Thursday, March 14, 2024

Earth, Wind & Infringement: TM owner succeeds against overclaiming "reunion" band

Earth, Wind & Fire IP, LLC v. Substantial Music Group LLC, --- F.Supp.3d ----, 2024 WL 1025265, No. 23-20884-CIV-MORENO (S.D. Fla. Mar. 1, 2024)

With the ordinary multifactor confusion test, courts position themselves as looking for empirics (even though the thrust of several of the factors is normative). But with nominative fair use, courts engage in more unfair competition/normative reasoning. When a court finds that a use went beyond identifying to suggesting a connection, it often doesn’t use any of the factors that empirically we might use to figure out if that was true. Instead, it generally determines that the defendants did “too much” based on its own sense of what’s accurate. Here, though, a bit of empirics creeps in.

The facts: Earth, Wind & Fire is owned by the sons of Maurice White, founder of the well-known musical group “Earth, Wind & Fire,” and owns trademark rights in the name.

“Defendants decided to form and promote a band, in which Richard Smith would be the guitarist that would perform the music of Earth Wind & Fire. It is undisputed that Smith played with the Earth, Wind & Fire for a few years, but the size of his role during those years is in dispute.” They called the new band, “Earth Wind & Fire Legacy Reunion” and “The Legacy Reunion of Earth, Wind & Fire.” They also used plaintiff’s word mark and its “Phoenix” logo mark. After plaintiffs objected, defendants changed their name to “Legacy Reunion of Earth Wind & Fire Alumni,” made logo and color changes, and ceased using the “Phoenix” logo.

The court granted summary judgment on liability to plaintiff.

Nominative fair use: Earth, Wind & Fire wasn’t readily identifiable without use of its name. What’s “reasonably necessary” to identify it can differ from case to case. Although the initial uses seemed clearly more than reasonably necessary, defendants stopped using Earth, Wind & Fire’s distinctive font, took out the distinctive “Phoenix” logo, switched the title of its musical shows from “Earth Wind & Fire Legacy Reunion” to “Legacy Reunion of Earth Wind & Fire Alumni,” and changed the color scheme. Thus, they satisfied the second element of NFU.

However, the court put the burden on defendants to show that they did “nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.” This was a closer call, but the court rejected the defense.

In the Princess Diana case, Cairns, the court “found persuasive that the advertisements for the Princess Diana related products did not claim that they were sponsored or endorsed by the trademark holder, where other of the defendant’s celebrity-related products do state that they are ‘authorized’ by a trademark holder.” By contrast, the silence here was not as meaningful because there weren’t other “authorized” products. And “Legacy Reunion of Earth Wind & Fire” lacked “a clear disclaimer or limiting language about who is performing.” Plus, defendants “combined the advertising with text that discusses the Earth Wind & Fire’s legacy”: their website said that the band “dominated the 70’s with their monster grooves and high energy, danceable hits, garnering 20 Grammy Award nominations and a Hall of Fame Induction along the way.” It further states that “[t]he style and sounds of the greatest hit recordings by Earth, Wind & Fire were built by founder Maurice White and the contributions of a stellar collective of some of the best musicians in the world throughout the decades.” These ads “draw a close, unmistakable association with Earth, Wind & Fire to a degree unwarranted by the historical record.” “Regardless of if Defendants’ musicians were technically sidemen or members, the advertisement and marketing were still deceptive and misleading as to whether the main (or most prominently known) members of the band would be performing. The use of the word ‘alumni’ is not enough to dispel the notion that Defendants’ band is not sponsored.” This was close, because “some original musicians and members … are performing, [but] the advertisements are overstating the originality of the group. Plaintiff shows this through multiple consumer online posts, commenting with frustration on their expectations based on advertisements verses what they received.” This isn’t evidence of association in general, like the survey in New Kids, but rather of a material quality gap—maybe that kind of evidence is especially relevant.

The court also rejected acquiescence, estoppel, and laches defenses.

A couple of points from the confusion analysis: Third-party use didn’t weaken the mark because each third-party use identified by defendants included “tribute” somewhere in the name and most of the websites made clear exactly who was performing. E.g., “The Ultimate Earth, Wind & Fire Tribute Band” website includes information of the performers, which explicitly states that the Saxophonist Curtis Johnson “[t]oured with the original EARTH, WIND & FIRE BAND.” The “Kalimba – Earth Wind & Fire tribute” site explicitly stated that the band seeks to “accurately reproduce the infectious grooves.” Defendants’ name, by contrast, was “Legacy Reunion of Earth Wind & Fire Alumni,” “which implies not that they are ‘covering’ or ‘reproducing’ the music but were the original performers.” Even “The Earth Wind, & Fire Experience featuring The Ray Howard Band” identified itself as an “experience” and a performance by an entirely different band.

Similarity of advertising media: The fact that the parties used separate websites and social media favored defendants, by showing a distinction between the groups. It just wasn’t enough.

Bad faith: Not shown, because just knowing of the prior mark isn’t enough without an intent to misappropriate.

Actual confusion: emails said things like “I attended the [Earth, Wind & Fire] legacy reunion in Pensacola, Florida in hopes of seeing Philip Bailey, Verdine White and others from the original band. Their pictures are on the advertisement, posters, or whatever. The impression of Reunion would be original band members from various years. Why is it misleading? The pictures should be removed from advertisement. The details read friends and family or something like that.”


calling an accepted Rule 68 offer a judgment of infringement could be defamatory

Double Diamond Distribution Ltd. v. Crocs, Inc., 2024 WL 1051951No. 23-cv-01790-PAB-KAS (D. Colo. Mar. 11, 2024)

I have a long-running interest in Rule 68 offers of judgment, and this case involves an interaction with false advertising law! The parties compete in the shoe market.

In 2006, Crocs sued now-plaintiff Double Diamond and Dawgs, its affiliate. Trial was scheduled for 2022 (!), but then-defendants sent offers of judgment to Crocs. Double Diamond’s offer stated: “This offer is made for the purposes specified in Rule 68 and is not to be construed either as an admission that Double Diamond is liable in this action or that Crocs has suffered any damage.” Dawgs’ offer was similar (though it offered $6 million, where Double Diamond offered $55,000, and contemplated bankruptcy).  Crocs accepted.

Crocs then issued a press release, “Crocs secures long sought-after judgment of infringement against USA Dawgs and Double Diamond Distribution.” The press release announced

a judgment of infringement against USA Dawgs and Double Diamond Distribution as a result of both companies’ sales of imitation Crocs shoes. In conjunction therewith, Crocs also obtained $6 million and $55,000 in damages, respectively, against the companies.

This case is the culmination of years long battles between the parties after USA Dawgs and Double Diamond Distribution began selling shoes that infringed Crocs’ patents in 2006. Both USA Dawgs and Double Diamond Distribution have since conceded the validity of Crocs’ patent rights.

“We are fiercely protective of the Crocs brand and our iconic DNA. We have zero tolerance for infringement of our intellectual property rights or for anyone who tries to benefit off the investments that we have made in our brand,” said Daniel Hart, Executive Vice President and Chief Legal & Risk Officer at Crocs. “This judgment not only reinforces the validity of our patent rights, it also reinforces our unrelenting determination to take forceful steps to protect our brand equity.”

This judgment of infringement comes nearly one year to the day after Crocs filed lawsuits against 21 companies alleging infringement of its registered trademark rights in its clog designs. …

The court declined to dismiss Double Diamond’s resulting defamation claim. This was not a case where the “gist” was true on the facts alleged. A Rule 68 offer of judgment does not require an admission of liability, which may be disclaimed. If that happens, the court’s judgment does not constitute a finding of or an admission of liability against the defendant.

