Second Circuit allows one mandatory pregnancy center disclosure

Posted on January 22, 2014 by rtushnet

Evergreen Ass’n, Inc. v. City of New York, — F.3d —-, 2014 WL 184993 (2d Cir. 2014)

The City appealed from a preliminary injunction against Local Law 17, which required pregnancy services centers to make certain disclosures about their services. On appeal, the court concluded that the law wasn’t impermissibly vague in its definition of pregnancy centers.  Further, plaintiffs didn’t show likely success on the merits as to the portion of the law requiring pregnancy services centers to disclose if they have a licensed medical provider on staff. However, other aspects of the law impermissibly compelled speech.

The law required pregnancy centers to disclose, at their entrances and waiting rooms, on advertisements, and during telephone conversations:

(1) whether or not they “have a licensed medical provider on staff who provides or directly supervises the provision of all of the services at such pregnancy service center”;

(2) “that the New York City Department of Health and Mental Hygiene encourages women who are or who may be pregnant to consult with a licensed provider”; and

(3) whether or not they “provide or provide referrals for abortion,” “emergency contraception,” or “prenatal care.”

The law defined a “pregnancy services center” as a “facility, … the primary purpose of which is to provide services to women who are or may be pregnant, that either (1) offers obstetric ultrasounds, obstetric sonograms or prenatal care; or (2) has the appearance of a licensed medical facility.” It provided a nonexclusive list of factors for consideration in determining whether a facility “has the appearance of a licensed medical facility,” and stated that it was “prima facie evidence that a facility has the appearance of a licensed medical facility if it has two or more of the factors.” Finally, the law exempted facilities that are “licensed … to provide medical or pharmaceutical services” or have a licensed medical provider on staff.

The NYC Council heard testimony about the need for such disclosures to avoid misleading women.  Several people testified about misleading practices by crisis pregnancy centers (CPCs), including that they’re often intentionally located in proximity to Planned Parenthood facilities and that they often use misleading names and signage. One women’s health center director testified about a CPC that would “park a bus in front of her clinic, from which the CPC’s counselors, often wearing scrubs, would offer ultrasounds, harass Center patients, tell patients that the Center was closed, or identify themselves as Center workers.”  An official from the Department of Health and Mental Hygiene testified that delay in prenatal care posed risks to women and newborns, and that delays in access to abortion and emergency contraception were risky.  Testimony discussed patients who’d been misled by CPCs, leading to delays in access to services, e.g.:

One woman scheduled an appointment for an abortion at an organization that, as she learned upon arrival, was a CPC. Another works at a grocery store and had to negotiate with both her boss and one of her co-workers to get the day off so she could go to the clinic and have the abortion that she and her husband had together decided was best. When she realized she had gone to a place that wasn’t going to provide the service she needed, that she had wasted her day off, lost the income she could have had that day working, and that it would be without purpose, and that it might be three weeks before she could get another day off to try this again, she was outraged.

Another patient went to a CPC and was told that she needed multiple ultrasounds before the abortion could be done.  Though these were medically unneccessary, they delayed her so long that she went beyond the legal limit for abortion.  Testimony indicated that this was not an isolated incident.  A NARAL Report summarized NARAL’s website analysis, phone survey, in-person visits, and review of literature distributed by CPCs: “many CPCs use medical sounding names, are located near medical clinics and hospitals, provide pregnancy testing and ultrasounds, and require patients to fill out detailed forms soliciting personal information, all of which creates the impression that the CPCs are medical facilities. Several counselors NARAL spoke with gave incorrect information as to how long a woman can legally wait before getting an abortion.”

Opponents also testified that their CPCs didn’t mislead patients.  The Council found that “some pregnancy services centers engaged in deceptive practices about their services; that these deceptive practices could impede or delay consumer access to reproductive health services and wrongly lead consumers to believe they had received care from a licensed medical provider; and that existing laws did not adequately protect consumers from these deceptive practices.”  It further found that delay increases health risks and financial burdens and may severely limit a woman’s options.  The Council stated that it enacted the law to ensure that “consumers in New York City have access to comprehensive information about and timely access to all types of reproductive health services including, but not limited to, accurate pregnancy diagnosis, prenatal care, emergency contraception and abortion.”

Some of the plaintiff CPCs offered ultrasounds and sonograms; others didn’t. Most provided their services free of charge, except for one that offers services to women housed at its residential facilities. They objected to the law on First Amendment compelled speech grounds.

The court first found the law severable, and then the majority found that the definition of “pregnancy services center” was not unconstitutionally vague, given the overall definition plus objective guiding factors.  (These were: “the pregnancy services center (a) offers pregnancy testing and/or pregnancy diagnosis; (b) has staff or volunteers who wear medical attire or uniforms; (c) contains one or more examination tables; (d) contains a private or semi-private room or area containing medical supplies and/or medical instruments; (e) has staff or volunteers who collect health insurance information from clients; and (f) is located on the same premises as a licensed medical facility or provider or shares facility space with a licensed medical provider.”)

The court then found that each challenged provision either stood or fell under both strict and intermediate scrutiny, so it didn’t have to pick a level of scrutiny, despite the parties’ arguments about regulating medicine etc.  In a footnote, however, the court rejected the argument that rational basis review applied because these were disclosures, not speech bans, applied to commercial speech. Even assuming the speech was commercial, the law didn’t regulate “purely factual and uncontroversial information,” as required to apply rational basis review.  (This is why “uncontroversial” is a ridiculous standard.  It’s uncontroversial that these facilities don’t provide abortion information; indeed, they’d rather not admit that abortion information exists, because the topic of abortion is controversial.  But any speaker resisting a disclosure mandate will not want to admit that the information is relevant, making it controversial no matter how factual the information is.)

Anyway, the status disclosure (whether a licensed medical provider was on site) passed strict scrutiny, while the others failed even intermediate scrutiny. The City had a compelling interest in passing the law, to prevent delays in access to reproductive health services.  “[T]he State has a strong interest in protecting a woman’s freedom to seek lawful medical or counseling services in connection with her pregnancy.”

