medical devices don’t need premarket approval, only premarket notification to the FDA.  If the FDA deems a Class II device to be “substantially equivalent” to a preexisting cleared device, it can be marketed without further regulatory scrutiny.

Zeltiq sells a medical device known as CoolSculpting, which is intended to cause fat cell elimination without causing scar tissue or damage to the skin, nerves or surrounding tissue. It’s been FDA-cleared for cold-assisted lipolysis of the flank and the abdomen.  Zeltiq alleged that it obtained clearance by submitting clinical studies and other data, because clearance of a device for treatment of body fat lends instant and substantial credibility.  As a result, CoolSculpting allegedly became the leading noninvasive fat reduction medical device, with huge sales jumps in a year.

BTL submitted a notice of intent to market the BTL Elite, asking for FDA clearance to market the device for applying heat to body tissues for pain relief, treating muscle spasm, increasing range of motion for joints, and increasing blood flow to tissues.  The FDA cleared the BTL Elite for these uses. Zeltiq alleged that BTL was unlawfully marketing a device called the Vanquish—the BTL Elite by another name—for fat reduction and body contouring. Both parties sell to doctors, not patients.

Zeltiq alleged that BTL didn’t promote Vanquish at all for treating muscle aches and spasms, but instead touted it for fat reduction while touting it as “FDA-cleared,” attempting to mislead doctors into believing that Vanquish was FDA-approved for fat reduction.

BTL didn’t dispute that it promoted Vanquish for fat reduction, an admittedly off-label use, nor that it only intended to do so (and not for muscle aches).  Its trademark registration describes Vanquish as a “[b]ody treatment device using heating and cooling for fat cell reduction.”  However, defendants argued that they’d stopped promoting Vanquish in the US for off-label use, and that they never represented that Vanquish had FDA clearance for fat reduction/body contouring.

Judge for yourself: in October 2013, as a sponsor of the annual meeting for the American Society for Dermatologic Surgery, BTL invited doctors to a private demonstration by stating: “Join us for a private demonstration of a newly FDA cleared technology … The only complete solution for non-invasive body shaping.”  Unless what comes between the dots is a discussion of the clearance for ache treatment (which BTL admitted wasn’t promoted) and clarification of what the FDA clearance was for, this is classic implicature; any linguistically competent English speaker should’ve taken away the implication that the clearance was for fat reduction. 

BTL also promoted fat reduction to end consumers, e.g., the technology “is proven to destroy fat cells.”  In addition, BTL allegedly recruited doctors to promote Vanquish to patients, and BTL didn’t dispute its involvement with vanquishfat.com (though it did dispute its involvement with other sources that promoted Vanquish to consumers for fat reduction). On that website, a doctor stated that he had “heard about a new, fat zipping device that’s about to receive FDA approval,” and the same doctor created a “Vanquish Fat” Facebook page and claimed that “Vanquish Melts Fat With No Pain.”

Also, BTL argued that in 2014, it hadn’t done anything in the US to promote Vanquish for fat reduction.  In rebuttal, Zeltiq submitted evidence that BTL planned to exhibit at two shows in February and April, displaying the Vanquish device “obscurely described as delivering ‘sub-cutaneous heating for body treatment based on induced apoptosis using a contract-free operator-monitored clinical approach.”

BTL has both a US website and a non-US website, bltvanquish.com and bltvanquish.com/en/vanquish.html respectively.  (Um, that looks an awful lot like one website.)  BTL argued that it only controlled the content of the US website, and the content of the non-US website was controlled overseas by a related company and directed at a worldwide audience. Only the non-US website presently promotes Vanquish for fat reduction explicitly, though the US site allegedly used to do so by showing a video from a Texas doctor who said it “shrinks fat cells,” and quoting a number of other U.S. doctors extolling its fat reduction benefits.   

BTL modified the US website after this lawsuit was filed, and BTL said that it sought out help for training about its marketing obligations.  Now, the US website describes Vanquish as “a revolutionary selective radiofrequency system” that “delivers a non-invasive solution with unparalleled efficacy” and “is the first and only non-invasive body treatment finally integrating all the most desired features.” The website states that “Vanquish is FDA cleared for deep tissue heating.”  Fine print describes its specific intended FDA-cleared indications.  (Wow, that really has the feeling of code.  How the heck would a consumer know what Vanquish was for? And why would you only describe what it was really for in fine print, unless you expected that consumers would already have something in mind, or would click around until they found real information, perhaps on the non-US part of the site?)  The website also said that it was for US medical professionals only, and wasn’t cleared for treating adipose tissue (fat).

Zeltiq argued that despite the purported two-site solution, the non-US website was actually intended to promote to the US.  For example, BTL sent invitations to doctors to attend open houses, and only listed the address for the non-United States website on the invitation.  “Moreover, until recently, the largest and boldest text on the United States website was a link in the middle of the page that stated, ‘Go to Non-US Website.’”  In fact, the US website contained hardly any information—most of it is quoted above.  The non-US site promotes Vanquish for fat reduction, including a page that links to magazine articles and videos quoting United States doctors who promote Vanquish for fat reduction.  The “international” website also used to include a page for seminars for doctors, listing five conferences in the US.  A version listing conferences in 2014 showed conferences planned both inside and outside the US.

