Saturday, June 30, 2012

Supreme Court punts on standing

This SCOTUSblog post from Kevin Russell explains what was at stake, and why the Justices may ultimately have declined the invitation to impose new Article III limits on statutorily created standing--an issue of great importance for consumer protection law more generally.  I'm generally in agreement with Russell on how the Justices might have blinked when they considered the difficulties any such judicial policing would have caused, but it remains to be seen whether the Court--or a Court with new members--will try again, given that many defendants continue to press the argument despite a paucity of precedent in their favor.

Friday, June 29, 2012

FTC releases study about consumer reaction to "up to" claims

Of interest to consumer protection and Lanham Act lawyers alike, given that this should count as evidence about how "up to" claims are generally perceived.  You can read the press release or read the study itself.

potential competitor could state false advertising claim

Tecnomatic, S.p.A. v. Remy, Inc., 2012 WL 2376066 (S.D. Ind.)
Tecnomatic makes stators, a key component of electric motors.  Remy wanted to get into stator technology.  Their failed attempt to share knowledge led to this litigation.  The gist of the complaint was that, “after obtaining the technology, inventions and know-how of Tecnomatic, and filing patent applications on such technology, and while blocking Tecnomatic from developing technology with the Remy Defendants' competitors, the Remy Defendants began to execute their original confidential strategy to control the hybrid car industry through improper means.”  I won’t discuss the core breach of confidentiality agreement and trade secret claims, which survived Remy’s motion to dismiss.  Some other claims did get kicked out.
In its claim for unfair competition, Tecnomatic alleged that Remy deceptively held itself out as the inventor, developer, and owner of technology that it improperly acquired from Tecnomatic.  This didn’t state a claim for unfair competition under Indiana law, which covers passing off; the state courts haven’t recognized a claim for reverse passing off in the sense of inventorship etc.: “Tecnomatic has not alleged that Remy removed any name or trademark from its product. Rather, Tecnomatic alleges that Remy manufactured the technology it is selling, albeit based on information it wrongfully acquired from Tecnomatic.”
As you might expect, this was a problem for the Lanham Act claims as well.  Tecnomatic alleged that Remy made misrepresentations to the Department of Energy to secure a grant, and then misrepresnented the performance of its motors in an ad. Tecnomatic argued that customers, contracts, and the DOE grant would have gone to Tecnomatic but for Remy’s misrepresentations about its relationship to the technology—reverse passing off.  Tecnomatic also argued that Remy used the DOE grant and images of the American flag to mislead consumers into thinking that the feds endorsed Remy; though this should state a separate theory of deceptiveness, the court was uninterested, stating that Tecnomatic failed to allege that it had any rights in the images.
In the absence of secondary meaning, there was no cause of action based on the stator technology itself, and Tecnomatic didn’t allege that the tech had secondary meaning signalling Tecnomatic as its source (and functionality would presumably be a problem anyway).  Appropriation of the actual features of the product or credit for the creation of the product aren’t matters within the scope of §43(a)(1)(A), per Dastar.
The court then turned to the false advertising claim based on Remy’s ad stating, “HVH patented winding technology provides more power and torque density than any other competitor” and “provides customers with better continuous power than any other motor on the market.”  Tecnomatic argued that these statements were false, and that Remy falsely held itself out as the developer/inventor of several innovations.
Remy argued that Tecnomatic failed to plead that it was in competition with Remy, since it doesn’t offer its products in the US.  The court disagreed.  “Tecnomatic alleges that Remy's motivation for feigning interest in a joint venture with it was to prevent Tecnomatic from using its inventions, technology and trade secrets in competition with Remy. Tecnomatic has also alleged that Remy was concerned that its customers may begin going directly to Tecnomatic for its hybrid motor needs, cutting Remy out of the transaction as an unnecessary ‘middle man,’ the implication of which is, of course, that Remy was concerned that Tecnomatic would compete with it.”  This was sufficient on a motion to dismiss.
However, Tecnomatic failed to allege likely injury: it didn’t allege lost sales or goodwill, and its allegation that “customers, contracts, and the [DOE grant]” would have gone to Tecnomatic in the absence of falsity was directed at the false inventorship claim.  Thus, this claim was dismissed without prejudice.
Tecnomatic also argued that statements to the DOE in order to procure the grant were false advertising, but the court found it clear that those statements weren’t made in advertising or promotion.  Plus, Remy’s touting of the fact of the grant isn’t misleading: the DOE did in fact award Remy the grant, no matter how it was acquired.

Thursday, June 28, 2012

Speaking of parody/satire

The Star Wars that I Used to Know.  Extra points for the video recreation of the Gotye video.