The status disclosure was narrowly tailored to promote this compelling government interest, using the least restrictive means.  The Supreme Court suggested in Riley v. Nat’l Federation of the Blind that a requirement that solicitors disclose their professional status would be narrowly tailored to the state’s interest in “informing donors how the money they contribute is spent in order to dispel the alleged misperception that the money they give to professional fundraisers goes in greater-than-actual proportion to benefit charity.”  Here, invalidating the status disclosure “would deprive the City of its ability to protect the health of its citizens and combat consumer deception in even the most minimal way.”  It was the least restrictive means “to ensure that a woman is aware of whether or not a particular pregnancy services center has a licensed medical provider at the time that she first interacts with it.” 

The alternatives of city-sponsored ads or signs posted outside CPCs, prosecuting fraud and false advertising, and imposing licensing requirements on ultrasound professionals wouldn’t get the job done.  “City-sponsored advertisements and signs cannot alert consumers as to whether a particular pregnancy services center employs a licensed medical provider, because, among other things, this is discrete factual information known only to the particular center.”  Fraud/false advertising claims pursued after the fact could be too late for women’s health, and licensing wouldn’t alert consumers to the status of a CPC unless the licensing scheme itself mandated disclosure.  Plus, not all regulated centers offered ultrasounds.

Nor was the law overly broad.  The district court found the law overinclusive because not all CPCs engage in deception.  But that wasn’t the only problem the City sought to solve—the law “seeks to prevent woman from mistakenly concluding that pregnancy services centers, which look like medical facilities, are medical facilities, whether or not the centers engage in deception.”  The law applied to centers that looked like medical facilities.  As with the law suggested in Riley, “the laws in question support the state interest in informing consumers and combating misinformation.”  The court noted that its result was consistent with Centro Tepeyac v. Montgomery County, 779 F.Supp.2d 456 (D. Md. 2011), rev’d in part, 683 F.3d 591 (4th Cir. 2012), rev’d en banc, 722 F.3d 184 (4th Cir. 2013). As Judge Wilkinson stated in his concurrence in Centro Tepeyac:

[I]n exercising its broad police power to regulate for the health and safety of its citizens, the state must also enjoy some leeway to require the disclosure of the modicum of accurate information that individuals need in order to make especially important medical … decisions…. [The Status Disclosure] relies on the common-sense notion that pregnant women should at least be aware of the qualifications of those who wish to counsel them regarding what is, among other things, a medical condition.

The other disclosures didn’t fare so well.  First, the service disclosure required pregnancy services centers to disclose whether or not they provide or provide referrals for abortion, emergency contraception, or prenatal care.  Though the suggested alternatives (state-sponsored ads, prosecutions for fraud and false advertising, etc.) were insufficient, the status disclosure by itself might satisfy the City’s interest, “as it alerts consumers to a small bit of accurate information about the type of services each center provides—medical or non-medical—even though it does not discuss specific services.”

Even absent less restrictive means, the services disclosure was too much of a burden on plaintiffs’ speech in the context of “a public debate over the morality and efficacy of contraception and abortion.”  This would alter their political speech “by mandating the manner in which the discussion of these issues begins.” “Because it mandates discussion of controversial political topics, the Services Disclosure differs from the ‘brief, bland, and non-pejorative disclosure’ required by the Status Disclosure.”  Intermediate scrutiny wouldn’t produce a different result given the political nature of the speech and the status disclosure as a less restrictive alternative.

So too with the government message requiring  pregnancy services centers to disclose that “the New York City Department of Health and Mental Hygiene encourages women who are or who may be pregnant to consult with a licensed provider.” Here, the status disclosure could satisfy the government’s interest, as could an ad campaign by the government.  “The City’s broad message does not require knowledge of discrete information available only to individual pregnancy services centers.”  Also, the centers shouldn’t have to advertise on behalf of the city, since the question of whether “pregnant women should see a doctor” is a “public issue subject to dispute,” as this very litigation demonstrated.  (See what I mean about controversiality?)  Though the regulation made clear that the message came from the government, “a law that requires a speaker to advertise on behalf of the government offends the Constitution even if it is clear that the government is the speaker.” See Wooley v. Maynard, 430 U.S. 705 (1977).

Judge Wesley dissented in part, finding the definition of pregnancy services centers too vague:

It contains a deliberately ambiguous set of standards guiding its application, thereby providing a blank check to New York City officials to harass or threaten legitimate activity.…The operators of such a center have no way of knowing whether the Commissioner will penalize them for failing to comply with the law’s requirements even if the center exhibits no other characteristics similar to a medical facility; the context of the law raises the troubling possibility of arbitrarily harsh enforcement against such centers that choose not to tell women about the option of abortion.
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changing goodwill signalled by mark isn’t infringement

Posted on January 21, 2014 by rtushnet

Purdum v. Wolfe, No. C–13–04816, 2014 WL 171546 (N.D. Cal. Jan. 15, 2014)

Kickstarter infringement dispute, which as a side note raises interesting questions of responsibility for third-party structuring of tools.  Plaintiffs Barrett Purdum, Michael Armenta, and Michael Maher are the co-owners and founders of an established San Francisco men’s clothing company, Taylor Stitch. They joined forces with defendant David Wolfe to develop Olivers Apparel, LLC, a San Francisco start-up specializing in the manufacture and retail of high-end men’s shorts.

The facts of Olivers’ founding are disputed, but the parties agreed to run a Kickstarter campaign to raise capital for the venture.  The Kickstarter video featured each of the four founders and represented to investors that the founders have “five years experience running a tailored men’s wear company.”  “The campaign was an enormous success, and in thirty days, Olivers raised $271,043 from 3,307 individuals. Maher had advertised Olivers to Taylor Stitch’s database of customers, and according to Maher, many of the investors were Taylor Stitch customers.” 

This unexpected success came with a relationship breakdown.  After plaintiffs demanded to split with Wolfe and keep the company/its IP assets, Wolfe changed the passwords to the Kickstarter page, all of Olivers’ social media pages, and Olivers’ bank accounts containing the $270,000 in Kickstarter funds. Wolfe did not disclose these changes to the approximately 3,300 Kickstarter investors, but rather continued to communicate with investors on the Kickstarter page using the name “David W, Barrett P, Mike M, Mike A.”  In a footnote, the court noted Wolfe’s assertion that he tried to remove plaintiffs’ names from the Kickstarter page, “but pursuant to Kickstarter policy, the names in the ‘project by’ section cannot be altered following the launch of a campaign.” (Should that matter?  Why not say that means he has to terminate the project, if it’s now conveying a false message?)  Wolfe didn’t otherwise try to communicate to investors that the plaintiffs’ involvement in Olivers stopped in September 2013.