The statements that Crocs obtained “a judgment of infringement against USA Dawgs and Double Diamond Distribution as a result of both companies’ sales of imitation Crocs shoes” and “[t]his judgment...reinforces the validity of [Crocs’] patent rights” were plausibly false because the statements would have a “different effect on the mind of the reader” from that which the Rule 68 offer of judgment would have produced. And they were plausibly material because the statements would likely cause reasonable people to think “significantly less favorably” about Double Diamond than they would if they knew the truth. Unlike the difference between “stalking” and “harassment,” this was not “a minor, technical error in legal terminology.”

Trade libel claims survived for the same reason.

Lanham Act false advertising: Crocs argued that the press release was not “commercial advertising,” because (a) the press release was directed at investors, not the relevant purchasing public; and (b) Double Diamond never alleged that the press release promoted Crocs’ shoes to consumers. However, Crocs published the press release on its website and had the press release published to 440,000 websites, newsrooms, and direct feeds using PRNewswire. And it stated that Crocs “is a world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers know and love.” This was enough to plausibly allege commercial advertising, along with the allegation that Crocs made the statement in order to obtain increased sales and brand differentiation; the press release repeatedly referred to Crocs’ brand and products and included the invitation “To learn more about our brands, please visit www.crocs.com or www.heydudeshoesusa.com or follow @Crocs or @heydudeshoes on Facebook, Instagram and Twitter.” Because the websites that posted the press release have a combined viewership of 6 billion people per month, the allegations were sufficient to show that the statements were “disseminated sufficiently to the relevant purchasing public.” This also allowed a claim under the Colorado Consumer Protection Act.

Intentional interference with contractual relations failed, however, because there was no identified specific relationship with a third party.

Friday, March 08, 2024

reasonable consumers aren't required to know collagen can't be vegan

Kandel v. Dr. Dennis Gross Skincare, LLC, 2024 WL 965621, No. 23-cv-01967 (ER) (S.D.N.Y. Mar. 5, 2024)

Similar California litigation at a later stage. Kandel alleged that Gross Skincare deceptively labeled and advertised its skincare products as containing collagen when, in fact, they do not.

“Collagen is a protein found exclusively in humans and animals that has been linked to youthful skin, hair, and nails. It is composed of thousands of amino acids intertwined in a specific, unique sequence. Without being sequenced this way, amino acids do not confer the same benefits as collagen.” The products at issue are uniformly branded with the phrase “C + Collagen.” The list of ingredients includes “Collagen Amino Acids”; some products also feature the term “collagen amino acids” in a separate section on the package titled “What It Is”/“What’s In It For You.”

one of the packages at issue: C + Collagen Deep Cream

One side of each package also contains a small symbol indicating that the product is vegan—making “collagen” content impossible. Gross Skincare allegedly knows that consumers will pay more for skincare products that contain collagen and intends for consumers to infer from the “Collagen” branding that the products do so.

C + Collagen package sides with small blue arrow pointing to small vegan symbol at bottom and blue underline of "collagen amino acids" in ingredient list
blue lines/arrows added by court to highlight relevant terms

NY GBL claims were sufficiently alleged. Gross Skincare argued that the “C + Collagen” phrase didn’t imply that the products contain collagen, but instead that the Vitamin C in the products increases natural production of collagen in the user’s skin. It claimed that the rest of the package clarified that the products contain “collagen amino acids” and are vegan. Because of the label “vegan,” it argued, a reasonable consumer would understand that they do not contain collagen.

This interpretation of “C + Collagen” was “certainly less intuitive than Kandel’s.” Even considered as a whole, the complaint alleged misleadingness. The use of “collagen amino acids” “likely only reaffirms that collagen is an ingredient” and was itself arguably confusing; the label did nothing to explain it.

Even if one accepts Gross Skincare’s definition of “collagen amino acids” as “the building blocks of collagen,” the court did not assume that a reasonable consumer understands that collagen is a protein composed of amino acids. So too with “vegan.” Even if the consumer noticed this small symbol, they’d have to know that collagen comes exclusively from animals.  This certainly couldn’t be assumed on a motion to dismiss.

Breach of warranty and unjust enrichment claims under New York law, however, failed, as well as claims on behalf of a nationwide class.

Kandel did have standing as to four products she didn’t buy but that contained the same alleged misrepresentations.

Thursday, March 07, 2024

small competitor lacks standing against big one's nondisparaging advertising

HomeLight, Inc. v. Shkipin, --- F.Supp.3d ----, 2024 WL 940089 (N.D. Cal. Mar. 5, 2024)

Sometimes, courts are very generous to competitors in presuming Lanham Act standing—as with the recent Meta ruling—and sometimes they aren’t. I have yet to detect a real pattern across facts/circuits, but suggestions welcome.

Previous ruling. Shkipin’s amended false advertising counterclaim fails again. Although Shkipin alleged commercial injuries—“network effects and ad revenues, and also … goodwill value associated with its 100% free services to real estate agents and consumers” but there wasn’t sufficiently direct causation. None of HomeLight’s statements allegedly disparaged or even referred to Shkipin’s business.

To establish that HomeLight proximately caused HomeOpenly to suffer a loss of sales, Mr. Shkipin would need to show how deceptive statements about HomeLight directed at shoppers on HomeLight’s own website necessarily caused advertisers not to buy ads from HomeOpenly. Even assuming that there is a direct relationship between the number of shoppers who use or visit HomeOpenly and its ability to sell ads, and that HomeLight’s deceptive statements resulted in some reduction in the number of shoppers visiting HomeOpenly’s website, this connection is too attenuated to establish proximate cause. This is especially true given the countercomplaint’s other plausible explanation for why online home shoppers might find HomeLight’s website but not HomeOpenly’s: HomeLight’s heavy spending on various forms of online and TV advertising that Mr. Shkipin characterizes as “highly effective.”

These causation problems also defeated his state UCL claim. The allegedly unlawful/fraudulent conduct underlying the UCL claim—that HomeLight received illegal kickbacks in violation of RESPA—wasn’t sufficiently linked to the injuries Shkipin claimed.

Wednesday, March 06, 2024

Second Circuit affirms holding that asterisk/fine print sufficiently clarifies ambiguous claim

Montgomery v. Stanley Black & Decker, Inc., 2024 WL 939151, No. 23-735-cv (2d Cir. Mar. 5, 2024)

Plaintiffs sued defendant (Craftsman) for deceptive business practice claims under both the New York General Business Law (NYGBL), and the Virginia Consumer Protection Act (VCPA), as well as asserting warranty and common law claims. They alleged that the “Peak HP” labeling on the packaging of Craftsman vacuums is misleading because the vacuums are unable to achieve the advertised horsepower. The District Court dismissed the complaint because the dagger or asterisk symbol next to the “Peak HP” label directs the consumer to fine print explaining that “Peak HP” is the horsepower achieved in laboratory testing, not ordinary use. The court of appeals affirmed.

Based on the entire packaging, a reasonable consumer would not be misled because of the fine print explanation. Plaintiffs didn’t allege the “Peak HP” label was false, and though their interpretation was one reasonable one, the fine-print meaning was also reasonable, and the dagger/asterisk “would alert a reasonable consumer to the fact that certain caveats may apply to the ‘Peak HP’ designation.” Just because it was in fine print didn’t mean it couldn’t clarify an ambiguous label. There were no allegations that a consumer couldn’t see it or that its terms were confusing.

 

local ad company has Lanham Act standing against Meta for allegedly overstating ad reach

Metroplex Communic., Inc. v. Meta Platforms, Inc., 2024 WL 940127, No. 22-cv-1455-SMY (S.D. Ill. Mar. 5, 2024)

Metroplex, a local advertising company, brought a putative class action against Meta for unfair competition. Although Meta argued that Metroplex was an ad purchaser for two of its local media properties (a news site and an FM radio station), given that it has advertised on Facebook dozens of times in the last few years, Metroplex argued that it was a Meta competitor.

