CFP: trademark, competition, or antitrust law

 I received a request to disseminate this CFP from the Jerzy Wiszniewski Foundation.

Works in any of the following fields may be entered in the competition:

Օ Trademark law

Օ Competition law

Օ Antitrust law.

The work may be a master’s thesis, doctoral or post-doctoral dissertation, monograph, or other work of a scholarly nature.

Requirements for submissions:

Օ Published (or defended) no earlier than 11 April 2019

Օ Accompanied by at least two written reviews by a person holding a doctorate or more advanced title, or a member of the judiciary or prosecution service

Օ No less than 100 pages

Օ Written in English or Polish.

Detailed information and the rules for the competition are found at the foundation’s website:

wiszniewski-foundation.org

The author(s) of the best work in the competition will be awarded a cash prize of USD 20,000.

Submissions should be addressed to: [email protected]

WIPIP session 4: ™ & Consumers

Mary Katherine Amerine, Reasonably Careless Consumers in TM & False Advertising

How do courts treat consumers in TM and false advertising cases? Assumption dates back to at least the 1930s that consumers exercise less care for inexpensive grocery items and are thus easier to confuse: Brew nuts v. Beer Nuts, Bulls’ Eye v. Raging Bull for barbecue sauce, Powerbar v. Powerstick for sports energy bars, Huggies v. Dougies for diapers. Even say that consumers can’t be expected to examine labels carefully.

False advertising uses v different framework: consider the challenged ad as a whole, including disclaimers and qualifying language. Consumers are often expected to pick up the product, look beyond the initial ambiguous statement, and inspect further. Inconsistent with idea that consumers just toss things in their carts. Thus, court said consumers wouldn’t be confused by “Trader Joe’s Manuka Honey 10+, 100% New Zealand Manuka Honey” because they would understand that it was unlikely that the honey would be purely from bees visiting Manuka flowers; they should know that Manuka honey is graded from 0-26 and 10+ is not great. Same result with Ghirardelli “classic white chips” that don’t have any white chocolate.

This is inconsistent! The consumer who scrutinizes “classic white chips” or googles Manuka honey ratings will not be confusing Brew Nuts and Beer Nuts or Huggies and Dougies.

In fact, consumers are highly involved in grocery shopping; more care than TM cases give consumers credit for.

RT: What would you say to the argument that the different treatment is justified by the role of consumer harm in the two causes of action? That is, TM infringement is a harm to the TM owner; harm to consumers isn’t necessary so it doesn’t matter if they’re tossing without thought; but if they don’t care enough to clarify ambiguities, then there shouldn’t be a consumer claim. Doesn’t totally deal w/Lanham Act 43(a) claims, but it’s notable that your precedents on the false advertising side are California consumer protection claims.

Jake Linford: Perhaps the consequences for the defendant are different, so we expect different behavior from consumers before applying those consequences. [Although these are presumptions about how consumers will think, so we’re not just expecting, we’re hypothesizing and holding as a matter of law.]

Eric Johnson: my confusion is often intrabrand: which variety does my son want? No one is confused about diapers; they’re very careful about which diaper. [I think of Eminem’s classic line: “I can’t provide the right diaper.”] Courts love IP and don’t like torts, which is contributing.

Q: Veuve Cliquot v. Boutique Cliquot—Canadian case looks at casual consumer somewhat in a hurry.

A: What I’m taking issue with is that assumption! Doesn’t map into realistic consumer behaviors.

Cathy Gellis: May depend on what kind of consumer and what kind of product. People who bake know what they want to cook with, but they might be in a rush and get the wrong one. Is there a difference in the examples? Ingredients v. end products, or products where the consumers will care which brand they got more or less.

A: this is the problem of flattening all these things, especially in TM cases.

Betsy Rosenblatt: Social justice implications. How much care should people be taking in the grocery store? And can law make them do it? What makes people take more or less care? Poverty might mean more care than less. (Poverty makes great cognitive demands on people!) Who gets harmed by which standard?

Laura Heymann: Warning labels. Tort context: courts make assumptions about how carefully consumers will read warning labels that are also inconsistent.

Eric Goldman: Third player, often ignored: the grocery store and what it does to create meaning about presenting products, which can be inconsistent and exacerbate potential problems. If chips are presented along with other chocolate chips, that could encourage confusion.

Bita Amani: What’s the endpoint? To change the standards in false advertising, in TM, or to create a new cross-context standard? Consumers do spend more time scrutinizing labels—if the empirics show one thing or another, how much should the normative reflect the descriptive?

Felix Wu: on the TM side, consumer sophistication is just one factor; on advertising, seems more directly connected to an element of the claim itself. One way to harmonize might be to make it more important/more directly connected to TM liability. Are courts just mistaking the nature of the consumer or just ignoring it and using other factors?

Laura Heymann

Thinking about how consumers view their interactions with companies both as a matter of branding and as a matter of contracts, specifically on social media. Move to “brand persona” in marketing and law—not a producer but a collection of characteristics and impression; the source is less important than the authorization and the meaning. The new model: Dove put out a commercial about real beautyàconsumer infers that Dove cares about women—using those personality traits as a reason to engage or not engage with the brand in the future. Relational: reinforcing and facilitating the relationship so the consumer has a good experience and feels well treated, so won’t search for alternatives.

Consumer contract part: consumers don’t read most consumer contracts, which are contracts of adhesion. It’s often not rational to read the contract, since most terms won’t end up mattering. Some companies use the contract language to reflect the brand image and communicate brand persona, but even apart from that, it’s not the contract or TOS that creates the relationship promise—it’s the brand. Brand acts as umbrella unifying messages from different parts of company as if they were talking as one—marketing, legal, billing. Casual speech feels more friendly. We’ve seen this on Twitter, where people engage in dispute resolution over social media as if they were resolving a dispute with an individual—they tweet at the brand. Can lure people into thinking that the relationship is other than transactional, blur understanding of who contracting partner actually is. Different brands under helm of same producer can be surprising.

Felicia Caponigri: what happens when a brand is attached to a founder?