In state court, Wolfe secured a TRO against plaintiffs’ and Taylor Stitch’s interference with Olivers’ supply contracts; the case was removed and was pending at the time of the court’s opinion.  Here, the court addressed plaintiffs’ request for an order 1) enjoining Wolfe from selling any shorts manufactured without plaintiffs’ assistance; 2) ordering Wolfe to turn over the passwords to Olivers’ social media and bank accounts; 3) enjoining Wolfe from using photographs copyrighted by Armenta; and 4) enjoining the use of the Olivers trademarks.

The court found that plaintiffs hadn’t shown likely success on the merits of their breach of contract claim (or unfairness UCL claim) given the disputed factual issues about the partnership, which I will not recount.

The court characterized plaintiffs’ trademark claim as an unusual one: they didn’t explicitly claim to own a valid, infringed mark.  Instead, they argued that trademark law is supposed to protect consumers from confusion and ensure that the public “will get the product which it asks for and wants to get.” They argued that the Olivers goodwill was based, at least in part, on their five years of experience in menswear with Taylor Stitch, given Olivers’ emphasis on this fact in the Kickstarter campaign.  But that experience is now gone from Olivers.  “Plaintiffs’ position appears to be that trademark infringement occurs when an element of the goodwill associated with the trademark has been altered or no longer exists.” Wolfe rejoined that, as founder of Olivers and the individual running the business, he could not be infringing anything. The court agreed.  First, there was little evidence that Olivers’ goodwill was based on plaintiffs’ experience with Taylor Stitch—they lacked an actual number of Kickstarter supporters who were also Taylor Stitch customers or other evidence of reliance on plaintiffs’ participation. Plus, “this type of alleged change in a mark’s goodwill” wasn’t the same as a transfer in gross that causes consumer confusion; here, there was no sale or assignment to a third party.  The court declined to address the novel theory that Wolfe’s conduct amounted to an infringing “assignment” of the mark because of the factual thinness of the record.

The court also found Intel Corporation v. Terabyte International, Inc., 6 F.3d 614 (9th Cir.1993), inapposite.  There, defendant relabeled legitimate Intel chips from slow to faster, more expensive ones.  Terabyte argued that there was no confusion as to source, only as to capability. The Ninth Circuit found that this ignored the “good will, reputation, and consumer protection functions associated with a particular trademark.” Intel didn’t establish that “infringement of a trademark occurs when an alleged element of the goodwill associated with the trademark has been altered or no longer exists, especially since Plaintiffs have not established the existence of the goodwill that they claim is associated with the mark.”

The copyright infringement claims weren’t a basis for a preliminary injunction because Wolfe removed the contested photos from the website and there was no reason to think they’d reappear.

Separately, the court found plaintiffs failed to show likely irreparable harm.  The theory was that Wolfe’s manufacture of shorts without the benefit of plaintiffs’ expertise would hurt their reputation, because consumers who receive shoddily manufactured shorts would believe that plaintiffs were involved with their production.  But plaintiffs didn’t provide any evidence of shoddy manufacturing, making their theory of irreparable harm “purely speculative.”  (Paging Mark McKenna! This “risk of crappy products” theory is a huge part of the theory that losing control of a mark is itself inherently injurious, and it’s significant that courts are picking up on the cautions of Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc., 736 F.3d 1239 (9th Cir. 2013).)
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No records, no class action against Chipotle

Posted on January 21, 2014 by rtushnet

Hernandez v. Chipotle Mexican Grill, Inc., 12-cv-05543 (C.D. Cal. Dec. 2, 2013)

The court rejected a proposed class action based on Chipotle’s alleged practice of serving conventionally raised meats on occasions when “naturally raised” meats were not available, though it had heavily advertised its use of “naturally raised” meats. Because the allegations centered on statements on in-store menu signboards and paper menus, which some people might not have seen, the court found the class wouldn’t be ascertainable.

“Most fundamentally, the questions of when a class member ate at Chipotle, the exact location where he ate, and which meat (if any) he ate are all not subject to class treatment.”  Consumers wouldn’t have records of purchase (and nor would Chipotle) and wouldn’t have retained the purchased item, and the dispute concerned a very low price transaction that they couldn’t be expected to recall.  “More importantly, the alleged misconduct took place only with regard to varying products at varying locations within limited time frames.” This made specific dates and locations more important than they’d be in other class actions. “[A] class member needs to know with some certainty – and Chipotle should be allowed some mechanism for confirming or contesting that certainty – the date, location, and particular meat purchased. That kind of certainty in a class action that encompasses purchases of burritos (for example) between June 2008 – more than five years ago – and now is not practical.”  Credit card records wouldn’t show the critical detail of what meat was bought.  “At best, there may be some class members who regularly eat – i.e., weekly or more often – at the same Chipotle location and always order the same thing, but presumably this is a relatively small subgroup of the proposed class.”

Plus, “the important question of whether a class member saw a so-called point-of-purchase (POP) sign when a particular purchase was made cannot be handled on a classwide basis.”  Chipotle stated that restaurants experiencing supply shortages were emailed instructions to post POP signs informing customers of a temporary shortage of naturally raised meats. The possibilities were that the signs were there and seen, there and unseen (due to Chipotle’s negligent placement of the sign or to the class member’s negligence), or not there.  Plaintiff argued that the signs were insufficient in any case, but “even if the sufficiency of the POP signs were an issue that could be handled on a classwide basis, it does not negate the existence of the further critical issue of whether a class member saw the sign on a particular occasion – an issue that cannot be handled on a classwide basis.”

