Monday, March 19, 2018

Truthful identification of performance defeats Illinois publicity claim

Martin v. Wendy’s Int’l, Inc., --- Fed.Appx. ----, 2018 WL 1225470, No. 17-2043 (7th Cir. Mar. 9, 2018)

“Guinness World Records lists Johannes “Ted” Martin as the record holder for consecutive kicks of a footbag.” He sued Wendy’s International and Guinness for urging families to play together and challenge world records like Martin’s in a promotion.  Each promotional kids’ meal, Guinness’s website explained, “will come with one of six Guinness World Records record-breaking toys” that “provides fun challenges and a chance for parents and kids to outdo each other for the title of family’s best.” One of the toys was a footbag. Each kids’ meal also included a link to a free Guinness World Records eBook, which provided “an exclusive guide to records” for families to use.  The words “Guinness World Records” were printed on the footbag and its packaging. An in-store display showed the footbag, alongside the five other toys, under the heading “Kids v. Parents” and the logos for Wendy’s and Guinness. The text on the kids’ meal bag also referred to the six toys as “record-breaking.” An instructional card with Guinness and Wendy’s logos asked “Can You Break The Record?” The instructions included: “How many times in a row can you kick this footbag without it hitting the ground? Back in 1997, Ted Martin made his world record of 63,326 kicks in a little less than nine hours!”

Martin didn’t plausibly allege false endorsement:

No reasonable consumer would think that Martin endorsed the footbags. The appearance of “Guinness World Records” on the footbag might prompt a reasonable consumer to conclude that Guinness—not Martin—is associated with the footbag. Martin’s name on the instruction card simply identifies him as the holder of a record, not the endorser of any product.

Nor was labeling the toys “record-breaking” false advertising.  It was puffery. “[N]o reasonable consumer would believe that free toys accompanying kids’ meals to encourage intra-family play were the same types of items used to set world records.”

The llinois Right of Publicity Act excludes the “use of an individual’s name in truthfully identifying the person as the author of a particular work or program or the performer in a particular performance.” Martin argued that this exception didn’t apply because he didn’t perform in the defendants’ promotion. “But Martin’s qualification is not in the statute. [The statute] allows anyone to identify truthfully the performer of a particular performance. And that is what the defendants did.”

Sock puppet reviews aren't literally false absent additional non-identity literal falsity, court rules

Nunes v. Rushton, No. 2:14-cv-00627, --- F.Supp.3d ----, 2018 WL 1271446 (D. Utah Mar. 9. 2018)

Every time I think I’ve seen it all, I’m reminded that humans are not only stranger than we imagine, they are stranger than we can imagine. Rachel Nunes sued Tiffanie Rushton for copyright infringement, defamation, etc., mostly unsuccessfully except for the copyright claims, leaving for trial only the amount of the statutory damages award for copyright infringement.

Nunes published her novel A Bid for Love in 1998 and registered the copyright the same year. Rushton published a novel, The Auction Deal, between May and July 2014 by distributing between 80 and 90 free copies to reviewers and bloggers for promotional purposes. “With the exception of the addition of sex scenes, The Auction Deal is substantially similar to A Bid for Love and shares the same dialog, scenes, characters, themes, settings, and plot.”

In May 2014, Rushton also created about fifteen “sock puppet” accounts on Google, Yahoo, Goodreads, and Facebook to post positive reviews of her previous two novels and negative reviews of Nunes’s book. She also posted two negative Amazon reviews of A Bid for Love under her own name and two under sock puppet names.

“After Nunes learned of The Auction Deal, she attempted to obtain a copy by requesting it from one of Rushton’s sock puppet accounts.” In response, Rushton sent Nunes a series of disparaging comments, then pulled The Auction Deal from sale on Amazon after Nunes contacted her. Other than copies she bought for herself, no other copies of the novel were ever sold.  Then Rushton posted another negative review of A Bid for Love under her own name and nine more negative reviews of Nunes’s books from sock puppet accounts. She also used sock puppets to give multiple one-star ratings of Nunes’s books on Goodreads. On Facebook, her public comments about Nunes accused her of “harassment,” e.g., “I have been harassed by Nunes and her assistant for not supplying her with an ARC [advance review copy].”

After Nunes discovered Rushton’s identity, she decided to sue and started a GoFundMe fundraiser to finance her lawsuit. Rushton posted several comments on Nunes’s GoFundMe page using sock puppets, calling the solicitation a “fraud,” “hoax,” and/or “scam,” e.g., “This ‘fund me’ has got to be a hoax or scam. A publisher would be backing this if it were a real claim.”

In deposition, Rushton conceded that her novel was substantially similar to Nunes’s novel.  There was no factual dispute on her liability for copyright infringement, though there was enough to go to a jury on whether the infringement was willful, given that there was only circumstantial evidence of Rushton’s state of mind when she infringed Nunes’s copyright.  “In an email to Nunes, Rushton insisted that she could not be held liable for infringement because, in her mind, she never published The Auction Deal by selling copies to the public.”  [Well, ok.  Seems kind of Trumpian to me, if she sent out review copies, but apparently Rushton may argue that she was in a manic phase due to her bipolar disorder, so she lacked willfulness.]

Nunes’ claim for actual damages failed. Nunes didn’t argue that the infringement caused the sales of her existing novels to suffer, and Rushton never sold any copies of her infringing novel to the public for disgorgement purposes. Nunes instead alleged that Rushton’s copyright infringement caused her mental anguish and prevented her from writing two novels that she would have otherwise written during this timeframe. The court determined that “actual damages” as used in the statute didn’t include damages caused by the copyright owner’s emotional response to the infringement of a published work. “[T]he explicit provision for the recovery of the infringer’s economic profits in the Act strongly suggests that the copyright owner’s ‘actual damages’ must similarly be economic in nature,” and the case law agrees.  Thus, only statutory damages remained for trial.

The defamation/defamation per se claims failed because the online comments and emails were opinion about Nunes’s books and personality traits, hyperbolic claims of “harassment,” “scam” or “fraud,” or unpublished communications sent only to Nunes.  For example, in context, “readers would understand the use of the terms ‘fraud’ and ‘scam’ as exaggerated language expressing strong disapproval of Nunes’s efforts to raise money online, not as a charge of criminally fraudulent activity.”  As for “Ask your attorneys if in your quest to investigate and have people rally around you if you are guilty of harassment. I think the answer is yes,” that could be read to express a legal opinion, but even questionable opinions about the legal significance of Nunes’s actions aren’t actionable as defamation.

Some of Rushton’s statements did contain false statements of fact, such as messages to book reviewers and bloggers claiming that Nunes had given her permission to use elements of A Bid for Love or that Nunes had co-written The Auction Deal with her. She also posted: “[Nunes] feels threatened because I told her I would be contacting my aunt, [the CEO of Deseret Book], and letting her know how she is handling the situation—through reviewers and not through the author. Deseret Book and Seagull Book are appalled at the way she is handling the situation.”  But the asserted facts weren’t defamatory: false claims about permission or collaboration don’t have a “tendency to injure a reputation in the eyes of its audience.” False claims about her aunt and of the bookstores’ alleged disapproval weren’t defamatory, even though they were likely intended to intimidate Nunes; the statements weren’t about her, and “a falsehood concerning an opinion held by a third party is not sufficient to expose an individual to public hatred or ridicule.”

False light claims failed for the same reasons as the defamation claims.

Business disparagement/injurious falsehood: A business disparagement claim “concerns statements regarding the quality of the plaintiff’s product or the character of the plaintiff’s business,” and not “statements about an individual’s reputation.” Rushton disparaged the quality of Nunes’s novels, giving them numerous one-star reviews and criticizing them for being “out of date” and “ridiculous.” These wer constitutionally protected opinions, and Rushton’s other online comments couldn’t be used to support her claim for the same reason the defamation claims failed.

Tortious interference: Rushton allegedly interfered with Nunes’ economic relations with the readers who purchase her books by way of two improper means: (1) posting defamatory comments on the internet and (2) infringing Nunes’s copyright to A Bid for Love.  But the first wasn’t an improper means, given the result on the defamation claims, and the second was preempted by the Copyright Act.

Nunes also alleged a violation of Utah’s electronic communication harassment statute. But the statute didn’t expressly create a civil cause of action, and the court wouldn’t imply one.

Lanham Act false advertising: Nunes alleged that the use of multiple sock puppet accounts to post positive reviews of her books and negative reviews of Nunes’s books constituted false advertising. First, Rushton pretended to be an independent reader, not the author herself/the author’s competitor. Second, by using multiple sock puppet accounts, Rushton allegedly created the false impression that multiple individuals liked her books and disliked Nunes’s books.  Nunes didn’t submit evidence of actual deception, so she needed to show literal falsity. 