Metroplex alleged that sells and places digital and targeted advertisements on its local news website, its “Best of Edwardsville” website, radio advertisements for its FM and AM radio stations, and print advertisements that are placed in local newspapers and in the “Best of Edwardsville” magazine. Metroplex also allegedly develops tools and systems for managing and optimizing advertising campaigns for businesses.

Meta allegedly drew buyers away from its local news outlets by (1) using the word “people” in statements related to advertising on Meta and (2) overestimating the number of people on Meta’s apps and reachable by ad campaigns, and contends that Meta’s users were “not actually people,” because some accounts were false and some people have more than one account. It asserted claims under the Lanham Act and the Illinois Uniform Deceptive Trade Practices Act.

Metroplex satisfied Lexmark by alleging that the parties compete directly for the same customers and Meta’s false or misleading statements were material to advertisement buyers. Lost sales could be plausibly inferred by these allegations.

As for stating a claim, Meta noted that most of the challenged statements weren’t “advertising.” They were numerical estimates taken from Meta’s SEC filings or provided to individual advertisers for particular ad campaigns, and generic references to “people” on informational webpages. But the plaintiff did enough to satisfy Rules 8 and 9(b).

A reasonable consumer could be confused despite Meta’s alleged disclaimers or qualifying statements in SEC filings or in icons that led to popup windows, given the allegations of falsity, just as the back label of a product can’t correct false statements on the front. Given allegations that Meta allegedly inflates audience estimates and reach metrics and such audience size figures can be over 30% of the actual number, it would be plausible for consumers to be deceived.

The IUDTPA claim also survived because Metroplex, an Illinois company, alleges it was damaged as a competitor in the Edwardsville and greater Metro East region in Illinois.

The court also rejected Meta’s motion to compel arbitration; these claims, asserted in its capacity as Meta competitor, were outside the scope of the agreement Metroplex signed to run its Facebook pages.
 

Bank has Lanham Act standing to assert disparagement claim against former customer (itself a service provider)

SouthState Bank, N.A. v. Qoins Technologies, Inc., --- F.Supp.3d ----, 2024 WL 911075, No. 1:22-CV-5020-MHC (N.D. Ga. Mar. 1, 2024)

“Qoins is a financial technology company that collects funds from its customers and disburses payments to designated creditors in order to help its customers pay off their debts.” Customers inform Qoins of their outstanding debts that they wish to pay and transfer money to Qoins “on a regular basis to satisfy such debts over time.” In 2019, Qoins entered into a Master Disbursement Services Agreement with Atlantic Capital Bank to establish a banking relationship, which included creating bank accounts that contained customer funds. SouthState is ACB’s successor in interest. Under the agreement, Qoins was the bank’s customer (and Qoins customers weren’t). It set up custodial accounts for holding customer funds—not to be used for operations; an operating account; and a reserve account. Qoins customers would make deposits to custodial accounts; Qoins would make payments to creditors and then reconcile deposits and payments. Qoins agreed to ensure that custodial accounts had sufficient funds to carry out the payments and to cover any fees related to the transactions, and to keep records of its transactions and provide accurate information to the bank.

In June 2022, “SouthState documented the mutual agreement” reached by Qoins and SouthState that the banking relationship between them would terminate, effective July 20, 2022. SouthState was unable to complete the transition process to a new bank partner (Evolve) because “ACH requests to SouthState for Qoins’s Customers’ funds [ ] exceeded the amounts in Qoins’s accounts with SouthState.” Qoins initiated an ACH request in the amount of $150,000 from the Custodial Accounts to Evolve; however, because the Custodial Accounts were overdrawn, SouthState denied the request. SouthState allegedly eventually had to charge off the negative balances of Qoins’s accounts in an amount in excess of $33,000.”

SouthState alleged that the custodial accounts were improperly “used in multiple instances by Qoins to fund Qoins’s other accounts at SouthState”; custodial accounts were frequently funded by the operating account; Qoins’ earnings weren’t sufficient to maintain operating capital; and funds from the different accounts were commingled.

In early December 2022, Qoins published an announcement on its website informing customers that it “recently switched to a new bank partner” in order to “provide additional services,” but “[u]nfortunately, however, some of our customers have not been able to migrate their accounts due to ongoing issues with SouthState Bank.”

The announcement included a question, “Why can’t I access my money?” and provided the following answer:

If you never attempted to migrate, or if you received an error message during the migration process (including a message that says your account is “on hold”), your funds are still at SouthState Bank. SouthState Bank is unable to release your funds, so we have been unable to migrate your account or refund your money. We continue to work with SouthState Bank to resolve this matter expeditiously. While we have seen some customers reach out to SouthState Bank directly, customers have had no luck. Some customers have also reached out to our new bank partner, but they are not in a position to help.

Qoins’s announcement also provided a link to the FDIC’s Customer Assistance Form and informed any aggrieved customers that a Qoins representative would assist in helping the customer file a complaint against SouthState with the FDIC. Qoins also referred to SouthState in its responses to customer reviews, saying it was responsible for withholding funds. This was all allegedly false and misleading (given that Qoins customers were not SouthState customers, they weren’t FDIC insured). “Numerous” Qoins customers allegedly filed complaints against SouthState “with relevant federal agencies,” even though SouthState was not responsible to Qoins’s customers and SouthState did not possess any records of the customers’ interactions with Qoins.

The court mostly denied Qoins’ motion to dismiss the resulting claims, including breach of contract and libel.

False advertising/false association: SouthState lacked standing to bring a false association claim against Qoins because there were no allegations of passing off, and in fact Qoins allegedly identified SouthState as a banking partner. Thus, SouthState didn’t fall within the zone of interests for false association. [I think what the court meant was that Lexmark’s zone of interests/proximate cause test applies to §43(a)(1)(A) claims, as I think it would have to, but that the zone of interests/proximate cause analysis differs as between false association and false advertising.]

But SouthState did have standing for a false advertising claim. “Because SouthState is alleging reputational injuries, no direct competition is required and SouthState has pleaded with sufficiency that it has standing to sue because the alleged false representations about SouthState could impact its business reputation.”

Were the Qoins statements made in commercial advertising or promotion? Qoins argued that they were answers to customer questions and not intended to influence customers away from SouthState or targeted at SouthState customers. The Eleventh Circuit has adopted Gordon & Breach’s test (probably as modified by Lexmark).

Qoins’s argument that the statements were not made to the purchasing public is unavailing because SouthState has alleged that Qoins made the representations on its website and in response to customer reviews on online application stores. Importantly, these representations are alleged to be public-facing and widely accessible. “[W]hen statements are so broadly disseminated, they are much more likely to constitute commercial advertising.”

Drawing all inferences in SouthState’s favor, “Qoins’s statements were made to pacify customer concerns and to influence customers to start or continue their relationship with Qoins. A reasonable inference also can be made that Qoins’s statements were intended to influence customers to purchase its service, because such issues were not attributable to the new banking partner.” That sufficed.

Interestingly, the court also found that SouthState sufficiently alleged materiality in two independent ways: (1) allegedly false representations that SouthState continued to hold customers’ funds concerned “the essential characteristic of its business as a bank” and (2) because consumers allegedly filed complaints against SouthState based on Qoin’s representations, it was plausible that those representations affected consumer decisions about SouthState.

Two hospitals can both be best, and use purple ads (for now at least)

NYU Langone Health Sys. v. Northwell Health, Inc., 2024 WL 898941, No. 23-CV-5032 (VEC) (S.D.N.Y. Mar. 1, 2024)

NYU Langone sued Northwell for trade dress infringement, unfair competition and false designation of origin, and false advertising under the Lanham Act, as well as related claims under the New York GBL and New York common law. The core allegation is that Northwell copied its advertising to trade off the good will and reputation of NYU Langone. The court dismissed the complaint—the false advertising claims with prejudice.