Even assuming a settlement, “there is no reason to believe that class members could be compensated appropriately.” Claims would have to identify specific dates, locations, and items purchased, and the court was confident that very few people could do that.  “People will either (1) lie, (2) attempt to fill out the claim form as best they can but be unable to do so accurately, or, most likely, (3) not bother. Money would be given out basically at random to people who may or may not actually be entitled to restitution. This is unfair both to legitimate class members and to Chipotle.”
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falsely claiming continued TM ownership leads to liability

Posted on January 21, 2014 by rtushnet

C=HOLDINGS B.V. v. Asiarim Corp., 2013 WL 6987165, No. 12 Civ. 928 (S.D.N.Y. Dec. 16, 2013)

C= sued Asiarim for infringement of Commodore trademarks (“a brand long associated with the 8–bit gaming computer popular in the early 1980s”) and related claims, and mostly prevailed after a bench trial.  The litigation was contentious; C= was formerly a subsidiary of Asiarim, but the court found that it departed with the Commodore marks rather than without them, and that Asiarim nonetheless continued to sell Commodore products and attempt to license the Commodore marks.  The opinion is shy on detail about what this continued sale meant—if the claim is that products manufactured under valid rights became infringing after the split, I’m disturbed, but it’s not really clear from the recited facts.

The court found that Asiarim infringed “when it promoted the sale of Commodore-branded products on its website and entered into licensing agreements for the trademarks with third parties.”  Even without purchases from the website, this was infringing use in commerce.  The court also found that no multifactor confusion test was necessary because these were counterfeit marks and confusion was presumed (but if a multifactor analysis was necessary, the use was confusing).  Just as when an ex-licensee continues to use a mark after its license expired, because there’d be sponsorship or approval confusion, so here.  (Those are service cases, though; a licensed Ford dealer shouldn’t be barred from selling Fords it lawfully owns even if its dealership is terminated.)  The court also emphasized Asiarim’s ownership claims—it filed SEC reports claiming control of the marks, advertised Commodore products on its website, and licensed the marks.  That was confusing.

The court also found false advertising based on the website: “though not expressed in as many words, the unambiguous message sent by this promotion was that Asiarim offered for sale authentic Commodore products.”  Thus, the website was literally false, and material (going to the very nature of the products).

And here’s where I get nervous:

It is immaterial that the products may, at one point, have been authentic Commodore products, as the right to distribute products branded with a registered mark properly follows ownership of the mark. In El Greco Leather Products Co., Inc. v. Shoe World, Inc., the plaintiff ordered a factory to manufacture shoes bearing the plaintiff’s trademark. The plaintiff subsequently canceled the order, and the factory sold the shoes to the defendant retailer, which then resold them. The Second Circuit held that, in reselling the shoes, the defendant violated section 32(1) of the Lanham Act even though the goods were originally manufactured with permission of the trademark holder. El Greco’s reasoning—that a product is not “genuine” merely because it was originally manufactured with permission from the trademark holder—applies readily here: the mere fact that the Commodore products Asiarim advertised were once authentic does not mean that they continued to be when the trademark owner, C=Holdings, withdrew its permission.

First sale is an important limitation on this principle—the right to distribute branded products does not follow ownership of the mark once there’s a first sale (or other transfer of ownership).  Where that principle should start is an important question, and I would like to know more about whether the then-owner took delivery of the products offered for sale on the website—it’s not obvious that this was a “cancelled order” situation where the trademark owner never accepted the goods.

Anyway, the court then found that Asiarim’s infringing licensing activities and SEC filings weren’t false advertising.  The license was a private contract, not advertising or promotion.  Even looking at Asiarim’s claim to own the marks to one licensor and one potential licensor, that wasn’t disseminated to the public.  Though the SEC filings were disseminated to the public, the statements weren’t made in connection with the sale of goods.

The court also rejected libel claims based on Asiarim’s fraudulent SEC filings and false ownership assertion via email.  “The two Form 8–K filings, while false and likely submitted in bad faith, state only that Asiarim’s subsidiary owned the trademarks and, by implication, that C=Holdings did not. Furthermore, one of the filings explicitly characterizes the trademark issue as an ongoing legal dispute about which Asiarim has sought the advice of counsel.” Though Asiarim lacked a good faith basis to assert ownership, the SEC statements weren’t defamatory, but simply “announced the existence of a legal dispute and declared the position Asiarim was taking in regard to that dispute. As such, they do not rise to the level of exposing C=Holdings to ‘public hatred, shame, obloquy, contumely, odium, contempt, ridicule, aversion, ostracism, degradation, or disgrace.’ Nor do they impute to C=Holdings ‘fraud or misconduct or a general unfitness, incapacity, or inability to perform [its] duties.’”

The email presented a closer question, since it told the recipients that C= lacked “any legal way to claim royalty payments from [a licensee] …. You can just ignore their requests, claims[,] and statements, but please consult your lawyer to contact Asiarim’s lawyers for further confirmation of the illegal status of their claims … by providing the proof of ownership of [Asiarim] …. For your further information, Asiarim has filed claims against C=Holdings and its director(s).”  These were less careful than the lawyerly statements in the SEC filing, “but at bottom they too state only that Asiarim is engaged in a legal dispute with C=Holdings and that Asiarim believes it will prevail.”

C=’s tortious interference with contract claim failed because it couldn’t show a valid contract between it and a third party or a breach.  Asiarim’s conduct may well have interfered with establishing new contracts, but it didn’t cause any breaches.  However, Asiarim did tortiously interfere with a prospective business relationship with a licensee. Asiarim, aware of the preexisting relationship, inserted itself between C= and the prospective licensee by insisting it was the owner of the marks.  As a result, the licensee refused to pay C= despite its intent to continue using the marks.

The court also rejected C=’s New York GBL §349 claim for lack of sufficient public harm. There was no evidence of consumer injury or danger to the public health or safety; filing false statements with the SEC doesn’t involve the relevant injury to consumers.  And the unjust enrichment claim failed because there was no evidence that Asiarim actually gained from the infringement by making any sales or collecting any royalties.

The court awarded $1 million in statutory damages based on the use of counterfeit marks. The statutory damages range goes from a minimum of $1,000 “per counterfeit mark per type of goods or services sold” for non-willful infringement, to a maximum of $2,000,000 per instance of willful infringement.  Asiarim admitted advertising eight different Commodore-branded products (not clear how this relates to how many “types” of goods there were), and entering into a licensing agreement with one entity and trying to license to another, making ten separate acts of infringement. The court also found willfulness given Asiarim’s knowingly false attempts to claim ownership of the marks.

