Wednesday, March 31, 2010

Is a name speech?

White v. Baker, 1:09-cv-00151-WSD (N.D. Ga. Mar. 3, 2010)

This decision, invalidating broad requirements that convicted sex offenders disclose all online identities and passwords to law enforcement agencies, was of primary interest to me because of what it said about anonymous speech. But I note a bit perhaps of broader interest to trademark types, the court’s apparent holding that usernames and passwords are not speech. “The mere reporting of [usernames and passwords] alone is not speech. It does not constitute content and these items are simply the vehicles by which communication can occur on the internet.” Though this is a bit confusing because of the reference to “reporting,” the second sentence quoted seems to indicate that the court thinks that usernames and passwords themselves aren’t speech—the reporting is compelled production of something, and I think what the court’s saying only makes sense if its conclusion is that the items compelled aren’t speech.

As a blanket statement, this doesn’t make much sense to me. While random alphanumeric combinations might not be First Amendment speech, an awful lot of usernames are communicative, even highly expressive (passwords too, but since they’re generally only seen by the human who creates them, there might be a problem calling them “speech” for constitutional purposes, which usually presuppose a message, a speaker, and a recipient). RedStater and BlueStater, for example, tell me a lot about themselves even while they stay pseudonymous. Source identifiers are far more than “vehicles” for communication, the way a mail truck or a bundle of cable might be. Trademark doctrine recognizes this. I’d be surprised if First Amendment law didn’t.

Tuesday, March 30, 2010

I thought the Europeans were more uptight about GIs?

Fucking Hell trademark approved for beer and clothing--but apparently it's not clear that the beer will be produced in the Austrian village of Fucking. Seriously, shouldn't that have been a barrier, even accepting that it's not reprehensible "to use existing place names in a targeted manner (as a reference to the place), merely because this may have an ambiguous meaning in other languages"?

Monday, March 29, 2010

there's always an IP angle

There is plenty of hay to be made over the RNC's expenses at a nightclub featuring simulated bondage and lesbian sex (apparently this is okay as long as big Republican donors are watching), but I was struck by the description of the club at issue as inspired by Eyes Wide Shut, along with some other pop culture references. So, in a permission culture, how many permissions do you need to open a club with cocktail servers (un)dressed like Natalie Portman in Closer, decor inspired by a Gucci purse, and a concept founded on 2o viewings of Eyes Wide Shut?

Saturday, March 27, 2010

Unapproved drugs and consumer understanding

A big issue in the FDA/Lanham Act overlap is the extent to which consumers receive a message of FDA approval simply through seeing that a drug is on the market. Here's a NYT story about a big move in the market for nitroglycerin pills with further anecdotal evidence that the answer is yes:

Leading cardiologists said they were shocked to learn that for years their patients might have been taking crucial heart drugs whose safety and potency had not been vetted by the F.D.A.

“I was taken aback,” said Dr. Ralph G. Brindis, the president of the American College of Cardiology, a professional association representing nearly 26,000 cardiologists in the United States.

Dr. Harlan M. Krumholz, a professor of medicine at the Yale School of Medicine, said it would not have occurred to him that licensed pharmacies might be filling prescriptions with unapproved drugs. “Nobody ever teaches you that in medical school,” he said.

According to the FDA, these drugs have not been grandfathered. What do reasonable doctors/consumers think about grandfathering? This is an especially interesting question as the FDA now disagrees with the manufacturers' interpretation of the rules about these nitroglycerin pills.

Friday, March 26, 2010

Recent reading: beyond fair use

Gideon Parchomovsky & Philip J. Weiser, Beyond Fair Use, 96 Cornell L. Rev. ___ (2011)

This is an interesting piece, one I’m still mulling over, arguing that because fair use is failing in many of the things we want it to do—particularly when the DMCA is taken into account—the law should incentivize content owners to offer some use privileges, initially by letting them define the contours themselves and, if that fails, through mandates that would draw on information about practices developed through voluntary actions.

This is a plausible solution, they suggest, because many copyright owners are already voluntarily relaxing the total control to which some descriptions of copyright aspire. The authors contend that their proposal “holds a great promise of creating a greater level of certainty as to what users are allowed to do with respect to digital content and empowering users to become more sophisticated purchasers of digital content. By contrast, demand side solutions, by and large, relegate[] users to a life of uncertainty as they require them to determine whether their planned use falls within the aegis of the current fair use doctrine—a near impossible task given the vagueness of the fair use doctrine.”

I found the article long on descriptions of models for allowing limited personal copying, notably Windows Media DRM, and short on evidence of market success. When was the last time (or, heck, the first time) you bought a WM license from MediaKey? Me neither. And I’ve tried a lot of new-media experiments—I paid for Stephen King’s The Plant; I possess DRM-protected pdf files, though that was a mistake.

I’m not saying such models won’t work for listeners/readers/viewers when integrated with sufficiently attractive tech and content (e.g., the Kindle). I’m saying that this creates a bewildering array of silos of different sets of permissions. Matters are even worse with the authors’ examples of permissive remix—they offer a handful of idiosyncratic examples, some of which aren’t even operational (the AP has “promised” to establish a policy indicating its opinion on how many words of an AP story one may quote without paying the AP—I’m not holding my breath) and few of which represent much more than an attempted contraction of fair use by setting rules for which fair uses the copyright owner is willing to permit. That is not how user privileges, especially those for uses beyond private copying, should (or can) work.

xkcd breaks it down:

I think the problem of content owner-defined rights may be connected to the numerus clausus principle as ably elucidated by Thomas Merrill and Henry Smith: we limit types of property more than we limit the customizability of contracts, so that people can more easily tell what they’re dealing with when they encounter a piece of property. Fair use can be hard to predict, yes, but it can be a lot easier than parsing out a contract—and once you learn the fair use factors, you can make a judgment call about every fair use situation you encounter, instead of having to learn a new set of permissions every time. This is why I think fair use principles focused on practice communities offer a really promising development. And it’s not as if licenses solve the interpretation problems of fair use; even setting problems of remix aside, which I’m unwilling to do, consider the massive uncertainty surrounding the definition of “noncommercial” in a Creative Commons license. The authors are well aware of the need for simple, clear rules, unlike the average privacy policy. I just doubt that multiple private actors will do better than fair use at providing such rules (with the exception of "you can make as many copies of this as you yourself have devices").

Final note: the DMCA is important to their argument, yet the authors don’t propose anything to cut back on the powers granted by the DMCA. Even if content owners grant permission to circumvent technological measures, you’d still need fancy footwork to allow people to provide the devices necessary to take advantage of such permission—and content owners are unlikely to provide the relevant tools themselves, preferring to provide specially chosen bits and pieces when they allow some remix. At a minimum, we’d need some DMCA exemptions focused on taking advantage of content owner authorization.

Bada bing

Microsoft's Bing has a product placement deal with The Vampire Diaries. Last night, that deal led to a character saying, "I binged it." Funny how that destroyed suspension of disbelief more than the presence of vampire diaries. But the real point is that trademark owners are now paying for (quasi-)naturalistic uses of their marks that traditional trademark lawyers sent threat letters over. And as I've said before, this makes sense in a world in which consumers can readily distinguish between the mark and the verb use, and in which "owning" the category is very valuable for the brand.

Wednesday, March 24, 2010

Impersonation neither infringement nor false advertising

Pitney Bowes, Inc. v. ITS Mailing Systems, Inc., 2010 WL 1005146 (E.D. Pa.)

The parties compete in the business of mailing solutions. Pitney alleged that ITS called Pitney’s customer service centers and posed as various clients in order to procure confidential account information, then used that information to solicit Pitney’s clients and undercut Pitney’s bids. ITS employees allegedly would claim to have been newly hired by a client and unable to find relevant documents, and would ask for information such as when the lease for the client’s postage meter was due to expire, the amount of lease payments, the cost of early termination of a lease, and so on. Eventually, Pitney caught on when supposedly different clients used the same phone number and the same voice.