Jeanne Fromer: celebrity relationships/parasocial relationships seem both similar and also different in key ways. Consider relevance for TM doctrine even though cases aren’t brought by consumers. If it’s the case that people are interacting w/businesses as if they’re people, that might provoke a lens of ways in which consumers are likely to be confused or not [or what counts as acceptable criticism, given the comparison to defamation].

Glynn Lunney: why personalization matters? Most TMs that have value are from repeat purchases—Loehmann’s brand loyalty [or my loyalty to Crest toothpaste] may or may not be distinguishable w/o a humanoid relationship.

Eric Johnson: consider lay dismissiveness towards contracts—it’s just legal stuff, legal mumbo-jumbo.

A: research on what people think makes a contract valid—not a meeting of minds, but a signature.

Betsy Rosenblatt: is there some implied contract to conform to the personality you’ve projected? The tendency to attribute blame to “the legal people” who aren’t really representative. [If only the tsar knew! There’s also resonance with the defense of overreaching C&D letters—“we have to protect our trademark! The law made us threaten you, not us!”]

Sari Mazzurco, Trademark Law’s Consumer/Public Problem:

Tam & Brunetti focused on the expressive qualities of TMs, and in VIP turned that around to suppress speech. Lemley/Tushnet discuss some possibilities. More foundational conflict: who TM law is for? And why we should care! TM law is supposed to serve consumers as market participants (reduce search costs) and protect competitors’ goodwill by allowing them to associate exclusively as source of products. But TM is full of protections that don’t serve consumers as market participants selecting among alternative choices. They serve a different legal subject: the public. The public has always been an intended beneficiary. Section 2 registration bars (public morals, public order, dignity/personality interests); remedies (disgorgement and injunctions both incorporate public interest considerations); cancellation (actions can be brought by anyone who thinks they may be damaged, even if dignitary interests of goats on a roof aren’t cognizable); dilution by tarnishment; post-sale confusion; infringement defenses (nominative fair use and Rogers invoke public interest in discourse, though positioned as a check on TM law rather than internal to it).

How does this affect application or development of TM law? Only prescriptive claim: TM should endogenize the public interest. Doesn’t dictate case outcomes, but lays out paths in front of court—consumer interests v. public interests. VIP looks to consumer interests, Tam and Brunetti, look to public interest.

Practical benefits: broadens potentially relevant public interests; helps articulate conflict in ongoing disputes; guards against 1A challenges; specifies relevant arguments in, e.g., domain name litigation, personal name litigation.

Rosenblatt: Already in injunctive relief?

A: when court says public interest is against consumer confusion, but that’s consumer interest, not the public as a whole. Broadens perspective.

Jeremy Sheff: If you’re trying to lay out the interests at stake, producers also have strong interests. If we’re pretending that consumer/producer interests are aligned, that’s clearly not the case; 2(a) cases in particular, it’s producer interests that seem to win out over public or consumer interests, rather than public v consumer.

RT: Another issue to consider: lack of need to define trade dress in advance or in a way that is clearly predictable by competitors; compare European registration regime Art. 4, which requires something that is clearly defined (“An EU trade mark may consist of any signs, in particular words, including personal names, or designs, letters, numerals, colours, the shape of goods or of the packaging of goods, or sounds, provided that such signs are capable of:

a) Distinguishing the goods or services of one undertaking from those of other undertaking; and

b) Being represented on the register of European Union Trademarks, in a manner which enables the competent authorities and the public to determine the clear and precise subject matter afforded to its proprietor”). Difficult issue b/c public also has contending interest: how can Brunetti and the scandalousness bar both serve the public interests?

A: the public interest shifts and evolves over time—the idea of gov’t protecting morals was the idea of the day at one point; we don’t feel that way any more.

Lunney: do you mean competitors or TM owners? Producers is a different group from either of those! Using the public as a convenient fiction to identify and protect it without acknowledging conflicts: post-sale confusion benefits the wealthy at the expense of people who can’t afford the original. Not a monolithic group. Courts always pretend it’s about potential consumers.

A: agree that the public isn’t monolithic; courts are constructing an idea of the public.

Fromer: should explore the interests of producers, in a way analogous to what’s been done in the © context: the romantic author is often held up to serve the corporate interests behind them—it’s attractive but serves a different group. Is that going on here? Who’s bringing the lawsuits, after all?

Felix Wu: More convinced by some examples than others. Public = nonconsumers? Not sure that post-confusion is an example; the competing groups are different classes of consumers rather than nonconsumers. Dilution is also weird: the concept is that brand consumers are going to be affected somehow. Biggest example is the speech cases: expressive interests are indeed nonconsumer interests, as you see in both registration and defenses. Then the Q is whether we’re just talking about speech interests or is there some other set of nonconsumer, nonproducer interests?

Linford: Do we care about the majority of consumers? In genericity, we say that. Is the public a placeholder for protecting new entrants over incumbents?

A: Concept from environmental law article by Sagoff: how does concept of public lead you to think differently about what we owe each other? Surveying involves a thick concept of interaction with TMs that can’t just be a matter of individual cognition. Meaning-making is social, so primary meaning is necessarily socially constructed.

Chris Buccafusco: Where do you see this entering at the various levels of abstraction/generality? Sometimes you’re discussing litigation level v. basic contours of the doctrine.

A: higher level argument goes to endogenizing the public in the contours of the doctrine; that then has doctrinal payoffs for use in specific litigation contexts.

Matthew Sipe, Trademarks as Competition Law:

TM as property—historically accurate but less plausible/supported today. Search-cost reduction/quality reputation incentive: descriptively accurate as matter of function, but only to a point (monopoly would diminish search costs most)/still requires resort to other principles. Promoting competition: common in modern case law, discourse, and organization; but questionable provenance and not adequately defined or specified. So what do we mean by promoting competition?

We’re still figuring this out after 100 years of the Sherman Act. One vision: protecting producers’ investments and interests: Learned Hand, for its own sake and in spite of cost, protect small units. We do that in TM to punish confusion even w/o demonstrable harm to consumers; prohibit dilution; protect some aesthetic functionality; we allow abuse of certification marks for cartelization.