Abortion criticism as fair use: parody/satire mucks up the analysis once again

Northland Family Planning Clinic, Inc. v. Center for Bio-Ethical Reform, --- F.Supp.2d ----, 2012 WL 2354350 (C.D. Cal.)
Here’s a rule worth following: Don’t sue your critics for copyright infringement. 
Northland made a video about why women choose abortion as part of an effort to de-stigmatize abortion, and various anti-choice people/entities used portions of that video in their own.  Northland sued for infringement and the court found fair use.  The defendants’ videos interspersed Northland’s footage with images of bloody fetuses, Bible quotes, etc.  One closed with Northland's name, telephone number, and the words “Your Dead baby at 10 to 12 weeks,” superimposed over a bloody, dismembered fetus.  The longest videos contained 2:22 of the original 4:41 Northland video (43%) and ran just over 4 minutes themselves.
One of the defendants, CBR, used its videos for publicity and fundraising, in that a “Donate” button appeared on the webpage with them, as it did with all pages on the site.  One of its representatives also testified that he showed the videos “every time” he did a fundraising pitch, because the videos are “part of what we are doing,” and CBR's “entire existence hangs on the goodwill of donors who want to know what we're doing and want to know what our challenges and burdens are....”   Northland submitted evidence that it had discussed licensing its video to other clinics, but once prospective licensees became aware of defendants’ videos they were no longer interested in using it, and Northland itself has curtailed its use.
The court accepted defendants’ characterization of their videos as parodies “intended to criticize, comment on, and disparage the narrator's calm manner as well as her message that good women choose to terminate their pregnancy and that abortion is ‘normal.’”  Why not just “criticism” and therefore transformative?  Good question.  The court apparently thought that, because of the pernicious language about satire in Campbell, it had to pick an acceptable type of criticism: it had to decide whether the original work was “incidental to the alleged infringer's comment on a broader topic.”  This is a terrible way to think about parody, much less transformation; the reason people target particular works is often that they are good examples of something that is more broadly familiar to the human experience.  Thus the court cited Blanch v. Koons as an example of satire instead of relying on Blanch’s overall discussion of criticism as transformativeness.
So, the videos were parodies because they used segments of the original “in alternation with macabre images of abortion procedures to deride the original work's message that abortion is ‘normal’ and that good women choose to terminate their pregnancy.”  Defendants’ videos turned plaintiff’s message on its head by contrasting the calm message of ordinariness with bloody images. 
Northland argued that there was no parody, because defendants were just using its video as a representative of the pro-choice viewpoint—“a placeholder for the pro-choice perspective” that spoke broadly about the abortion debate and not about the Northland video specifically.  Within the terms of the court’s unfortunate interpretation of parody v. satire, this argument makes sense (though of course even a “satire” can be fair use, as in Blanch).  But the court found that defendants weren’t attempting to present both sides, nor were they attacking an entirely separate subject.  Rather, they copied the Northland video “for the primary, if not exclusive, purpose of attacking it. While the accused Videos may comment globally on the abortion debate, they are primarily focused on criticizing elements of the Northland Video.”  The first part of that is true!  The second isn’t!  Whatever the Northland video had looked like or contained, defendants would have attacked it, because Northland provides abortions and defendants oppose that!  When Republicans copy Democratic campaign ads or interviews, and vice versa, they aren’t criticizing that particular clip, or if they are it’s only an intermediate goal, not a primary goal and certainly not an exclusive goal.  So too here, and it makes no sense to pretend differently.  And, yes, that is transformative fair use.
The court noted that defendants specifically disagreed with the “falsities” of the Northland video.  “Thus, the criticism is targeted at the copyrighted work specifically, not just the pro-choice position.”  Comment: No, the criticism is targeted at the views expressed in the video that abortion is a normal and reasonable choice; the video is an example of such views.  In the absence of the video, defendants would (and do!) criticize other examples of the same views.  What would it mean to criticize a work but not criticize the broader worldview it represented?  To ask such a bizarre question is to illustrate just how badly the parody/satire distinction serves us when asking a legal question about transformativeness. 
Indeed, the defendants’ videos even suggested that the Northland narrator was Satan.  Anyway, a loosely targeted parody may be sufficiently aimed at an original to count as a parody.  “Thus, even if this Court found that the accused Videos broadly criticized the pro-choice position in addition to the Northland Video, the analysis would be in accord with Campbell.”  Again, this statement reveals the fundamental weirdness of this application of Campbell: could any of the defendants, in good faith, say “we only intended to criticize this video and weren’t trying to say anything about the pro-choice position broadly”?  Of course not, and no one should expect them to in order to make a transformative fair use.
Naturally, given the expansion of “parody” to mean “transformative,” the court then has to deal with the fact that the videos aren’t funny.  They don’t have to be for purposes of fair use.  “Here, the accused Videos fall squarely within the Campbell definition of parody because there is no doubt that a viewer could, and most likely would, reasonably perceive the accused Videos to be highly critical commentary on the original, aimed at ridiculing it.”
In addition, Northland argued that the videos weren’t parodies because the original wasn’t well-known.  But that isn’t a requirement either.  An audience unfamiliar with the Northland video could still recognize that the defendants’ videos were meant to ridicule the original.  “Parody promotes the creativity copyright law is designed to foster whether the parodied work is a household name or completely unknown. The benefit of social commentary and criticism is not confined to works indicting the former. Just as the Campbell decision cautioned courts against evaluating a parody's success, so too should courts refrain from evaluating the popularity of the parodist's target. Indeed, courts have no business circumscribing the parodist's victim.”  (The court’s reasoning on this point is sound, and it found some interesting examples of lesser-known parodied works, but I’ll reiterate that this argument would have been much easier to resolve without the whole “must target this work particularly and not the genre of which it is a part” bit above.)
Given that the videos were parodies, Northland’s argument that they weren’t sufficiently transformative because they used big verbatim chunks of the original also failed.  “While courts have not addressed verbatim use of copyrighted video content in the parody branch of the fair use doctrine, it is well established that ‘wholesale copying does not preclude fair use per se.’”  Mattel v. Walking Mountain and Bill Graham v. Dorling Kindersley are just two examples of transformative verbatim copying.  Here, defendants had to make a full copy of Northland’s video “in order to distill it into the segments they would need to create their own videos.” 
And they needed to use verbatim segments because the Northland video isn’t highly recognizable and ingrained in the audience’s collective psyche.  “Unlike ‘Pretty Woman’ or Barbie, where a parodist can comment on the original with a broadly suggestive allusion, here, Defendants could not effectively comment on the Northland Video without showing verbatim excerpts that captured the essence of the message and the mannerisms of the narrator.”  (And this explains Mattel how?  Forsythe literally used segments of Barbie ….)  I would have gone with “copying is proof”—it’s always possible to criticize an imitation for exaggeration/lack of verisimilitude.  Anyway, even if the transformation was more “rudimentary” than in Campbell or Mattel, “Defendants fundamentally changed and commented on the copyrighted work. The new background soundtrack, the visuals, and the juxtaposition of the new video clips with the original creates an entirely different impact on the viewer. Thus, the accused Videos are transformative.”
The court then turned to the commercial/noncommercial distinction.  There are vastly overbroad cases out there, primarily Worldwide Church of God, saying that profit can come from things other than monetary gain, such as an increased number of adherents to a religious sect.  Here, then, defendants “at least in part” profited, because they used the videos for fundraising and spreading their message.  Using a work to solicit donations for a litigation defense of that work is commercial.  Even if they weren’t used directly for fundraising, the videos “generated traffic to the anti-abortion websites on which they were posted and incited discussion on the sites' message boards. Defendants appropriated the copyrighted material to advance their own message, and therefore derived a benefit from their use. Generating traffic to one's website or conveying one's message effectively using copyrighted material is within the type of ‘profit’ contemplated by Worldwide Church.” 
So, basically, noncommercial use is private use (except where private use is also commercial under the precedents, e.g. Napster).  Obviously I think that’s a huge mistake, and adds to the incoherence of “noncommercial” in IP law.  It also creates a tension between transformativeness and “commerciality”: if you need to convey your own message to make a transformative use, and advancing your own message makes a work commercial, then a finding in your favor on transformativeness automatically weighs against you on commerciality.  We may be living in a consumers’ republic, but that doesn’t mean that every way in which ideas are transmitted is thereby commercial.
The court added that the fact that users could make donations through a link on the same page where the videos were posted was further evidence that defendants profited from the videos.  (That they profited?  Was there any evidence that any donations came through those pages?  Never mind, Jake, it’s fair use analysis.)  At least the court dropped a but see to one of the Righthaven cases holding to the contrary.
Anyway, commercial aspects are less important when a work is significantly transformative, since even comment and criticism is generally done for profit in this country. “On balance, the profit Defendants gained from the use of Northland's copyrighted material is a minor part of the analysis in light of the transformative use of the material.”
The nature of the work isn’t all that important in parody cases, even though Northland’s video was creative; this factor weighed “slightly” in its favor.
Amount and substantiality of portion used: parody has more leeway under this factor too.  Two videos used about half of Northland’s video for half of their own.  One video was 1:17, and its entire audio track was from Northland’s, which was 27% of the audio track.  Northland argued that this was excessive.  The court disagreed.  There’s no fixed limit on what a parodist may copy.  The amount that may be taken depends on three things: first, the degree of public recognition of the original: “Close copying is impermissible when the work is well-known or familiar to the audience.”  Second, the “ease of conjuring up the original work in the chosen medium.” (Citing the terrible old Air Pirates case which found that defendants took “more than necessary,” despite the 9th Circuit’s later disavowal of any “minimum necessary” standard.)  In graphic design, less copying is necessary to put in readers’ minds the parodied work, while “other media, such as song or speech, could have more fair use leeway, given the greater difficulty in mimicking that media.”  (This seems to me to be a reason that song parodies will ordinarily copy less than graphic parodies, not that they should copy less; and I’m not so sure about the is/ought in that is.)  Third, “the focus of the parody”: whether its overriding purpose was parodying the original, or something else.
Here, because the Northland video wasn’t well-known or familiar, defendants had to use a significant portion for the audience to appreciate the parody: they needed more than a mere allusion. 
Now we get a discussion of verisimilitude (I won’t say realism since we aren’t really interested in direct representation of reality):
Second, the Northland Video is not easy to conjure up in a sound byte or a single image. While the Ninth Circuit has not specifically opined that video or film is a difficult media to parody, the challenges of parodying video are closer to song or speech than graphic design. Akin to a song or speech, with parody of video there is a “special need for accuracy” that provides some license for a “closer” parody.   Just as a would-be parodist loses the likeness of a song if she substantially varies the music or meter of the original, a would-be parodist loses the likeness of a film if he substantially varies the script or setting of the original. It follows that video, like song and speech, should be afforded greater leeway in determining whether a defendant borrowed in excess. Moreover, the Court also considers the difficulty of “conjuring up” the message of a little known video without resorting to use of that video. While five seconds might be sufficient to capture the iconic image of Marilyn Monroe in a billowing skirt standing over a vent, the challenge presented in parodying the Northland Video is at the other end of the spectrum.
And finally, the overriding purpose was parody of the original.  Commenting on the broader abortion debate or soliciting donations were “incidental” to the primary parodic purpose.  Plus, the lack of market substitution weighs in defendants’ favor.  (As has often been observed, factor three tends to get the other factors, especially one and four, shoved into it, as here.)
Market harm: Northland’s alleged harm wasn’t cognizable because it stemmed from criticism, not market usurpation.  That potential licensees are no longer interested is a real injury, just not one covered by copyright law.  There’s no market substitution.
The balancing of factors, of course, favored fair use.
Final note: interesting that there’s no DMCA claim here (a victory for the remix exemption?  except that then “noncommercial” in the exemption would have to mean something other than what the court here says it means).  As far as I can tell, defendants must have used a program to download the video from YouTube, whose terms of service purport to disallow this.  