The court noted that Asiarim “flouted the finding of a Dutch bankruptcy trustee regarding the validity of the C=Holdings transfer, made false statements in SEC filings, and run roughshod over the authority of this Court throughout this action.” A sizeable award was needed, but C= only proved lost revenues of $22,000—the $1,000 monthly royalties lost from the licensee multiplied by twenty-two months of litigation.  Still, “Asiarim’s two-year campaign of intentional infringement and deceit” “certainly” caused more harm than that, given the proven value of the marks in the past and the lost ability to exploit the marks’ licensing potential. A million-dollar award more than compensated C= and would deter future infringements.

The court also entered a declaratory judgment to clarify that C= owned the marks and that Asiarim infringed, to give relief from Asiarim’s “galling tactics” and to end the uncertainty surrounding the marks. Asiarim was enjoined from using or claiming ownership of the Commodore brand without C=Holdings’s explicit authorization.  Plus, the court ordered corrective advertising explaining the court’s findings on Asiarim’s website, also to be sent to the two licensees/potential licensees named in the case “and any other customers who purchased Commodore-branded computers from or discussed entering into licensing agreements with Asiarim.”  Also, the court ordered Asiarim to file a corrective statement with the SEC, and stated that it would refer the matter to the SEC.

Finally, the court awarded attorney’s fees.
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Product placement labeled news attracts NAD’s condemnation

Posted on January 21, 2014 by rtushnet

American Media, Inc. (Shape Water Boosters), NAD Case #5665 (Dec. 18, 2013)

NAD brought this case itself.  NYT article on the case, of note given the NYT’s own foray into “native advertising.”  An article in Shape magazine, and on its website, bore the caption “News,” discussed the importance of staying hydrated and recommended SHAPE Water Boosters as an aid to staying hydrated: “The obvious solution is to stick with water, but about 20 percent of Americans reportedly don’t like the taste. If that sounds like you, check out the new SHAPE Water Boosters … Just a single squeeze … adds delicious flavor – but not calories – along with a concentrated punch of nutrients that offer some important bonus benefits.”

NAD “was concerned that consumers may give more credence to the advertiser’s objective claims about the product’s attributes because of the context in which the claims appeared.” Unlike a standard product placement, the ad made specific, objective benefit claims for the product.  Shapeargued that the connection between the content and the magazine was obvious to consumers. NAD didn’t disagree.  But NAD was concerned that the article was “formatted and titled and appeared to be a news article” but promoted the SHAPE products as part of the news.  “Although consumers reading SHAPE magazine may be aware that SHAPE Water Boosters are related to SHAPE magazine, those same consumers can reasonably attach different weight to recommendations made in an editorial context than recommendations made in an advertising context. Put another way, consumers may reasonably believe that editorial recommendations in SHAPE magazine are independent of the influence of a sponsoring advertiser.”

NAD rejected Shape’s argument that an editor’s note on page 32 sufficiently alerted consumers that the article was an ad.  “[E]ffective disclosures must be in close proximity to the main claim, meaning that they can be read at the same time a consumer reviews the claim.” Though readers may have become accustomed to the informational/endorsement format, they “generally attach different significance to recommendations made in an editorial news article than they would if the same recommendations were made in an advertising format.” NAD recommended a clear and conspicuous “advertising” designation.
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Reading list: Fagundes on market harm in the fair use test

Posted on January 21, 2014 by rtushnet

David Fagundes, Market Harm, Market Help, and Fair Use (forthcoming 2014)

Judges, commentators, and practitioners alike agree that the final factor of copyright’s four-part statutory fair use defense to copyright infringement requires judges to consider “market harm.” That is, all sources understand this fair use factor to require analysis only of the deleterious economic effects of the defendant’s use on the market for or value of the plaintiff’s work of authorship. Yet this widespread consensus lies at odds with the plain language of the Copyright Act itself, which dictates that fair use analysis requires consideration of all economic effects—harmful and helpful—of an unauthorized use. This Essay investigates this puzzling gap between general practice and statutory text—the “market harm puzzle” … What would fair use analysis look like if courts simply followed the plain language of section 107, rather than the prevailing “market harm” interpretation of factor four? This thought experiment first provides a taxonomy of market help; then sketches the rough outlines of how this interpretation would cash out doctrinally; and finally considers prevailing objections to considering market help in a factor-four analysis.
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there’s no transformation but what we make for ourselves

Posted on January 21, 2014 by rtushnet

Transformative work of the month, at least! Terminator 2, retold using only lines from Shakespeare. Via FC.

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World Without Privacy Wrapup

Posted on January 17, 2014 by rtushnet

Overview and Commentary

Ronald Krotoszynski, John S. Stone Chairholder of Law, The University of Alabama

Moderator:      Montré Carodine, Associate Professor of Law, The University of Alabama

Krotoszynski: potential virtues of a comparative law perspective.  All of the papers reflect assumptions/understandings from domestic privacy regimes, which won’t necessarily hold true across national boundaries.  Doesn’t mean to suggest we should create global law of privacy or look for platonic ideal of privacy.  Claim only that knowledge of foreign regimes could assist us in evaluating contemporary arrangements.

Haggerty worries that reasonable expectation standard will undervalue privacy as surveillance expands.  Maybe not—substantive outcomes matter more than legal frameworks. Language can be misleading.  Reasonable expectation need not be descriptive; could be normative/aspirational, as Canada has held it is.

We are not prisoners of tech.  France: employers can’t routinely surveil employees, even to avoid shirking and ensure adequate productivity. Cultural tide is strong enough to resist.  Vigorously enforced.  Suppose Wal-Mart put cameras in employee bathrooms to monitor productivity—Wal-Mart has a similar interest in that stall. Yet that’s culturally unthinkable, and the legal reaction would be swift. (I wish I were this confident of that.)

SCt of Canada decoupled privacy protection from property ownership—student can claim privacy in data on a computer owned by her school. US has more often tied privacy to property.  Nomenclature matters less than scope and substance of the rights protected. Germany doesn’t protect privacy, but it does protect dignity and personal honor. Interests sounding in privacy in US terms are more reliably/robustly protected there. A society that expects privacy gets more, not as reasonable expectations but as a matter of political economy. In the US, free speech has more cultural/social relevance and thus gets more protection—a function of social/cultural expectations.  Privacy has more relevance in Europe than here, opposite of free speech.

Austin’s focus on consent v. power, and the role of private actors.  In ECJ, human rights have both positive and negative dimensions, and aren’t necessarily bounded by property/state action. State’s duty to safeguard fundamental rights could matter: everyone has a right to respect—creates a positive obligation in EC.  Many US state constitutions have a right to public education clause. Our general tradition of negative rights doesn’t mean it’s the only possibility.