A new US-targeted website, which BTL denied any control over, promoted Vanquish for fat removal, including links to two video clips—allegedly the same clips that were deleted from BTL’s original website.  In one, a doctor appears on Fox News. When he’s asked whether Vanquish is safe, he responds:

This is exceptionally safe. The FDA basically is there to provide safety, it is not so much there to provide efficacy. So when they do these FDA approval studies, the number one, two and three thing they are looking at is safety, and this is exceptionally safe. They—even in the animal models, they looked at every part of the animal to ensure that there was no damage to anything other than the fat.

Zeltiq, understandably, argued that this was misleading, suggesting that the FDA approved Vanquish for the purpose for which it was being promoted.  (Query: after Lexmark, can Zeltiq sue individual doctors making claims about Vanquish?)

But what do doctors think? Both sides submitted declarations from doctors. Zeltiq’s declarant said that doctors make off-label uses, but that they generally only develop after doctors have experience with a new device for its approved use, and that information about a new device is generally scant.  She concluded that when a manufacturer promotes a new device in the early stages after device is launched, physicians would presume that the new device has been approved by the FDA for the promoted use.   BTL submitted declarations from two other doctors.  One noted that both parties’ devices cost approximately $80,000 to $90,000, and both said that before they bought the Vanquish device they were made aware of the scope and limits of FDA clearance.

BTL argued preemption.  The court found this a serious question, but better dealt with on a full record.  For one thing, the core claim—a false or misleading representation of clearance for fat reduction—wasn’t preempted regardless. Also, since BTL didn’t dispute that it promoted Vanquish for a non-FDA-cleared use, interpretation of FDA rules wouldn’t be required to decide the false advertising claim.

However, the court concluded, Zeltiq didn’t show literal falsity.  Instead, the “newly FDA cleared technology” invitation wasn’t literally false because Vanquish was FDA cleared, even if not for body shaping.  (Ugh.  That’s sophistry, which is the point of having a doctrine of falsity by necessary implication.)  Nor does the current website contain literal falsity. Zeltiq argued falsity by necessary implication, but the court didn’t buy it, stating without further explanation that none of the identified statements necessarily implied FDA clearance for fat reduction.  Half-truths aren’t literally false.

Zeltiq did show that BTL’s promotions were potentially misleading, and its use of FDA clearance as a selling point in promotional materials was evidence of materiality. But Zeltiq didn’t show that any doctors had been fooled. “At best, Zeltiq’s evidence shows that physicians in general presume the Vanquish device is FDA cleared for fat reduction because it was marketed for that use in the early stages after its launch.” This evidence was too general—it didn’t show that actual purchasers believed the Vanquish was FDA cleared.  BTL’s evidence suggested that “at least one group of physicians decides to purchase such an expensive medical device only after fully evaluating the device’s efficacy and safety for patients and understanding the official FDA clearances.” 

In light of the device’s high cost and limitation to doctor-purchasers, Zeltiq wasn’t likely to prove deception. Still, there were serious questions going to the merits.

Zeltiq brought a serpate claim under the California UCL’s “unlawful” prong.  While the UCL prohibits the sale of an uncleared device, the Vanquish was cleared, and the statute wasn’t use-specific. Zeltiq also argued that the Vanquish was misbranded because its labeling fails to include “adequate directions for use” in fat reduction procedures. “In light of the fact the FDCA regulations require instructions to be catered to ‘the purposes for which [the device] is intended,; Zeltiq raises an interesting argument.”  But the “labeling” was the targeted source of misbranding, and the operator’s manual included instructions detailing the FDA-cleared uses and providing directions for such uses.  Zeltiq didn’t convince the court that misbranding can come from overall promotional practices, though it did raise serious questions going to the merits.

But the balance of hardships didn’t tip sharply in Zeltiq’s favor.  Zeltiq could suffer without an injunction, losing its unique place in the market.  But BTL would endure hardship from an injunction, which as Zeltiq proposed would require delinking the US and non-US websites and providing written notification to every doctor who bought the Vanquish that it’s not FDA-cleared for fat reduction. Zeltiq also wanted to bar BTL from selling Vanquish for non-cleared uses, but doctors have the right to make off-label uses.

Also, Zeltiq didn’t show irreparable injury. Though lost market share can be irreparable harm, Zeltiq didn’t show actual lost market share. Zeltiq argued that it could show likely irreparable injury by showing that the parties competed and that there was a logical causal connection between the false advertising and its own sales position.  But the court thought that this wasn’t enough in light of Winter, which held that a showing of irreparable injury is always required.  “Merely showing that the parties are competitors and that there is a logical connection between the false advertising and the plaintiff’s sales may be sufficient to show a possibility of irreparable harm, but is insufficient to show a likelihood of irreparable harm without additional evidence.”  (Again, I wonder when if ever this kind of reasoning will hit trademark.)
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