FCC honors program for new lawyers

From the FCC:
Attention graduating law students and judicial clerks: are you interested in a rewarding career in the government working on cutting edge legal and policy issues? Please apply for the Attorney Honors Program at the FCC. The application window is from 7/23-9/21/2012.

The Stolen Valor Act and advertising/trademark law

U.S. v. Alvarez, 567 U. S. ____ (2012) (affirming the invalidation of the Stolen Valor Act)
I’m not hugely surprised by the result, and the plurality written by Justice Kennedy at least attempts to limit its rationale to the particulars of the case: a prohibition on intentionally false claims to have been awarded certain medals is unsustainable given the failure to show a need for the ban in order to prevent the identified harm.  Still, the wobbliness on “false factual speech has no value in itself” leaves some uncertain ground of interest to trademark and advertising lawyers.  In particular, the plurality opinion doesn’t miss a chance to link false (that is, untrue) commercial speech to fraud, when of course modern advertising regulation covers far more than deliberate fraud.  Thus, Virginia Pharmacy becomes a case standing for the proposition that “fraudulent speech generally falls outside the protections of the First Amendment” (emphasis mine).
In the key passage for broader lessons, the plurality says, “there are instances in which the falsity of speech bears upon whether it is protected. Some false speech may be prohibited even if analogous true speech could not be.  This opinion does not imply that any of these targeted prohibitions are somehow vulnerable. But it also rejects the notion that false speech should be in a general category that is presumptively unprotected.” 
The plurality doesn’t talk about trademark law, but it specifically distinguishes the Stolen Valor Act from the special protection for the Olympics: the law bars lies “entirely without regard to whether the lie was made for the purpose of material gain.  See San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U. S. 522, 539–540 (1987) (prohibiting a nonprofit corporation from exploiting the “commercial magnetism” of the word “Olympic” when organizing an athletic competition (internal quotation marks omitted)).”  So material gain is apparently a limit now--but of course much noncommercial speech, as defined by First Amendment doctrine, is published for material gain.
Perhaps unsurprisingly, weirder things are going on in Breyer’s concurrence, joined by Kagan.  Breyer, who favors a more contextual First Amendment analysis as compared to Kennedy’s categories, identifies a range of laws prohibiting false speech, with various levels of particularization in the harms targeted.  “Those [other] prohibitions, however, tend to be narrower than the statute before us, in that they limit the scope of their application, sometimes by requiring proof of specific harm to identifiable victims; sometimes by specifying that the lies be made in contexts in which a tangible harm to others is especially likely to occur; and sometimes by limiting the prohibited lies to those that are particularly likely to produce harm.”  Fraud statutes are an example of the first category, requiring proof of materiality, reliance, and injury.  But all the interesting work happens in the second and third, where legislators decide that categories of misrepresentations, or specific contexts, make harm particularly likely.  Alvarez suggests that a majority of the Supreme Court is skeptical of such findings, even though it accepts them as applied to perjury, misrepresentations that a private party comes from the government, and a few others.
Turning to the trademark analogies that made this case of particular interest to Lanham Act scholars, we don’t get much that’s satisfactory.  Either Breyer is deeply confused about what trademark law currently is and how infringement and dilution are proven, or he sees much better than we admit in reducing trademark law to dilution and presumptions to proof: 
Statutes prohibiting trademark infringement present, perhaps, the closest analogy to the present statute. Trademarks identify the source of a good; and infringement causes harm by causing confusion among potential customers (about the source) and thereby diluting the value of the mark to its owner, to consumers, and to the economy. Similarly, a false claim of possession of a medal or other honor creates confusion about who is entitled to wear it, thus diluting its value to those who have earned it, to their families, and to  their country.  But trademark statutes are focused upon commercial and promotional activities that are likely to dilute the value of a mark. Indeed, they typically require a showing of likely confusion, a showing that tends to assure that the feared harm will in fact take place.
If you just substitute “dilution” for “infringement” and “confusion,” this almost makes sense, but “(about the source)” makes clear that Breyer really did conflate infringement and dilution.  And “dilution causes dilution of value” as an explanation of harm is not really a rigorous definition of the harm.
Later, Breyer brings up but doesn’t resolve the applicability of the Lanham Act to political speech:
Some lower courts have upheld the constitutionality of roughly comparable but narrowly tailored statutes in political contexts.  See, e.g., United We Stand America, Inc.  v. United We Stand, America New York, Inc., 128 F. 3d 86, 93 (CA2 1997) (upholding against First Amendment challenge application of Lanham Act to a political organization); Treasure of the Committee to Elect Gerald D. Lostracco  v.  Fox, 150 Mich. App. 617, 389 N. W. 2d 446 (1986) (upholding under First Amendment statute prohibiting campaign material falsely claiming that one is an incumbent).  Without expressing any view on the validity of those cases, I would also note, like the plurality, that in this area more accurate information will normally counteract the lie.
The dissent, written by Alito, makes the most of the trademark analogy, endorsing on the way the idea that a proper function of trademarks is to signal exclusivity:
It is well recognized in trademark law that the proliferation of cheap imitations of luxury goods blurs the “‘signal’ given out by the purchasers of the originals.”  Landes & Posner, Trademark Law: An Economic Perspective, 30 J. Law & Econ. 265, 308 (1987).  In much the same way, the proliferation of false claims  about military awards blurs the signal given out by the actual awards by making them seem more common than they really are, and this diluting effect harms the military by hampering its efforts to foster morale and esprit de corps.  Surely it was reasonable for Congress to conclude that the goal of preserving the integrity of our country’s top military honors is at least as worthy as that of protecting the prestige associated with fancy watches and designer handbags.  Cf. San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U. S. 522, 539-541 (1987) (rejecting First Amendment challenge to law prohibiting certain unauthorized uses of the word “Olympic” and recognizing that such uses harm the U. S. Olympic Committee  by “lessening the distinctiveness” of the term).
I think the dissent’s most important point is largely put in a footnote: there is a potentially big difference between “each plaintiff/prosecution must show individualized harm” and “the legislature can reasonably decide that a situation poses so much risk of harm that it may be banned/criminalized,” and lumping them together makes distinguishing between constitutionally ok laws and the invalidated Stolen Valor Act more difficult.  The dissent reiterates previous language that false speech has never been protected for its own sake, and finds the plurality’s more wishy-washy “the falsity of speech bears upon whether it is protected” to be “a dramatic—and entirely unjustified—departure from the sound approach taken in past cases.” 
Alvarez and his supporting amici argued that only falsity proved to cause specific harm lacks First Amendment protection, but the various categories of examples offered don’t show that (unless, which the dissent apparently isn’t willing to do, you regularly allow legislative predictions to substitute for case-by-case litigation).  These examples include “(3) false speech that does not cause detrimental reliance (neither perjury laws nor many of the federal false statement statutes require that anyone actually rely on the false statement); (4) particular false statements that are not shown in court to have caused specific harm (damages can be presumed in defamation actions involving knowing or reckless falsehoods, and no showing of specific harm is required in prosecutions under many of the federal false statement  statutes); and (5) false speech that does not cause harm to a specific individual (the purpose of many of the federal  false statement statutes is to protect government processes).”
And I present this paragraph just for irony, given how the dissenters voted on another case that came out today:
The problem that the plurality foresees—that legislative bodies will enact unnecessary and overly intrusive criminal laws—applies regardless of whether the laws in question involve speech or  nonexpressive conduct. If there is a problem with, let us say, a law making it a criminal offense to falsely claim to have been a high school valedictorian, the problem is not the suppression of speech but the misuse of the criminal law, which should be reserved for conduct that inflicts or threatens truly serious societal harm. The objection to this hypothetical law would be the same as the objection to a law making it a crime to eat potato chips during the graduation ceremony at which the high school valedictorian is recognized.  The safeguard against such laws is democracy, not the First Amendment. Not every foolish law is unconstitutional.
Eat your broccoli!