Anonymity: societies vary in their tolerance for anonymity/pseudonymity.  Can assist those without power.  But there’s a dark side to anonymous speech too—empowering gov’t to propagandize population with false identities.  Lyrissa Lidsky has written on problems of using sock puppets to push gov’t views—TSA has been accused of doing this on its own websites and on sites like Flyertalk. Impedes democratic discourse.  Koch Bros. also use anon/pseudon speech to hide their starting points. Trust in gov’t affects willingness to accept regulations designed to force speakers to disclose their identities. US citizens distrust gov’t and view speech regulations with distrust.  Canada etc. don’t mind as much.  (This account of distrust is coherent as limited to speech but can’t explain what’s going on with surveillance. This is the gov’t we distrust so much, the one reading all our emails? Conversely, the Europeans don’t seem all that trusting on surveillance.)

World without rules about pseudon. speech might undermine discourse more than empower it, given the power of corporations.  Might undermine confidence in all speech online—never know if NSA is texting you. Could preclude gov’t/corporations from engaging in anonymous speech. Predictively, though, SCt isn’t likely to tolerate that given its rulings on compelled commercial speech.  If we had to choose a world that allowed everyone anonymity, we might be worse off.  If there are political benefits to misattributing speech by powerful, they will use this modality to their full extent.  Cost and difficulty of securing a ballot initiative, for example, make it much easier for Costco etc to do it than for grassroots activism. It’s easily to romanticize the web, but it’s also a means of mass communication for gov’t and corporations.  We need to be clear eyed in associating net social costs. 

(But no one in the US ever proposes “net” regulations in that sense. Like Google+’s real name policy with all its exceptions/failures to see how it was allowing some people to do what it was barring others from doing, the regulations are always more situation specific.  South Korea’s real name policy is not on the table here.  (And a good thing too!)  I think we’ve heard quite a lot about the harms of anonymous speech; I’m also interested in putting other uses on the table, especially given that powerful entities will misuse identification as well as anonymity, as the Koch case amply demonstrates.  I’m also not really sure why the First Amendment would protect pseudonymous gov’t speech, though that gets into complicated gov’t speech doctrine; at the very least I have trouble understanding why the First Amendment would precludea law against deceptive gov’t speech, as right now the CIA is barred from propagandizing American citizens.)

Some cultures accept public defecation and sexual activity.  Thus privacy norms aren’t cross cultural. But even so we can learn from other nations’ privacy laws. 
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World Without Privacy 4

Posted on January 17, 2014 by rtushnet

Session IV: Enough About Me: Why Privacy is About Power, Not Consent or Harm

Lisa M. Austin, Associate Professor, University of Toronto Faculty of Law

Consent is often seen as the heart and soul of models of privacy protection. These regulate personal information, not private information (information about you). A very large amount of info is potentially regulated by these kinds of regimes, and the dominant idea is that it’s up to you to figure out how much you want to share.  If you think privacy is complex, contextual, varying among people, this looks incredibly promising because we don’t predefine what private is.  “Self-determination” or self-management models.

We should be very skeptical of these models.  Standard problems: people can’t read policies, don’t read them. But her problems are deeper/more structural. Cautionary tales from Canada.  Pay attention because one might think Canadian privacy law is comprehensive and strong.  Our legislation covers public sector and increasingly the private sector as well; privacy commissioners are dedicated regulators; easy to make complaints; not just procedural but substantive—consent doesn’t matter, you can only collect info for reasonable purposes.  Situated in broad constitutional framework including a right to privacy, which rejects the third-party doctrine. Reasonable expectation of privacy standard is normative, not descriptive.

Problems: First, designed to regulate relationship between individual and a service.  Certain model of fair and appropriate in that info flow. But internet companies are intermediaries—they mediate multiple relationships, including interpersonal: platforms for interaction, deeply bound up with their own business practices.  Second, collect so much information about us that they’ve become treasure troves for state agencies.  Those things affect the structure of privacy.

If you see the benefits of consent based model as individual self-management, that reflects very individual, subjective view of privacy. But implemented as law that invokes two pressures: other competing interests.  It can’t just be up to the individual to do what’s best for her—law enforcement/national security push back, as well as business interests. No matter how implemented, you find various places where that balancing is in play—proportionality analysis, objective standard. Pressure is to move away from individual self-determination.

Also, people who have to obtain consent are now under obligations—they need to seek out information about the user’s consent. If the collection involves really private information, maybe it has to be opt in; less private, maybe implied consent works. Once that categorization is occurring, we’re not doing individualized subjective preferences any more. Retreat to ideas of privacy as sensitive information occurs, narrowing the scope of what we’re protecting. Retreat to accounts of social/reasonable expectations of privacy, but very different from the constitutional version.  Social norms instead of normatively reasonable expectations. Both work to undercut the promise of this type of privacy law.

Recent privacy decision about FB: should you be able to opt out of targeted ads?  Initially targeted marketing was considered a secondary use, and required another consent.  If true in retail context, why not in FB context?  Answer: no!  Accepted that FB’s business model was based on ad revenue, and business interests had to be balanced with privacy.

Defaults make a huge difference. The charge made was that they should be more restrictive than FB sets, which would then force people to think harder about their privacy settings.  Privacy commissioner rejected this too.  Why? Commissioner said, people join FB to share information. The idea that it can’t be deeply sensitive because you’re there to share information—privacy as secrecy, sensitive information.  Also influenced by expectations of FB users that this was reasonable within the community—but no discussion of how this was a shift from general cultural expectations formed independent of something like FB to descriptive account of expectations of FB users within an architecture that was formulated based on the business model. Intermediaries participate in shaping social norms but are not noticed to be doing so.

Multiple courts have upheld warrantless access to subscriber info. Usually about child porn, which makes courts reluctant to touch this. But also they say that the legislation creates carveouts so that they don’t violate statute when sharing information with law enforcement without consent. Could say, re: the carveouts: Not up to ISP to vet the credentials of LEO/whether they need a warrant.  Could still have separate inquiry into whether warrant was required.  State might still need a warrant under Canadian law because the third-party doctrine isn’t part of Canadian law. But instead: courts say that the legislation permits sharing, thus you have a diminished expectation of privacy. And the contracts with subscribers vaguely, buried deep, have a clause that say that they can share info with law enforcement, diminishing reasonable expectation of privacy. Terms imposed by company in standard form contract now alter relationship between individual and state, and the courts keep saying this.