Bork’s version: consumer welfare, but smuggling in total welfare standard. In TM law: we allow total cashout in final period, harming consumers; we effectively allow transfers in gross (maybe justifiable as efficient but transfers wealth from consumers to producers); we allow protection for rivalrous functionalities, like placebo marks (again, transfers from consumers to producres); we allow price discrimination (including same product under national brand and house brands, which again capture from consumers/avoid deadweight loss). That can drift towards a thin vision of consumer welfare. Fail to recognize source, origin, and other nonconsumptive qualities as valuable—you can outsource production and keep using the same brand; freely permit abandonment, rebranding, and proliferation of different brands in same space all owned by the same company—obfuscating market concentration.

Simultaneously making key mistakes from every law]antitrust era b/c we haven’t thought about what promotion competition really means.

Structural/institutional lessons: find a common denominator of what we want. Consumer welfare might be valuable, but more robust than pure price.

Enable consumer participation and remedies: the consumer has an interest in TM but right now we don’t have standing or remedies.  

TM law is more afraid of false negatives than false positives, and it should balance them.

Move from bright-line rules to flexible standards.

Eric Goldman: the question is what should be exogenous and what we should import from other laws. What should we import from antitrust or other areas into TM? What methodologies should we use for gatekeeping? Maybe we need to rebuild antitrust law on its own merits. Rules might be better than standards! You could be legal under TM law but violating antitrust law.

A: at a minimum, TM shouldn’t frustrate competition law.

Linford: we don’t want consumers bringing their own TM actions, which is weird if TM is supposed to be about consumers. But if you take seriously about how consumers think—1/3 of them are just irredeemably confused—maybe keeping them away from the law and using others as a proxy to represent their interests is a good thing. Descriptively—are there folks you need to respond to on bright line rules? Lisa Ramsey wants more bright line rules, as does Bill McGeveran—lots of folks see standards as problematic.

Jeanne Fromer: Daniel Francis in antitrust is trying to chart a path between Bork and Kahn in common-law principles, could be helpful analogue. Antitrust standing is completely the opposite, w/consumers bringing suits—why is the decision different there?

RT: Consider false advertising as another kind of competition law. Bright line rules—where are they located in TM now? Glynn Lunney has a great paper on this.

Lunney: we don’t have antitrust nearly right, and it certainly isn’t helping the economy be optimally competitive today. Hand quote maybe doesn’t mean what you think—it’s anti monopolization (echoed by Wu).

Buccafusco: do this one doctrine at a time, not all TM. Find the best thing in antitrust that is most useful in TM and write that paper showing how it can help TM.

Wu: do you mean to import a broader consumer welfare standard, or anti-monopolization, which would mean fewer monopolies/cut against broad producer-friendly doctrines.

Heymann: another benefit of picking a problem

standard setting bodies don't proximately cause Lanham Act injury when states adopt their recommendations

Geomatrix, LLC v. NSF Int’l, 2022 WL 4369950, No. 20-13331 (E.D. Mich. Sept. 21, 2022)

Geomatrix sued defendants for Sherman Act violations and false advertising in the market for onsite wastewater treatment systems, aka septic systems. The antitrust claims failed because they were antitrust claims/because of Noerr-Pennington (First Amendment protection for petitioning government trumps antitrust laws); the false advertising claims also failed.

Two competitors are defendants, as well as NSF, a nonprofit accredited by ANSI that “certifies many of the onsite wastewater products brought into commerce.” Both NSF employees and employees of product manufacturers sit on the relevant committee, and one defendant’s employee served as chair of a subcommittee charged with the development of a new standard for high-strength wastewater, and allegedly essentially ran the Wastewater Technology standard-setting process on behalf of NSF between 2010 and 2020.

According to the complaint, increasing environmental regulations and other constraints have led for demand for more advanced technologies to ensure sewage is thoroughly treated before it reenters the water table. There are two main options: an “aerobic treatment unit” known as an “ATU,” or “Contained System,” which “works more like a mini-municipal wastewater treatment plant, cleaning the water within a controlled environment before its release.” The majority of plaintiff’s competitors allegedly produce contained systems. The second option is “Treatment and Dispersal”/“Open Bottom” systems, which operate much more like a traditional septic system, but use more advanced dispersal devices which allow in oxygen (thereby increasing the growth of microorganisms) and provide additional filtration as effluent leaches back into the ground. Geomatrix largely produces treatment and dispersal systems, which are allegedly both cheaper to install and operate than contained systems. But competitors have allegedly used misinformation to limit their uptake.

Each manufacturer pays NSF annually to renew the “listing” for each wastewater products it has certified under its standards. So, Plaintiff theorizes that NSF participated in the conspiracy to protect its own revenue since the majority of the products it certified are contained systems.

The advertising-related allegations involved disparaging a Geomatrix product that was already certified; adopting the disparaging term “uncontained” system to refer to its products; and otherwise disparaging the safety and efficacy of treatment and dispersal. Geomatrix was allegedly “unable to receive approvals in most states” for its product in states that had adopted statutes and regulations “requiring NSF Standard 40 certification” for onsite wastewater systems, and was under threat of being excluded from the new standard for high-strength wastewater.

Lanham Act claims: Geomatrix alleged that NFS misrepresented its own services, e.g., marketing that “NSF provides a fair and open process for standards-setting;” falsely informing Geomatrix “that it abides by the Standards Development Process and Antitrust Guide;” “publishing an issue paper stating that Treatment and Dispersal Systems did not fit under NSF/ANSI Standard 40;” “[m]aking public statements that require NSF Standard 441 to incorporate all technologies and subsequently placing blame for the delay in the standard-setting process on Geomatrix.” Other defendants allegedly used their roles in the standard setting process “to disparage and preclude Geomatrix products from the market.”

Both types of claims flunked Lexmark’s proximate cause requirement, and the court commented that the claim against NSF also didn’t fall within the Lanham Act’s zone of interest; NSF was essentially a supplier of services and Geomatrix most analogous to a customer, who lacks Lanham Act standing. “Put simply, ‘it is impossible to trace a straight line’ from Defendants’ alleged conspiracy to disparage GeoMat by questioning their effectiveness and environmental impact (the illegal conduct) to Plaintiff’s inability to sell its GeoMat products in various states (the injury).” The actual cause of Geomatrix’s inability to sell its GeoMat products in an unspecified number of states was the “independent decision of each state’s environmental regulators not to approve the products for sale.”