Pitney sued for common law fraud, unfair competition, tortious interference with contractual relations, conspiracy, RICO violations, and Lanham Act violations. Here, the court dismissed the Lanham Act claims. Under §43(a)(1)(A), the trademark claims failed because Pitney couldn’t allege a sufficient ownership interest in any of the marks or names used by ITS. Even if it’s unlawful for one person to falsely represent his association with another in connection with goods or services, Pitney can’t complain because it neither uses nor owns the marks at issue. Query: could the clients maintain a trademark action? Hard to see how this could harm the trademark owner's goodwill, or how it otherwise implicates the policies of trademark.

As for §43(a)(1)(B), the problem was “commercial advertising or promotion.” These were communications intended to obtain information about Pitney’s clients, nothing like communications designed to influence customers to buy ITS’s products; nor were the communications sufficiently disseminated to the relevant purchasing public, as required. The statements at issue were simply misrepresentations of ITS employees’ true identity used to obtain confidential information. That might be actionable, but not under the Lanham Act. (Why wasn’t this misappropriation of trade secrets? It can’t just be that the clients also knew the details of the contracts, can it?)

Happy Ada Lovelace day!

I'll let the OTW explain:
Happy Ada Lovelace Day!

The OTW is an overwhelmingly female organization whose major projects include the design and development of the Archive Of Our Own, which may be the largest, majority female open source software project on the web. ... Our staff is made up largely of female coders, sysadmins, webmasters, designers, and others of considerable technical skill.

Thoughts from committees & links roundup beneath the cut!

A word from our Board:

The OTW Board - which has never been in the same room at the same time; our corporate headquarters are digital - celebrates all our technical women today and every day. We are proud to have a big, healthy open source project – the Archive of Our Own/AO3 – which is designed, coded, documented, supported, and maintained almost entirely by women (and that's not even counting our fabulous sysadmins and webmasters, and the teams that work with MediaWiki, OJS, CiviCRM…)

A few relevant statistics:

Number of AO3 users: 6,038.

Number of A03 fandoms: 5,485.

Number of fanworks: 67, 858.

Lines of code in Archive of Our Own (2007): 0.

Lines of code in Archive of Our Own (2010): 73, 757.

Estimated AO3 project cost: (from ): $989,259.

Value of our amazing team: Priceless.

Tuesday, March 23, 2010

Is shrinkwrap around a functional design thereby functional?

Luv N' Care, Ltd. v. Walgreen Co., --- F.Supp.2d ----, 2010 WL 996515 (S.D.N.Y.)

Plaintiffs make NUBY baby products. They alleged that Walgreens sold knockoff copies of two sippy cups, perpetrating a bait and switch by shelving the lookalikes next to NUBY products and below signs identifying them as NUBY products. Walgreens then stopped selling NUBY products and continued to sell the allegedly infringing sippy cups. (One consumer testified that she was tricked into purchasing the non-NUBY sippy cups.)

The court found material issues of fact on protectability of the alleged trade dress, secondary meaning, nonfunctionality, and likely confusion. The presence of a house mark, among other things, would allow reasonable triers of fact to differ on likely confusion. Likewise, though all the elements of the sippy cups were in use on other products, there were material issues about whether the combination of elements was itself functional and about the relevance of various utility patents. The product packaging trade dress claim was in some respects dependent on the product design trade dress claim, because the packaging was plastic in the shape of the included sippy cup. The court therefore erred on the side of caution, as instructed by Wal-Mart, and required a showing of secondary meaning for purposes of the summary judgment motion. On functionality, however, the court found extra issues with regard to functionality: perhaps product design and packaging merged, but a jury might find that there are alternate ways that the packaging, including graphics and lettering, could have been designed, especially given that Nuby previously used large cardboard boxes instead of individual shrinkwrap. (I bet there are good cost/sales-related functionality arguments for switching from box to shrinkwrap, though.)

The NY unfair competition cause of action does not always require a showing of secondary meaning in cases of deliberate, confusing use of nonfunctional trade dress by a competitor. (Note: especially given Wal-Mart, Traffix, Dastar, and the like, I would find NY’s law on this point vulnerable to conflict preemption: if federal law allows deliberate copying of an unpatented article, then, absent some special circumstance like hot news, state law shouldn’t be able to reverse that policy judgment. Then again, I’m not sure how there could be confusion in the absence of secondary meaning.) Material issues of Walgreens’ bad faith and likely confusion remained. The court did, however, dismiss plaintiff’s New York statutory consumer protection claim; ordinary trademark infringement doesn’t cause the special harm to the public interest required for a NYGBL §349 claim.

June advertising law conference

June 15-16, I'm going to be speaking at a conference in NYC, Litigating & Resolving Advertising Disputes. The general counsels for Verizon and Weight Watchers will be giving keynotes, which ought to be interesting, and panels are scheduled on the Lanham Act, NAD, TV network challenges, and so on. Readers of this blog who are interested in attending can get a $200 discount by using code 660L10.S at registration.

Monday, March 22, 2010

Today's right of publicity question

The Doggie Gaga project. Given Gaga's intense relationship with product placement, can we not imagine her imprimatur on this? (Of course we can; of course that shouldn't make a difference to whether it requires authorization.)

Burn notice: dueling sunscreen ads found false

Schering-Plough Healthcare Products, Inc. v. Neutrogena Corp., --- F.Supp.2d ----, 2010 WL 960635 (D. Del.)

Earlier ruling. Plaintiff (Coppertone for convenience) makes Coppertone Sport sunscreen, introduced in 1992, and defendant makes Neutrogena Ultimate Sport sunscreen, introduced in late 2008 and first advertised in 2009. There were false advertising claims and counterclaims; both prevailed in part.

The parties disagreed about whether a sunscreen’s ability to protect against UVA rays is subsumed within the SPF measurement, which definitely measures UVB protection. Another measurement, protection factor A (PFA), can be used to quantify protection against UVA rays.

Coppertone challenged a Neutrogena Ultimate Sport ad, “best line of sport sun protection,” claiming superiority based on “average” combined SPF and UVA scores across the parties’ sport product lines, which compared Neutrogena and Coppertone Sport with the phrase “Best average UVA/UVB protection vs. leading sport lines” next to a chart.

The big problem, in my opinion, was that Coppertone’s line included SPF 15 to SPF 70 products, whereas Neutrogena’s line began at SPF 55, leading to very different averages. The other problems were, Coppertone alleged, that Neutrogena double-counted UVA, since it was already measured by the PFA test, and because Neutrogena’s PFA testing wasn’t sufficient to support the “best line of sun protection” claim.

The court found that the bar graphs constituted an implied establishment claim: a signal that numerical values for UVA and SPF were “derived from some manner of product testing.” Neither party presented the court with enough evidence to analyze Neutrogena’s PFA testing, so the court found that Coppertone hadn’t met its burden to show that the tests were inappropriate/unreliable. Thus, notwithstanding “obvious deficiencies” in Neutrogena’s substantiation, this claim failed. This result is a good reminder that even when an establishment claim is challenged, the plaintiff has the burden of proof on something: to cast sufficient doubt on the quality or relevance of defendant’s studies.

On the motion for preliminary injunction, the court had refused to find literal falsity for the differentials between the combined SPF and UVA bars. Coppertone offers products from SPF 15-SPF 70, average 38.5; Neutrogena offers SPF 55-SPF 70, average 64; and the difference across the lines is 40%. Because the SPF portion of the bars in the ad differed by about 40%, there was no literal falsehood. Likewise, the PFA scores across the entire product lines were approximately correct, showing a near 100% difference in relative heights based on a 30.2 average for Neutrogena and 16.7 for Coppertone.