The parties are both nonprofit health systems in New York and advertise to the same market, with NYU Langone having recently expanded its presence on Long Island, where Northwell is headquartered.

NYU, including NYU Langone and other subsidiaries, has used the color purple in its signage and branding for over 100 years. NYU Langone’s 2017 style guide suggests the distinct shade of purple be “prominently feature[d]” with white font and accent colors like teal and orange, like so:

NYU Langone ad with purple background and white sans serif text

another similar ad on a billboard

NYU Langone alleged the existence of advertising trade dress (e.g., teal and orange) and photos, ... [and the] use of purple, white, and accent color combinations in words and phrases in the ad headlines.”

Before 2019, Northwell advertisements allegedly featured a logo with blue letters and multicolored arrows on a white background:

ad with patient picture on top and orange and blue text on white background

teal and white background, white and black text

In 2021, Northwell’s advertisements allegedly changed and now use white letters and arrows on a purple background:

Northwell ad with purple background and blue and white text

similar ad but some of the background is teal

NYU Langone failed to adequately allege a protectable trade dress. “To state a claim for trade dress infringement, a plaintiff must first clearly articulate the design or combination of features that make up the trade dress. The articulation must provide a ‘precise expression of the character and scope of the claimed trade dress.’” Clarity and specificity are “imperative because courts cannot ‘shape narrowly-tailored relief if they do not know what distinctive combination of ingredients deserves protection.’” Further, “[t]rade dress descriptions with too many possible combinations are not specific enough to state a claim.”

The allegations here were

confusing and expansive. The Complaint provides a laundry list of elements, some introduced by “e.g.” and some connected by “or,” that encompasses such a wide variety of features that it would be difficult for competitors to know whether their advertisement falls within the trade dress. NYU Langone defines its trade dress as follows:

the prominent use of a distinctive purple color, the use of particular accent colors (e.g., teal and orange) and photos, specific font types, colors and headline styles (i.e., all cap sans serif white headlines, as well as white font with certain words and phrases emphasized in the same or similar accent colors), use of purple, white, and accent color combinations in words and phrases in the ad headlines, and specific layouts in terms of placement and use of accent colors, all of which create a distinctive look and feel.

Photos in the complaint of the alleged trade dress “vividly illustrate how features such as font, color, and layout vary across ads. Even among ads that are predominantly purple, the shade of purple varies; some have all cap white writing; some have all white sentence case writing; and some have a mix of white and other color writing.”

subway ad as described by court

Facebook ad on purple background with white and orange text

Other ads had “just a splash of purple”:

Mostly teal background with white text and then some purple at bottom

mostly pink background with white and purple text and purple at bottom

Some ads were split between photos and text, with the text varying in color and case and with the split sometimes being vertical and sometimes horizontal:

photo of basketball players on left, purple background and white/blue text on right

purple background with white text on top, photo of runner on bottom

The court couldn’t identify specific fonts, colors, or headline styles that were part of the trade dress, other than that they were sans serif fonts. “Categories of features” were insufficient.

The current definition was too general, contained too many “or” connectors and “for example” phrases, and “overall encompasse[d] too many possible permutations and combinations to constitute a singular distinct trade dress,” though the court would allow an amended complaint.

False advertising: NYU Langone alleged that a Northwell ad falsely claimed that one of its hospitals “is NYC’s only hospital in the Nation’s Top 50” and “offer[s] the best care in Manhattan.” This claim was based on rankings from Healthgrades and included the Healthgrades logo directly underneath the claim. NYU Langone alleged that Healthgrades’ rating methodology lacks transparency and relies on inaccurate and incomplete reporting, and that the claim was false because U.S. News & World Report ranked NYU Langone “#1 in New York State and in the New York City Metro area” in its “Best Hospitals Honor Roll.”

ad as described with Healthgrades logo on bottom

The statement that Lenox Hill is the only NYC hospital in the Nation’s Top 50 wasn’t literally false because Northwell cited the Healthgrades rating. Questioning Healthgrades’ underlying rating methodology didn’t falsify the claim that Lenox Hill was the only NYC hospital rated in the Top 50 in that particular list.

Nor did NYU Langone sufficiently allege misleadingness. It was not enough to allege only that “Northwell’s false or misleading statements actually deceived or have the tendency to deceive a substantial segment of consumers.” “While proof of confusion is not necessary at the pleading stage, factual allegations that would allow the Court plausibly to infer that the advertisement caused confusion are. NYU Langone’s single conclusory sentence is insufficient.” And “best care in Manhattan” was puffery.

Under NYGBL § 350, “a disclaimer or similar clarifying language” can defeat a claim of false advertising as a matter of law, and the Healthgrades rating did so here.

Amendment would be futile because no reasonable jury could conclude that consumers were misled or confused by an add bragging about Lenox Hill’s Healthgrades rating and boasting that it offers the “best” care in the city. “Consumers are familiar with this common type of advertising, in which businesses tout that they are the best according to some newspaper, magazine, blog, Yelp or Google review, poll, or other rating system.” In fact, NYU Langone does the same:

NYU Langone ad also claiming to be #1 in outcomes with logos of rating entities

Both of these claims can be true.

Monday, March 04, 2024

“it appears difficult for a defendant, innocent or not, to defend himself in a claim for disgorgement of profits"

Newborn Bros. Co. v. Albion Engineering Co., No. 12-2999, 2024 WL 887785 (D.N.J. Feb. 29, 2024)

Previously, after a bench trial, the court found Albion liable for falsely advertising its caulk dispensing guns as “Made in the USA.” Now it’s disgorgement time.

After more evidence, the court found that Albion adequately supported its unclean-hands defense—that Newborn had also made false USA origin claims—until early 2007.

Although this wasn’t a two-player market, the evidence (including trade organization membership and Albion’s own offers to distributors) suggested that Newborn and Albion were direct competitors. Many distributors carry just one vender; many parties who sell private label products use only one manufacturer.

Albion saw a strategic advantage in presenting itself as an American manufacturer, e.g., in a meeting with an end-user/owner of a caulking company, its director of marketing noted that Newborn guns were made in China, to which the owner responded “[t]hat’s how we got into this economic mess,” and the marketing director noted in the contract management system that “Made in U.S.A. could become even more important during this economy.” A former Newborn customer switched to Albion based on its claim of US manufacture. After Albion added hard-to-remove country of origin markings, Newborn’s sales increased fifty percent.

In fighting disgorgement, Albion pointed to other factors driving sales. Many Albion caulking guns were priced forty percent higher or more; Albion argued that this was evidence that the products do not compete in the marketplace and cited survey data and testimony that consumers’ American-made preference cannot account for purchases made despite such cost disparities.

Because the court had already concluded that disgorgement was appropriate, it was Newborn’s burden to prove Albion’s sales and Albion’s burden to prove costs and other deductions from that amount.

Newborn’s expert calculated Albion’s total revenue from relevant products to be nearly $32 million, and profits a bit over $15.5 million, meeting Newborn’s burden. Although “it would be inequitable and contrary to [the court’s] responsibility under the Lanham Act to disgorge profits unrelated to Albion’s offending conduct,” the court rejected “any interpretation that places the burden of proof of the sales attributable to specific representations or consumer confusion affirmatively on Newborn.” Indeed, the court cited with approval another court’s statement that “it appears difficult for a defendant, innocent or not, to defend himself in a claim for disgorgement of profits.”

Moreover, this burden shifting

allows for, and in some instances encourages, parties to argue past one another to the collective detriment of themselves and the Court. A plaintiff’s minimal obligation to prove sales and a defendant’s heavier burden to deduct costs, demonstrate a lack of competition or confusion, and make other showings to subtract from the sales figure do not naturally result in apples-to-apples comparisons.

So, Albion didn’t focus on its costs associated with its sales, but rather whether the parties’ products competed and whether there was actual consumer confusion. The court partly agreed: customers who repurchased after the country of origin marking was corrected showed “a disregard for country of origin as a deciding factor.”