US v. Alvarez

If you're having trouble accessing the Supreme Court's site, here's the opinion.  More later.

Copyright myths

People believe some weird things about copyright (and don't get me started on the other parts of this person's beliefs!).  No, you can't copyright your face.  I did once do an exam question about the copyrightability of plastic surgery, though.

Wednesday, June 27, 2012

stating a warranty policy that defies the law may be false advertising

Bel Canto Design, Ltd. v. MSS HiFi, Inc., 2012 WL 2376466 (S.D.N.Y.)
Discussion of previous opinion.  Bel Canto, which makes high-end audio equipment sued MSS and its principal Boey for trademark infringement based on resales of altered products.  Bel Canto secured a preliminary injunction barring MSS from (1) falsely claiming affiliation with or endorsement by Bel Canto, (2) advertising or selling Bel Canto products bearing altered serial numbers, or (3) advertising or selling Bel Canto products for which warranty protection is unavailable because of actions taken by MSS HiFi such as opening the product’s case. 
MSS filed counterclaims; the court here granted in part and denied in part Bel Canto’s motion to dismiss.  I won’t discuss the antitrust claims (based on Bel Canto’s resale price maintenance-related activities) or the contract claims, which were dismissed.
MSS alleged that Bel Canto had engaged in commercial disparagement: defamatory statements about MSS’s goods/services causing special damages.  The alleged disparagement came in statements on eBay, and in letters to authorized dealers Bel Canto terminated for selling to MSS, saying that MSS engaged in “illegal” behavior, including infringement of Bel Canto's intellectual property rights.  This stated a claim: Bel Canto’s statements could be read to say that MSS’s “Bel Canto” products weren’t genuine.  But the court had already found that Bel Canto was likely to succeed in proving that MSS did in fact infringe Bel Canto’s intellectual property rights.  If proved at a full trial, this would provide a complete defense.  Though the court’s finding was only preliminary, it cautioned MSS to “think very carefully” about continued pursuit of this claim: if they pressed it and lost, the court would entertain a motion for Rule 11 sanctions.  In addition, Bel Canto could renew its argument on summary judgment that these statements were protected by the absolute litigation privilege, though that requires additional factual material not properly considered on a motion to dismiss.
MSS also alleged tortious interference with prospective economic advantage.  Though MSS stated a claim, this cause of action would also collapse if what Bel Canto said to eBay and MSS’s customers was true.  Allegations that Bel Canto terminated its dealers for selling to MSS, however, did not state a claim.  Since MSS didn’t sufficiently allege an antitrust violation, terminating authorized dealers for breaching their dealership agreements by selling to a reseller wasn’t illegal, tortious, improper, or wrongful.
MSS also alleged false advertising in violation of the Lanham Act and New York's GBL.  First, it alleged, Bel Canto conveyed to consumers that its products had a 90-day warranty, which was misleading because it wouldn’t honor the warranty on products sold by unauthorized dealers.  This policy is now disclosed on Bel Canto’s website.  The court found that the counterclaim didn’t adequately allege misrepresentation, and dismissed it without prejudice.  It might be misleading “to say, without qualification, that Bel Canto products carry warranties if some do not.”  But the counterclaim lacked factual specificity: where, when and to whom the claim was made.  The court couldn’t tell whether the statement was unqualified or conditioned.  “To evaluate context, the Court must also know where the representation was made—on the website, in the manual, on the warranty card—and what other information was readily available to one reading it.”
MSS argued that Bel Canto’s disclosure was itself misleading, because under New York law Bel Canto must honor all warranties, even on products sold by unauthorized dealers.  At this stage, the court allowed this theory to proceed.  Previously, the court concluded that MSS hadn’t shown that Bel Canto didn’t have other reasons for refusing to honor any warranty—that is, it’s ok under NY law to refuse to honor a warranty because the case has been cracked, for example.  Facts developed at trial could keep the issue alive.  (The court said something confusing about reliance; reliance here must mean not reliance on the law requiring manufacturers to honor warranties but on the misleading statement that Bel Canto wouldn’t do so: if consumers believed Bel Canto because they didn’t know about the law, then that’s a reason they might have paid more for a product from an authorized dealer—materiality seems to be the appropriate inquiry.)
Finally, MSS argued that Bel Canto falsely said that MSS was selling Bel Canto products in violation of the Lanham Act.  This theory was duplicative of the commercial disparagement claim, and survived subject to the warning above.

ACPA claims fail in context of pitched competitive battle

Pensacola Motor Sales Inc. v. Eastern Shore Toyota, LLC, --- F.3d ----, 2012 WL 2345117 (11th Cir.)