State law claims failed for similar reasons, including Noerr-Pennington.

 

"unfair trade practices" insurance exclusion covers antitrust, not consumer protection

G-New, Inc. DBA Godiva Chocolatier, Inc. v. Endurance Am. Ins. Co., C.A. No. N21C-10-100 MMJ CCLD, 2022 WL 4128608 (Del. Super. Ct. Sept. 12, 2022)

An insurance coverage case about a false advertising claim that doesn’t turn on “advertising injury”! Godiva had insurance from defendants when it was accused of misleading consumers with the “Belgium 1926” label on its products. The settlement, still pending final approval, in the underlying case obligated Godiva to pay: (i) a maximum of $15 million in monetary relief; (ii) a maximum of $5 million in attorneys’ fees; (iii) all settlement notice and administration costs; and (iv) up to $10,000 in class representative service awards. The insurers refused Godiva’s demand to cover the claim.

Other matters appear, but of most relevance: an exclusion for civil money penalties imposed for “knowing or willful” conduct did not apply in the absence of “evidence or admission that the violation of law was knowing or willful.” “[T]he Settlement Agreement is a covered loss within the meaning of the term ‘Loss’ as explicitly defined to include settlements in the Policy.”

There was also an exclusion covering claims “based upon, arising out of or attributable to an actual or alleged violation of the Sherman Anti-Trust Act, the Clayton Act or the Federal Trade Commission Act, as amended, or any other federal, state, local, common or foreign laws involving anti-trust, monopoly, price fixing, price discrimination, predatory pricing, restraint of trade, unfair trade practices or tortious interference with another’s actual or prospective business or contractual relationships or opportunities.”

Did the undefined term “unfair trade practices” include consumer protection and false advertising? No. “Generally, consumer protection involves violations of statutes, regulations, and common law standards. The Endurance Policy does not explicitly exclude consumer protection actions from coverage.” Other than the ambiguous term “unfair trade practices,” the rest of the terms in the exclusion were antitrust-based. “The Court questions whether unfair trade practices are the equivalent of consumer fraud. Defendant insurers have presented no authority demonstrating that these terms are interchangeable or legally equivalent.” Nor did the settlement specifically say that it provided monetary relief for “unfair trade practices,” though it was possible that some of the settlement could be covered.

A similar result occurred with an exclusion for “fines or penalties imposed by law, other than civil money penalties expressly referenced in the definition of Loss above....” Godiva argued that the settlement amount constituted restitution for the alleged price premium paid for Belgian chocolate, not a penalty; the court again found that at least some of the settlement could be covered.

antitrust claim against Suboxone, including false advertising, survives summary judgment

In re Suboxone (Buprenorphine Hydrochloride and Naloxone) Antitrust Litig., --- F.Supp.3d ----, MDL NO. 2445 13-MD-2445, CIV. A. NO. 16-5073, 2022 WL 3588024 (E.D. Pa. Aug. 22, 2022)

The court here allows an antitrust claim to proceed based in part on allegedly false/misleading statements because they form part of the alleged anticompetitive product-hopping scheme and because the unique characteristics of the drug market make market-based responses to false advertising difficult. (That difficulty is not really unique, but the court is forced to make distinctions because of the unwarranted exclusion of many false advertising claims from antitrust consideration.)

The issue here involves Reckitt Benckiser’s switch of Suboxone, a drug commonly used to combat opioid addiction, from tablet to sublingual film. This made it difficult-to-impossible for generic tablet sellers to succeed in the market because they weren’t AB-rated (therapeutically equivalent) to the remaining branded product.

Reckitt’s scheme had many alleged parts, one of which was safety claims for film over tablets. Unfortunately for Reckitt, based on the findings in Reckitt’s clinical trial data, the FDA concluded that “expanded use of this product [film] will result in significant abuse and diversion that needs to be considered.” FDA noted a “high incidence of drug unaccountability in subjects who completed the trial and those who were discontinued in each of the three clinical sites. This is predictive of the likely occurrence of diversion after the drug is approved and marketed.” Because the FDA found that Reckitt’s clinical study was poorly designed and conducted, it found that it was “not useful for demonstrating any difference in the safety profile or abuse potential of these two formulations [tablet and film].”

Reckitt also received reports that film could be dissolved in water and ingested through the nose, allowing misuse or diversion, but did not study whether users could inject or were injecting it. The employee responsible for collecting and reviewing data on abuse, misuse, and diversion, and pediatric exposures, told several Reckitt executives: “I am not aware of any data to indicate any differences in the abuse/diversion of Suboxone tablets versus Suboxone film.”

Nonetheless, Reckitt’s witness “testified that, despite the information in its possession, Reckitt’s objective was to get 100% of the highest ranking doctors to accept that the film is less abusable than the tablet because it could not be snorted.” At the time it released its marketing statements, Reckitt didn’t have any statistically significant evidence that film reduced the risk of misuse and diversion compared to tablets. There was also conflicting evidence about the risks of pediatric exposure specifically; FDA “specifically rejected any notion that film was safer than tablets with respect to pediatric exposure,” noting among other things that “because the film cannot be spit out (unlike a tablet) it is possible that a child who obtains access to even one dose might be more adversely affected than a child who obtains access to a single tablet.” A senior brand manager for Reckitt said internally that, based on subsequent studies by Reckitt, “[u]nder no circumstances can we make the claim that Suboxone Film is safer or better at reducing pediatric exposures than Suboxone Tablet.” Reckitt, of course, claimed that it had other evidence suporting safety superiority to tablets.

The Third Circuit has used the rule of reason to assess product hopping antitrust claims, and commented that “courts may need to be cognizant of the unique separation between consumers and drug manufacturers in the pharmaceutical market, especially in cases where there is evidence of extreme coercion of physician prescribing decisions or blatant misrepresentation about a generic manufacturer’s version of a drug.”

For purposes of summary judgment argument only, Reckitt conceded that it did everything that plaintiffs alleged and that its conduct was anticompetitive in nature, but that the purchaser classes’ claims still failed. The court disagreed.