To think that consent mediates all this is mistaken, not just for regular problems of reading the forms but because consent as a concept facilitates broad collection of info and easy access by law enforcement in a disturbing way.

What to do? Analytic framework: privacy is no longer that helpful; lost analytic rigor.  There are two lessons from privacy’s roots in trespass that are underappreciated and that could be reappropriated/revised. (1) The “power to” view: trespass is not an injury based tort.  Always looking for the harm of privacy violations leads to trouble—so diffuse, balanced against very pressing concerns.  When we can’t find specific harms, we discount it.  Property law is often not about protecting people from injury but about giving people powers to do what they couldn’t otherwise do—e.g., transfer property after death.  Law as facilitative, not just obligations/remedies for injuries. 

What’s the legal architecture we need to facilitate privacy? What do we think privacy norms allow us to do?  Audience norms of tact: pretending not to notice something that we do.  That could help us think about FB’s obligations beyond securing consent—it too could be required to exercise tact.

(2) Public context—early search and seizure cases are trespass cases.  Some accounts of trajectory of privacy say that we went from protecting property to protecting more.  But early trespass cases aren’t merely upholding private property; they were about concerns over arbitrary exercise of state authority/rule of law. Explicit focus on rule of law can be helpful in getting us off focus on individual (consenting or not) to the surveilling party—who’s exercising power and how can we constrain it so it’s exercised in an accountable/transparent matter. That’s the central Q, not a side show. That helps explain what’s wrong with the standard form contracts nobody reads. We each have roles in holding each other and the state accountable.

In earlier privacy debates there was a lot of debate about practical obscurity—records on you held in paper file cabinet are different because they’re harder to access and link to other information.  Paperless = loss of practical obscurity.  (Pseudonymity is one way of restoring that, at least as against other individuals!) Similar phenomenon going on with law enforcement. Police require cooperation of community in so much; you need trust. We all know what happens when a community stops trusting the police.  RCMP built trust with community and got tips that led to apprehension of people who planned terrorist attack.  That requires responsible action by law enforcement.  We all exercise judgment about when to act (call in the police) or not. This plays a role in practical constraints on police action. When info is no longer held in community, but by an intermediary with different rules about sharing, we need to think about what accountability looks like.

Growing scholarship in rule of law: not just about constraining state authority, but also about constraining private actors.  Is rule of law consistent with administrative state? Information law is another major shift in the nature of the state, and we need more than privacy to think about it.  Consider other legal vocabularies about the nature of law.

Moderator:      Tanya Cooper, Assistant Professor of Clinical Legal Instruction and Director of Domestic Violence Law Clinic, The University of Alabama

The poor have no power over their privacy. We see this in family law, disproportionately affecting racial minorities. Example: child welfare/dependency courts where children are adjudicated abused/neglected. Families routinely invaded by state actors/agencies, lawyers, judges. Their information is collected and used against them. No meaningful consent/ability to opt out because the countervailing interest is protection of children. Irony: these courts are closed to the public. They use privacy as an umbrella term for confidentiality—mask a wide array of abuses against due process and families are routinely separated forever.  So she likes thinking not about consent but about power.  So what to do?  How would we apply your concepts about power? 

Austin: one possibility: disclose facts without personal details. Program in Canada to train judges to voluntarily redact information in their judgments, because they throw in all sorts of unnecessary details.  Get them to reflect on what they can and should put in the judgments as explanation for the reasoning versus what should be left out, like a house address.

Sarat: was there a golden age for consent, when it was meaningful?  Likes idea of obligations imposed on intermediaries; empirically, on what basis would you believe that society as a whole would endorse this view of affirmative obligations.  The way in which US citizens think about these problems is almost entirely about consent, even when the consent wasn’t meaningful. 

A: there was no golden age.  Looked at privacy commission findings over a number of years about consent.  Striking result: every example was basically resolved on the logic of business interest—reasonable purpose got interpreted as reasonable business interest, and then consent was implied; consent didn’t do any work.  Need more normative discussion to have any bite.

Sarat: if I was a consent advocate, I’d say we need to get away from implied consent.

A: has philosophical concerns.  What does it mean to consent to give up privacy, if privacy is about consent?  What are you consenting to give up?  There must still be some independent concept of what it is that you’re giving up when you consent.

In Canadian human rights law, we impose affirmative obligations to reasonably accommodate religious views, disabilities, etc. up to the point of hardship.  Completely accepted now, with lots of debate over what reasonable accommodation/hardship means, but the basic principle is now grounded.  People accept the ethical settlement.  Unthinkable to build a new building that wasn’t wheelchair accessible/build curbs without curb cuts.  Positive obligations around privacy could also be built into infrastructure—a building code for privacy.

Sarat: draw on analogies in American law to obligations that prisons have to prisons: social relationships they create based on dependency; remove the effective capacity to opt out.
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World Without Privacy 3

Posted on January 17, 2014 by rtushnet

Session III: Four Privacy Myths

Neil Richards, Professor of Law, Washington University

(1)   Privacy is dead.

1970: Newsweek cover story: Is privacy dead?  People have been declaring privacy dead for a while.  Privacy law is booming, as is debate on appropriate collection, use, and disclosure of information.  Privacy still exists: no cameras in bathroom (and expectation is so deep that we feel no need to disclose that there are no cameras in the bathroom).  Need for rules regulating what happens after info captured is all the more important. HIPAA/FCRA govern use of information.  Transparency makes consumer credit work for consumers as well as agencies.  Trade secret law is a law of privacy. Data brokers like being able to operate in private and resist calls for transparency.  Facebook is an enemy of privacy but likes its own: Richards visited and was required to sign an NDA saying he couldn’t describe anything that happened during his visit; tried that with a press conference too.  FB believes in privacy for itself, as does the NSA.

The content of the rules is more important than ever, and we need to decide what rules to have before it’s too late.