However, the court found that the bar graph was misleading in other ways. First, using UVA and SPF as separate measures of protection. UVA is a kind of ultraviolet light, not a measurement of skin protection. Neutrogena argued that there was nothing false about using PFA scores to make UVA claims, but Neutrogena didn’t use PFA scores to draw its comparison. Instead, it stacked a UVA value on top of a SPF value. On the motion for preliminary injunction, the court had found that this was an ambiguous message, not unambigously double-counting.

After trial, the court found literal falsity. Due to the predominance of UVB in SPF measurements, SPF is commonly understood to refer to UVB, and the FDA has issued a statement to this effect. But at least 10% of SPF correlates to UVA. The ad is literally false because it provides a separate UVA quantification which is “neither an accurate description of protection nor completely independent of the SPF value.” It conveys, by using different labels, that UVA and SPF are different measurements, and this is “indisputably not so.” Though Coppertone and Neutrogena were both treated the same, the “absence of bias” caused by the double-counting doesn’t eliminate the falsity.

The core of the implied falsity argument was that consumers perceive the ad (which was labeled with brand names, not SPF numbers) to reflect an “apples-to-apples comparison of similarly-labeled sunblocks”—Neutrogena SPF 70k to Coppertone SPF 70k, for example, while in fact the comparison is an average and the number of products compared isn’t disclosed. (I would have been willing to find this message conveyed by necessary implication. It doesn’t make sense to compare one brand’s SPF 35 product to another’s SPF 20—even accepting, as a commenter on my earlier post pointed out, that above a certain level all sunblocks provide the same protection; in fact that position makes the ad even more dubious.)

But because the court saw this message as one conveyed only by implication, Coppertone had to prove consumer reception. Coppertone offered a survey conducted by Gary Ford, who concluded that “consumers perceive that they can get greater protection ... and/or durability from Neutrogena than Coppertone after seeing [the Best line ad].” He found a 24% difference between test and control groups. But his testimony was brief and summary-level, and Coppertone redacted the details, apparently in response to Neutrogena’s pretrial objection; thus the court found that Coppertone hadn’t met its burden to prove actual deception.

The counterclaim dealt with a Coppertone Sport ad showing athletes running in the ocean, applying sunscreen, then running/swimming/biking. The voiceover says, “You give your sport 100%--so should your sunscreen. Coppertone Sport® spray and Neutrogena spray provide the same amount of sun protection. Coppertone Sport® gives you better coverage. Waterproof, sweatproof--Coppertone Sport®--100%.” “Better coverage” accompanies an image in which a Coppertone spray user is depicted covered by blue shading, while a Neutrogena spray user is covered by slightly lighter blue shading. Text at the bottom says, “Simulated coverage study results. Among sprays with comparable SPF.” One version of the ad also had a visual where the Coppertone user was labeled “100% sunscreen formula” and the Neutrogena user “28% chemical propellant,” with a voiceover to the same effect.

The court agreed that “better coverage” was an establishment claim not supported by sufficiently reliable tests. To date, Coppertone hasn’t performed an in vivo coverage study on either spray featured in the ad, though it has tested other non-sport-branded products. In that earlier test, Coppertone Ultra-Guard outperformed Neutrogena Fresh Cooling Mist only in density, and there was testimony that density alone provides better coverage, as well as corroborating in vitro evidence.

The court disapproved of running a head-to-head comparative ad without testing the actual products. Coppertone argued that its in vivo study showed that its method of delivery provided better coverage than Neutrogena’s aerosol, regardless of formulation. The court found this conclusion “too sweeping” to be based on a comparison of just one of each party’s products. Neutrogena’s sport spray has a different formulation and different orifice size for its aerosol can than its Fresh Cooling Mist. A J&J scientist (Neutrogena’s parent company) testified that these specific formulation differences made extrapolation of test results impossible, and a consultant with experience in aerosol design made the same point about ingredients and orifice design.

Though they didn’t detail how these differences affected performance or substantiate the claim with scientific evidence, Coppertone’s witness admitted that they might produce different results in vivo. Coppertone’s director of packaging said that there were “too many other factors” to “categorically” state that a small orifice results in a particular spray. The court found this convincing as comporting with the “generally-accepted scientific principle that compositions of different molecular weights tend to have different properties. In this context, some differences in the formed aerosol droplets and their trajectories appear to be more likely than not.”

Even testing the right products, the in vivo test was insufficiently reliable to support a coverage claim. The test had no specific goals for substantiation; it looked at density, evenness and thoroughness, and Coppertone chose density after the fact when that was where Coppertone prevailed. But density doesn’t equal “coverage.” Ultimately, Coppertone used a non-standard protocol (there is no standard one) with no particular goal in mind, and the analysis “was driven by the results obtained by the tests.” (In a footnote, the court stated that it didn’t want to discourage novel protocols; the issue here was not novelty but overall unreliability, “a portion of which” is attributable to the lack of protocol or cited industry support for Coppertone’s methods.)

Given the differences between the products tested and the products in the ad, there was no “true scientific basis” for attributing the Neutrogena Fresh Cooling Mist data to Neutrogena Ultimate Sport. Coppertone “elected not to test the competitive product at the heart of its advertisement and, instead, superimposed data from an in vivo test of another competitive product into its commercial. This type of unsubstantiated ‘scientific’ claim is precisely what the Lanham Act seeks to prevent.”

The court also addressed the “28% chemical propellant” statement in one version of the ad. The court found that the “ultimate import” of the ad was that the Neutrogena sunscreen “as applied on the athlete” was 28% propellant. This was undisputedly false: though the can is 28% propellant by weight, that primarily evaporates when the aerosol is used. The ad “contrasts two sunscreens, not two cans or delivery methods.” The visual—overlaying the words “Neutrogena” and “28% propellant” on the bare chest of an athlete—reinforces the message that 28% is applied to the body. There was no qualifying statement or other clarifying language. This was a literally false message, unambiguously conveyed by necessary implication.

In conclusion, the court commented that these ads were “essentially meaningless and, therefore, of no help to the consuming public who, finally, is paying attention to the health concerns presented by overexposure to the sun.” The consumer was the real loser.

Saturday, March 20, 2010

What permission culture really looks like

Following up on some newspaper representatives' calls for a complete "permission culture," here's a story about a well-known French business suing a novelist for setting a fictional thriller at the business. "'No one can have anything to do with or talk about the Marché Saint Pierre without the authorisation of the owner and the director,' [the store's director] said. 'It's defamation.'" What I most like is "the owner and the director." Why not the employees too? Also the people who have bought stuff from there in the past? Perhaps also the government agency that licenses the business? What, I wonder, is the line that the AP etc. draw between their claims and this one?

Friday, March 19, 2010

They like our style

My favorite bit from the Google summary judgment motion in the Viacom case: Viacom made promotional video "[d]eliberately made to look like it was cut together by a 16 year old" (Viacom's own characterization).

This is part of Google's basic argument that, if Viacom can't tell what's unauthorized, YouTube certainly can't. But I like it because it indicates that Viacom wasn't just interested in taking advantage of new marketing channels, but also of new styles bubbling up from creative subcultures.

Thursday, March 11, 2010

230 victory for AdWords

Jurin v. Google Inc., No. 2:09-cv-03065-MCE-KJM, E.D. Cal. (filed 3/1/2010)

Jurin sued because Google’s AdWords program suggested “Styrotrim,” his mark for building material, for certain ads. Allegedly, competitors’ ads may appear higher than Jurin’s own site on a result page. He argued that this constituted a form of bait and switch advertising.