The court relied on Romeo & Juliette Laser Hair Removal, Inc. v. Assara I LLC, 2016 WL 815205 (S.D.N.Y. Feb. 29, 2016), another case involving fake reviews.  There, the court found that fake bad experiences of non-existent customers were literally false because they described events that never occurred and fictitious customers that did not exist. But reviews posted under three separate pseudonyms by an owner of a competing business who was an actual customer of the plaintiff, claiming that the services was slow and that the plaintiff’s employees were rude, weren’t literally false because they were “largely matters of opinion and the plaintiff [had] not shown that they are actionable as false statements of fact.” But that’s not really the literal falsity part: the literal falsity is the misrepresentation about being someone else (and about having three separate experiences instead of one).  Whether that literal falsity is material is a separate matter, but it might well be so, and the FTC’s Endorsement Guidelines follow the principle that falsity/failure to disclose in these matters violates the FTCA even without other specific factual claims, because of the materiality of endorsers’ connections to the endorsee.  I certainly would find it highly material that the author of a review was a direct competitor, or was also the provider of the reviewed good/service.

However, the court here found that the sock puppet reviews were just opinions: “Rushton did not misrepresent the essential characteristics of the books she reviewed. Instead, she claimed that her books were good while Nunes’s books were boring and outdated. Such statements are a matter of opinion and cannot be proven true or false.” 

Also, the Lanham Act claim failed separately because Nunes didn’t show any damages or injury. Nunes offered the testimony of her expert that negative online reviews generally negatively affect book sales, and the lay opinion of a representative of Amazon, as evidence that she had been harmed. But Moore didn’t analyze Nunes’s book sales and didn’t know whether her sales went up or down after Rushton posted her reviews, nor could she assign a monetary value to the effect online reviews may have; her opinion was based on common sense. The Amazon rep also provided his lay testimony that bad reviews generally discourage sales.  [My understanding is that there is some research out there trying to quantify this, for those of you thinking about the future of these claims.]  Without evidence as to the specific effect that Rushton’s online reviews had on Nunes’ books, or about sales during the relevant period of time, or customer surveys or customer testimony, there was no proof to support Nunes’s damages claim for lost sales. Damages caused by mental anguish also weren’t covered by the Lanham Act.  

Utah Truth in Advertising Act claims also failed; the law provides that a defendant who’s violated the law “shall” be enjoined, but also requires prior notice and an opportunity to correct the allegedly unlawful ad by the same media before injunctive relief is allowed.  Nunes’ prelitigation emails and a blog post complained about plagiarism and copyright infringement, not about the alleged violation of the Utah Truth in Advertising Act, and it didn’t provide Rushton an opportunity to correct the record in order to avoid an injunctive relief action.  Damages failed for the same reason as they did for the Lanham Act claims.

Tuesday, March 13, 2018

Pop goes the kitty? registration and infringement are separate inquiries, court points out

SportPet Designs Inc. v. Cat1st Corp., No. 17-CV-0554 (E.D. Wis. Mar. 2, 2018)

SportPet sued Cat1st for patent, trademark, and copyright infringement and violations of Wisconsin's Deceptive Trade Practices Act based on its sale of pet products such as play structures for cats. SportPet alleged infringement of two registered trademarks: POP OPEN for collapsible containers for household use [containers that … pop open?] and SPORT PET DESIGNS for pet kennels, beds, and bedding and pet toys.

SportPet wasn’t assigned the POP OPEN mark until after it brought this action, so it lacked standing to assert a claim for infringement. Even if it could establish standing, the complaint didn’t plausibly suggest infringement.  Not strengthening the claim for the distinctiveness of the mark, the complaint alleged that “Cat1st is violating SportPet's . . . Pop Open trademark[]” by “using and advertising the pop open design,” which “is a protectable mark.” But the word mark (if mark it be) does not protect “the pop open design” (which presumably would have its own functionality issues if claimed as a mark).

The complaint also alleged that “Cat1st's packaging and advertising copies” language from SportPet, e.g., “pop open, sturdy and lightweight, for travel, and convenient for carrying”—“almost word for word.”  That wasn’t enough here. Examples in the complaint showed Cat1st’s use of similar terms to those used by SportPet—e.g., “sturdy,” “lightweight,” “for travel,” and “for your carrying convenience”—none used the specific phrase “pop open” (or a colorable imitation of it) in any way, much less as a distinguishing and source-identifying mark.

SportPet’s second trademark claim did a lot better.  Here are the parties’ logos and packaging:
Plaintiff and defendant logos

Plaintiff and defendant packaging

Cat1st argued that the issue was whether its logo infringed SportPet’s standard text mark.  But that’s not so: trademark cases evaluate the marks “in light of what happens in the marketplace.”  [citing me!]  The court also rejected as outside the pleadings Cat1st’s argument that its uses were all “from packaging for products sold in Japan under an exclusive license agreement” between the parties, “where Cat1st lawfully owns the trademark registration for ‘Sport Pet Japan.’” Likely confusion was sufficiently pled.

SportPet’s copyright infringement claim failed because it had’t sought or received registration.  [And might have a Kirtsaeng issue, if Cat1st’s claims about Japan are true.]

The court also dismissed a claim under Wisconsin's Deceptive Trade Practices Act alleging that Cat1st misrepresented “to the public . . . that [it is] selling SportPet’s products” and “misrepresent[ing] to [SportPet] that [it] only sold the infringing products in Japan.” Cat1st’s misrepresentations to the public allegedly caused SportPet to lose sales due to customer confusion and Cat1st’s misrepresentations about where it was selling its goods allegedly allowed it avoid legal action as it snuck into the U.S. market. The court found that SportPet didn’t plausibly allege that the misrepresentations caused SportPet any pecuniary losses recoverable under the DTPA, because misrepresentations to consumers didn’t materially induce SportPet itself to act, as required.  And Cat1st’s alleged misrepresentations to Sport Pet didn’t contribute to SportPet’s decision to buy anything or otherwise enter into any commercial transactions as a consumer of goods or services, also required by the DTPA.

Use of photo beyond license window doesn't create false endorsement claim

Bovinett v. HomeAdvisor, Inc., No. 17 C 6229, 2018 WL 1234963 (N.D. Ill. Mar. 9, 2018)

Bovinett, a model and actor, participated in a photoshoot for HomeAdvisor. Bovinett’s agent was allegedly assured that the photos would be used in static form only (i.e., either in print media or as a static image posted on a website), and would not be incorporated into any video. Two weeks later, Bovinett’s agent signed a consent and release form stating that Bovinett agreed to convey his rights in the photos to HomeAdvisor for use “in advertising, promotions, and any other use, and in any media, desired by HomeAdvisor in its sole discretion, including but not limited to display on the HomeAdvisor website, in television commercials, and on the Internet.” HomeAdvisor’s personnel allegedly assured Bovinett’s agent that notwithstanding the consent and release language, HomeAdvisor would not put the photos to use in any video format.  Then it did.

Fraudulent inducement: Claims involving a false statement of intent regarding future conduct are generally not actionable under Illinois law, unless they are “particularly egregious” or are part of a larger scheme. These alleged misrepresentations weren’t particularly egregious, nor did Bovinett allege a pattern; two different statements about non-video use could in theory be a pattern, but Bovinett didn’t sufficiently allege the first statement with specificity.  Nor was fraudulent concealment properly alleged; this requires that the defendant concealed a material fact when under a duty to disclose that fact, but some sort of fiduciary or confidential or other special relationship is required and none was alleged.

Lanham Act/Illinois Consumer Fraud and Deceptive Business Practices Act/Illinois Uniform Deceptive Trade Practices Act:  Bovinett failed to allege any false statement.  And the likely confusion claims failed because there could be no confusion about Bovinett’s affiliation, sponsorship, or approval of defendants and/or their activities and services. “Bovinett admits he agreed to pose as a model for HomeAdvisor’s photoshoot with the knowledge that HomeAdvisor intended to use those photos in advertising. … [T]he allegedly tortious commercials might well leave viewers with the impression that Bovinett endorses HomeAdvisor. But that impression is accurate, at least as of the time Bovinett sold his rights in these photos, so the impression cannot confuse anyone.”  The court doesn’t discuss the rump confusion theory that viewers would be confused about whether he authorized video use—which could hardly be material to anyone, even if for some extremely unlikely reason the matter occurred to them.

Redbox's claims miss release window for injunctive relief

Redbox Automated Retail, LLC v. Xpress Retail LLC, 2018 WL 1240345, No.17 C 5596 (N.D. Ill. Mar. 9, 2018)

The parties compete in the market for DVD rental services through automated vending machines called kiosks. “In early 2016, Redbox learned that DVDXpress was using kiosks that were, like Redbox’s, entirely red in color. Around the same time, Redbox also learned that DVDXpress was advertising—on its kiosks, its website, and elsewhere—that customers could rent movies through DVDXpress twenty-eight days before the same DVDs became available through Redbox.”

Nearly a year later, one Redbox official wrote in an email, “I think that’s false advertising[.] We are day and date for most,” then asked the CEO whether DVDXpress’s red kiosks infringed Redbox’s “trademarks or other IP.” The CEO replied: “No it does not. We have looked at [sic] many times. Nothing we can do except get these locations.” Four months later (15 months after learning of the comparative advertising) Redbox sent a C&D.  More than three months after that, Redbox sued. 