Judge Carnes offers an engaging introduction to this case:
People who compete against each other in the same business or profession don't have to dislike one another. A few years back there was even a song lyricizing about “Lawyers in Love.” But no one has ever written a song about “Car Dealers in Love,” and if this case is any indication, no one ever will. These two car dealers are bitter business rivals in overlapping markets. One of them used a software program to compete more aggressively with the other one over the internet. That program produced a multiplicity of mini-websites, a host of hard feelings, and of course litigation. This is the appellate part of that litigation.
Nor is this the only case involving the parties: just last year, a state court awarded Shawn Esfahani and his company Eastern Shore Toyota $7.5 million in slander damages against plaintiff Bob Tyler Toyota and its sales manager.  The slander involved false accusations of terrorism and financial support for terrorism against Iranian-born Esfahani.  The period of the slander overlapped the period of Eastern Shore’s anti-Bob Tyler internet strategy, which gave rise to this lawsuit.  The $7.5 million slander judgment, $5 million of which represents punitive damages, is currently on appeal to the Alabama Supreme Court.  (I wonder which one of the parties spent valuable space in the appellate brief informing the court about this other litigation?)
Esfahani also deals in Hyundais.  In 2009, he attended a Hyundai dealers’ conference, where Hyundai officials introduced dealers to David Vaughn, Jr., the corporate division's internet marketing expert, who offered to help the dealers revamp their websites and spruce up their technology systems. I quote the court: “Not that there's anything wrong with that.”
However, Vaughan went a bit further.  He pitched defensive and offensive marketing strategies to Esfahani.  The defensive strategy was to buy and hold desirable domain names to keep them from competitors; some would incorporate competitors’ marks.  These wouldn’t resolve to a webpage.  The offensive strategy involved creating many mini-sites.  By entering domain names into a program he proposed to license to Esfahani, Vaughn could “instantly mass produce microsites for Esfahani, each one using a name related in some way to the car business, for example, Those microsites would either automatically redirect users who clicked on them to Eastern Shore's official websites or they would display a one-page website advertising Eastern Shore.”  Esfahani agreed to both proposals, and quickly went from owning about 40 domain names to owning around 4000.  Some incorporated trademarks from well-known sites, for example:,, and  Others used competitors’ marks, such as eBay objected to in September 2009, telling Eastern Shore that its registration and use violated the Lanham Act and ACPA.  Esfahani surrendered the domain name the day after receiving eBay’s email, but didn’t review any of his other domain names for infringement.
In October 2009, a Bob Tyler sales manager discovered the microsite, featuring a photo of a model sold by Bob Tyler and allowing visitors to enter their email addresses and financial information to apply for a car loan.  But the phone number was Eastern Shore’s.  Bob Tyler employees found five other Eastern Shore microsites with virtually the same design and some version of the Bob Tyler TM along with Eastern Shore’s phone number.
A Toyota manger told Eastern Shore that Bob Tyler objected and urged Eastern Shore to disable the microsites. Continuing in the slightly-cuter-than-perhaps-I-want-my-appellate-opinions vein, the court recounted that “Esfahani was shocked—‘shocked,’ he said—to learn that those domain names were operational, and he immediately ordered Vaughan to disable the microsites.”  A few days later, Bob Tyler’s lawyers sent a C&D threatening a lawsuit unless Eastern Shore paid $250,000, though Eastern Shore was already in the process of disabling the microsites.
Esfahani and Vaughan blamed each other.  Esfahani terminated his contract with Vaughan and accused Vaughan of having misled him into believing that buying the domain names was legal, while Vaughan said that Esfahani “went rogue” despite Vaughan’s warnings that buying the domain names and hosting the microsites “was a real bad idea[ ].”  By the end of the day after the C&D, all the microsites using the Bob Tyler trademark had been disabled, except for two undetected because misspelled ones.  (The total was 14.)
Bob Tyler sued anyway, alleging false advertising, unfair competition under the Lanham Act and state law, violation of ACPA, state trademark dilution, and violation of Florida’s “Antiphishing Act.”  Bob Tyler moved for summary judgment.  Eastern Shore argued that it allegedly “believed and had reasonable grounds to believe that the use of the domain name[s] was a fair use or otherwise lawful,”15 U.S.C. § 1125(d)(1)(B)(ii).  At trial, Bob Tyler didn’t prove any money damages, which left it only able to seek damages on its Florida antiphishing and ACPA claims.  The court granted judgment as a matter of law to Eastern Shore on the antiphishing claim, and also denied injunctive relief because Bob Tyler failed to show any likelihood that Eastern Shore would resume the objectionable conduct. 
When the court instructed the jury on the ACPA statutory defense, it stated that Eastern Shore had the burden to prove that it had both “reasonable grounds to believe that the use of the domain names was [a] fair use or otherwise lawful” and that it actually “had this belief.” The court told the jury that “reasonable grounds” meant that “an ordinary person in [the] defendants' position would have had those grounds.”
The jury, by special interrogatory verdict, found that Bob Tyler proved a violation of ACPA by Eastern Shore, but that the defendants had “a reasonably held belief that their use of the domain names was a fair use or otherwise lawful.”  Thus Bob Tyler got nothing.
Bob Tyler appealed.  I will ignore most of the many procedural/waiver issues.  It first argued that it was entitled to equitable relief on its false advertising/unfair competition claims, a holding reviewed only for abuse of discretion.  There was a reasonable basis for the district court’s conclusion, so the court of appeals affirmed.  Eastern Shore disabled the infringing microsites right after the C&D (a little longer for the undiscovered misspelled ones). “Eastern Shore acknowledged its error in creating the microsites, fired its internet consultant, and promised to stop any infringing activity.”  There was no evidence of a likelihood of continued infringement, so the district court’s ruling was justified.
Florida’s antiphishing law allows the owner of a web page or trademark “who is adversely affected by [a] violation” to bring a lawsuit under that act, but Bob Tyler failed to prove any damages at trial or otherwise show that it had been adversely affected, so the claim was properly dismissed as a matter of law.
ACPA was the big issue.  Bob Tyler argued that the district court shouldn’t have let the statutory safe harbor defense go to the jury because Eastern Shore’s bad faith barred it from the safe harbor.  The Fourth Circuit has held that a “defendant who acts even partially in bad faith in registering a domain name is not, as a matter of law, entitled to benefit from the Act's safe harbor provision.”  Here, Eastern Shore conceded that six of the nine statutory ACPA factors for determining bad faith were present and weighed against it.  But bad faith intent to profit isn’t a “score card” of statutory factors; the statute says they’re nonexclusive factors that “a court may consider.”  There is no per se tipping point that excludes a defendant.  The Fourth Circuit case involved a defendant’s undisputed bad faith intent to profit by selling or threatening to sell the infringing domain name to the highest bidder if the plaintiff did not buy the name from it.  Nothing like that happened here; there was some evidence of intent to profit from the infringing domain names, but also contrary evidence.  Resolving the dispute was for the jury.
Eastern Shore’s defense wasn’t mistake of law: it was that Eastern Shore believed and had reasonable grounds to believe that its actions were lawful based on Vaughan's professional advice.  There was evidence supporting this. 
The court of appeals also rejected Bob Tyler’s challenges to the jury instructions; there was no evidence that things like an instruction that even one improper motive is enough for liability would have changed the verdict.  Likewise, Bob Tyler argued that the jury’s answers were inconsistent, and they were: the jury found that Eastern Shore had violated ACPA and also that it qualified for the safe harbor, but a defendant who falls within the scope of the safe harbor provision necessarily lacks the bad faith intent to profit that is necessary to violate the statute.  But Bob Tyler waived the argument by not objecting before the jury was discharged.
Bob Tyler also argued that it should have been granted judgment as a matter of law, or a new trial based on the weight of the evidence.  The former turned on whether there was enough evidence for the jury to find that Eastern Shore reasonably believed its actions were lawful.  Regardless of the number of statutory factors in play, there would be no bad faith intent to profit and thus no liability if Eastern Shore nonetheless “believed and had reasonable grounds to believe that the use of the domain name was ... lawful.”  This requires both a subjective belief and an objectively reasonable belief in the lawfulness of its actions.  The standard of review is one designed to support the jury’s verdict:  “when all credibility determinations are made and all inferences are drawn in favor of the verdict, and all evidence disfavoring the verdict that the jury was not required to believe is disregarded, was there enough evidence to support the verdict that Eastern Shore lacked a bad faith intent to profit because it believed and had reasonable grounds to believe that its actions were lawful? There was.”
To start with, Esfahani testified that he believed that owning the domain names was legal.  There was evidence that Vaughan assured him that this was so, and that Esfahani reasonably relied on Vaughan’s expertise:
Esfahani had every reason to believe that Vaughan was a bona fide and independent internet marketing professional on whom he could rely. Vaughan had worked in the car dealership business for about twenty-seven years and had started working in internet marketing as early as 1995. He owned Advanced Dealer Systems, an internet marketing company whose clientele included car dealerships and manufacturers, such as Hyundai, Dodge, Jeep, and Chrysler. It was Hyundai's corporate division that introduced Vaughan to its dealership owners, including Esfahani, as a “preferred vendor” and the corporate division's internet marketing expert, someone who could help dealers revamp their websites and internet marketing strategies to compete in the twenty-first century economy.
Indeed, Vaughan continued to tout his defensive strategy of registering multiple inactive domains in his deposition, so convinced was he of its legality and propriety:
If I was a guy like Shawn Esfahani, I would buy my competition up; and I would just not let them use it. I would just keep [the domain names] dormant. I think that's a good strategy.... I've actually helped Hyundai buy Toyota domains just to keep them away from Toyota.... Everybody does it.
There was, in addition, evidence that Vaughan inadvertently launched the microsites that used the Bob Tyler trademark instead of keeping those domain names dormant, as Esfahani testified he had believed Vaughan would do.  The one-click nature of the computer program allowed for inadvertent activation, and Vaughan was the one who did the detail work.  Vaughan denied responsibility for activating the infringing microsites, but the jury didn’t have to believe him; at least one of them bore the name of his company in the tagline “Powered by Advanced Dealer Systems.”  Vaughan undisputedly had exclusive access to the operational back-end of the microsites, where he could upload content and track visitors to the sites.  Esfahani testified that he “personally had no idea these things were hooked to [the] website generating machine.”
The jury could have accepted Esfahani’s reaction to the news that infringing domain names were in use as more evidence that he didn’t want them used offensively and hadn’t known about that use.  He immediately ordered Vaughan to deactivate them, before receiving Bob Tyler’s C&D, and terminated Vaughan’s contract a few days later, stating that he’d been misled into thinking that purchasing the domains was legal.  Eastern Shore surrendered the Bob Tyler domain names to GoDaddy before this lawsuit was filed in this case, and surrendered the domain names using trademarks of its other competitors soon thereafter.
Overall, though the court noted that it wasn’t saying that it would have reached the same result as the jury, defendants’ actions and reactions “were starkly different from those of defendants who have been held to have violated the anticybersquatting act.”  Bob Tyler argued that the eBay C&D email put Eastern Shore on notice of likely ACPA violations.  But the email said that the “registration and use” or “use, [sale], or offer for sale” of the domain name likely violated the law.  A jury could reasonably have found both that Esfahani still reasonably believed that his defensive strategy was ok, and that he didn’t know the Bob Tyler microsites were operational.
Bob Tyler contested Esfahani’s subjective lack of knowledge, because Esfahani testified that a number of years ago a competitor’s disgruntled ex-employee offered to sell him the competitor’s domain names, to which he had access because he’d bought them at the competitor’s direction while still employed there.  Esfahani turned this offer down as “dirty pool.”  But a reasonable jury could have found that Esfahani distinguished between pilfered property and buying unregistered names from GoDaddy, especially when Vaughan told him he could do the latter.
Another wrinkle was that Bob Tyler obtained a party admission under Federal Rule of Civil Procedure 36(a) from Eastern Shore admitting that it “purchased the Bob Tyler Domain Names with the intention of diverting consumers from [Bob Tyler Toyota's] website or business to [Eastern Shore's] own website.” This would normally conclusively establish the admitted fact, but “what ordinarily happens and what should have happened did not happen in this case.”  Though Eastern Shore never moved to withdraw this omission, Bob Tyler never objected to Eastern Shore’s contradictory position at trial that it only intended to hold the domain names defensively.
The only people who noticed the inconsistency were members of the jury, which sent a question to the court about how it should resolve the conflict between the party admission and the “[p]resented testimony that [Eastern Shore] did not willfully activate a site.”  Bob Tyler’s lawyer, for whatever reason, agreed that the jury should simply be instructed to give the admission and the trial testimony “the weight you believe it deserves.”  The district court instructed the jury that: “The Request for Admissions relates to the purchase of a domain name. The testimony which you describe in your communication relates to the activation of a website. The two are different things. You should give each the weight you believe it deserves.”  The jury then asked whether Eastern Shore had admitted only to defensive use or to both defensive and offensive use.  The court, again with the agreement of the parties’ lawyers, told the jury that “the defendants' response simply admitted that sentence as it is worded.”  Given the invited error, Bob Tyler couldn’t complain now.
Eric Goldman would undoubtedly suggest some good business lessons here.  I can see why the jury sympathized with Esfahani (I don't know whether the slander issue was admitted as evidence here)--if they believed his testimony, he was misled by a consultant who seemed highly legit and endorsed by the Hyundai hierarchy.  It may be hard for a nonspecialist to make legal distinctions--though I will say that even what Vaughan called the "defensive" strategy smells bad to me, and is also unlikely to provide any return given how consumers find websites in the age of search engines.  These registrations might have earned Vaughan fees, but it's hard to imagine how they helped Eastern Shore's competitive position even setting aside this expensive lawsuit.