Google won dismissal of Jurin’s claims. On his Lanham Act claims, the court concluded that Google had not represented in any way that it produced Styrotrim products. If Jurin was arguing that Google helped facilitate confusion, that was a “highly attenuated” argument. (And would require a contributory infringement allegation; such claims are very hard to win in trademark cases.) Even accepting the allegation that a “Sponsored link” might cause confusion, the court found it “hardly likely” that confusion could occur with several different sponsored links on each page—a consumer wouldn’t believe that each one was the true producer or origin of Styrotrim. Not all courts would dismiss this claim at the pleading stage! It depends on what one thinks the reasonable consumer might conclude, and judicial intuitions on this differ. I think this is the right result, but it also highlights the way that Twombly and Iqbal require plaintiffs to speak to the judge’s prior understanding of the world.

On the false advertising claim, the court found that Jurin had failed to plead that he was in competition with Google, even if Google provides advertising support for others in Jurin’s industry.

Google then used §230 to knock out the remaining non-IP claims (interesting that the court didn’t address §230’s application to §43(a)(1)(B)—I didn’t read the papers, so I don’t know whether Google argued it). Jurin argued that Google’s provision of a keyword suggestion tool meant that Google participated in creating the content of ads. The court disagreed. Google provides “space” and a service. Suggesting keywords merely “helps third parties to refine their content,” which is “tantamount” to the editorial process protected by the CDA. Google provides a neutral tool that only provides options that advertisers could adopt or reject at their discretion, which makes it immune under §230. (Compare the Quiznos analysis—they’re fundamentally incompatible, I think.) The court ended by commenting that AdWords furthers the purpose of the CDA, to encourage “open, robust, and creative use of the internet.” AdWords simply allows competitors “to post their digital fliers where they might be most readily received in the cyber-marketplace.”

"Men tend to send in song lyrics to express their stories"

The ever-fascinating cryptoxin pointed me to this 2008 National Review Online story about the antiabortion strategy of arguing that abortion harms women. One site encourages people to send in their abortion stories, and its creator reports that men use song lyrics to speak about their own experiences. This is consistent with my argument in Copy This Essay that copying can be a means of self-expression and of political speech, and it illustrates the ways in which pop culture is itself political, providing means of understanding and articulating the self in society.

Lyrics, like other forms of expression, are readily repurposed for speakers' personal meanings. Authorial control is in many ways the opposite of infant baptism. (Attributed to many, many wits: asked if he believes in infant baptism, the wit replies, "Believe in it? I've seen it!")

Organization for Transformative Works membership drive

The OTW, on whose board I sit, is having a fundraising drive! Your donation supports noncommercial transformative works. We've had a busy year, what with servers of our own to host the Archive of Our Own (one of the largest mostly-female open source projects extant), testimony before the Copyright Office, an amicus brief with the American Library Association and others in the pending Salinger case, and many more exciting endeavors. If you can, please donate!
9-15 March 2010 OTW Membership Drive

Wednesday, March 10, 2010

More on press releases as subject to the Lanham Act

Star-Brite Distributing, Inc. v. Kop-Coat, Inc., 2010 WL 750353 (S.D. Fla.)

What began as a traditional advertising dispute, resulting in an injunction against certain Kop-Coat ads for its ethanol gas treatment, has now evolved into battles over press releases. The key issue was whether Star-Brite’s press release constituted “commercial advertising and promotion” subject to the Lanham Act; the court held that they could. The press release was commercial speech promoting ethanol fuel additives in general and attacking Star-Brite’s competitor’s product. The release was intended to influence consumers to buy one product instead of the other. Kop-Coat alleged that the press release was placed in marine industry and online trade publication websites, and thus sufficiently disseminated to retailers who buy the products.

Second, did the press release misrepresent the “nature, characteristics, or qualities” of Kop-Coat’s product, or Kop-Coat’s “commercial activities,” as also required by the Lanham Act? The press release didn’t say anything about the product, but it did allegedly misrepresent Kop-Coat’s commercial activities, specifically its ad campaign. (How does this interact with materiality, I wonder?)

Orange Book status is formidable Lanham Act shield

Wyeth v. Sun Pharmaceutical Indus., Ltd., 2010 WL 746394 (E.D. Mich.)

These days, new drugs require a New Drug Application (NDA). Drugs subject to the NDA requirement are sometimes called “pioneer drugs.” But generic drugs get to file an Abbreviated NDA, or ANDA, requiring that the active ingredients have been previously approved. In addition, an ANDA requires bioequivalence and identical labeling, and must not infringe a patent. (Here, Wyeth is currently contesting the validity of Sun’s patent for its generic product.) The FDA has to approve an ANDA for a generic with a single active ingredient unless it finds that the information submitted is insufficient to show that the active ingredient is the same as that of the previously approved drug. The FDA produces the Orange Book, which shows all pioneer drugs and their approved generic equivalents, updated monthly. A generic listed in the Orange Book may be prescribed as a substitute for a costlier pioneer.

Wyeth makes Protonix, a prescription drug that treats various gastro-intestinal disorders by inhibiting the secretion of gastric acid. Its active ingredient is pantoprazole sodium sesquihydrate (“sesquihydrate”). Its NDA was approved in 2000, and it was quite successful, with annual sales approaching $2 billion prior to generic availability. (Wyeth now makes its own generic version.)

Sun makes a generic version of Protonix. Its ANDA was approved in 2007. The Orange Book lists it as an AB-rated generic substitute, meaning that Sun provided adequate studies to establish bioavailability and bioequivalence. But Wyeth alleged that the active ingredient is not sesquihydrate but rather pantoprazole sodium monohydrate (“monohydrate”), a polymorph of sesquihydrate. This means different crystal forms with potentially different properties, including melting point, stability, dissolution, and bioavailability.

Sun argued FDA preclusion; the FDA is currently investigating Wyeth’s allegations. Somewhat puzzlingly, the court stated that “[c]ourts have acknowledged the inherent conflict between the FDA’s exclusive jurisdiction over prescription drug regulation and the Lanham Act’s protection of patents and trademarks involved in prescription drug manufacturing.” The problem is neither patents (not the Lanham Act’s subject matter) nor trademarks (usually, anyway, though I was involved in a trademark case where the defendant leveraged FDA approval of its name into a factor favoring a finding of no likely confusion) but false advertising. The court then wobbled back onto course, noting that the issue is whether a false advertising claim can be proved without using FDA regulations or with reference at most to an unambiguous FDA definition.

The court held that Wyeth was asking it to hold either that the FDA erred/was misled in approving the ANDA, or that Sun received approval to market sesquihydrate, but instead sells a nonapproved monohydrate. The first position is precluded by the FDCA. The second is an extremely serious allegation, potentially subjecting Sun to severe criminal and civil liability. But even if that were proved, there’s no private right of action under the FDCA. (But that’s not the end of it: if there are unambiguous definitions of sesquihydrate and monohydrate, then determining what’s in Sun’s drug doesn’t require interpreting any FDA regulations, only comparing the drug to the definitions. If the claim is that Sun purports to sell sesquihydrate but actually sells monohydrate, that’s a pretty classic false advertising claim, albeit a serious one.)

The court concluded that even if the claims weren’t precluded, the matter should be left to the FDA’s expertise. Wyeth argued that all it was asking was that, just as a seller of orange juice can’t claim “100% orange juice” and add additional ingredients, a pharmaco can’t label a product with a different active ingredient than what it actually contains. But in previous cases, the FDA hadn’t approved or taken other action regarding the products at issue—it never tested the orange juice. So private parties were free to challenge unsubstantiated remarks about the quality or content of competitors’ products. But where a Lanham Act claim requires more than comparing a product to a stated regulation, it encroaches on the FDA’s jurisdiction. The court then cited cases involving interpreting regulations to figure out, for example, whether an ingredient ought to be labeled “active.”