Given this recitation of the facts, you won’t be surprised to learn that a preliminary injunction was denied due to Redbox’s delay.  The court didn’t even consider whether eBay changed the Lanham Act presumption of irreparable injury (it does) because the delay would rebut any presumption.

Redbox argued that, at first, only lower-level employees knew of DVDXpress’s alleged infringement. “But that assertion is not backed by evidence in the record, and in any event Redbox does not explain why it would be relevant to determining when it, as a company, learned of the infringement.”  The email from the CEO stating that the company had already looked “many times” into the matter of DVDXpress’s red kiosks and concluded that there was no infringement was only icing; it showed that Redbox was “well aware of [its] rights and had concluded that they were not violated.”

Redbox argued that it didn’t delay in bringing the false advertising claim because it sought relief based only on DVDXpress’s advertising regarding DVDs released between December 2016 and July 2017. But the content of DVDXpress’s advertising—“Rent it here first 28 days before … Redbox”—hadn’t changed since early 2016.  Redbox argued that DVDXpress’s comparative advertising was only “partially false” in early 2016, and that Redbox brought suit when the advertising became false as to more DVDs through new agreements with Warner Bros., Fox, and Universal Pictures decreasing the delay between a DVD’s release and its availability at Redbox kiosks.  If there had been a 28-delay for all such films in early 2016, then waiting to sue would have been a good idea.  But of the 24 recent movies Redbox claimed to have available within 28 days, only 8 were distributed by these studios.  There was no evidence that DVDXpress’s advertising as to those studios’ DVDs was any less false in early 2016. And even as to those studios, Redbox was releasing some DVDs from them earlier—five out of the 8 it named were distributed before the new agreement. Thus, the comparative advertising couldn’t have converted to “substantially false” as a result of those agreements.  Indeed, the emails showed that people at Redbox believed the advertising was false in early 2017.

Nor would the court stop the clock when Redbox sent its C&D. “If the letter had led to negotiations with DVDXpress, then Redbox perhaps could not be faulted for waiting to see if the dispute could be resolved out of court. But DVDXpress never answered the letter, and Redbox proceeded to wait a further three months before filing suit.” That delay “severely undermines any sense of urgency that might otherwise have attached to Redbox’s request for preliminary injunctive relief.”

Friday, March 09, 2018

Pod save the claim: "sportspods" competition leads to false advertising, TM claims

Anthem Sports, LLC v. Under the Weather, LLC, 2018 WL 1175406, No. 17cv596 (D. Conn. Mar. 6, 2018)

Anthem and UTW compete in the market for “sportspods,” small tents for viewing outdoor sporting events during inclement weather. I won’t discuss the claims for declaratory relief against potential violations of UTW patents.

Anthem initially distributed UTW products online under an exclusive distribution agreement, until the relationship collapsed and UTW turned to Dick’s Sporting Goods for distribution. “Anthem subsequently located a different manufacturer and “began offering all weather personal enclosure products under the trade names UnderCover™ and SportPod™, including SoloPod™, Action Pod™, TeamPod™, and BugPod™.” UTW then allegedly began using “the mark ‘Sportspod’ to refer to multiple goods” that it offered for sale.  UTW also allegedly threatened Anthem, its supplier, and customers with patent infringement claims.

On Facebook, when customers leave comments indicating a desire to purchase Anthem Pods on Anthem’s Facebook page, UTW’s representatives allegedly respond (i) that the “only place to get [Anthem Pods] is,”; (ii) that the Anthem Pods “are illegal knockoffs and very poor quality,” and that the “legal ones are only available at”; and (iii) that the Anthem Pods were “[Pescovitz’s] idea and patent”; (iv) and that the Anthem Pods are “complete knock offs.” (Couldn’t UTW's reps just be blocked?)

Based on this conduct, Anthem brought a false designation of origin claim, a false advertising claim, and a trademark infringement claim. Guess which survived!

For false designation of origin, the court found that Anthem hadn’t properly alleged a reverse passing off claim.  Misrepresentations of inventorship aren’t actionable under Dastar.  The alleged claims that Anthem pods could only be bought from UTW were really statements that the Anthem pods were are “knockoffs” or of “inferior quality,” and that the only place to get legal “pods” was from UTW’s website. These comments couldn’t plausibly be interpreted to suggest that UTW sold Anthem Pods but rather presents UTW as an alternative.

False advertising: The “knockoff” and “poor quality” statements were mere statements of opinion, not fact.  The “illegal” and “patent infringing” statements were also nonactionable layperson statements of legal opinion.  “Complete knockoffs” was both opinion and puffery via subjective hyperbole.

Trademark: claims based on UTW’s use of SportsPod and Anthem’s claimed SportPod mark survived.  [Since the judge in this case identified the products at issue as “sportpods,” I foresee a problem with this term as a mark for the products.]

Anthem also sufficiently alleged tortious interference (and common law unfair competition) from UTW’s allegedly disparaging statements on FB, including an allegation that UTW made these comments with full knowledge of the lack of “any legitimate basis” for them and in “bad faith to unlawfully stifle competition.”  Instead of identifying specific lost customers, what was required was facts demonstrating “that, except for the tortious interference of the defendant, there was a reasonable probability that the plaintiff would have entered into a contract or made a profit.” The complaint alleged that various potential customers have expressed interest in purchasing Anthem Pods on Anthem’s Facebook page, and the majority of the disparaging comments were aimed at customers who had expressed enthusiasm for Anthem’s products.  Targeting “enthusiastic potential customers” made it plausible that some of them didn’t buy Anthem pods due to UTW’s statements.

Connecticut’s unfair trade practices law, CUTPA, also allowed a state coordinate trademark infringement claim, but not a false advertising claim for the reason discussed above.  Anthem also alleged that UTW violated CUTPA by “inducing Anthem to invest significant resources and efforts in marketing and selling the UTW Personal Enclosures by promising Anthem that it would be the exclusive distributor for such products other than UTW and then selling the UTW Personal Enclosures to Dick’s Sporting Goods for resale.”  UTW argued that, even if accepted as fact, these allegations established little more than breach of contract.  However, “although “a simple breach of contract would not be within the criteria for a CUTPA claim, substantial aggravating circumstances attending the breach would sustain such a claim,” and Anthem alleged sufficient aggravating circumstances by adding to the alleged breach trademark infringement and baseless infringement threats against Anthem when the company attempted to sell its own products in lieu of those from UTW.

unauthorized sale of model's photos leads to internally inconsistent TM/ROP ruling

Passelaigue v. Getty Images (US), Inc., 2018 WL 1156011, No. 16-CV-1362 (S.D.N.Y. Mar. 1, 2018)

Elodie Passelaigue is a professional fashion model who sued under the Lanham Act, Washington state law, and New York law against Getty, Bill Diodato Photography, and Bill Diodato (no stranger to IP litigation) for unlawfully licensing and selling images of her that were eventually used to advertise synthetic beauty products. The court dismissed some claims but allowed others to continue.

As part of one advertising campaign in early 2004, Clinique arranged for a test photo shoot in New York, and hired Diodato to take the photos. After the test shoot, Diodato allegedly “asked Ms. Passelaigue if he could use photos from the test shoot for his portfolio and professional website simply as an example of his work.” He allegedly “showed her a form document titled ‘Model Release,’ representing to Ms. Passelaigue that if she was willing to allow him to use the photos only for his portfolio and website, she just needed to sign the Model Release form.” Passelaigue allegedly agreed to allow him to use the photos for his website “[a]s a professional courtesy.” The Release she signed allegedly didn’t have some important information, including photographer or witness signatures, a “Description of Shoot,” or an attached copy of a photo ID or “Visual Reference.”

In 2009, Passelaigue was hired to model for a photo shoot in New York for Spiegel, and Diodato photographed that shoot. Diodato allegedly took about a dozen headshots of Passelaigue without Spiegel’s consent, and told Passelaigue the headshots were “precautionary, in case Spiegel later decided it wanted to use the images for the cover of a catalog.” Passelaigue didn’t sign anything at the 2009 Spiegel photo shoot.

In 2014, Passelaigue learned for the first time that her headshots were being used for an advertising campaign for Botox and on an Allergan website,  The webpages allegedly falsely suggest that Passelaigue was at least in her 40s.  Allergan allegedly continued to use Passelaigue’s images in its advertising campaigns until 2016.  Passelaigue’s agent investigated, and eventually Getty provided a copy of the Release containing a handwritten date of “6-11-09” under her name, and the phrase “Clinique Underwater Shot [sic] & Spiegel Beauty” on the line designated for “Description of Shoot,” both written by someone else. This Release also included two sample headshots, one from each shoot.  Getty eventually identified the photographer as “Adrianna Williams,” who was selling other models’ photographs through Getty, but other models hadn’t heard of her either, and Passelaigue determined that the photographer was in fact Diodato.