However, the court declined to rely on testimony that consumers would only pay a 15% premium for American-made products (meaning that sales of products with a greater premium weren’t attributable to the false country of origin claims).  It was “clear that Albion saw value in representing itself as an American manufacturer and sought to distinguish itself from competitors, particularly Newborn, on that basis. Finding for Albion on this issue would risk, at least in some instances, unjustly giving Albion the benefit of excluding relevant products based on markups.” Without definitive evidence quantifying the value of American manufacture, the court erred on the side of Newborn. The court also included private-label sales, because it couldn’t find that the private-label sales were unrelated to American manufacture.

The court set disgorgement at a bit over $1.6 million plus prejudgment interest. Deterrence couldn’t justify increasing the sum—that would be a penalty.

Injunctive relief was also appropriate. Albion ceased placing markings on the relevant products representing Albion’s eighty-year history of American manufacture after the lawsuit was filed. It added a “Made in Taiwan” label to handles, later replaced by a stamp on the recoil plate. Still, Albion guns stamped or otherwise marked to indicate American manufacture are presently displayed across the country. One distributor continued to advertise a relevant product as American made until October 2023, and there were other scattered similar references online.

Thus, there was continued irreparable harm. (I didn’t see discussion of the TMA’s presumption.)

And legal remedies were inadequate, since they couldn’t prevent future violations. “The inadequacy of compensation for past harm is all the more apparent, in the Court’s view, in light of the continuing misrepresentations and lack of clarity in the market despite Albion’s assertion that it has engaged in corrective efforts for more than a decade.” Thus, the balance of equities and the public interest also favored injunctive relief.

Albion was ordered to mail a letter and a copy of the court’s order to each distributor it has sold a caulking gun to within the past five years requesting that any samples, displays, or other materials referencing “Phila. PA.” or referring to Albion caulking guns being “Made in USA” be returned. Albion had to remove from the inventory of its distributors any B-line guns that bear markings describing Albion’s history as an American manufacturer and offer to replace any returned materials at its own cost. It was also required to provide notices to be displayed at each location at which Albion products are displayed:

A judge of the United States District Court for the District of New Jersey has ruled that Albion Engineering Corp. has previously misrepresented that certain products were “Made in USA,” through product mismarking and statements in advertising, promotional materials, websites, and to customers. Newborn Brothers Co. Inc. v. Albion Engineering Co., No. 12-Civ-2999 (NLH).

The Court has ordered Albion to comply with all applicable country-of-origin marking and disclosure requirements. The Court has ordered Albion to provide to its distributors copies of this notice so that they may be displayed at all distributor sales locations.

Yikes!

Also, “until such time that Albion seeks and receives confirmation from United States Customs and Border Protection as to the marking requirements of its specific manufacturing processes, the packaging of each Albion caulking gun with any foreign component shall list each component of the caulking gun and its country of origin.”

 

Monday, February 26, 2024

Falsely advertising "ghost guns" as legal in NY is actionable

State of N.Y. v. Arm or Ally, LLC, 2024 WL 756474, No. 22-CV-6124 (JMF) (S.D.N.Y. Feb. 23, 2024)

The AG sued sellers of “unfinished frames and receivers” — also known as “80% lowers” or “receiver blanks” —designed to evade restrictions on gun sales. The court explains the allegations:

A “frame” is the core part of a handgun or pistol, and a “receiver” is the core part of a rifle, shotgun, or other long gun. An “unfinished” frame or receiver requires an extra step to be rendered usable: usually the drilling of a few required holes or the filing of excess plastic.

This step is, according to one of the defendants, “ridiculously easy” and can be done by an amateur in under an hour with only basic tools. Some of the defendants make it even easier by shipping their products in a “jig,” a plastic setting that enables a customer to easily convert an unfinished frame or receiver into a firearm. As one defendant said to customers when linking to an instructional video: “There’s no complicated setup because the jig that came with your slide keeps everything properly aligned as you make simple cuts with the included drill bits. Wait, it can’t be that simple? Yes, it is.”

The completed products are allegedly functionally and visually indistinguishable from frames or receivers one could buy at a gun store, but they are effectively untraceable because manufacturers, distributers, and purchasers generally do not comply with the registration and serialization requirements applicable to “firearms,” making them “ghost guns.” Lawmakers in New York City and New York State banned the sale of unfinished frames and receivers in 2020 and 2022, respectively.

During the relevant time period, defendants allegedly marketed and sold unfinished frames and receivers “directly to consumers without following any of the federal or state laws and regulations that apply to the sale of guns, and in particular without conducting a background check, placing a serial number on the gun, or entering it into a federal database so that it can be traced back to its source if used in a crime.” Defendants made at least 100,000 shipments to consumers in New York not registered as federal firearms licensees (FFL), including undercover agents employed by the State. Defendants who had federal firearms licenses had access to, but did not use, the National Instant Criminal Background Check System before selling unfinished frames and receivers to New York consumers, while some defendants weren’t licensed to sell firearms at all.

The advertising bit: Defendants allegedly misled New York customers into “believing that unfinished frames and receivers are legal workarounds to New York’s gun control laws, as well as federal law.” Defendants’ websites claimed, among other things, that unfinished frames and receivers could be sold and purchased with “No FFL Required,” could “be shipped straight to a customer’s home without an FFL,” were “not subject to the same regulations as any other complete firearm[s],” were “completely unregistered and legal,” allowed consumers to “build a completely legal handgun without any ‘government oversight’ ” and to “legally own a firearm that does not have to be ‘registered,’ ” were “[a]pproved” by the ATF, and were considered by the government to be mere “pieces of metal and/or plastic and not guns.”

Among other claims, the AG brought NYGBL Sections 349 and 350 claims against them. Defendants contended that marketing unfinished frames and receivers as “legal” was protected by the First Amendment. It was not.

First, the marketing was commercial speech: “NO FFL Required!” came in the midst of other advertising language, such as “Various colors available,” and “no RED TAPE ... NO Registering ... No Transfer fees ... Ships right to your door.” Labeling unfinished frames and receivers as “ATF Approved” on sales websites or touting “Ban Reversed on All of Our Products!” next to pictures of unfinished frames and receivers constituted proposing a commercial transaction.

I assume because Sections 349 and 350 don’t themselves make the sales illegal, the court didn’t point to the part of Central Hudson that makes clear that ads for unlawful products can simply be banned. But that part also says that false or misleading ads can simply be banned.

And that was sufficiently alleged: Defendants allegedly continued to market unfinished frames and receivers as “legal” to New York consumers even after the State and New York City banned the sale or possession of ghost guns. The complaint plausibly alleged that at least some defendants knowingly evaded federal and state laws. On Halloween Day in 2022, one defendant posted a facetious photo of one of its products dressed as a “ghost gun,” showing that it understood that “its unfinished frame and receiver products have only one use — to make untraceable ghost guns.” Various other defendants allegedly touted the “untraceable” and “unregistered” nature of ghost guns as a major selling point.

a ghost gun--get it?

The defendants mostly argued that their statements were merely “expressions of legal opinion.” The question is whether the customer “understood [the statement] merely as an expression of opinion.” Nat’l Conversion Corp. v. Cedar Bldg. Corp., 23 N.Y.2d 621, 628 (1969) (finding it important that the “tenant’s lawyer was persuaded not to verify” the truth of the landlords’ statements about the law on account of the landlords’ authority and the certainty with which they spoke); see also Lukowsky v. Shalit, 110 A.D.2d 563, 567-68 (1st Dep’t 1985) (“[A] misrepresentation of law is actionable if the representation is made by an individual possessing superior knowledge.”). Defendants marketed their unfinished frames and receivers as “completely” legal “from a position of superior knowledge as established merchants in the gun industry.”