Part of the successful theory was that, even though generic tablets have been cheaper than film for years, “Reckitt has retained its share of the market through its disparagement campaign.”

Because the Third Circuit has not presumed that false advertising inflicts de minimis harm as some circuits do, instead considering it as part of the broader picture of an antitrust case, the court evaluated the claims without any such presumption. The court also rejected Reckitt’s argument that actionable statements had to be “clearly or demonstrably false” or “blatant misrepresentations.”

Although “wrong, misleading, or debatable” statements can indicate competition on the merits, it doesn’t always do so: The Third Circuit has clarified that some falsities can destroy competition, including “making false statements about a rival to potential investors and customers.” Indeed, “in some cases, such defamation, which plainly is not competition on the merits, can give rise to antitrust liability, especially when it is combined with other anticompetitive acts.” Although that court referred to “blatant misrepresentation” in its prior discussion of pharma antitrust, “[n]o fair reading of these cases suggests that the Third Circuit was opining that only ‘blatant misrepresentations’ could be anticompetitive.”

A reasonable jury could find that Reckitt’s alleged false “safety story” campaign was plainly not competition on the merits, particuarly given that this wasn’t a stand-alone deception claim but part of conduct constituting an alleged illegal product hop, “an actionable scheme under the Sherman Act.”

Also, the court pointed out that the concerns in the out-of-circuit cases are about difficulties of proof of materiality/harm, but the regulatory context here offered a “unique separation between consumers and drug manufacturers.” “Given this separation, and unlike other industries where consumers can credit or discredit disparagement as they see fit, the ultimate consumers of the drug at issue did not have the opportunity to evaluate the statements and decide whether or not to rely upon them.” [Of course, I don’t think that matters—if the deception was material and harmful, then the theoretical possibility that doctors or ultimate consumers could evaluate the claims didn’t materialize and the market as a whole was harmed.]

Here, too, there was “evidence that Reckitt actively sought to deprive consumers of the ability to actively evaluate safety claims and make the choice between film and tablets.” Reckitt’s own expert “testified that, in the relevant period of 2010, physicians were less mindful of and more reliant on statements made by pharmaceutical companies and their representatives.”  Its own documents showed that many physicians viewed Reckitt as a “trusted advisor” and “relied upon Reckitt’s sales representatives for information and training.” Reckitt campaigned to convince doctors to stop giving patients a choice in the form of Suboxone and warned physicians to distrust patients who preferred tablets because those patients could be misusing or diverting the tablets.

Likewise, while other cases say that false advertising merely provides an opportunity for a competitor to counteradvertise (without ever requiring any empirical testing of that proposition), “the unique characteristics of the pharmaceutical market” made that unworkable. When Reckitt engaged in its campaign, the only relevant products on the market were Suboxone tablets and Suboxone film; there were no generic products and none could be legally advertised. “Reckitt remained the lone voice pitting one of its products against the other and controlling the entire flow of information to physicians, insurers, and the public. Accordingly, unlike in the cases upon which Reckitt relies, the alleged false advertising at issue actually eliminated the forum for competition in the advertising market.”

In addition, the regulatory context always matters. (Citing Trinko in what is perhaps an unusual way?) Given the FDA’s marketing rules, unsubstantiated safety statements (lacking substantial evidence or statistically significant data from head-to-head clinical trials) were deemed false/misleading. And plaintiffs produced evidence that Reckitt lacked the necessary evidence, and that its executives were aware of this when they made the claims. At the time, it hadn’t performed any clinical tests and had “only a subjective belief based on the characteristics of film, including unit dose packaging, dissolution rates, and strong adherence to the sublingual mucosa.” Nor did Reckitt have any data to suggest that film had less pediatric exposure potential. FDA disagreed with the safety claims. This allowed plaintiffs to survive summary judgment.

Reckitt argued that unsubstantiated statements didn’t violate antitrust law and weren’t “false” or “blatantly misleading” because there wasn’t definitive expert evidence either way.

Applying this reasoning in the context of the pharmaceutical market would make little sense. In the real world, pharmaceutical manufacturers must perform adequate studies and provide sufficient data to substantiate marketing statements about its drug. Reckitt’s legal construct would flip that burden and require that an antitrust plaintiff disprove the validity of marketing statements by the manufacturer. In other words, a pharmaceutical manufacturer could, as part of an antitrust scheme, make unsupported claims about its drugs without doing any studies to substantiate those claims but be insulated from potential antitrust exposure because no contrary studies exist.

Plaintiffs had evidence that Reckitt, experienced in pharma, understood the regulatory requirements, including the substantial evidence/substantial clinical evidence standard. “Yet, taking the facts in the light most favorable to Plaintiffs, Reckitt made the safety statements to the pharmaceutical industry disregarding whether they were true, thereby creating the false perception that it actually had statistical support for the claims.” A jury could believe that it wasn’t Reckitt’s technical violation of the FDA regulation that was anticompetitive, “but rather Reckitt’s false representation to the pharmaceutical community that it actually had scientific support for its claims.”

IPSC breakout session 2: Int'l IP. TM, Antitrust

International IP

Infringement as Artefact: The Curious Case of Paramount Pictures v Rup Kamal Chitra

Arpan Banerjee

Film industry 60 years ago was not seen as respectable industry in India: female actors were considered sex workers. Banks wouldn’t give loans to filmmakers. Easiest way to make money was to make a film likely to succeed, and copying a successful foreign plot was a good way to do so. But there weren’t reported lawsuits against Bollywood films. Around 2010, some studios started enforcing, e.g., Twentieth Century Fox sued over copying of plot of Phone Booth and was successful.

But we have to revise the story: National Film Archives of India discovered a film from famous Kishore Kumar, modeled himself after Danny Kaye. There’s a lost film, found at NFAI. It was injuncted by a court as a copy of a Hollywood film starring Danny Kaye, who found it on a visit to India. There’s no record of the judgment but there is contemporaneous reporting. Can the NFAI screen the movie? The Hollywood movie is now out of copyright according to Indian law. Paramount waived its [apparently nonexistent?] rights so now it can be shown.