The FDA defines polymorphs and notes that “polymorphic forms of a drug substance ... can have different chemical and physical properties that can have a direct effect on drug product stability, dissolution, and bioavailability, which ultimately can affect the quality, safety, and efficacy of the drug product.” But the same FDA document says that “differences in drug substance polymorphic forms do not render drug substances different active ingredients for the purposes of ANDA approvals within the meaning of the Act and FDA regulations.” So to resolve the claims here, the court would have to interpret FDA regulations on polymorph equivalency. Moreover, ruling in Wyeth’s favor would conflict with the FDA’s approval of Sun’s product. Thus, deference was justified.

Similar problems faced Wyeth’s challenge to Sun’s website statements that its product was a generic equivalent of Protonix. When a defendant has “the backing of the FDA” confirming its equivalency representations, a Lanham Act claim is inappropriate—past cases have gone forward only because the drugs at issue didn’t have ANDAs and Orange Book status, and so there was no FDA-set way to measure equivalency.

The court did conclude that, if the FDA confirms Wyeth’s suspicions, Wyeth might be able to sustain a Lanham Act claim. Thus, the complaint was dismissed without prejudice.

Tuesday, March 09, 2010

Formula won: post-verdict rulings in PBM v. Mead Johnson

A couple of clean-up rulings from this case, which has already produced a number of written opinions.

PBM Products, LLC v. Mead Johnson & Co., 2010 WL 723739 (E.D. Va.)

After the jury found in PBM’s favor on its false advertising claims, Mead Johnson moved for a new trial or remittitur and PBM moved for enhanced damages and attorneys’ fees. The court left the award where it was. The jury awarded $13.5 million, an amount lower than PBM’s expert’s estimate for PBM’s lost profits and Mead Johnson’s unjust enrichment, each of which he put at $30-60 million. The court rejected Mead Johnson’s criticisms of PBM’s damages expert, even though Mead Johnson argued that there has only ever been one Lanham Act case with a higher award, $19.25 million based on allegations of $544 million in damages. I’m not sure why that’s relevant, and neither was the court. The verdict was not against the clear weight of the evidence, based on false evidence, or a miscarriage of justice. Nor was the verdict so excessive as to shock the conscience, justifying remittitur under Rule 59.

There might be some interplay between Rule 59 and 15 U.S.C. § 1117(a), which states that if, with respect to an award based on defendant’s profits, the court finds the award either inadequate or excessive, the court may in its discretion enter judgment for such sum as the court finds just. But an award based on plaintiff’s damages permits the court to increase the amount up to three times, but not to reduce the amount. So it’s easier for a court to reduce a profits-based award under the Lanham Act than under Rule 59. “The trick then is to know when an award was based on plaintiff’s damages or on defendant’s profits.” The verdict form didn’t specify, and the jury was offered both figures.

But the court found that it didn’t matter, because neither a reduction nor an increase was warranted either under Rule 59 or under §1117(a). The bottom line was that Mead Johnson failed to carry its heavy burden. The expert used a reliable regression analysis based on relevant and appropriate data, even if others would have done it differently. And Mead Johnson’s valid, nonfatal criticisms might have been reflected in the limited size of the jury’s award.

As for size, the jury heard sufficient testimony to conclude that PBM was significantly harmed, including testimony on PBM’s lost profits around the time of the false advertising, the lingering effects of false advertising in the infant formula market, and Mead Johnson’s reputation as an infant formula leader that would give its words weight.

PBM also failed in its motion for enhanced damages and attorneys’ fees, despite its arguments that Mead Johnson’s multiple encounters with PBM and the Lanham Act over the past few years justified an enhanced award to punish its willfulness. PBM argued that Mead Johnson had no real defense to the literal falsity of its ads. Among other things, Mead Johnson’s witnesses tried to claim that its ad’s reference to not “cutting back on nutrition” was not comparative vs. store brand formula, but merely a statement that mothers shouldn’t starve their babies. Moreover, given the importance to families of proper infant nutrition, the false claims did significant economic harm to consumers, which also represents lasting harm to PBM’s goodwill.

Deterring future misconduct, as well as compensating plaintiffs for actual injuries where harm is not speculative but can’t be precisely calculated, can justify enhanced damages under §1117(a). But here the damages weren’t undercounted because of insufficient information or any other reason. Mead Johnson was aggressive, but not intentional in its falsity. The award shouldn’t be punitive.

In the Fourth Circuit, a fee award is only available in the exceptional case where a prevailing plaintiff proves bad faith (though the court noted a lack of parallelism in the rules for defendants and suggested that this was inconsistent with Fogerty v. Fantasy, though still followed in the circuit). PBM didn’t show clear and convincing evidence, as required, that Mead Johnson acted in bad faith or willfully. PBM also failed in its attempt to get fees as a prevailing defendant, even though Mead Johnson’s Lanham Act counterclaim (see below) was unsuccessful—Mead Johnson’s claim survived Rule 56 but not Rule 50, making it an average case (though a case that survives summary judgment could still be found exceptional).

PBM Products, LLC v. Mead Johnson & Co., 2010 WL 723750 (E.D. Va.)

Mead Johnson challenged PBM’s “Compare to Enfamil” claim, alleging that it communicated the false messages that tests had shown equivalence and that the parties’ formulas were identical. Though the court had rejected PBM’s motion for summary judgment, after the close of testimony it granted judgment as a matter of law in PBM’s favor on the counterclaim.

First, the statute of limitations/laches barred Mead Johnson’s claims as to PBM’s “routine” and gentle formulas. Because the Lanham Act has no statute of limitations, courts borrow. The analogous state period was Virginia’s action for fraud, with a 2-year limitations period. Mead Johnson counterclaimed on May 18, 2009. PBM first made the “compare to Enfamil Lipil” claim no later than 2003 for its routine product, and in 2006 for its gentle product. As to post-May 18, 2007 claims, PBM argued laches: (1) lack of diligence by Mead Johnson and (2) resulting prejudice to PBM. A filing outside the statute of limitations leads courts to presume laches. Given that Mead Johnson knew about the “compare to” claim since at least 2006 when the parties litigated over trade dres containing the claim, it delayed unreasonably in bringing its false advertising claim, resulting in prejudice to PBM because PBM continued to use the ads on all its formulas in over a dozen retail stores for years.

Moreover, the court held that the Lanham Act claim failed on the merits.

Initially, only Mead Johnson’s claim about “compare to” on PBM’s added rice starch formula remained before the court. Mead Johnson didn’t claim literal falsity. It relied on surveys on what consumers understood about “compare to.” The open-ended question asked “Based on [the ‘compare to’] phrase, what if anything do you believe about this product in comparison to Enfamil AR LIPIL?” The close-ended question stated “Based on [the ‘compare to’] phrase, which of the following do you believe?” and the potential answer choices were (1) the formulas had the same ingredients; (2) the formulas had different ingredients; or (3) don't know or none of the above. The survey expert concluded that a substantial portion of respondents interpreted “compare to” as “same.”

The problem is that “same” was never defined in the survey. The ingredients of the parties’ products are very similar, but not identical, and the nutritional value of the products is likely nearly the same. So the critical question is whether consumers understood “compare to” to mean identicality, as opposed to some other gradation. But the survey never used the word “identical” nor probed on the meaning of “same.” Respondents who thought that 95% of the ingredients were the same might have chosen to say “same.” Without a good survey, the falsity claims failed, both with respect to ingredients and with respect to whether the formulas had “equivalent” benefits.

What about the alleged implication that “compare to” means that the products have been tested against each other? The survey expert testified that consumers received this message, but PBM’s marketing director testified that the products have been tested against each other. Without further evidence of what type of tests consumers expected, Mead Johnson’s claim failed for want of falsity.