Why I now have a .ca domain name

Google just rolled this out: country-specific redirection for blogspot blogs like mine.  So gets you my blog, as does  I found this out because the New Statesman picked up the Yahoo! "get the look" photo ad problem I shared, and apparently the source read the post in Canada.  This move allows Google to engage in country-specific compliance with non-US takedowns; we'll see how it goes.

Highly recommended: Abraham Drassinower on copyright and copying

Abraham Drassinower, Copyright is Not About Copying, 125 Harvard Law Review Forum 108 (2012).  Short and excellent.

Centering the copyright system on the obligation not to copy relegates the public domain in copyright  law to the periphery of the copyright system.  The view that the defendant’s duty not to copy is the core of copyright law misses the richness and fruitfulness of copyright law as an institutionalized distinction between mere copying and wrongful copying.  Fundamentally, what turns on this distinction is the possibility of broaching the sphere of permissible copying not merely as an empty field devoid of core juridical import, but rather as an irreducible indication of the genuinely constitutive depth at which copyright law captures not only the wrongfulness but also the lawfulness of copying.  Just as the idea/expression dichotomy is as much about the free availability of ideas as it is about the duty not to copy expression, so is copyright law generally as much about the defendant’s as it is about the plaintiff’s authorship. 

Judicial deference to administrative agencies?

I bet the FDA wishes it got the kind of deference on offer in the D.C. Circuit opinion upholding the EPA’s greenhouse gas regs:

As we have stated before in reviewing the science-based decisions of agencies such as EPA, “[a]lthough we perform a searching and careful inquiry into the facts underlying the agency’s decisions, we will presume the validity of agency action as long as a rational basis for it is presented.” Am. Farm Bureau Fed’n v. EPA, 559 F.3d 512, 519 (D.C. Cir. 2009) (internal quotation marks omitted). In so doing, “we give an extreme degree of deference to the agency when it is evaluating scientific data within its technical expertise.” 

…If a statute is “precautionary in nature” and “designed to protect the public health,” and the relevant evidence is “difficult to come by, uncertain, or conflicting because it is on the frontiers of scientific knowledge,” EPA need not provide “rigorous step-by-step proof of cause and effect” to support an endangerment finding. Ethyl Corp. v. EPA, 541 F.2d 1, 28 (D.C. Cir. 1976). As we have stated before, “Awaiting certainty will often allow for only reactive, not preventive, regulation.”

(Compare Alliance for Natural Health v. Sebelius, which among other things finds that, because there was one well-conducted study supporting a health claim, the FDA couldn’t bar supplement makers from making the claim, even though four well-conducted studies didn’t support it.  See xkcd for the error.)

Tuesday, June 26, 2012

Glass House unbroken by Big Brother's copyright/trade secret claims

CBS Broadcasting, Inc. v. American Broadcasting Companies, Inc., 2:12-cv-04073-GAF-JEM (C.D. Cal. June 21, 2012)

CBS has aired the reality TV show Big Brother for 13 years.  It’s set in a sound stage built to resemble a house, with 12-14 participants live in front of cameras that record everything that happens.  Participants are eliminated through various means until the last one left wins some cash.  ABC developed The Glass House, a competing show in a similar setting with a similar number of contestants and a similar motivation. “As with Big Brother, cameras will record the interaction among contestants in the hope that, once thrown together in close quarters with no escape, drama will ensue.”

CBS sued for copyright infringement and misappropriation of trade secrets.  The court denied its motion for a TRO, concluding that CBS was unlikely to show that ABC copied protectable elements of Big Brother.  In addition, the alleged trade secrets were already known in the business, easily reverse engineered, or not adequately protected as trade secrets.

CBS argued that the similarities between Big Brother and Glass House were unsurprising because ABC hired numerous former Big Brother staff to work on Glass House, including the Glass House showrunner (responsible for day-to-day operations).  The showrunner admitted that he showed the Big Brother “Houseguest Manual,” a compilation of rules for Big Brother contestants, to a production coordinator on Glass House, and asked that its contents be re-typed and sent to in-house counsel at ABC.  He also consulted consulted an old “Master Control Room” schedule for Big Brother when determining how many “story positions” he would need to hire for Glass House.

CBS contended that Big Brother’s unique success was substantially due to its schedule, which required “recording, editing, and broadcasting episodes during the competition,

within 48 hours of the events actually happening.”  This quick turnaround depends on special filming, editing, and production techniques, including multiple production teams separately assigned to monitor major storylines and searchable databases that catalog all house activities; CBS argued that these were trade secrets.

The court turned first to the copyright claim.  Access was clear, and given the similarity of the concepts, there was no doubt that some copying occurred.  But the question was whether there was substantial similarity in protected elements.  Citing Swirsky v. Carey, CBS argued for an “inverse ratio” rule that required less proof of substantial similarity when access is shown, but that’s a really bad idea.  As the court noted, such a rule “stands logic on its head … [A]ccess says nothing about whether two works bear any similarity to each other which must be determined solely by a comparison of the elements of the two works.”

Copyright protects expression, not ideas, themes, concepts, or scenes a faire.  Nor does it protect “hard work, industriousness, persistence, perseverance, tenacity or resourcefulness.”  (Insert West Wing “you just said three things that all mean the same thing” reference here.)  Nor, as §102(b) states, does it extend to any “procedure, process, system, [or] method of operation.” 