 

US News rating was mere opinion except as to school that intentionally submitted bad information to it

Favell v. Univ. of Southern Cal., 2024 WL 751006, No. CV 23-3389-GW-MARx (C.D. Cal. Jan. 23, 2024)

Plaintiffs alleged that defendants conspired to inflate the US News ranking of USC Rossier School of Education by submitting inaccurate or incomplete data to US News and market the resulting ranking to the public. USC had a business relationship with 2U, an education technology startup, to develop an online Master of Arts in Teaching program. This was the first of USC Rossier’s online degree programs and went live in June 2009; 2U received an undisclosed percentage of the tuition revenue.

US News calculates its education school rankings using eleven criteria, including “student selectivity,” which accounts for 18% of the school’s total score and is comprised of three objective sources of admittance data: (1) the school’s doctoral acceptance rate (6%); (2) mean GRE quantitative scores (6%); and (3) mean GRE verbal scores (6%).

During the relevant period—through 2021—US News didn’t distinguish between in-person and online programs. However, USC submitted student selectivity data only for USC Rossier’s highly selective, in-person Ph.D. program, but not from its less-competitive EdD program (which was offered online after 2015). From the 2009 rankings to the 2010 rankings, USC Rossier’s reported acceptance rate dropped 40 percentage points (from 50.7% to 10.5%), and its ranking rose 16 places (from #38 to #22). US News began publishing a specialty ranking of online master’s degrees in education in 2013, when USC Rosier’s online Master of Arts in Teaching program ranked #44. USC didn’t appear on the list after that.

Defendants allegedly heavily marketed USC Rossier’s rapidly rising ranking to the public to boost enrollment in the online programs. USC allegedly orchestrated this scheme through its submission of false/incomplete data, and then advertised the resulting rankings knowing that they were misleading. 2U allegedly helped “push the rankings out on a much broader scale,” and knew or should have known that the rankings were fraudulently procured. For example, 2U engaged in online advertising to promote USC Rossier’s ranking; it spent more than half of its revenue on program sales and marketing. USC likewise regularly touted USC Rossier’s ranking (and that USC Rossier was “top-ranked”) in press releases, on social media, on the Rossier Website, and in other promotional materials.

Fortunately for 2U, the court thought it was accused only of puffing. The court considered two kinds of statements: (1) statements that USC Rossier was “top-ranked,” and (2) statements which included the specific numerical ranking assigned by US News.

The first category was “textbook puffery.” A claim that a school is “top-ranked” is both “vague [and] highly subjective” and lacks “the kind of detailed or specific factual assertions that are necessary to” test the truth of the claim.

Some ads included a specific numerical US News ranking. For example, USC published a “News Alert” on the Rossier Website celebrating the fact that it “ha[d] just been ranked 22nd in U.S. News and World Report’s 2010 edition of America’s Best Graduate Schools.” On an earlier motion to dismiss, the court had found that this was potentially actionable because the allegations

do not target US News’ selection or weighing of the objective criteria which determine the rankings.... Instead, Plaintiffs claim that Defendants knowingly reported false data to US News. Those underlying data are entirely falsifiable, and the weight that they were to be assigned by US News was predetermined. The fact that such data were considered alongside other subjective considerations to produce a final ranking does not render USC’s promotion of the allegedly fraudulently obtained ranking non-actionable. As Plaintiffs note, if the law were otherwise, “any business that submits false information to get a certification ... could not be held liable because each of those certifications would have at their core a methodology based on an opinion as to which data points should be considered.”

2U argued that, since it didn’t knowingly provide false data, this reasoning didn’t apply to it. Plaintiffs responded that they still weren’t targeting US News’ choices about how to rank, only the underlying false data, and that false advertising is strict liability. The court, I think wrongly, agreed with 2U: to proceed, plaintiffs needed to allege that 2U knew of that falsity or lacked a good faith belief in the accuracy of the rankings. And since rankings and ratings are “almost universally” treated as statements of opinion, “even if [one] could draw any fact-based inferences from [the] rating, such inferences could not be proven false because of the inherently subjective nature of [the] ratings calculation” as long as the party expressing the opinion honestly entertained it and didn’t have superior knowledge or special information.

Although US News is the one with the opinion here, a reasonable consumer could construe defendants’ affirmation of that opinion as implying that the defendants “held some good faith belief in its accuracy (i.e., that it was not fraudulently obtained).” Plaintiffs plausibly pled lack of good faith as to USC, but not as to 2U; alleged negligence was insufficient.

Although there’s no mens rea requirement in California’s consumer protection statutes, that goes to a separate issue:

Although Plaintiffs are correct that the negligent dissemination of a false statement of fact would suffice, Plaintiffs do not allege that 2U’s advertisements were literally false, nor could they. The question here, therefore, is whether 2U’s advertisements are even actionable in the first instance – i.e., are they misleading because they imply any false assertions upon which a reasonable consumer could rely? In most instances involving statements of opinion, the answer to that question will be “no.” In some cases, however, a statement of opinion may “reasonably ‘be interpreted ... as an implied statement’ that the speaker ‘knows facts sufficient to justify him in forming’ the opinion, or that he at least knows no facts ‘incompatible with [the] opinion.’ ” If and only if that implied statement is false – and the speaker does know of undisclosed fact incompatible with the opinion – is the opinion is misleading. In other words, requiring that Plaintiffs allege knowledge of the falsity underlying US News’ opinions in not contradicted by the absence of a mens rea requirement under the statutes ….

Nor did plaintiffs successfully plead joint/secondary liability. Liability under the UCL and CLRA “cannot be predicated on vicarious liability.” It “must be based on [defendant’s] personal ‘participation in the unlawful practices’ and ‘unbridled control’ over the practices that are found to violate [the UCL] or [FAL].” In making this determination, courts have focused on various factors such as whether the defendant: (1) “issued [its] own advertisements” or merely repeated the deceptive statements of another, (2) “controlled the language” or “reviewed or monitored the representations” made by another, or (3) had notice of the violating conduct.

The service agreement between the parties wasn’t enough to make 2U liable. Under the agreement, “USC was required to (1) market the online programs ‘in a manner comparable to’ the in-person programs; (2) ‘consult with [2U] in the development of additional Promotional Strategies’; and (3) provide 2U ‘with access to information pertaining to both classroom-based and online students’ admissions, performance, and post-graduation outcomes.’ ” Although plaintiffs alleged that 2U bought ads, they didn’t allege that 2U actually issued or authored any of the advertisements upon which they relied. The mere fact that under the agreement, USC was required to market the online programs “in a manner comparable to” the in-person programs and “consult with [2U] in the development of additional Promotional Strategies” didn’t show that 2U controlled the statements at issue here. “USC maintained the main Rossier website” where the allegedly misleading statements were posted, and any marketing materials 2U made were “subject to USC’s written approval prior to any use.”

Saturday, February 24, 2024

TMSR Session 3: Private Actors…and their Machines

Introduction: Jeanne Fromer

Private actors pursue their own interests. Focused on Amazon: free riding on gov’t mechanisms, particularly TM law, to communicate to gov’t not to regulate it—product liability, intermediary liability. It’s also cheaper, and Amazon is notoriously cheap. Affecting TM law (as set forth in new paper with Mark McKenna, which is excellent). Can enshrine things like notice & takedown in © law, but that has effects on the ability to assert fair use. When things are happening en masse at a business, just as in the TM system, w/o individualized attention and with a different agenda than the law’s, you can see the law’s protective features be minimized. So big theme: dealing with masses of marks—eBay, domain names are another example—requires new thinking. You have to be wary of private actors’ incentives.