Finally, Mead Johnson alleged that PBM’s statement on its label that its gentle formula contains “partially broken down whey protein” was false. Even assuming the survey showed that consumers believe that this statement implies that all or most of the whey protein in the product is partially broken down, or that PBM has the same amount of partially broken down whey protein as Mead Johnson’s gentle formula, that wasn’t enough. There was no scientific proof that the products differed in digestibility for infants. So the implied message couldn’t be proven true or false. (This is, I think, a judgment about materiality, which seems reasonable: what the partially broken down whey protein claim really means is that partially broken down protein is more digestible for infants; otherwise there’d be no point in making the claim; if there’s no ultimate difference in digestibility, then any differences in composition can’t be material.) Moreover, Mead Johnson couldn’t prove any damages, because its expert used an unworkable market share analysis, assuming that every PBM sale was attributable to the “compare to” claim. Without proof of causation, the Lanham Act claim couldn’t go to the jury, which would have been fatal even to the non-lached/time-barred claims.

FTC workshop: How Will Journalism Survive the Internet Age?

Audiocast and some materials on the FTC website. There's a whole other day I won't be attending, but this morning was certainly interesting.

Jon Leibowitz, Chairman, Federal Trade Commission, earlier speech on “Creative Destruction” or Just “Destruction”? Sadly, I missed his intro because the published times were at variance with the actual start time!

Newspaper Economics, Online and Offline

Hal R. Varian, Chief Economist, Google; Professor, University of California, Berkeley

What we all know: decline in circulation, despite increase in revenue per subscriber. New sources: 26% of Americans get news on their mobile phones, 43% of those under 50. 80% get news from emailed links—very popular distribution mechanism.

Online page views of news are only 3% of total news page views (total on and offline), and less than 1% of time online is at newspaper sites; people spend less time on news online than they do when they read physical newspapers. Still, it’s very popular to access news online, 3rd most popular online activity (following email and search). So, a paradox: it’s popular but people don’t spend much time on it. They’re accessing news during the day, and searching more on the weekend. So to increase value, need to turn it back into a leisure-time activity.

Value of clicks: search engines drive 35-40% of traffic to online news sites, which means—if you assume about equal monetization—that search engines are driving 35-40% of revenue, though online news revenue is only 5% of total revenue. We can classify the kinds of searches that drive people to online news sites. Turns out: sports, news/current events, and local. But the money is in travel, health, shopping, consumer electronics. Hard to monetize the categories where newspapers do well. Same as the offline world: news, narrowly defined, is relatively hard to monetize. Newspapers have never made money from news. Cross-subsidization is not working as well because it’s hard to do ad targeting for pure news: what do you put next to “Bombing in Baghdad”? And ad revenues for newspapers have had about 20% general merchandise, 14% financial, and other smaller things—not the kinds of things that people are making money on online.

Newspapers are valuable, but can you charge for them? He’s not sure. The weather isn’t unique.

Conclusion: newspaper ad revenue is where it was in 1982 in inflation adjusted dollars, though number of readers has dropped dramatically for print circulation. Cable TV has the largest increase in ad revenue since 1995, not the internet.

What can be done: increase people’s engagement. Experimentation! He thinks it’s promising to link news during the day—brief, occasional—to bigger engagement by shifting some access to leisure time. Living Stories: string together all items about a particular story. Starred Stories: you can follow what happens in a story. Fast Flip? Not clear what this was.

He’s a fan of new devices: tablets may make a big difference because of ergonomics of accessing news. At the end of the day, people don’t want to sit and do the same things as at work, but may want to sit in easy chair. Merger of TV-radio-magazine-newspaper experience. Emotions of video can be frustrating for lack of depth; newspaper allows depth but not emotional involvement; perhaps they can be combined.

Newspapers should better exploit the info they have. In many cases the site is seen as something for the techies, but there’s hugely valuable information in web logs both from editorial and marketing points of view. What do people come back to? Where do they spend the most time?

The State of Advertising

Bob Garfield, Author, The Chaos Scenario; co-host, NPR’s On the Media

NBC is doomed except as a cable channel: tech and simple economics undermine TV’s business model. All TV, and all newspapers, and all magazines, radio, Hollywood, what’s left of the record business, are in big trouble, along with the advertising industry and 1000 leading national advertisers. The collapse of barriers to entry has unleashed competitors, and high production quality isn’t enough to pose a sufficient barrier, especially as the studios cut production quality to save on pennies.

95% of music downloads were unlawful, even as Apple sold 3 billion songs. The same is happening to movies and TV; Star Trek was downloaded so many times that it siphoned off $100 million in box office (um, I simply do not believe this, given the lack of 1-to-1 substitution). Google profits from snippets of others’ content. Between 50-75% of DVR owners fast forward through commercials. Why? If Madison Avenue firms think that people love their ads, they’re tragically mistaken. People have put up with ads in exchange for free/subsidized content. Yes, some are funny and some worm into our hearts, but to most people all ads are spam, proved by what happened as soon as tech allowed us to skip them.

Supply and demand: ad supply is great; the price any advertiser can fetch for any ad anywhere is reduced, especially online. On display ads, newspapers are competing with bloggers, and on classified they’re competing with free.

If advertisers won’t pay, and users won’t pay, then: the revolution will not be monetized. It was nice while it lasted, when advertisers subsidized free/cheap content for audiences, but it was an accident of history. In the past couple of years, 900 magazines have disappeared; 86,000 employees of periodical industries have lost jobs. Cable is in no better position in the long run. Vulnerable to TiVo, and suffering from autoimmune disease: cable also brings in broadband, which allows users to get the same programming.

When mass goes away, the ad agency business model does too—it made big profits from big campaigns.

People are sticking it to the man: but traditional news organizations are the man. We are the dictators, the establishment, the elite.

Current Copyright Issues in Journalism

James Boyle, Duke Law School

Varian’s presentation makes clear that it’s not illicit uses of news that are the problem. Disintermediation, etc. mean that even perfect enforcement wouldn’t change the financial situation of news. The issue of how to pay for investigative journalism won’t be solved by tweaking copyright law.

Yochai Benkler, Harvard Law School

We’re looking at an industry that’s used to monopoly rents. 95% of cities are single-newspaper towns. But people can get news from other sources now. Classifieds are also a key factor. So what are we willing to give up? Are we willing to give up the idea of national and global sources of news as a part of the local paper, reading the NYT no matter where you are? Are we going to try to give the rents back to papers, and if so how?

Kenneth A. Richieri, Senior Vice President and General Counsel, The New York Times Company

Copyright may not have caused this situation, but to support investment one needs the ability to monetize it, and one can’t do that if the entire work product can be taken instantaneously.

Bruce W. Sanford, Partner, Baker Hostetler

FTC should issue a report with factfinding. In one 30-day period, 75,000 unlicensed sites showed US newspaper content, with 112,000 full copies of newspaper content unauthorized. The amount of unauthorized usage is staggering. Copyright-type protection, such as the type England is considering, is what we ought to do to protect journalistic content. (These two sentences don’t match up. If copying full articles is the problem, then it’s an enforcement issue, not an expanded rights issue. If what you really want is to pick some deeper pockets who aren’t engaging in full copying, then say so.)

James Marcovitz, Senior Vice President and Deputy General Counsel, News Corp.

Consumers are reading the news differently now. We need laws alongside copyright to encourage investment.

Laura Malone, Associate General Counsel, Intellectual Property, The Associated Press

Nobody thinks copyright caused the problem. But it’s one remedy we have to protect valuable content. AP stories are distributed to many customers, and many are illicitly used as well. A member will ask: “why am I paying dues when the guy across the street is copying and pasting?”

Boyle: The call for factfinding is good. If you compared Varian to Garfield, Garfield was more entertaining because it was about half purely factually wrong. “You can’t compete with free.” Obviously: look at the bottled water industry. Yes, there are illicit copies of newspapers. And it’s already illegal, with powerful remedies. Also, you can’t confuse the number of illicit copies with economic harm; downloads do not represent one-for-one someone who would have paid $8.50. Calls out that $100 million figure same as I did; blockbusters still exist.