The court began by identifying some of the last category, noting that CBS conflated the copyright and trade secret analysis in order to make the copyright argument appear stronger.  CBS identified various procedures, processes and techniques it used to create Big Brother that it argued were protectable by copyright, including: (1) the number and placement of cameras used to record the activities of the “cast” of the show; (2) the fact that the video streams live to the internet; (3) the fact that contestants are housebound for some or all of the period during which the show is shot; (4) the timing and scope of the post-production work; (5) the fact that the post-production does or does not involve editing of content; (6) the fact that shows commence airing before the final episode has been shot; (7) the size of the production crew and the array of positions that are held by crew members.  “While these various procedures and processes may ultimately have an impact on the expressive elements of the show, 17 U.S.C. § 102(b) establishes that they are not within the ambit of copyright protection.”  The court therefore disregarded them.

So what was the expression of Big Brother?  “CBS has attempted to fit the reality show square peg into the fictional round hole.”  It argued that there were similarities in “plot, themes, dialogue, mood, setting, pace, characters, and sequences of events” between the two shows, but “Big Brother does not, as a concept, readily exhibit any of these elements.”  Rather, “the ‘drama’ that occurs in the voyeuristic variant of reality television develops, by design, in an unpredictable way. Until the cameras begin to record, there is no plot, there is no dialog, there is no pace or sequence of events, and there are no fixed characters because there is no author.   There is a setting, which is hardly novel, and some general ideas regarding the structure of the show, but little else.”

CBS was really trying to claim copyright in a format or template:

a voyeuristic reality show involving a group of 12 to 14 participants who compete for a grand prize while being subjected to round-the-clock observation while locked in a sound stage designed to give the appearance of a house.   To avoid the risk that the interactions among the participants becomes boring and uninteresting, the participants are given periodic challenges that earn privileges or cost them sanctions and, hopefully, create plot elements. As the season wears on, the drama intensifies as participants are voted off (“evicted”) by the other contestants until only one is left and declared the winner.  

This it could not do.  While the concept was more concrete than the broad abstraction “reality show,” it was still quite general and made of unprotectable elements.  A shared “voyeuristic” feel and “unscripted” character weren’t concrete expressive elements.  Nor were the components new or unique.  “[A]ccording to some sources, the idea of a voyeuristic television program depicting strangers thrown together in the same environment for an extended period of time while their interactions were recorded was pioneered in the 1991 Dutch television series ‘Nummer 28,’” then extended in MTV’s The Real World.  No prior show in the record kept the contestants housebound, “but that is more a procedure employed to induce interesting behavior than an

element of expression in and of itself.”  And most reality shows involve a contest for a grand prize; smaller competions along the way are a staple of reality programming “for obvious reasons – competition creates conflict; conflict creates drama; and drama (hopefully) creates interest, viewers and revenue.”  Competition and the risk of expulsion “are the life blood of reality programming.”

CBS’s expert argued that the “characters” were of “varied gender, age, and ethnicity.”  The court thought that they were people, not distinctly delineated characters deserving copyright protection.  The expert opined that some were “natural leaders and others . . . are natural whiners.”  The court was dubious: “Well, maybe it will work out that way, but no one can say for sure until the door closes, the cameras are turned on, and the producers watch to see what develops.  Moreover, the presence of leaders, followers and whiners is hardly an idea that would warrant copyright protection.”  The expert surmised that episodes would be about trust, betrayal, ambition, disappointment, bonding, competitiveness, and affection.”  The court: “But saying that is to say that anything can happen, and themes that are common to all literature for all time may arise during recording.”

CBS’s expert’s own language suggested dissimilarity: the characters were “varied,” the dialogue “improvised,” and, “most tellingly, the shows are aimed at eliciting nearly every human emotion that one might expect to find in anything resembling the dramatic arts.”  These were all generic tropes.  True, structural features gave rise to similarities—contestants on Glass House played kitchen bowling like those on Big Brother, but that real people found kitchen bowling worthwhile while they were locked up didn’t make the two works substantially similar.  (Interesting issue here about people playing out very specific cultural scripts they’ve picked up from existing reality TV.  See I’m not here to make friends.  Hmm, I wonder if you could get the cameras off you in one of these shows by speaking only in extended movie quotes and making the studio’s lawyers nervous?)

Courts dealing with reality show formats have unanimously denied copyright protection to them.  The court cited Survivor v. I’m a Celebrity, Get Me out of Here!, The Apprentice v. C.E.O., Rachael Ray v. Showbiz Chefs, and The Biggest Loser v. a prior treatment.  Even taking all the shared elements together, there wasn’t substantial similarity.  CBS argued that the key expressive features of Big Brother were “an unscripted house reality competition show whose voyeuristic feel depends on minimal interaction between cast and production, and viewer and production.”  But that didn’t identify any concrete, discernible and protectable plot, themes, or dialogue.  It’s not the case that any combination of unprotectable elements automatically qualifies for copyright protection.  (Or more precisely, CBS can get a copyright in its film of the Big Brother contestants interacting, and even its selection, coordination and arrangement of the film, but none of that gives it any rights to stop someone else from taking the same ideas and making their own film.)  It was reality TV’s “very aspiration towards the ‘real’” that doomed attempts to copyright reality TV concepts.  No matter how similarly contestants are selected or even forced to sleep, “the fundamental premise is to let ‘reality’ play its course.”  There’s no plot as the term is normally used in copyright cases.  Any “plot” emerges from the interaction of the contestants with the structure as the contestants begin to reveal their characters and assume specific roles. 

Two asides: (1) This sounds a bit like a video game; the video game designer may or may not have a lot more control over how the story develops. (2) I’m very interested in the concepts of “reality” suggested by these two phrases—people “reveal their characters” as if that were a fixed thing unrelated to circumstance, which is fundamental attribution error; but people may well “assume specific roles” because those roles are elicited from them, not least by their and others’ expectations about how people in X circumstance behave—often modified by demographic characteristics.

In any event, CBS’s ads touted Big Brother for these very emergent features, and the court found the ads more instructive than the legal argument.  “‘Reality,’ it turns out, is hard to copy.”

The court then turned to the trade secret claims.  Neither the Big Brother master control room schedule or House Guest manual, the two documents admittedly consulted by the showrunner, appeared to contain information that derived independent economic value from not being generally known to the public.  Even if such generic instructions could constitute trade secrets, it turns out that various versions of the House Guest manual are online, revealing many of the same instructions.  And the showrunner testified that he didn’t use the CBS schedule, “at least in the sense relevant to that document’s unique economic value, as his hiring practices revolved almost exclusively around budgetary considerations.”  “[T]he haphazard use of two generic documents” didn’t merit an injunction.

As for the remaining techniques, the court didn’t find either ownership or misappropriation.  Similar techniques are common for reality TV.  Nor did CBS show that Glass House actually used CBS’s procedures, citing only indirect evidence like media accounts calling Glass House a knockoff and Glass House’s hiring of Big Brother staffers.  This was plainly insufficient, especially given California’s public policy favoring employee mobility and freedom to use experience gained in prior employment.

For belt and suspenders, the court went on to find that even if CBS had shown likely success on the merits, it still wouldn’t be entitled to an injunction.  Irreparable harm isn’t presumed in copyright cases any more.  There was no evidence that Glass House “would in any way dull viewers’ appetites for Big Brother or similar reality television programs.”  Nor would loss of viewership be irreparable: CBS didn’t show that it couldn’t be compensated in money.

Furthermore, the balance of hardships tipped in defendants’ favor.  An injunction would disrupt the employment of more than 100 employees working on the show, as well as the contestants, who gave up their own employment opportunities to participate.  Defendants’ $20 million investment in Glass House would be rendered almost worthless.

Copyright-related links

Piracy and the Greek crisis. Fascinating article, especially on fan subbing.