TMs are a proxy for all sorts of info and goodwill, but there are other things that are proxies for that and have always been—selling in a certain marketplace or mall gives information; being the first listing in the Yellow Pages (might be the first nonsense marks!). But we’re seeing more and different proxies for information and goodwill; started w/search engines but seems more prominent now. Amazon is used for more product search than Google. Product reviews: different info is available. AI modeling is also imagining what consumers want to see. We consider that TMs have costs as well as benefits; we should think about the costs as well as benefits of these proxies. TMs may not matter as much with these other proxies, but they’re also noisy proxies. (This reminds me of a classic Posner assertion where he claimed that Trisha Waldron’s photograph, or the location of her stores, would give people information about whether she was Native American.)  People will game them in all sorts of ways that dilute their information, whether that’s product review manipulation or otherwise.

People trust Amazon, not the individual “marks” on the site, including their ability to return products easily; TM’s work is done in the service of Amazon. A variant of separating the mark from the brand; not seeing it in all categories, and we may have a world in which some marks—maybe the 1%--are not divided from brands but the others are. Not that surprising that the luxury marks are not selling on these platforms and are often fighting them; luxury may require keeping the mark with the brand.

Human desire for TMs? We like how they sort us/how we get to identify with them? Even if we live in a world with other sources of info, maybe we still like TMs. How much of that is cultural?

Eric Goldman

SAD scheme and what it tells us: Efficacy/brittleness of our institutions—the real action is below the waterline, with implications for everything else we’re doing. Sealed complaint; ex parte TRO; used to freeze entire accounts and money. TRO is better than a notice & takedown—you get the seller’s entire account down and you get all their money; marketplaces are treating them as risk of being held liable for infringement by that merchant. Gives rights claimants things they couldn’t get from notice & takedown; will only increase until we fix it.

Standard notice doesn’t produce $, but if you can freeze $, they’ll pay you to get it back. Entire law firms tell rightsowners: let me have the right to enforce and I’ll cut you a check every month. Luke Combs outsourced his enforcement; he didn’t say that he was going to stop using the scheme, even though he tried to make the one person who got attention whole.

TRO freeze is usually left in place even after the TRO expires. We can start w/good faith presumption that the court thinks it’s doing something temporary, but it’s not given the nature of the TRO and the marketplace. Mistakes are common in the process and appeals are almost nonexistent. Thus there is little scrutiny and little pushback.

Main players have dubious rights—emojis, smileys—already at the border of what TM should protect. They shouldn’t have the power that marketplaces give them.

Increasingly seeing competitors using SAD scheme to knock them out during peak sales periods. TROs harm consumers.

Lessons for institutional thinking: The law of TM on the streets is very different from what it looks like in appellate cases. Ex parte: the law is whatever the judge will sign. Civil procedure critiques—basic joinder, jurisdiction questions where the rules are clear but are simply not matching what is taking place.

Third-party enumerated rules are also law on the street. Actual adjudication by services is what the law “really” is. Google’s TM policy for keyword ads is law for 99% of all TM disputes out there.

SAD scheme is swallowing up the rest of TM law. About 1000 SAD scheme cases are filed in the past year with 200 defendants each, that’s 200,000 defendants versus about 3000 traditional cases in the past year. It’s 99% of TM law and that will only grow as long as the scheme continues to work.

TM is a terrible subject matter for ex parte proceedings. When the defense doesn’t show up, it’s too error-prone. It’s like with CPB. Riddled with errors. Adjudicators need to hear about risks of overenforcement, overclaiming; defenses—he gets emails from sellers of used or grey market goods snared in a robotic search. The judge isn’t hearing that they’re not counterfeiters.

Other examples: design patent, as Sarah Burstein has written. Putting pictures side by side often isn’t enough. Trade secret: its scope is the whole ball game.

Because of the lower stakes, secretiveness, lack of access to court that Ds have, these cases just don’t get corrected.

Research project: Go and look at ex parte proceedings and whether there were subsequent proceedings and whether the court changed its mind—we could literally identify the error rate.

This needs to be fixed, but next steps are not clear. We haven’t found a good way to intervene in the cases. Even when judges blast specific plaintiffs, they still aren’t taking the corrective action—they aren’t applying their reasoning to other cases or other Ds, they aren’t imposing sufficient penalties to deter.

Mary LaFrance

Focusing on counterfeits doesn’t address other forms of infringement. Birkenstock & Nike left Amazon b/c of counterfeit concerns; that was Amazon’s focus. But private systems have limited ability to process context. High risk of false positives as well as false negatives. Focusing on counterfeiting doesn’t protect consumers from other types of non-genuine goods, which exist on Amazon & eBay—gray goods, expired products, repackaged, mishandled in supply chain. SHOP SAFE wouldn’t change that b/c it is only about counterfeits. We know that automated systems designed to flag infringements get lots of false positives b/c they can’t recognize fair use; may also be false negatives, though that’s not the focus. There probably aren’t other major complications than fair use for © screening, though they can also miss licensed uses; but it’s much harder for TM to determine infringement.

Nongovernmental mechanisms that work well: Dave Fagundes on derby girl names, using norms. But the context is really simple: 1 name, 1 skater.

UDRP: context gets considered.

But you need a full LOC analysis if you really want to ID infringement; instead, automated systems aim for counterfeits. False positives: probably miss descriptive fair use. Platforms may not have incentives to help sellers who are wrongly identified get back online; not willing to face potential contributory liability. Platforms don’t disclose how many invalid notices they get.

Brands can choose to “gate” on Amazon with authorization letters, but how does the consumer know the seller will stick to selling genuine goods? Brick & mortar sellers have more protections in their supply chains as a rule—relations w/distributors over time, though there are exceptions with discount retailers. [I don’t think this is describing the situation of small brick & mortar sellers.] Their potential liability for counterfeits gives them more incentives to be careful, whereas ecommerce platforms don’t face that potential now with third party sellers.

SHOP SAFE would impose contributory liability with [RT: impossible to comply with] safe harbors. Would lead to more false positives. Seller could appeal, but there’s no requirement that be expeditious. And proof that goods aren’t counterfeit could be challenging, b/c there’s no way to have Amazon actually inspect the products; there’s also no requirement that the TM owner cooperate with the process, so even if the seller provides product codes, the TM owner doesn’t have to verify them even if they’re accurate.  SHOP SAFE would also presage a move to require filtering for © to replace the DMCA.

Stacey Dogan: role of human agency in private actions in an increasingly AI-driven world. We think of TMs as informational vessels that allow consumers to make decisions for themselves based on what they’ve learned either personally or through other means about the goods bearing the mark. But as we move increasingly to algorithmically chosen or differentiated tools to be used by third parties to shape our preferences, that notion of TMs as having info value to humans who then exercise their agency and make choices go away. Private actors will act in profit-maximizing ways; TM owners have always done this, and intermediaries have existed, but when they’re doing all this informational intermediation for their own economic incentives, that’s very troubling.

Jeremy Sheff: we have one to one disputes; one to many where a TM owner tries to enforce against a lot of counterfeiters; then many to many disputes like low quality marks flooding the system in ways that raise costs for everyone. Crystals and mud story about this: in many to many, an attractive case for more crystalline, bright line, formalist rules for cancelling registrations. One to one is more attractive for standards. One to many: hard to figure out whether to worry more about over or underenforcement. If we were to try to adapt different rules, we have to ID what category we’re in, and how someone might be allowed to contest their categorization. DMCA has a formalist process: if you flip the switch three times, you end up in federal court. [You’re supposed to do that, but platform policies don’t work that way—they often don’t restore struck material—and neither do infringers, who may just reupload without filing a counternotice.]

Goldman: that assumes that someone can access court enough to push back.

Sheff: yes. If everything’s done by platform w/no recourse, there’s no way to reverse that.

Goldman: the rule of law is in place but is inaccessible.

Sheff: DMCA says counternotify and you’ll end up in federal court at the end of the day; that might be too expensive, but that’s the cost of muddy standards. Nothing like that for TM.