The court found the release binding as to the 2004 Clinique shoot only, since Passelaigue conceded that she signed it; the plausible allegations of “doctoring” the release sufficed to continue the case for the 2009 photos.  Passelaigue argued that she was fraudulently induced to sign the original Release because
Diodato orally promised her that he would only use her photographs in his portfolio and on his website.  However, the release language was two paragraphs of super-broad language allowing the photographer to distribute the images “for editorial, trade, advertising, packaging or other purposes in any manner or medium … throughout the world, in perpetuity.”  It further said, “I understand Photographer may contract with a stock agency and that the images may be included in stock files. I further understand and agree that the images may be modified, altered, cropped and combined with other content such as images, video, audio, text and graphics.”  Because the alleged misrepresentations conflicted with the terms of the Release, “there can be no reasonable reliance as a matter of law.”

Nor was the Release voidable because, “for a high-end fashion model, the limitation of $500 in damages, as well as the prohibition on any objection to unflattering, embarrassing, or otherwise objectionable uses, are unconscionable terms.” Although the allegations in the complaint suggested “some deceptive tactics,” they didn’t rise to the level of depriving Passelaigue of “meaningful choice,” as required for unconscionability.  “The Release is short—one page—and afforded Plaintiff with the opportunity to easily disprove Diodato’s alleged oral promises that he would only use the photographs for his portfolio.” Passelaigue didn’t allege that her bargaining power, experience, and/or education were limited, or that she was under any sort of duress or pressure to sign the release without reading it, and she admitted that she signed it as a “professional courtesy.” Thus, there were no allegations that Diodato did anything so as to effectively deprive Passelaigue of a meaningful choice.

The same arguments disposed of her fraud claim.

Continuing on with the 2009 photos, the court turned to her NY right of publicity claim.  Defendants argued that the photographs weren’t used “for purposes of advertising or trade” under Section 51 because they were merely making the images themselves available for license.  But an image for sale by an online image distributor is exempt from Section 51 liability only so long as it was “for use in a manner lawful under this article.” Because Passelaigue plausibly alleged that the sale of images was not in fact “for use in a manner lawful under” Section 51 by virtue of the fact she did not knowingly authorize their use, and she also adequately alleged that sale of the images themselves was “for purposes of advertising or trade.” 

The court also disposed of defendants’ First Amendment defense.  “The photographs here are entirely commercial in nature. They were commissioned by companies seeking to use them in advertising campaigns, and any artistic expression added by Diodato as the photographer was incidental.” Nor was Section 51 preempted by §301 of the Copyright Act, because of the additional element of use of the image for advertising or trade purposes without written consent.

Passelaigue’s Lanham Act claims mostly failed.  Her allegations were that defendants violated the Lanham Act by (1) misrepresenting that Getty had the right to license or sell photographs of her; (2) using the fictitious name of Adrianna Williams as the name of the photographer, which was likely to cause confusion as to the origin of the images; and (3) contributing to Allergan’s use of her image in a way that falsely associates her with synthetic cosmetic products.

However, Passelaigue had no rights to the photos themselves.  “[H]er only plausible claim can be based on harm to her image, and its false association with another product.” Thus, alleged misrepresentations (1) and (2), as well as allegations that Diodato contributed to Getty’s acts, failed to state a claim; even if she did have rights to the photos, Dastar would bar those claims.

Turning to claims based on false affiliation with Allergan and with the pseudonym Adrianna Williams, the court noted that “the misappropriation of a completely anonymous face could not form the basis for a false endorsement claim, because consumers would not infer that an unknown model was ‘endorsing’ a product, as opposed to lending her image to a company for a fee.” However, Passelaigue’s allegations she is an “internationally-renowned fashion model” might establish that her mark is strong enough to cause a likelihood of consumer confusion.  In addition, the sale of images of Passelaigue on Getty’s stock photo website and its listing under the work of photographer “Adrianna Williams” were affiliations that are covered by the text of the Lanham Act. [How could this possibly be material to anyone?  Also, if Diodato really did take the pictures, why can’t he use a pseudonym without violating the Lanham Act? Are other pseudonyms also violations of the Lanham Act?  Also also, why isn’t this conduct, which is to say a false designation claim repled as "affiliation" with Getty or Williams, covered by Dastar too?]

As for contributory infringement, Passelaigue failed to sufficiently allege that defendants intentionally induced non-party Allergan to violate the Lanham Act, as required. She alleged that Diodato was aware that, by selling the images to Getty, that Getty would “use the images commercially, advertising them for sale or license to others, such as Allergan,” and that Getty “knew or should have known that professional models such as plaintiff ... would not have agreed to convey rights to their images to Diodato, Getty, or ultimately one of Getty’s clients.” She further alleged that Getty should have known how Allergan would use the image because it licensed that image. None of this was sufficient to allege intentional inducement. (Citing Tiffany v. eBay.)

Anyway, the NY unfair competition claims were analyzed just as the Lanham Act claims, except that NY also requires bad faith.  But Passelaigue’s allegations of defendants’ responsibility for the unauthorized use by Allergan would show bad faith.  [Wait one second: weren’t those the allegations just found insufficient to allege contributory infringement?  If NY law is the same as federal law, how can this be the case?]

As for NY consumer protection law under Section 349, allegations that Getty misrepresented its right to license were too conclusory to state a claim, or explain how the alleged misrepresentation actually targeted or harmed consumers.

The court refused to dismiss class allegations at this stage of the case.

Monday, March 05, 2018

Falsity claim isn't the ticket for cancelled concert

Universal Attractions, Inc. v. Live Nation Entertainment, Inc., 2018 WL 1089747, No. 17 Civ. 3782 (S.D.N.Y. Feb. 12, 2018)

Universal, an entertainment company, produced the I Love the 90’s tour, a series of concerts by various artists from the 1990s. Universal engaged promoters throughout the US to work with Ticketmaster to market and sell tickets to the show. Prices for the tickets ranged from “the low $20s to hundreds of dollars depending on seating and perks offered[.]” For the Vina Robles Amphitheatre in Paso Robles, tickets were priced to be sold for $65, $75, and $150, along with a group of VIP tickets set to be sold for the PR Venue, which ranged from $250 to $375 per ticket.

Ticketmaster sold tickets in two phases: pre-sales (before availability to the general public) and general sales.   For pre-sales, “a select group of consumers were given codes through e-mail, social media, or other means that could then be used to unlock the relevant pre-sales offer.”  For at least two venues, Ticketmaster only listed VIP tickets in the pre-sale period; those with the codes could access and buy the cheaper tickets, but members of the general public only saw the VIP tickets.  As a result, Universal alleged, fans were “turned off” and the number that left Ticketmaster’s site without purchase was uniquely high, and the conversion to sales was uniquely low.  The Pasa Robles operator ultimately cancelled the show due to the lower than expected volume of ticket sales.

The court rejected Universal’s argument that Ticketmaster deceived members of the general by presenting them with only the VIP tickets during presales, causing them to leave without purchasing any tickets and not return because they believed that the VIP ticket prices were the only ones available.  Failing to disclose information isn’t literally false, and it isn’t misleading unless it renders any affirmative statements false or misleading. But “the lack (or presence) of tickets at prices lower than the VIP tickets on Ticketmaster’s website during presales has no bearing whatsoever on the veracity of the VIP ticket prices themselves.” 

This reasoning seems to me to avoid the challenge of Universal’s argument, which is that the list of available tickets for a particular show implicitly (mis)represents that these are not just the available tickets, but the full range of tickets that will be available, especially for members of the general public who believe, correctly, that they can’t buy tickets at present.  That is, the listed prices implicitly represent that these are the only sets of tickets which members of the public may be able to buy once general sales begin.  Thus, the listed prices became misleading because of the context.   That is certainly plausible—most events, after all, want you to come, and it seems logical that they’d advertise the cheap available tickets if there were any to be had.  Sufficient disclosure could have come in other ways than in listing all the different prices that tickets would be available at in the future, though that’s one way to do it.  But the key point, reinforced by the alleged behavior of consumers in not bothering to return to the site after sales began, is that ticket-buying consumers presume that information about what tickets will be available when the sales begin is complete information.

Wednesday, February 28, 2018

Article in Judges' Journal is opinion, not actionable under defamation or false advertising law

Board of Forensic Document Document Examiners, Inc. v. American Bar Ass’n, No. 17 C 01130, 2018 WL 1014510 (N.D. Ill. Feb. 22, 2018)

The Board of Forensic Document Examiners, and seven of its members, alleged defamation by an article appearing in The Judges’ Journal, published by the ABA. Members of the Judicial Division of the ABA receive a complimentary subscription to the Journal. In August 2015, a special issue titled Forensic Sciences – Judges as Gatekeepers focused on various subjects of forensic science that judges might encounter when qualifying experts. One article, Forensic Handwriting Comparison Examination in the Courtroom, was written by defendant Thomas Vastrick, who is a forensic document examiner certified by a different board, namely, defendant American Board of Forensic Document Examiners. Vastrick also sits on the board of the American Board and is one of its past presidents. The court commented that he really should have disclosed that affiliation, but still there was no viable cause of action.