How much of this is not already illegal, and how much that isn’t illegal should be? His answers: Hardly anything, and not at all.

Moderator: what about news aggregators/headlines/links: is that a problem? Does IP have any role to play?

Sanford: With aggregators—you have to identify a specific activity. Some are clearly infringing, and others have a fair use defense. What happens when you litigate: plaintiffs tend to bring strong cases and win; some aggregators go down the tubes. That’s a near certainty if the status quo continues. Some aggregators may beat the rap, leading to a chaos of decisions that are difficult to apply consistently. At that point, it’s in everyone’s interest to agree on some sort of rules of the road. (I really want to hear Jessica Litman talk about this narrative.) This needs to be done before we go down the road of judicial decisions. (Because Heaven forfend we might have a court interpret a statute!)

Moderator: Why haven’t we seen more of these cases?

Sanford: It’s a matter of business deals. Players are talking deals in the market. There will be litigation—people who feel they have strong fair use cases, and copyright owners who feel there’s no fair use. May or may not be good for fair use, because fair use hasn’t been very robust in the digital age—not really tested in a digital world. That’s why it’s time for a legislative response. (Again, this is a fascinating narrative, skipping over among other things a whole line of online fair use cases centering around search engines.) Doug Lichtman’s expert report found that there really was a lot of subtraction of value. (No disrespect intended, but as I recall Prof. Lichtman teaches law, not the economics of journalism.)

Benkler: Information is an output and an input. When you decide how to allocate value to one party, you’re increasing the price for another. So when there is a wide new set of models, some no-cost and low-cost, the risk of introducing a proprietary-like right as a solution vastly outweighs whatever discrete advantages might exist. The people around the table agreed that copyright wasn’t the problem. So how precise a hammer do you want? We could say “let’s tax internet access to pay for music and movies.” There’s no bigger reason not to say “let’s tax internet access to subsidize newspapers,” as compared to “let’s introduce a right that’s not justified on its own merits to subsidize newspapers.” We know IP rights ratchet up over time as concentrated interests mobilize to deepen that right; it’s a volatile right that looks at the internet as a threat in order to preserve an existing 20th-c. business model.

You’re not the first industry to come up against this. Search engines: linking is perfectly fine. We know that wholesale copying is not fine. So maybe at the margin we’ll have some wrongly decided cases. But the solution space is ambiguous and problematic. Information, when it’s controlled, undermines and increases the cost of information production.

Moderator: are you confident in the courts to get us into the right place?

Benkler: No, he’s not thrilled with the development of fair use doctrine, but it’s relatively susceptible to manipulation by local conditions (identity of plaintiff and defendant), but the baseline copyright law tilts against many gray-area practices. Fair use is uncertain (but killing it won’t make a difference to newspaper revenue). The solution is not a government-created new right. We have a baseline; there will be battles in the market and the courts. There’s enough money on both sides to suggest that litigation won’t clearly go in one direction or another. New business models emerge: some commercial, some nonprofit, some hyperlocal, some by dedicated journalists willing to live with lower returns, the rise of party presses in the large-scale blogs. We don’t in fact have a problem of “putting cars on the information superhighway,” as we were warned would happen without massive increases in copyright protection in the early days of the internet.

The industry is used to extremely high rents and is looking for intervention to create barriers to entry. The simplest solution: do nothing to constrain information. Make government data more available; invest some in government subsidies; allow new nonprofit models; teach journalists to be their own small-scale business operators. Any of that would be better than a new right making it more expensive for new business models to transmit information.

Richieri: Looking at headlines/links: most of our sites sponsor RSS feeds. We are in a net that’s interconnected. Any vibrant news/info site will have to participate. The word aggregator is too broad, covering a variety of sins and non-sins. People need to focus on specifics. Some people use these tools to create substitutability—you know it when you see it. Garfield was right that bloggers have access to everyone—if they copy the NYT, they aren’t doing anything the NYT isn’t also already doing; they aren’t adding value.

Moderator: Is substitutability the touchstone?

Richieri: know it when you see it. A headline with a clean link back not interrupted by an ad, that’s perfectly fine and everyone benefits. Once content is used in ways that don’t violate copyright but that create an audience for a site, that’s a substitutability issue. (!)

Marcovitz: RSS feeds are permission-based. We’d like to see a permission-based economy, where we can set the value for our content and people come to us to seek permission to use it. (This is pretty much an exact quote, though I might have gotten a preposition wrong.) We want to set the terms of use. (And this is why there are people who oppose you.)

Malone: What we’re talking about is news aggregation sites where they take headline and lede, which if well-written can be the heart of the story. The way people consume their news is to look at the top 2 things, read quickly, and not click through to the original source—they got what they need in the headline. That is supplanting the NYT and the Washington Post. (I’m now kind of surprised they allow me to read the front page in the newspaper box without putting in my coins.) We get to set the parameters by which people publish our stuff. We will license them easily and not expensively. But people shouldn’t do it for free just because they can.

Boyle: Legal clarity might be useful: Fair use is perhaps the least important limit on copyright. The most important limit, which the AP and newspapers use all the time, is idea/expression and fact/expression dichotomy. This is necessary to allow newspapers to do their business (not to mention the First Amendment). Facts and ideas go immediately into the public domain, and that’s what’s on the table here. Return on investment is important as a business matter, but sweat of the brow is foreign to copyright, and the Supreme Court said even unconstitutional. So let’s focus on the kinds of uses interfering with monetization. Take the use by aggregators: Google News v. splog that scrapes everything are different. With headlines and ledes, you’re getting close to merger: there are very few ways of expressing all the facts, which means there’s no copyright at all. Problematic in ways that should deeply worry news companies.

If you really don’t want to be aggregated, use robots.txt. But no, we want to be indexed! We want to make you pay for permission to link through to the story. But copyright doesn’t do that now and it would have bad unintended consequences if it did. Economics: If you genuinely want to charge for something for which there are substitutes, price goes down to marginal cost, and that’s a problem because investigative journalism is expensive and difficult. A new legal right is the wrong tool and a massive distraction from the real problem.

Richieri: The ability of a site to determine whether or not it’s going to be aggregated by robots.txt is good, but no law requires sites to use robots.txt. Many aggregators, particularly in mobile world, present themselves as an iPhone and are really aggregating hundreds of thousands/millions of pages. Why not require an aggregator who wants to index to present itself in a technologically cohesive way so that the site can opt out? A permission based system ought to be fine. And many sites may choose to be indexed.

Marcovitz: Look at hot news doctrine; robots.txt and other technological solutions. A more detailed standard—it’s really about developing a permissions-based system, using different tools to fight different forms of aggregation.

Moderator: opt-out v. opt-in: robots.txt is opt-out.

Marcovitz: It’s only opt-out now because there’s no rule that you have to abide by these instructions. We need to shift to permission-based instead of opt-out-based.

Sanford: Federal law of unfair competition might be more appropriate than copyright to deal with unfair appropriation of value. Feist was legislative interpretation, not constitutional interpretation, and said that Congress didn’t intend to extend protection to sweat of the brow. (Look, you can disagree with O’Connor; I might. But that’s not what Feist said.) Phone books are different from newspapers, and we could get a new rule for copyright that does extend to some recognition of protecting effort underlying expression, as Europe is exploring.

Moderator: anything you’d like to see with fair use?

Sanford: It’s in everyone’s interest to come to some resolution about uses and abuses of journalistic content in a marketplace solution. Legislation is difficult and takes a long time; not suited for speedy solutions. But if that has to take place to create leverage for marketplace solutions, then maybe it should take place. (Interesting conception of what counts as a marketplace solution—I totally agree, by the way; it makes no sense to talk about a market without talking about the state that structures the background conditions of the market.)