Lemley: Prior rounds of trolling, something that helped: targeting the lawyers for sanctions or even state bar work. Are these the sorts of representations a lawyer can ethically make to a court? State bars don’t have standing requirements and you don’t have to litigate in the case itself. The appetite for doing it might dry up if there are disciplinary consequences for lawyers about joinder, jurisdiction, etc.

RT: On LaFrance’s points about gray, expired goods, etc: I’m pretty sure TM owners are actually happy to argue that all those things qualify as counterfeits. I also don’t think used, grey market, expired/near expired, repackaged goods, mishandled goods are infringing or counterfeit; the problem if any is that they’re falsely advertised.

Fagundes wrote follow-up article suggesting that system was breaking down. Revisiting Roller Derby’s Master Roster, in CREATIVITY WITHOUT LAW (Kate Darling & Adam Perzanowski eds., NYU Press, 2016).

Marketa Trimble: A little worried about following up TRO success rates—in the trade show context, should not compare to online case results. In the trade show context, there’s a lot of information that preexists, so there is some relationship between the two parties. Judges are pretty strict on issuing bonds in those cases. And also there is a robust world of social norms surrounding Ps in these cases—they do have offline reputation to protect; they’re repeat players. Online plaintiffs are less constrained to care about their reputation among sellers.

Even in trade show cases, we were shocked how little the judges knew about the problem of bad TROs. What helped was meeting judges from other countries, so they weren’t just hearing from local lawyers about how the world worked. Protective letters in other countries: ability to alert court in advance about a potential problem with a case. Might seem burdensome but courts love it (they collect fees for it).

Mark McKenna:

Important to recognize that the quality of online shopping has gotten really bad. Enshittification is real. Labeling has gotten much more confusing. Amazon is also decentering brands because you can’t necessarily trust that you’ll get the right thing just by ordering it by name. The motivation to respond to counterfeiting is increasingly understandable even if we have skepticism about methods. What’s the best way to do that? Schedule A was an invisible problem, but why is that happening at the same time as platforms are creating dispute resolution policies? Maybe this is all really about lawyers and not brands. But it’s worth thinking about which levers are being pulled on brand value/what is depressing the informational value of TMs.

Linford: externalization of costs—Amazon just tells you to throw the product away if it’s not what you ordered. Free shipping makes it easy to start & stay with Amazon.

One response is to get off the platform. We’ve externalized to consumers the cost of protecting themselves—reading reviews.

Another cost of AI specifically: energy. Generating one image cost as much as one charge of your phone. Should that weigh into the fair use analysis? [No, for so many reasons, including that the alternative to fair use is licensing.]

Doesn’t handing over right to sue to lawyers create a problem like for Righthaven in ©? Some sort of naked licensing/transfer in gross?

Lisa Ramsey: this might drive us not to grant TMs in inherently valuable terms like LIFEGUARD for clothing.

Could algorithmic practices affect what counts as TM use? Brand name, product source (manufacturer, third party, etc.), description all show up on Amazon. If Amazon adopted a policy of taking down content only when it appeared in brand name or product source and not in description, that could affect how courts think about it too. User names on social media may or may not include trademarks; user bios give more information.

Bill McGeveran: Enshittification is about size, size is about antitrust: you can enshittify when you have market power. Scale has various manifestations.

Burrell: Monopsony is a better description b/c the economic evidence is that lower market concentration is necessary to have a monopsony.

McGeveran: that’s definitely Wal-Mart. Links to larger conversation about antitrust. You can’t tell a full story about causes or potential responses without looping in antitrust concerns.

There are so many different harms, including monopsony, that are getting blurred together. Useful to pull them apart. Having a listing taken down is not the same thing as being kicked off a platform entirely and losing your reputation accrued on the platform [and having your account seized including the money]. Some enshittification is nuisance to consumers, but it’s not the same thing as getting expired medicine that Amazon wouldn’t replace quickly.

Grinvald: Amazon’s disregard of supply chain is part of what’s eroding connection between product and source—signaling to purchaser that it doesn’t matter who the seller is.

Note that shifting to Target by mail won’t help b/c Target/Wal-Mart has also allowed third-party sellers to ship from their site. That’s the Amazon effect!

Discussion of various attempts to game liability for selling defective products—if Amazon is advertising, storing the product in its warehouses and shipping it, why should it matter whether it’s a “third party seller” fulfilled by Amazon?

Mid-Point Discussants: Lisa Ramsey

The problem of anticompetitive takedowns: DMCA, UDRP. Parody accounts: use noncommercial speech s a bright line, whether as defense or otherwise? If we had bright lines in the statute, maybe platforms would be more willing to keep speech up when challenged.

Marketa Trimble

UDRP as potential model for alternative dispute resolution/shaping rules that can be skewed by private ordering. UDRP is fast, cheap, doesn’t require legal representation. But also has flaws that we can learn from. Flattened the TM world. Designed for alphanumerical strings; treats TMs as word marks and ignores other types of TMs. Ignores classes of goods and services, which is incredible. It also ignores national law. Drafted w/the assumption that there is something beyond the written words that can be drawn from to interpret many of its concepts: what is a TM? Is registration required? What is substantial similarity? What is fair use? Many things were left unexplained, and there was no choice of law provision. The idea that you create a new body of law that will on its own create all this case law and interpretation to fill in the blanks is rather naïve. Common law takes centuries. So naturally they started w/national law, and given the dominance of US, Australian, UK panelists, we saw a lot of that influence. Might work well for the US, but might have problems scaling internationally. The panels may give victory to one who had a mark anywhere in the world first.

Need appellate process. The alternative is court—so how do you treat the UDRP in courts? It’s possible that courts turn to their own national laws, as we saw in the Barcelona.com case and others. Filling in the blanks is a big challenge.

Despite all the changes in the world, there is still a lot of reliance on TMs. [Tide is not a “brand” in the pumped-up way that some now are; its primary function is to guarantee and make you feel good about your detergent, not anything else.]

Note that UK IPO won’t register a mark in all non Latin characters on the theory that no British person would be able to understand/remember it—compare to “nonsense marks.”

Just as we needed AirBNB to understand why a hotel is a good idea, Uber to see what taxis are good for, we may need algorithmic recommendations to see what TMs are good for.

Linford: There’s been a presumption that Amazon isn’t working right now for buying a brand I want to buy b/c search results are not reliable. If I put Tide in I don’t necessarily get Tide out. If I’m uncertain about whether I’ll get Tide and how long the search will continue to do that, that’s a problem. MTM v. Amazon bothers him: would like Amazon to do the one thing of telling him “we don’t have MTM.” Danger is that intervention has problematic downstream effects.

We are talking about these brands as if they once had a guarantee—Philip Morris has bought brands that I may have strong affection for, but I don’t have strong affection for Philip Morris. We no longer have strong rules against selling marks. But does that mean we presume too much consistency from brand sellers? If that was already false, the Amazon problem is less acute/might get us to correct our priors in the proper direction.

Lemley: MTM is a Rorschach test to see if people’s attitudes have shifted to see how we’ve been affected by the techlash. Would it be great if you could automate communicating only and all correct information at scale? Sure. But if you just give liability for not doing so, we are likely to do damage, and end up with sites that warn “we don’t have what you want” followed by a list of things you want. That doesn’t solve the problem of whether Amazon is reliable. But MTM is a case of Amazon being perfectly reliable: here are the watches we have available to you, the closest to what you were looking for. A standard higher than that is trouble.

Enshittification is not “there’s stuff on Amazon whose provenance I don’t know.” It is that Amazon got dominant by giving you the products you wanted; once it achieves that position, it has a strong incentive to sell the space between you and the stuff you want. Accurately identifying third party alternatives is not a problem, but making it hard for me to find what I want through the clutter of advertising is a problem. Amazon makes more profit selling ads than it does selling products, which is not great.

Dinwoodie: Lush won against Amazon in the UK, had to label “we don’t have it.”