(2)   People don’t care about privacy

If people didn’t care, would you know who Edward Snowden was? Pew study shows people do care—when they can figure it out, they use adblockers, Tor, pseudonyms, give false info.  Privacy paradox: the idea that we say we like privacy but just go ahead and sell our info.  Dan Solove: the failure of privacy self-management.  FB provides “tools” to control privacy, but they’re too hard to use.  Even privacy experts aren’t good at this—there are too many of them to control.  If you read all the privacy notices you encounter in a day you’d need 76 workdays.  Putting burden on users to read, adjust, tweak, opt out does not work—choices and time are limited.

(3)   Young people don’t care about privacy

Actually, they do. They see the benefits of connecting. They care about the immediate privacy threats to them, which is not the NSA, and not even FB. It’s their parents and teachers.  FB activity is declining because old people are now there.  It’s not that FB is uncool.  It’s that when your parents are on FB you watch what you do.  Privacy purges upon college graduation: pictures of everything they’d taken shouldn’t be on their timelines any more.  Also, like older people, young people face limited privacy choices—you have to go where the people are; having less money gives them more limited choices.  Reverse privacy paradox: if we don’t care about privacy, why do we talk about it so much?  Privacy is the shorthand for anxiety about radical transformations in info tech we’re witnessing and how those affect our lives.

(4)   If you’ve got nothing to hide you’ve got nothing to fear.

Posner said: privacy is just a right to conceal discreditable facts about ourselves: fraud on the market for humanity.  But we all have something to hide.  Not just toilet activities or private parts.  Tyler Clementi killed himself after his sexual activities were secretly recorded and shared. 

People behave differently when they believe they’re under surveillance, or even behaving in front of a picture of eyes. Is the solution for all of us to watch each other? No. Privacy in social space allows us to figure out who we are, play with identity as Tushnet discussed.

Privacy has power effects: information can be power over.  NSA collecting information on people viewed as pro-radical Islam, creating a chart of the porn they liked, planning to threaten disclosure to silence them.  FBI did the exactly the same thing to MLK Jr., believing him a Communist agent.

Target knows you’re pregnant: the intent wasn’t to be creepy; it was to get power, here commercial power.

(5)   Privacy is bad for business

User data is valuable.  If this is just a transaction, we’re paying for FB without dollars, and that’s misleading.  Is privacy a tax on profitability?  Well, is having to pay wages to your employees a tax on profitability?  It’s a cost/input.  Privacy is ultimately good for businesses, which depend on trust.  Trust/confidentiality can garner a competitive advantage.

How we frame/talk about privacy matters.  Free services, Big Brother, oil, death of privacy matters for diagnosis and solutions.

Moderator:      Fred Vars, Associate Professor of Law, The University of Alabama

Qs: is that what we really mean when we say privacy is dead? Don’t we mean that the scope of available info about individuals is much greater, even if rules still exist?  Would a more satisfactory response to the myth be that the percentage of total information that’s private is smaller but not because privacy is dying but rather than the amount of public information has skyrocketed?

Richards: goes to discourse.  Labeling and framing: when it ceases to be private, information does not necessarily become public.  A lot of baggage comes with the term “public.”  Info is shifting from the superprivate state to the less superprivate, but that doesn’t mean it’s all out there and unregulable.  Managing flows becomes more important. 

Sarat: Contrast Haggerty’s point: privacy for excretory functions remains.  But the social domain has dramatically shifted.  Just because it’s not fully public doesn’t mean it’s private (against the gov’t, advertisers, etc.).

Real point of disagreement is whether rules still matter a lot.  Haggerty says no.  You say yes.

Slippage between language of secrecy and privacy—privacy is even more a matter of power.

Richards: as a sociologist, the goal is to explain and describe and diagnose complex social phenomena.  As lawyers, our job is to fix things and talk about rules and prescriptions.  Haggerty is right about the mean shift from relatively private to relatively public, and the risk that it will become dangerously public.  Also agrees that legal rules/privacy rules can end up becoming problems themselves, making it easier to give up privacy—FISA court gives stamp of democratic approval.  But sometimes legal rules have unintended effects, and even fail; his departure is the hope that we can have good rules that actually work and don’t become privacy theater.

Q: seems like the only people who really care about privacy are those who want to live off the grid—no phone, no connection to public services.  Tech is too pervasive for privacy to exist. Security breach at Target = no privacy.

Richards: we continue to use credit cards because the benefits outweigh the costs, but the costs are still there. Humans are wired to be intellectually lazy, and existing concepts are easily blurred. Need better encryption, among other things. But clients still care about confidences—they want their information kept private.  (We act as if the NSA isn’t listening, I would say!)  Regulation can prevent certain uses. Cultivate ethical sensibility among info tech engineers. When doctors started to be able to cure, we had ethical regulations about their responsibilities; when lawyers could change legal status, they developed ethics; software engineering needs constraints too, through professional ethic of utilizing great power.

My Q is about the last myth: Silicon Valley libertarianism; why doesn’t market reasoning completely dispose of your responses—we’ve bargained/there’s consent; minimum wage laws are bad; if privacy is good for business we will adopt it precisely to that extent, and no more.

Richards: My audience is not so much the Randians as the non-true believers, as well as consumers.  There are different kinds of privacy/rules. Some are at times flatly opposed to profitability.  “You may not have a free service” would make things less profitable. Other protections allowing users real control, or regulating the way ads delivered, or regulating how information is safeguarded, are essential. Even where there are actual tradeoffs, by looking at the rules in the broader context you can see the complexity of the problem and that we’re looking for decisions about when we’re allowing information to flow unimpeded.  Less concerned with rules that come out of the ethical conversation than about having a conversation about what ethical rules would be, as we did about what the rules for workplace safety should be.

Austin: to what extent is privacy a real live analytic tool any more? Yes, we need rules, but does it make a difference to call them privacy rules as opposed to information rules?  Confidentiality won’t get us very far; it’s narrow. 

A: doesn’t like term privacy. We need to work on the intermediate concepts. People keep looking for the harm rather than figuring out rules. He has tried to pick some concepts and start from there: informational privacy/privacy in the formation of beliefs and political commitments—the goal is to defend kinds of information rules. In security, we may want to rely on economics—our interest in credit card security is more in not losing money. In surveillance, we need to look at balance between political liberty, public safety, and risks of corruption from unreviewable security apparatuses.  Just not privacy as secrets or on/off binaries.
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