Cross-cultural plagiarism: adaptation of a film to a different cultural context. Disney’s Cars was remade in China as the Autobots, unlicensed remake—Disney sued and won. Generally perceived [by elites] as embarrassing, but can law accommodate the cultural value—e.g., that Kumar went on to become an idol? Now, Bollywood copies Hollywood, but they use licenses—how does that compare? Very few plaintiffs have actually won.

Marketa Trimble: Talk about effect of this on creativity? Are the plots and stories in limited supply, so that we need this type of borrowing? Is it bad for local culture because we might have had a different film instead?

A: Indian gov’t wanted films made from well-known Bengali novels. But there was pressure from the market: this is a business trying to make money. Same reason there are so many superhero movies: a safer investment. Licensing is also one way to do it [which seems to conflict with the idea that without this you’d get home-grown plots etc.].

RT: Insiders/outsiders’ copying is often treated very differently across different groups; can be heightened by racial/national differences: this can even occur with transformative fair use: if it is a subaltern take from within the US, e.g. The Wind Done Gone, then its critical stance towards the original seems easier to understand, but if it is a cultural translation it may not be understood as a critique.

A: Over 1000 cases in the US concern cinematic copying, and very few succeed. In this case, certain gags had been copied from Knock on Wood.

Trademarks

Trademark Free Riders

Mike Grynberg

Due to technical issues I was late to this but the basic argument is that plaintiffs often also free ride on the industry as a whole or other features of a product, along with the efforts of the public/associations that the public makes, and then try to appropriate the entire value to themselves. This should be recognized beyond the specific defenses like functionality. Free riding stories are already part of TM law, but we are leaving something on the table by surrendering that rhetorical ground to TM owners.

Implications: greater emphasis on acquired distinctiveness versus inherent distinctiveness? Get rid of Ambercrombie? Is he advocating for rewards for bigness?

Rosenblatt: The big guys will likely have done more free riding [e.g., Disney and Cinderella, or Disney fandom creating the value for the corporation, for whom matter may not even have been conceived of as source identifiers]. The upside-down free riding story is just as hard to tell in litigation as the mosaic of exceptions and limitations that we already struggle to tell. But maybe there’s a way to tell it differently.

A: He doesn’t want to take on consumer contributions as much here [covered by others]. You fight it when they say free riding or you don’t: say that free riding isn’t relevant to economic considerations v. saying tu quoque.

Lisa Ramsey: worries that acquired distinctiveness is pro-monopoly; failure to function, functionality, genericide are all better than giving rights but trying to limit them on the back end. Comparative advertising is another example of free riding that is actually a very good idea.

Jeremy Sheff: skeptical about characterizing all failures of reciprocity as free riding. Rent seeking is not the same thing as free riding. They are different kinds of failures of reciprocity. Maybe they trigger moral intuitions differently, which accounts for differences in doctrine. You might want to blur the distinctions for rhetorical purposes, but our moral intuitions might differ.

A: There is an issue where everyone thinks there was real work done on behalf of/by the claimant, and that matters.

Mark McKenna: what happens in a lot of free riding cases is the court has the sense “this party created the demand for this product, and so they might be getting the benefit of competitors’ ads, but that belongs to them”—whose characterization of free riding sticks? Student story: every CVS store is accompanied by a Walgreens in the Midwest. One company does the market research and the other follows. It’s obviously free riding and nobody thinks it’s a wrong. You will have to engage with what counts as free riding.

Competition

Gendering Antitrust

Jennifer Sturiale

[Also late to this one, ack.] Things gendered female are privatized, not considered subject to government regulation of unfairness. Antitrust is focused on monopoly, not on consumer harms. Merger analysis: claims of innovation from bigness should get greater scrutiny and greater consideration of alternate measures of welfare that don’t just look at price effects or new products as inherently good.

Q: industries gendered female v. male?

A: I’m specifically not considering that, but it is important, e.g., the market for baby formula.

RT: Harms to labor being considered, not just consumer welfare/prices, also may be gendered/a step to gender equality.

A: to suggest that the firm achieved monopoly profits “on its own” is itself androcentric, but also consideration of labor would consider more conduct to be unlawful. Our notions of contract/markets out of which the current rules arise are themselves influenced by androcentric notions.

Social Uses of TM

Stephanie Plamondon Bair, Clark Asay, and LaReina Hingson

Early stage research on use of “TM” in casual social discourse. Just as hashtags have expressive functions, so does “TM” appended to one’s own expression. Themes in use: stock phrases, e.g., The Feels™ or I’ve had A Day™—also connected w/use of capitalization. Also people trying to create their own stock phrase to describe themselves.

Another use: stereotyping or caricaturing: a feminist v. a Feminist™.

Another use: emphasizing or mocking the “officialness” of information.

Another use: branding function for purposes of parody/humorously assert rights or ownership. Relatedly: emphasize corporate aspects of a concept, e.g., Real™.

Implications: insight into understanding of TM by ordinary citizens; does it create misconceptions about ownership? If used all over the place, does that impose additional cognitive costs on people?

Jeanne Fromer: Not folk conceptions of TM law, but maybe an overlap. It’s like using quotes. Don’t treat this the way you might treat the word on its own—read this differently, but not as a TM. Might be different than when a company uses TM on a social media post.

Lisa Ramsey: A matter of public education/need to educate the public about overclaims.

A: not clear if people are joking, not joking, ironic?

McKenna: strong impression that people are joking. We teach that TM is evidence of claim, but maybe it’s not.

Rosenblatt: Aspirational but meaningless is how I teach it [how I teach it too!]. Social uses are similarly aspirational but less meaningless b/c they have discursive meaning. Genericide of ™ absent other context.

Grynberg: do people use ®? That is the real consequence of the genericide: ® really means something.