The plaintiffs challenged four statements as defamatory/false light invasion of privacy/false advertising under state and federal law:

An appropriately trained forensic document examiner will have completed a full-time, in-residence training program lasting a minimum of 24 months per the professional published standard for training. Judges need to be vigilant of this issue. There are large numbers of practitioners who do not meet the training standard.
The American Board of Forensic Document Examiners … is the only certification board recognized by the broader forensic science community, law enforcement, and courts for maintaining principles and training requirements concurrent with the published training standards. Be wary of other certifying bodies.
In a section captioned, “What to look out for,” the statements, “Certified by board other than the American Board of Forensic Document Examiners” and “Member of American Academy of Forensic Sciences but not the Questioned Document Section.”

Plaintiffs challenged these statements as false based on the required training standards for certification, their specific backgrounds, and the courts’ previous acceptance of practitioners certified by the Board. The author and editor allegedly knew that the statements in the article were false, because both knew that the Board and the American Board were each certified by the same accrediting entity, and that the Board abided by published training standards for certification.

Defamation: An actionable statement must sufficiently identify the person who is being criticized to a “reasonable individual” reading the statement. If “extrinsic facts and circumstances” are needed to show that a statement refers to a particular plaintiff, it’s not defamation per se. The challenged statements didn’t identify any particular person by name, let alone any of the plaintiffs. Plaintiffs argued that this was group defamation: a statement can identify the persons in the group if the group is “sufficiently small and the words may reasonably be understood to have personal reference and application to any member of the group.” Plaintiffs’ group was around 12 diplomates certified by the Board.  But that wasn’t enough, because the first challenged statement could reasonably be interpreted to refer to any forensic document practitioner who has not completed the specified training program—not just the twelve examiners certified by the Board. It even says, “There are large numbers of practitioners who do not meet the training standard.”

So too with the second and third statements, which promoted the American Board without explicitly naming the Board.  Plaintiff Sulner claimed that he was the specific target of the fourth statement, “look out for” someone who is a “Member of American Academy of Forensic Sciences but not the Questioned Documents Section.” Sulner alleged that he was the only certified forensic document examiner “known to be” a member of the American Academy of Forensic Sciences but not a member of the Questioned Documents Section (because members can only be in one section and as an attorney he was in the Jurisprudence section). But anyone who is a member of the American Academy of Forensic Sciences but not the Questioned Documents Section fit into the statement.  Also, Sulner didn’t allege that a reasonable reader somehow has access to all the relevant information and thus would interpret the statement to target him. “Even if some extraordinarily enterprising reader of The Judges’ Journal pieced all of that together, where a ‘speaker is meticulous enough to preserve the anonymity of an individual … the speaker should not be exposed to liability for defamation because someone ferrets out the identity of the individual.’”

Separately, the statements constituted non-actionable opinion.  The court first framed the overall context: it’s a “scholarly” journal, setting the stage for the article to be received as opinion, “because reasonable readers (especially judges) know that scholarly journals often present one side or the other in opinionated debates.” And the relevant article explicitly presented itself as offering suggestions for judges to consider in evaluating the expertise of document examiners. The intro for “What to look for” and “What to look out for” “employs the language of opinion, not hard facts”: “While judges are responsible for being court gatekeepers, I, as a practicing forensic document examiner, would like to respectfully suggest ways to differentiate between the true professional and the lesser-qualified practitioners.” The entire section of the article was called, “Gatekeeping Tips from a Practitioner,” indicating that this is the author’s viewpoint.  

The individual statements also used the language of opinion, such as “appropriately trained forensic document examiner” (emphasis added), and “recognized by the broader forensic science community, law enforcement, and courts ….”  There was no way to verify the American Board’s “recognition” in the community, and the sweeping breadth of the statement made it even less fact-like/verifiable.  The third and fourth statements were part of the section “What to look out for,” which already spoke in the language of an opinion. And the intro sentence says that the author “suggests” that judges look for certain things to distinguish between a “true” professional and “lesser”-qualified practitioners. “Suggests,” “true,” and “lesser” “all signify that Vastrick is expressing his opinions in offering the lists.”

Without a factual statement, the false light and state-law false advertising claims also failed, as did the Lanham Act claim--without even needing to address the question of whether the article constituted "commercial advertising or promotion."

Tuesday, February 27, 2018

NY AG proceeds against Charter for throttling providers while boasting of internet speeds

 People v. Charter Communications, Inc., No. 450318/2017 (N.Y. Sup. Ct. Feb. 16, 2018)

Charter allegedly defrauded New York consumers by promising high-speed Internet services and reliable access to online content that it knew it couldn’t or wouldn’t deliver, in violation of Section 53(12) of the NY Executive Law and sections 349 and 350 of the GBL.  Defendant Spectrum-TWC advertised specific Internet speeds, available in tiers ranging from 20 to 300 megabits per second (Mbps), with higher fees for faster-speed tiers. Spectrum-TWC assured subscribers not only that they could achieve the advertised speeds, but that subscribers were guaranteed “reliable Internet speeds,” delivered “consistently,” “without slowdowns,” and otherwise without interruption. Spectrum-TWC assured subscribers that the promised speeds would be delivered anywhere in their homes, at any time, and on any number of devices, regardless of whether the subscriber connected by wire or wirelessly.

However, for many customers, the promised Internet speeds were allegedly impossible to attain because of technological bottlenecks for which Spectrum-TWC was responsible. First, defendants determined that the older generation modems they leased to many of their subscribers were incapable of reliably achieving Internet speeds of even 20 Mbps per second. Spectrum-TWC’s modem “replacement” program allegedly resulted in 900,000 subscribers continuing to pay for promised speeds beyond the technical capabilities of their Spectrum-TWC-provided modems, as Spectrum-TWC knew.

Second, Spectrum-TWC also failed to maintain its network as necessary to deliver the promised speeds. Although Spectrum-TWC allegedly knew the precise levels of network congestion at which customers would be prevented from achieving the promised speeds, it deliberately hid and exceeded those congestion levels to save itself money.

Third, due to older or slower wireless routers it provided, and other technological limitations, Spectrum-TWC allegedly knew that its subscribers could not achieve the same speeds wirelessly as through a wired connection, as confirmed by at least three independent tests of Internet speed.

Next, Spectrum-TWC allegedly represented that its subscribers would receive reliable, uninterrupted access to the Internet content of their choice, but failed to deliver on these promises. Spectrum-TWC’s assurances of reliability were allegedly specific and unconditional, guaranteeing access to specific content with “absolutely no buffering,” “no lag,” “without interruptions,” and with “no downtime.” “These promises were explicitly tied to the delivery of some of the Internet’s most popular content, including Netflix and online games, and Spectrum-TWC’s advertisements prominently featured such content as being accessible without interruption.” Yet Spectrum-TWC allegedly failed to maintain enough network capacity in the form of interconnection ports (where one network connects to another) to deliver this content as promised. It also allegedly “throttled” access to Netflix and other content providers by allowing those interconnection ports to degrade, causing slowdowns, then extracted payments from those content providers as a condition for upgrading the ports. Spectrum-TWC’s subscribers thus suffered, generating thousands of consumer complaints to NY’s AG.

The FCC regulates broadband Internet access service (BIAS) providers like defendants in various ways, including requiring them to “disclose accurate information regarding the network management practices, performance, and commercial terms of [their] broadband Internet access services sufficient for consumers to make informed choices regarding use of such services.” They must disclose “expected and actual access speed and latency,” as well as accurate monthly subscription rates and usage-based fees. The FCC established a “safe harbor” program called Measuring Broadband American (MBA) to “measure the actual speed and performance of broadband service,” and stipulated that a BIAS provider could satisfy the transparency standard by “disclos[ing] data from the project showing the mean upload and download speeds in megabits per second during the ‘busy hour’ between 7:00 p.m. and 11:00 p.m. on weeknights.”  The FCC’s 2015 Open Internet Order states that the FCC “expect[s] that disclosures to consumers of actual network performance data should be reasonably related to the performance the consumer would likely experience in the geographic area in which the consumer is purchasing service.” The FCC also created a “Broadband Nutrition Label,” a second “voluntary safe harbor for the format and nature of the required disclosure to consumers,” modeled on nutrition labels used for food products. BIAS providers provide consumers with the format for an easy-to-understand label that discloses a service plan’s “typical speed[s],” i.e., “typical speed downstream,” and “typical speed upstream,” which reflect averages measured during the peak usage period of the service”

However, FCC regulations clarify that the provider could still be found in violation of federal law if the content of the disclosure is “misleading or inaccurate,” or if the provider “makes misleading or inaccurate statements in another context, such as advertisements or other statements to consumers.”

TWC-Spectrum argued that it advertised only “up to” certain maximum speeds (as measured in Mbps), and that it relied on the FCC’s safe harbor to substantiate these performance claims. TWC-Spectrum further asserts that the MBA reports regularly showed that its actual speeds, based on mean or median peak-period speeds,met or exceeded the maximum advertised speeds. TWC-Spectrum also participated in the FCC’s safe-harbor consumer labeling program.