Cribbed from gk: When the DC Circuit, in today's opinion rejecting challenges to the EPA's greenhouse gas rules, linked to this Schoolhouse rock video, did it know whether the video had been posted with the permission of the copyright holder?

initial interest confusion lives to lose another day

Eric Goldman nicely covers the recent PissedConsumer ruling holding that, despite the unlikelihood that consumers would expect a website called PissedConsumer to be endorsed by the businesses criticized thereon, the parties have to wade through expensive discovery to reach that result.  One thing the case highlights is that no court has adequately considered the relationship between “initial interest confusion” and comparative advertising, even though the whole point of comparative advertising is to use a consumer’s recognition of the comparator to attract attention to the advertiser’s product—and that’s a good thing!  It is hard for me to understand why competitors’ ads placed on the PissedConsumer page for plaintiff Amerigas would not be protected by precisely that principle.

Audience expectations affect literal falsity determinations

Thermal Design, Inc. v. Guardian Building Products, Inc., 2012 WL 2254195 (E.D. Wis.)

The parties compete in the sale of ceiling and wall insulation systems for large non-residential metal buildings.  They sued each other for false advertising.

Thermal Design sells the Simple Saver System, “an insulation system that can be installed in roofs and walls of non-residential buildings” and that “mimics a suspended ceiling, which serves aesthetic and interior lighting distribution functions.”  It added alternative fall protection to the Simple Saver System as a standard worker protection feature, consulting with OSHA on test and safety requirements.  OSHA ultimately sent a letter stating that, though it didn’t endorse products, it had concluded that, if the Simple Saver were installed as described, the product would put users in compliance with OSHA fall protection requirements.

For 15 years, Thermal Design bought nearly its entire supply of fiberglass insulation from Guardian.  About a decade ago, Thermal Design’s then-largest competitor, CGI, began selling a fabric liner system, the Energy Saver System.  Six years ago, Guardian bought CGI and began selling the Energy Saver FB.  The Energy Saver used components similar to those of the Simple Saver.

For a while, Guardian sold both the Simple Saver and the Energy Saver, but Guardian’s distribution relationship with Thermal Design ended shortly after Guardian added fall protection to the Energy Saver.  In 2007, Guardian issued a press release announcing that Energy Saver had been “enhanced to include OSHA-compliant leading edge fall protection.”  Its ads made similar claims, as well as claims such as “your safest bet” and “To meet OSHA guidelines an insulation support and fall protection system must restrain and support 400 pounds dropped from at least 42" above the system. The Energy Saver FP™ System passes this rigorous test!”

Thermal Design challenged Guardian’s fall protection claims for the Energy Saver.  Its expert evaluated earlier drop tests and conducted some of his own, and concluded that the Energy Saver didn’t meet OSHA standards.  Further, he concluded that Guardian’s expert’s test was invalid because of flaws in test methodology.  This created a genuine issue of fact on literal falsity.

However, Thermal Design didn’t get summary judgment in its favor on its claim that Guardian failed to disclose that the Energy Saver does not pass the drop test within six feet of the perimeter/edges of the building.  Kudos to the lawyer behind this explanation of the claim: “if this piece of paper were a roof, the space between the outer edges of the paper and the typed portion (the margin) has no OSHA compliant fall protection …. Any person working in ‘the margin’ will fall, hard and fast, to the ground or floor level below.”  But the meaning of a claim must be considered in context and with reference to its audience.  Guardian produced evidence suggesting that the six foot margin is excluded when using the phrase “leading edge fall protection,” including deposition testimony from a Thermal Design salesman about the relevant consumers’ understanding.  Thus, there was a factual dispute over literal falsity with respect to the six foot perimeter.

Thermal Design also challenged Guardian’s claim, by email to potential customers, that the Energy Saver was “considered an equal” to the Super Saver.  The plainly erroneous 7th Circuit rule that person to person communications can never be advertising or promotion kicked this claim out (though presumably a well-pleaded state law claim could have survived).

Guardian also offered the Purlin Glide insulation system, which like the other two could be used in metal buildings.  Insulation’s thermal performance can be measured using what’s known as U-value and R-value: the higher the installed R-value the better or more efficient a building is to heat and cool.  Guardian lowered its advertised U- and R-values for the Purlin Glide starting in 2009.  Thermal Design alleged that Guardian falsely advertised the thermal performance of the Purlin Glide; its evidence that Guardian’s underlying tests were flawed was sufficient to create a material issue because this was an establishment claim.

Thermal Design also argued that it was entitled to summary judgment because Guardian changed the reported R-values in 2009; the old values were based on a mean temperature of 35.1°F, but its new brochure reported R-values on upon a mean temperature of 75%°F.  The old ads didn’t state a mean temperature, so the R-values might have been literally false, “but only if the audience to which the statement is addressed would assume 75%°F or anything other than 35.1°F as a mean temperature.”  The parties’ experts disagreed on whether there was a standard in the industry (and what it was), creating a genuine issue of material fact.

Thermal Design also challenged a brochure distributed by the North American Insulation Manufacturers Association as having incorrect thermal performance values for various insulation systems.  Though Guardian's name is listed on the last page of the brochure as a “NAIMA Metal Building Committee Member,” the evidence showed that Guardian had nothing to do with the publication of the brochure. Thus, Guardian did not cause the NAIMA publication to enter interstate commerce and this claim was dismissed.

Similarly, Thermal Design alleged that an article linked on Guardian’s website provided incorrect U-values and an incorrect formula for calculating certain insulation values.  But the article said nothing about any particular Guardian or Thermal Design product.  “Therefore, even if the article includes false or misleading information, it cannot form the basis of a false advertising claim.”

The court turned to damages, and found that Thermal Design failed to produce any evidence that it was damaged by actual consumer reliance on the allegedly false statements (herein, about source).  Guardian did produce evidence that consumers weren’t confused, in the form of statements from consumers who said they understood that Guardian was selling the Energy Saver system and not the Simple Saver and that the two were separate.  Thus, Guardian was entitled to summary judgment on the damages claim, though other relief might remain available.

Thermal Design also claimed tortious interference based on 128 incidents in which the Simple Saver was specified by a design professional as “appropriate” for a project, but the ultimate bidder used the Energy Saver instead, without revised specifications.  However, an architect on one of the projects testifed that, while the original specifications used the Simple Saver as the basis for design, it wasn’t a requirement as long as the product ultimately met the minimum specifications.  Other architects said “more or less the same thing”: substitutions were ok if they accomplished the same purpose in basically the same manner as the originally listed product.  The architects thought that competition for substitution was good for consumers.  Thus, Thermal Design failed to create an issue of fact as to sufficiently certain prospective contractual relationships.

Guardian brought a number of counterclaims, including defamation.  Among the claims it identified as defamatory: Guardian is “putting innocent workers at risk of serious injury and death;” Guardian adopted a “market whoring scheme;” Guardian “counterfeited our system;” and Guardian's “motive is to confuse purchasers and prey off the good will, reputation and value of the highly promoted and specified simple saver system, its trademarks and service marks.”  Since there was a genuine issue of material fact on fall protection, Thermal Design might have a truth defense on the worker safety claim.

Thermal Design argued that some of these statements fell outside the two-year limitations period based on when Guardian counterclaimed, but the statute of limitations was tolled when Thermal Design sued.  Thermal Design argued that Guardian’s counterclaims were permissive, and the limitations period should only be tolled for compulsory counterclaims, but Wisconsin apparently made no such distinction (and the court found that the defamation claim was compulsory anyway).  Even if the court was wrong, there were still statements within the two-year period before the counterclaims were filed, and also the discovery rule might aid Guardian, so the court refused to dismiss the counterclaims.  The only instance excluded on statute of limitations grounds related to an April 2006 article in Metal Construction News,“Counterfeit System Creates Confusion, Endangers Lives,” since it was undisputed that Guardian knew about the article in the same month.  But the same article was “essentially republished” under a slightly different title in the October 2006 Metal Architecture Magazine, “Performance Claims of Some Insulation systems Manufacturers Creating Confusion, Endangering Lives,” within the period.  (I just love that there are at least two different industry publications for this industry!  We live in complex times.)