RT: effect of generation hustle/be your own brand ideology—look 10 years back for all the self-help rhetoric? Consult literature on irony: neither joking nor not joking, which may be inherently corrosive to what the TM system is trying to do. The flip side of nonsense TMs—the function of TM has become detached from the functioning of the actual market and maybe the system is just degenerating into noise.

alleged "misinformation campaign" about micro-irrigation firm is enough to survive motion to dismiss

Netafim Irrigation, Inc. v. Jain Irrigation, Inc., 562 F.Supp.3d 1073 (E.D. Cal. 2021)

The parties compete in the micro-irrigation industry, which targets agricultural growers. Netaifm alleged that defendants engaged in anticompetitive market behavior when the Jain entities acquired majority shares of two local design firms, which connect manufacturers to growers, and alleged false advertising. Jain is Netafim’s largest competitor.

In 2016, Netafim had approximately $65 million in sales in Central California, which included around $9 million in sales through the design firms acquired by a Jain entity; those design firms had combined revenues of $113 million in 2016 and were the two largest micro-irrigation design firms in the area. Jain had approximately $25 million in Central Valley sales in 2016. After the acquisition, Netafim terminated its relationships with the firms, and Netafim’s equipment sales declined in 2017 and were still depressed through 2020.

The antitrust claims were insufficiently pled because they were antitrust claims.

False advertising: “Netafim alleges that, following the acquisition, Defendants made numerous false or misleading statements about (1) the usefulness and safety of micro-irrigation equipment manufactured with additives, foaming agents, or recycled materials, and (2) Netafim’s ability and willingness to fulfill warranty obligations.”

Jain allegedly trained its new salespeople how to pitch against Netafim equipment “with a sales handbook that included magnified photos purporting to be damaged Netafim equipment,” using the images “to falsely represent to customers that Netafim’s equipment is of inferior quality because it contains recycled materials.” Salespeople also allegedly stated: (1) “Netafim is primarily owned by venture capitalists and the investors have been concerned with their returns”; (2) “[o]ther than changing the names of some products, there have not been recent new product advancements, or improvements in efficiency made by Netafim to stay competitive”; and (3) “[a]s a result, Netafim have been utilizing foam fillers and recycled materials to manufacture its new drip tape and hose in order to reduce its resin cost and maintain margins.”

Netafim also identified blog posts on Jain’s website and republished on a design firm’s website making similar claims that “some manufacturers” were using bad materials to “save money” and “no longer follow engineering standards,” along with other specific performance claims, including “There simply is not enough of a safety factor in operating pressure and long term operating and burst pressure performance.” Other allegedly false statements about Jain’s own products were in a video embedded in one of the blog posts, e.g., allegedly false claims to use  “100% virgin plastic.”

The court was unimpressed by Jain’s quibbles with particular statements. Although Netafim’s allegations about one grower “describe only statements made by a single salesperson to a single grower during a single sales conversation,” and although that wouldn’t be enough on its own, the pleadings supported its “overarching claim that Defendants engaged in a ‘misinformation campaign’ regarding Netafim’s products and the usefulness and safety of micro-irrigation equipment manufactured with additives, foaming agents, or recycled materials.” As an overarching claim, this was sufficient.

“Netafim has identified specific false or misleading statements that Defendants made regarding their own micro-irrigation equipment and that of competing manufacturers. Although some of these statements did not refer directly to Netafim or include a side-by-side comparison between Defendants and their competitors, some direct comparisons were made and the collection as a whole reasonably indicates that such associations were implied when not expressed.”

And commercial advertising/promotion was also satisfied, given the statements’ “dissemination to the relevant purchasing public through direct interactions or targeted blog posts” and allegations that salespeople were trained to make false comparisons. “While generic, this point is adequately bolstered by Netafim’s description of the conversation with the San Joaquin Valley grower that involved the same kind of statements, as well as its allegation that growers informed of being pressured with similar sales pitches after the acquisition.” Likewise, “even though Netafim’s injury allegation is conclusory, commercial injury is generally presumed when the plaintiff competes directly with the defendant and the defendant’s statement has a tendency to mislead consumers.”

Warranty statements: One blog post said, allegedly in relation to a then-pending change in Netafim’s ownership: “I would recommend asking, who is warrantying the product? Will this company be in its current form and have the ability and willingness to honor the warranty or will you be dealing with a new owner in a business that has significantly changed.” Defendants argued that this was puffery and not alleged to be deceptive or harmful. Netafim lumped this statement in with others. Though the court declined to dismiss the claim as applied to the statement simply because there was no direct comparison, it did think Netafim hadn’t adequately alleged deceptiveness/materiality.

Alcon's alleged anticompetitive shenanigans to prevent resale were not defenses to TM claims

Alcon Vision, LLC v. Lens.com, Inc., 2022 WL 1665453, No. 1:18-cv-00407-NG-RLM (E.D.N.Y. May 25, 2022)

Alcon sued Lens.com for federal and state false advertising and trademark claims. Lens.com’s answer asserted affirmative defenses and counterclaims, including seven antitrust counterclaims not relevant to this opinion.

Lens.com “sells, at a discount, Alcon lenses, in the United States, that were originally sourced from outside the United States.” Alcon alleged that Lens.com infringed its trademark rights (including rights inherited from Novartis AG) by doing so.

Lens.com responded that Alcon was engaging in various anticompetitive strategies to exclude discounting retailers like Lens.com from the market, including a group boycott, exclusive-dealing agreements, tying arrangements, and a price-fixing conspiracy.

In addition, Alcon developed U.S.-only packaging for certain lenses, allegedly solely to provide legal recourse against discounting retailers. The lenses contained within the new packaging are allegedly of identical quality to those sold in the old packaging, but provided the hook for Alcon to sue discounters for selling genuine Alcon lenses, in old packaging, that they had sourced from abroad.

The changes were:  

Alcon added, in fine print, references to a helpline and a brand-specific website, placed product instructions on the outside of the packaging, added an American flag icon in the corner of the packaging, and—for one lens type—added an additional logo and product lot number. Directly underneath the American flag icon is the statement, “For sale in USA only.”