The court rejected defendants’ conflict preemption argument. They contended that the central allegation underlying the complaint is that Spectrum-TWC failed to deliver the broadband speeds advertised to its customers, but this allegation depended on methodologies for calculating actual broadband speeds starkly inconsistent with the federal methodology. “[T]he ‘starting presumption is that Congress does not intend to supplant state laws,’ unless its intent to do so is ‘clear and manifest,’” especially for state efforts to enforce consumer protection laws. Spectrum-TWC didn’t identify any statutory provision that preempts state anti-fraud or consumer-protection claims, and indeed there was a broad savings clause.

“An administrative agency cannot exceed the authority Congress has granted it,” so the FCC couldn’t preempt state consumer protection law either. Though defendants argued that NY’s contentions “thwart[]” the FCC’s purposes and objectives in promulgating the Transparency Rule, and that it would be “impossible for broadband providers in New York to rely on the FCC’s safe harbors without running afoul of state law,” “the FCC’s purposes and objectives are irrelevant to the preemption analysis where, as here, Congress has expressly preserved state laws.” Plus, the Transparency Rule recognizes concurrent state authority over deceptive practices; although the Transparency Rule requires certain performance disclosures by BIAS providers, it doesn’t provide a safe harbor for statements outside those disclosures. The Rule provides a limited federal “safe harbor” from FCC enforcement actions on transparency grounds for broadband providers who participate in the MBA program, insofar as their official disclosures comply with the “format” specified by the FCC. But there’s no insulation from liability for misrepresentations made in other consumer communications; the FCC specifically explained that “providers may still be in violation of FCC rules if the content of their labels is misleading or inaccurate or if they make misleading or inaccurate statements to consumers in ads or elsewhere,” and that “a provider making an inaccurate assertion about its service performance in an advertisement, where the description is most likely to be seen by consumers, could not defend itself against a Transparency Rule violation by pointing to an ‘accurate’ official disclosure in some other public place.”

Separately, Spectrum-TWC’s preemption argument didn’t apply to the claims relating to modem failures, wireless failures and service reliability failures, because those claims were entirely unrelated to Spectrum-TWC’s Transparency Rule disclosures, as well as claims relating to service failures in the 100, 200, and 300 Mbps plans, which weren’t comprehensively measured by the MBA program, and were thus not part of Spectrum-TWC’s Transparency Rules disclosures. As for the remaining claims, “the FCC’s goal of promoting competition through the Transparency Rule is not thwarted by state laws that require broadband providers to speak truthfully.” New York’s laws don’t require Spectrum-TWC to disclose anything, but only demand that defendants refrain from fraud, deception, and false advertising when communicating with New York consumers.

What about the NY AG’s alleged use of “metrics that cannot be squared with federal law, which looks to the average peak-period speeds measured by the MBA as the appropriate way to measure and describe actual broadband performance”? First, many of the allegations of the complaint explained why the disclosures were deceptive, without reference to particular speed tests.  Second, NY wasn’t challenging the “typical speed downstream” and “typical speed upstream” disclosures made by Spectrum-TWC in the format specified by the Transparency Rule, but rather its TV ads ads in other media “that conveyed the overall impression that subscribers would have ‘consistent’ or ‘reliable’ service at the speeds advertised for the plans that they paid for.” There was conflict with the purposes and objectives of the Transparency Rule.

Defendants also argued that federal law preempts state regulation of interconnection disputes, and that NY was trying to do so by alleging that Spectrum-TWC deceived its customers by “fail[ing] to maintain sufficient ports at its interconnection points with backbone and content providers” and knowingly causing “interruptions and slowdowns during peak hours.” This argument was “baseless.” NY wasn’t trying to regulate bilateral agreements, but regulating Spectrum-TWC’s advertising that specific online content would be swiftly accessible through its network, while it was simultaneously deliberately allowing that service to degrade that service and failing to upgrade its network’s capacity to meet demand for this content.  An internal email, for example, observed that the company’s approach to intentionally delaying capacity upgrades “may be artificially throttling (subscriber] demand.”

Next, Spectrum-TWC argued that it advertised its broadband service plans as providing speeds “up to” a particular speed, so reasonable consumers should have expected to receive the advertised speeds or less.  That conflicted with NY law on “up to” claims where, as alleged here, the advertised “up to” speeds were functionally unattainable as a result of the defendants’ knowing conduct. In a consumer fraud action, the phrase “up to” does not reflect a maximum, but expresses a representative amount a consumer would receive. The NY AG alleged this to be what consumers expected, and also that Spectrum-TWC knew it couldn’t meet those expectations. FTC pronouncements are persuasive authority in the context of consumer protection suits brought under GBL sections 349 and 350, and the FTC interprets “up to” language similarly.

Spectrum-TWC argued that its statements about speeds, reliability and access to content were mere “puffery.” It cited claims to have a “blazing fast, super-reliable connection” and campaigns that said “[e]njoy Netflix better” or “[s]tream Netflix and Hulu movies and shows effortlessly.” But “advertising claims that are easily capable of being proved to be true or false through common testing methodologies are, by definition, not puffery,” and statements such as “no buffering,” “no lag,” with “no slowdowns,” “without interruptions,” and “without downtime” “are all highly specific claims that are easily capable of being proven to be true or false through common testing methodologies, and, by definition, are not puffery.” The puffier statements couldn’t be read in isolation; it’s the net impression that matters.

Finally, the court declined to stay the action in deference to the FCC’s “primary jurisdiction” over this suit. This doctrine was irrelevant, given that the case involved “purely state law claims over which the FCC has neither jurisdiction nor expertise, and which involves misrepresentations in advertisements and other media not governed by FCC regulations.” The heart of the case was not a “complex and technical question[] of engineering and policy,” but a traditional deceptive practices claim that falls traditionally within the “conventional competence of courts.”

Even net neutrality repeal didn’t change things; the FCC’s order said: “[a]lthough we preempt state and local laws that interfere with the federal deregulatory policy restored in this order, we do not disturb or displace the states’ traditional role in generally policing such matters as fraud, taxation, and general commercial dealings, so long as the administration of such general state laws does not interfere with federal regulatory objectives.”

Reading list: further on global mandatory fair use

Tanya Aplin & Lionel A. F. Bently, Displacing the Dominance of the Three-Step Test: The Role of Global, Mandatory Fair Use, Forthcoming in Wee Loon Ng, Haochen Sun, and Shyam Balganesh (eds) Comparative Aspects of Limitations and Exceptions in Copyright Law (CUP, 2018).

Article 10(1) of the Berne Convention mandates a quotation exception that is broad in scope, one that is not limited by work, nor type of act, nor by purpose, and is only subject to the conditions in Article 10, namely, the work has been lawfully made available to the public, attribution, fair practice, and proportionality. We call this “global, mandatory fair use”. This overlooked norm in international copyright law is unaffected by and distinct from the three-step test and, as such, potentially dislodges its dominance. In turn, this creates different possibilities for how to conceive of and assess copyright exceptions at national level. To substantiate our argument, this chapter is structured in three parts. Part I outlines our underpinning contention, namely, that Article 10(1) creates a global, mandatory “fair use” type obligation. Part II explains why this obligation is unaffected by the three-step test in international copyright law. Finally, in Part III, we draw out the differences between Article 10(1) and the three-step test and illustrate the potential relevance of this for national law using the specific case of U.S. “fair use”.

University-adjacent is not university-approved in supplement ads

Obesity Research Institute, LLC v. Fiber Research International, LLC, 2018 WL 1001089, No. 15-cv-00595 (S.D. Cal. Feb. 21, 2018)

Despite the high-falutin’ names, the parties compete in the market for glucomannan dietary supplements. Glucomannan is a soluble-viscous fiber derived from the Konjac plant root used in weight loss supplements. The parties agree that numerous studies have shown that at least some types of glucomannan are effective for losing weight, but dispute whether different types, grades, places of origin, processing procedures, and/or characteristics, including viscosity, of the specific glucomannan products alter its effectiveness on weight loss.

ORI’s former products sourced glucomannan from another company, Shimizu. Currently, ORI sells its supplements branded as Lipozene, which is not manufactured with Shimizu’s glucomannan.  ORI (with a supplier) funded a study purporting to find significant weight reductions, of which 78% was fat, using Shimuzu-supplied glucomannan.  ORI references the study in promoting Lipozene, characterizing it as a “major university double blind study.” Lipozene’s packaging stated that there are “[n]o known allergens in this product.”

Shimizu assigned any false advertising claims it might have to FRI, as well as the rights to distribute its glucomannan. The court found that FRI had statutory standing under the Lanham Act to bring claims on behalf of Shimizu.  Though trademark claims require “an interest in the asset allegedly harmed,” under §43(a) standing is broader.  Under Lexmark, Shimizu had standing: it invested millions of dollars into developing its products, and created a relationship with FRI to serve as its newest U.S. distributor, largely because FRI was in a stronger position to “launch direct-to-consumer” products than Shimizu, given its location in Japan. Though it isn’t a direct competitor with Lipozene, Shimizu also distributes glucomannan and supplies glucomannan to FRI, who seeks to compete with Lipozene in the glucomannan supplement market. Thus, Shimizu likely suffered an injury to a commercial interest in reputation or sales and ORI proximately caused Shimizu’s injuries by using a clinical study analyzing Propol to sell an allegedly inferior glucomannan product. “Because a valid assignment allows for an assignee to ‘stand in the shoes’ of the assignor, the Court finds FRI has standing to proceed with Shimizu’s Lanham Act claim.   