Boyle: calls Sanford out on Feist, with appropriate quote using the word “constitutional.” What did we do before handheld devices?

Benkler: the beguiling idea of permissions for everyone—when a NYT reporter reads three Spanish newspapers and puts together a reaction, should we require permission? When a NYT reporter listens to a discussion and draws conclusions, should we require permission? Brandeis and Holmes, our First Amendment heroes, didn’t like the result in INS v. AP, which was about punishing Wm. Hearst for his stance on the war: the authorities blocked him from gathering news, and then the Court allowed him to be enjoined. Facts are as free as the air for common use. You don’t need permission to breathe.

Moderator: What about the hot news doctrine?

Boyle: limited use now, because only a state right. Used concomitantly with a copyright claim to deal with “framing” content. No one would consider it important now, except as extra boilerplate for a threat.

Malone: Disagrees! INS v. AP was endorsed in Motorola, and AP used it against All Headline News; judge refused to throw it out on a motion to dismiss. Hot news protects news organizations who send reporters out at a cost in money and in lives. Free riding occurs, by direct competitors who strip off AP credit. This is a disincentive to AP funding reporting.

Moderator: but hot news is pretty limited: free riding must threaten the existence of the product itself. Does that reach far enough?

Malone: if there’s going to be federalization, it has to be very narrowly drafted, and protect many kinds of behavior, the way Motorola does.

Benkler: the narrowness of the doctrine is federalized: Motorola is a preemption case. How far can you go without conflicting with copyright? Particularly the element that the behavior has to threaten the existence of the product is a result of copyright preemption. Remember database protection debate of the 90s? A lot of work on the constitutional constraints placed on Congress’s use of commerce clause power to end run around exclusive rights clause. It’s not at all clear that there is an ability to expand the right federally, even before you get to the First Amendment questions. It’s very different to protect expression v. prohibit a person from using his/her own words to describe a true fact. The news organizations are arguing that the government, in the public interest, can bar someone from reporting a true fact because that will undermine a global public interest concern in supporting news.

Boyle: looks at how wrong his own predictions have been about tech in the past: how do encyclopedias get put together? Hard to have predicted Wikipedia. The key here is the term permissions-based. At the beginning of the WWW, it was open whether linking would be permissions-based; some people thought that links ought to require permission. If we’d been debating that question in this room at that time, we’d say: “it won’t be that hard to get permission—just ask. There aren’t that many information sources, after all.” All that would have prevented was the web, but the people in this room wouldn’t care because they wouldn’t ever have known/imagined it. All the bad and all the good—we would have gotten it dramatically wrong.

Humility should be a guiding principle, and a major change like “permissions-based” would be tragic. We have criteria for least harmful interventions: acknowledge you’re likely to be wrong about the future/promise of the technology. E.g., Jack Valenti and his comparison of the VCR to the Boston Strangler. The DMCA ends up being used by people who make toner cartridges and garage door openers: no matter how precisely we craft the right, people are going to make unintended uses of it.

Moderator: talk about legislative proposals for hot news. Is preemption a problem/do we need statutory clarification? Should hot news be federalized?

Malone: AP relies on it state-by-state, but being in NY is a help. The reason for federalizing it is so that there’s some guidance from state to state. But she isn’t worried about preemption currently.

Sanford: It’s useful to talk about federalization, though preemption isn’t a huge deal; the key is fair and reasonable compensation for content providers and moving to a permission-based economy. Newspapers don’t have an audience problem, they have a revenue problem. Legislation should be designed to address how we can adjust laws in an era where journalism needs more funding. There’s no silver bullet to solve the revenue problems, but it can make a material incremental contribution.

Boyle: Look at the full range of possible interventions and weigh costs and benefits. There is a persistent mistake that “this stuff is ours” and so we want to protect our existing rights. But of course if that’s true, then existing law is sufficient. If you want new rights, look at the costs of intervention v. the very uncertain benefits. Boyle is himself a net loser from the new economy, but we shouldn’t make the mistake of conflating a currently useful way of delivering a social service with the service itself. The companies that sold whale oil for illumination were good at providing illumination, but we shouldn’t have allowed them to put electric companies out of business. Hot news is deeply problematic; much of what newspapers do with each other’s work—copying facts and repackaging, usually with credit to the first to break the story--is troubling from a pure doctrinal perspective, but would never be sued over. And in fact we can look at those practices to show that copying facts doesn’t threaten the existence of the enterprise. Between traditional newspapers, there’s a gentleman’s agreement, but with new entrants, the rights get invoked in more extreme and problematic ways.

Enforce current law, ok, but we know what happens to IP rights when federalized—let’s just broaden it a little bit, for real estate prices, or your own favorite special interest. Newspapers are good poster children, with genuine concerns about survival and a social utility they provide, but opening the box is a bad idea.

Richieri: There are entities that are only one-way streets, existing to report on what the Times is reporting.

Moderator: where the user is rewriting the content, are there other tools than hot news?

Marcovitz: You look at copyright and hot news.

Benkler: advantage of FTC factfinding is that you’re not limited, like courts, to looking at hand-picked defendants. To describe the day of a true journalist as one involving only 3-month trips to the hills of Afghanistan, whereas everyone online just copies from the AP, profoundly misstates and mischaracterizes the news ecosystem. The implication that the problem is the equivalent of a copyist/spammer is wrong. Go back to unintended/unspoken consequences. Look at Wikipedia, Yelp, and many other models. Ecosystem includes all sorts of players. When you emphasize a particularly unattractive player, you understate the negative implications for all of the other places where you’re, e.g., seeing the emergence of commercial and noncommercial party presses; research centers suddenly not just delivering one paper once in a while, but blogs that are sources for more sophisticated journalism. All of these things would have to move from assuming they could report facts from needing to have special relationships with other sources. This is bad for the web. Systemic effects: given all of the players, the cost to these other models would increase when you try to solve the problem of the unattractive defendant.

Boyle: right now we don’t understand the most unattractive things about the hot news doctrine because the AP does care about the First Amendment. Remember the guy with the ACORN story—highly politically motivated. Not repeat players. With a hot news doctrine in place, this guy can claim the right to control the reporting—not willing to allow the NYT to report the facts. The legal club at least allows him to slow down the reporting, in a situation where time is of the essence. The people enforcing hot news now are generally interested in reporting in a large-scale system; but the AP’s commitment—which Boyle does not doubt—to enforcing a hot news right in the correct way does not mean that others with access to the same right, with different structural positions and incentives, will behave well.

Moderator: what now?

Sanford: Elephant in the room is Google Book Search. A marketplace solution may be reached with the search engine—and that’s the same attempt here.

Moderator: Doesn’t the idea of marketplace solution rest on an underlying IP right?

Sanford: Yes. The question is whether repeated copying allows a fair use defense, depending on the facts of the case. Commercialization and substitutability of the use are key. Could be resolved by English approach of legislation. Legislation is difficult, but can still be worthwhile.

Moderator: how can rights backfire?

Boyle: Rights of landowners to control whether airplanes could fly high above would have been disastrous, as was quickly realized. Opt-in for linking or indexing would be equally disastrous; opt-in has worked pretty well. Caching is more complicated. When a “cache” is merely a substitute, that’s a weaker fair use argument. But recall unintended consequences: don’t give control over the tech of the web to a certain set of content providers, to the detriment of society. Thank goodness we didn’t legislate on this early. As soon as you start saying property rights exist unless specifically waived, you change the fundamentals of the web. What robots.txt does, however, should be up for debate and reform. Let’s do experimentation with business models rather than legal change—this is not the time to drop a new crystal into the supersatuated solution we have.