FRI also showed standing to sue on its own behalf.  FRI’s declarations included testimony that “[a]s a direct result of ORI’s use of claims derived from the Propol® studies to sell an inferior product, FRI has been unable to make inroads into the direct to consumer glucomannan supplement marketplace.” Though FRI didn’t have a sale when it counterclaimed,

having a sale is not the sole mechanism for standing under the Lanham Act. The law is clear that a party does not need to show a loss of sales. Moreover, a lack of sales is consistent with FRI’s alleged economic injury that it was shut out of the glucomannan supplement market because of ORI’s false advertisements. Based on the evidence presented, a reasonable juror could find that FRI sought to enter the glucomannan supplement market, but found it was blocked from doing so in part by ORI utilizing a clinical study on its exclusive source of glucomannan.

Though the Court didn’t consider FRI’s post-counterclaim activities for standing purposes, its later market activities were consistent with its claims: it registered a website, launched a direct to consumer Propol, and made a sale.

Falsity: FRI challenged a bunch of ORI’s statements allegedly based on clinical studies; instead of studying Lipozene, the key studies (by Kaats & Walsh) evaluated Shimizu’s Propol-branded glucomannan, a distinct product. ORI disagreed, arguing that the product was the same and that it used the specifications from the Kaats Study as a guide and “floor” for the ingredients they ultimately chose. These disputes were best presented to a jury, so the court denied summary judgment.

ORI also advertised that the Kaats Study is a “major university study.” But the study was conducted by Dr. Kaats’s then-private clinical research organization. ORI responded that the study’s design was approved by Texas Women’s University’s IRB and that two of the named reviewers of the study were affiliated with two major universities—Georgetown University and the University of Texas.  Nope.  Kaats stated that he isn’t affiliated with a major university, that no university was involved in the measurements for the study, and that he does not consider the study a university study (and even told ORI to stop calling his study university sponsored).  There was no evidence that IRB involvement “transforms a study’s sponsorship or affiliation into that of the IRB,” or that a reviewer’s affiliation with a university allows the study to adopt that university’s affiliation or sponsorship.  FRI was entitled to summary judgment on the falsity of this claim.

ORI also advertises that, in the Kaats Study, the test subjects were “asked not to change their lifestyle” and “asked not to change their diet or exercise” and lost weight anyway. FRI argued that this statement was literally false because the test subjects were given no instruction—one way or another—as to their lifestyle, including diet and exercise. In fact, the study states that “participants were free to follow any diet/exercise plan of their own choosing.”  The court found literal falsity: ORI sought to communicate that study participants “were affirmatively asked not to change their diet and exercise, implying that any weight lost while taking Lipozene could not be due to a lifestyle change.” But that message is not true, although a jury could find it immaterial.

FRI also challenged ORI’s “pure glucomannan” claims such as “Take pure Glucomannan from the finest Konjac Plants and see results” and “Lipozene is made with 100% pure Glucomannan, which comes from the root of the Konjac plant.” Lipozene is made of a combination of ingredients, with the majority being glucomannan.  No reasonable jury could find literal falsity—the message was that Lipozine was “made with” glucomannan, not “made entirely of” glucomannan, and there was no evidence of actual deception, so that falsity claim was gone.

Finally, ORI claimed that Lipozene contains “no known allergens,” but FRI argued that it contained excessive sulfite levels, which qualify as a “known allergen” under FDA regulations. The court couldn’t grant summary judgment either way; FRI didn’t show that these FDA requirements should apply to ORI’s statement, and ORI didn’t show that the absence of “major food allergens” was the same as having “no known allergens.” A jury could find that this statement only applied to the commonly known major food allergies, such as nuts, milk, and other common allergies, or that it instead meant additional irritants, such as sulfites.

Deception: falsity and deception are linked; “[t]he expenditure by a competitor of substantial funds in an effort to deceive consumers and influence their purchasing decisions justifies the existence of a presumption that consumers are, in fact, being deceived.” FRI was entitled summary judgment as to the deception element of its Lanham Act claim for the “major university” and “no lifestyle change” statements.

Materiality: The court mostly declined to find that, as a matter of law, the challenged statements were material, but neither did ORI show immateriality. For the false-as-a-matter-of-law statements, “major university study” and “no lifestyle change,” FRI argued that false claims were presumed to be material, but the court disagreed, and anyway ORI rebutted such a presumption for the “no lifestyle change” statement by arguing that the difference between the true and false statements wasn’t material to a consumer. Though “extensive” empirical evidence isn’t required, FRI needed something.  Nor was “no lifestyle change” an “inherent quality or characteristic” of the product in the same way as statements relating to Lipozene’s product composition and proven effects on weight loss.  However, the court did find that no reasonable jury could find that “major university” was immaterial. “[A] ‘major university’ affiliation invokes a level of legitimacy and assurance for a consumer that would likely affect a consumer’s decision to purchase Lipozene,” which accounted for ORI’s desire to have a “university affiliated” study.

Although there was a genuine issue of material fact as to whether FRI and Shimizu were likely injured, they failed to show irreparable harm absent injunctive relief. Even assuming the Ninth Circuit would still presume irreparable harm from falsity [no], ORI rebutted the presumption, so the issue was best suited for a jury.

Crowning inglory: no trade dress in short-lived ads

EZ Pedo, Inc. v. Mayclin Dental Studio, Inc., No. 16-cv-00731, 2018 WL 934552 (E.D. Cal. Feb. 15, 2018)

EZ-Pedo sells “prefabricated pediatric zirconia crowns,” which are colorless, durable, all-ceramic crowns that mask disfiguration or stains on children’s teeth. Mayclin sells similar pediatric zirconia crowns under the business name Kinder Krowns.  EZ-Pedo sued over the copying of several ads it made from stock photos, but its trade dress claims failed.

EZ-Pedo used the “Beach Girl” ad at the 2014 annual meetings of the California Society of Pediatric Dentistry and the American Academy of Pediatric Dentistry; both organizations also featured the Beach Girl advertisement in their trade journals; and EZ-Pedo displayed the image on secondary pages of EZ-Pedo’s website. EZ-Pedo alleged that it stopped investing in this “trade dress” within four months after its first use, after discovering Kinder Krowns had used it in AAPD’s July 2014 print journal.

EZ-Pedo’s “Gears” design is in an ad that shows a photo of metal gears plaintiff downloaded from a third-party website; the photograph is placed beside the slogan, “engineered for a precision fit,” and Kinder Krowns allegedly copied it to advertise its “Less Prep” crown line on its company website, causing EZ-Pedo to abandon it after about a year.   The “Blue CAD” design depicts a computer-aided drawing of a deep-blue-colored tooth with visible contours. The image was created with 3Shape 3D Viewer, and deep blue is one of three default color choices.  The image was featured in print ads, trade-show banners, brochures, flyers and on its website. Kinder Krowns allegedly copied the Blue CAD trade dress to advertise its own line of “Less Prep” crowns.    
Beach Girl ads

Blue CAD images


Promotional flyers/ads could in theory be covered by trade dress protection; courts have said as much about a website’s “overall look and feel.” Nonetheless, the burden of establishing protectability is a serious one.  EZ-Pedo argued that its ads were inherently distinctive trade dress because each contains “beautiful, glamorous, fanciful, recognizable” imagery.  But it couldn’t meet the “demanding” standard; Wal-Mart cautioned against vague tests for inherent distinctiveness.  At least inherently distinctive trade dress requires “manifestly unique arrangements,” and a plaintiff can’t just point at an “overall look”; it must “articulat[e] the specific elements which comprise its distinct dress.”    EZ-Pedo’s claims couldn’t meet this standard.  For Beach Girl, adjectives like “unique” and “distinctive” weren’t sufficiently specific.  “As currently defined, the court and competitors remain in the dark as to what EZ-Pedo purports to own. Are competitors never to advertise using the same third-party stock photograph? Can they use the same photograph, but pair it with different text, logo and company information?” Vague descriptions may also cause “jurors viewing the same line of products [to] conceive the trade dress in terms of different elements and features” and so the verdict may drive from “inconsistent findings.”  

Nor was there a triable issue on secondary meaning. “Not one of its promotional advertisements was on the market for more than a year before the alleged infringements happened.” That was too short, especially given the lack of any consistent theme in the ads and indeed the drastic differences among them.  Nor were any of the ads ever placed on EZ-Pedo’s product or product packaging, “further weakening any association.”  And there was no direct evidence of any consumer meaning, let alone meaning to a substantial portion of consumers.  A vague, self-serving declaration from EZ-Pedo’s founder that “[t]he pediatric dentistry community has come to associate the Blue Crown CAD imagery with EZ-Pedo’s products. I know this...from specific conversations I have had with purchasing pediatric dentists who have stated they recognize the Blue Crown CAD as symbolizing our products,” was insufficient. So too with claims of “thousands” of ads distributed and “substantial time and energy” promoting the imagery. “[P]rominent display” in a trade journal “is not the kind of media coverage that shows the ‘enthusiasm and loyalty’ of plaintiff’s customers.”  

Monday, February 26, 2018

Sanderson can't chicken out of false advertising claims

Organic Consumers Assoc. v. Sanderson Farms, Inc., 2018 WL 922247, No. 17-cv-03592 (N.D. Cal. Feb. 9, 2018)

OCA sued Sanderson, a poultry processor, over ads that allegedly mislead consumers about the nature of Sanderson’s chicken products and farming practices. OCA and co-plaintiffs FoE, and CFS are non-profit organizations that “work to safeguard the rights and promote the views and interests of socially responsible consumers and farmers.”  OCA challenged claims that Sanderson’s chicken is “100% Natural,” has no “hidden ingredients,” and that “at Sanderson Farms, being 100% natural means there’s only chicken in our chicken.” In TV ads, two men wearing Sanderson Farms baseball caps make comments such as, “no antibiotics to worry about here” and “good, honest chicken.” But USDA testing found 49 instances in which Sanderson’s products tested positive for antibiotics, pharmaceuticals, and other unnatural substance residues, causing the plaintiffs to undertake efforts to warn customers and educate the public about the true nature of Sanderson’s products and chicken raising practices.

The court found organizational standing under the UCL and FAL, which is available where there is  “(1) frustration of [the plaintiff’s] organizational mission; and (2) diversion of its resources” to combat the challenged actions by defendant. OCA’s research into Sanderson’s farming practices and advertising, preparation of internal memoranda, strategy meetings, and coordination of a multi-organization consumer outreach plan diverted resources and staff time away from OCA’s policy and consumer education work on other issues.  So too with the other organizational plaintiffs.

The court also rejected Sanderson’s argument that state law claims challenging its advertising were impliedly preempted by the Poultry Products Inspection Act (PPIA) and Federal Meat Inspection Act (FMIA), given the congressional intent to provide uniform national standards for monitoring food producers and ensuring they do not mislead consumers as to the contents of meat products. Also, the USDA approved the “100% Natural” language.

But consumer protection laws “are within the historic police powers resting with the states and are therefore subject to the presumption against preemption.” There was no manifest purpose to displace them, and avoiding misleading advertising was consistent with the federal statutes’ aims to ensure quality and proper labeling. And USDA approval wasn’t enough to avoid misleadingness: “Label language is reviewed for technical and scientific accuracy. Yet common sense suggests even ‘language that is technically and scientifically accurate on a label can be manipulated in an advertisement to create a message that is false and misleading to the consumer.’”  Also, Sanderson’s ads included “images, representations, and language that go beyond what is included on the USDA approved label.”

Plausibility: Sanderson argued that a reasonable consumer wouldn’t interpret “natural” as stringently as the plaintiffs propose or be surprised to learn that Sanderson’s products have trace amounts of synthetic materials like antibiotics.  The court disagreed: Plaintiffs alleged the existence of surveys indicating a majority of consumers believe: a) a “natural” poultry product is produced without the use of antibiotics or other drugs at any point; and b) it is important to reduce antibiotic use in food production and improve the living conditions of animals. The allegations were plausible.

claiming to provide services then referring out can be false advertising, but P must still show harm

Larry Pitt & Associates v. Lundy Law LLP, No.. 13-2398, --- F.Supp.3d ----, 2018 WL 925011 (E.D. Pa. Feb. 15, 2018)

The parties are Philadelphia-area law firms that advertise for personal injury, social security, and workers’ compensation cases. Pitt sued Lundy Law and its managing partner, L. Leonard Lundy (“Lundy), asserting wrongful use of civil proceedings, false advertising, and trade secret misappropriation. Lundy sought and received summary judgment.

“In Pennsylvania, unlike in many other jurisdictions, an attorney or a law firm is permitted to refer a case to another attorney or law firm and earn a portion of the clients’ fees without performing any work on the case, so long as the arrangement is disclosed to the client and the fee is not excessive. However, a law firm may not actively advertise in its own name for certain categories of cases for the purpose of referring those cases to other law firms.”  Lundy Law, a personal injury law firm, has used the slogan “Remember this Name” and its mnemonic hotline number 1-800-LUNDYLAW for years.

Lundy had agreements with other firms that they’d share in the cost of Lundy Law’s advertising for social security disability cases in the Philadelphia area, and Lundy Law would refer all of its potential social security disability cases directly to the other firm in return for referral fees; the most recent version of the agreement involved Lundy hiring a part-time Social Security lawyer to handle up to five cases a month.  For workers’ comp, Lundy Law had a referral agreement with the Law Offices of Lenard A. Cohen, P.C., under which Lundy Law refers all its potential workers’ compensation cases in Pennsylvania to LOLAC in exchange for a referral fee. Cohen himself has been covered under Lundy Law’s liability insurance policy as “of counsel” to the firm since 2009 and keeps Lundy Law business cards and a Lundy Law email address, as well as other connections to Lundy Law.

Some Lundy Law ads featured 1-800-LUNDYLAW in large font with the words “Injury and Disability Lawyers” or “Injury, Disability & Workers’ Compensation lawyers,” in smaller font above or below the telephone number. Some ads feature dtestimonials from purported social security disability or workers compensation clients that they were glad they “remembered the name.”  Some TV ads specifically promoted workers’ compensation and social security disability services, e.g., “Lundy Law gets you the social security benefits you deserve.”  Pitt asserts that all of these ads were false and misleading because Lundy intended to refer, rather than handle, any potential workers’ compensation and social security cases.

Separately, Lundy Law purchased ad space on SEPTA buses, trains, and transportation stops for years, and throughout that time, Leonard Lundy’s daughter, Sara Lundy, was an account executive at an ad firm. She provided Lundy Law with photos of ads used by other law firms and information on their locations as well as transit ridership information. Pitt alleged that these disclosures constituted misappropriation of confidential information about the advertising strategies of Lundy Law’s competitors, including Pitt.

False advertising, workers’ comp: Pitt didn’t raise a genuine issue on material falsity/misleadingness.  Pitt didn’t show that the nature of Cohen’s relationship with Lundy “differed materially from a consumer’s reasonable understanding of the relationship between a law firm and its attorneys,” since a potential client “would meet with an attorney physically present in the office and would have recourse to Lundy Law’s malpractice insurance for the attorney’s conduct, if necessary.”

Social Security: There was no evidence of consumer deception, so Pitt had to rely on literal falsity. Most of Lundy’s statements were too general/ambiguous to qualify, but there were a few more specific statements in TV ads such as “Lundy Law gets you the social security benefits you deserve. • We’ll help you through the process. That’s what we do.”  Although Lundy argued that the ads didn’t indicate that Lundy employees would “themselves handle the viewers’ social security disability claims from beginning to end,” “when a law firm releases a commercial directed specifically at social security disability cases, and tells viewers that it will help them through the process of obtaining social security benefits because ‘that’s what [they] do,’ such a message necessarily implies that lawyers within the law firm handle their clients’ social security claims.” And if Lundy didn’t handle any aspect, that was literally false. So too with Lundy’s listing “social security” among its “practice areas”: “it unambiguously implies that attorneys at the firm handle cases within that practice area.”  Between late  2008 and late 2013, Lundy Law referred all of its potential Social Security cases directly to other law firms, creating a genuine issue on literal falsity.  But after that, a part-time attorney came on to handle Social Security cases; even if she handled only a few, the post-2013 ads didn’t “unambiguously represent that the firm would take on more than five cases per month.”

But Pitt couldn’t show damages: it had to show a causal link between its alleged injury and Lundy’s specific misrepresentations by showing that Lundy’s statements actually deceived and influenced consumers. Evidence that potential clients responded to Lundy Law’s advertisements wasn’t enough to show that the clients relied on any of the specific false representations. And there was no evidence linking an increased Social Security intake to the use of any specific ads; it might have resulted from Lundy’s non-false advertising, such as the firm’s more general “injury & disability lawyers” ads or its personal injury ads. This defeated Pitt’s damages claim, and also its request for disgorgement of profits and corrective advertising.  

There was no reason to proceed to trial for injunctive relief; though Lundy could once again farm out all its Social Security cases while misrepresenting that its attorneys handled those cases, there was no evidence that Lundy intended to do so.

The same analysis applied to the state UCL deceptive marketing claim.

The trade secret claim failed because, while the nepotism might concern Titan (the ad agency) and SEPTA, there was no evidence that any of the information Sara Lundy shared with Leonard was confidential.  “[T]he content and location of a law firm’s advertisements is generally intended to be public.”

The court concluded with a cautionary note: “In many instances, a complaint to the state attorney disciplinary boards may be the most effective means for quickly ending and sanctioning plainly unethical conduct. Thus the Court’s decision should not be read to condone or excuse Defendants’ alleged actions, but should instead serve as a reminder of the burden that plaintiffs bear when they choose to seek relief against their competitors in court.”