Alcon also allegedly sells a significant number of lenses overseas that are not FDA-compliant, rendering its product packaging for such lenses false and misleading to consumers, including Lens.com. In this litigation, Alcon has taken the position that a “significant number” of lenses that Alcon sells outside of the United States have not been tested for FDA-compliance and are “non-FDA-compliant.” Despite this, its product packaging for lenses it sells overseas allegedly contain symbols and statements that convey to purchasers, including Lens.com, that the product complies “with all FDA regulations and all European Union regulations and may be lawfully sold in the United States.” For example, the “Rx Only” symbol, according to Alcon’s own product inserts, means “CAUTION: Federal (United States) law restricts this device to sale by or on the order of a licensed eye care professional.” Alcon’s “promotional and safety literature … also contain statements which inform consumers that all Alcon products are safe and meet all criteria for sale in the United States.”

The use of the U.S. flag also allegedly conveyed to consumers that all “products displaying the American flag are ‘made in America,’ which is not the case.” And it allegedly conveyed superior quality.

At the pleading stage, an implied falsity claim can be supported by consumer survey data, but also by pleading “non-conclusory facts raising a plausible inference that a statistically significant number of consumers were misled.”

As to the U.S. and EU symbols, including RX Only, Lens.com failed to plausibly allege literal falsity. One plausible meaning of RX Only was “that the products must be sold by or on the order of a licensed eye care professional.” Likewise, ® and TM symbols let “consumers and competitors know you’re claiming [a] trademark as yours.” And another reasonable interpretation of the “For USA: Request Package Insert for Clinical Details” was that United States users of the product can request a package insert if they want clinical details.  Thus, “none of these symbols and statements unambiguously convey compliance with all FDA and European Union regulations and that the products may be lawfully sold in the United States.”

The other allegations were “simply too vague and conclusory to plausibly state a claim” that Alcon misrepresented that its overseas products were legal for US sale.

The implied falsity theory also failed for want of “any non-conclusory facts that would allow [the court] to draw a plausible inference that a significant number of consumers were misled.”

Use of the US flag in US-only product packaging was also not actionable.Under Forschner Grp., Inc. v. Arrow Trading Co., 30 F.3d 348 (2d Cir. 1994), “before considering consumer survey evidence, a district court must, first, determine whether the designation of geographic origin is ‘geographically descriptive.’ If it is not, as a matter of law, it ‘cannot be deceptive as to geographic origin under § 43(a) of the Lanham Act.’”

Here, the US flag on the packaging “cannot fairly be read to say ‘made in the U.S.’ so as to be geographically descriptive. While the U.S. flag may ‘evoke’ clear geographic associations, it does not designate geographic origin.” Though the court would reach that conclusion regardless, it was further persuaded by the language directly beneath the flag: “For sale in USA only.” “Viewed in the context of that language, the U.S. flag describes where these products may be sold, not the location of origin.”

So, consumer survey evidence may be disregarded when courts disagree enough with the reasonability of consumer perceptions—another example of normative concepts of deception.

The Lanham Act false advertising counterclaim was dismissed. The GBL §§ 349 and 350 claims were also dismissed, for this reason and the additional reason that the relevant conduct wasn’t NY conduct.

The court also kicked out Lens.com’s unclean hands defense that Alcon’s “trademarks...[have] been used by Alcon as an effective tool to violate the antitrust laws of the United States.” Because unclean hands must be based on the right in suit, “when a defendant brings an unclean hands defense to a trademark infringement lawsuit based on the plaintiff’s anticompetitive conduct, the defendant must allege that the ‘mark itself has been the basic and fundamental vehicle required and used to accomplish the violation.’” This is hard to show. Indeed, McCarthy says that, in “no final reported decision involving trademark infringement has a court actually refused to enforce a trademark because it was used in violation of antitrust law.” The allegations of Alcon’s antitrust misconduct, including the alleged strategy to bring trademark infringement lawsuits after changing its product packaging, didn’t plead facts showing that Alcon’s trademark “was the basic and fundamental vehicle required and used to accomplish the alleged antitrust violations.” It was not enough to allege antitrust violations relating to the goods bearing the marks. [Then what could this defense possibly mean? Is it simply a nullity despite also appearing in the Lanham Act as a specific defense?] Defense stricken.

There was also no FDCA preemption of the claims on the arguments presented.

However, Lens.com plausibly alleged US abandonment of a mark that Alcon was allegedly only using overseas. The “use” and “nonuse” of the mark relevant to the abandonment affirmative defense is use and nonuse in the United States, not abroad, so this defense survived.

WIPIP 2022, Session 7 (internet law/antitrust)

Sari Mazzurco, The Law of Social Roles for the Platform Internet

Law’s expressive function: how law tells people what social roles various institutions are supposed to carry out. Policy discourse should explicitly consider the social roles legal reform would construct for platforms to help public understand whether platforms are doing what they should, guide platform behaviors, and guide further reform. Legislation should be attuned to multiple social roles platforms play. Social roles are fundamental: shorthand that help us understand what behavior is appropriate or inappropriate based on relationship context. OK to ask barista to make a latte and pay her for it, not so much for one’s PhD advisor. Law can shape roles: set exit and entry conditions (e.g. licensing) for roles. The roles of business and consumer have been applied flatly and wrongly. Businesses have been assumed to be asocial; consumers are satisfying self-interest. Businesses harm consumers only in a few ways—false advertising, monopoly prices, defective products. But these roles support only very thin social norms. It’s ok for businesses to do most profitable things. It’s ok for consumers to care about price and quality, and not much else. What did FB do wrong when sharing information with third parties when it told people it was going to do that? Business frame obscures broader privacy harms.

A woman who feels shame when her breastfeeding photos are taken down is not reacting as a consumer; she is reacting as a speaker whose culturally meaningful speech has been censored, and censorship is not a business-related concept.

Evaluates various proposals with attention to roles, e.g. digital due process—platforms as speech governors and users as democratic participants interested in collective and individual autonomy, interested in accessing a wide variety of speech that complies w/public morals. Platforms should moderate content in the public interest.  Lawmakers should enact regulations that create

RT: (1) When you say platform, do you mean FB? Conflating the two is common but misleading. Mike Masnick’s test suite is worth thinking about. (2) If FB should be democratic, why would we accept due process in place of voting? Being the authoritarian in authoritarian constitutionalism is a role, but is it a role you are happy with? (3) “Sir, this is a Wendy’s” meme: mistaking a place for having a different role is pretty common (and also correlated with racial and gender privilege). Sometimes we just tell people that they’ve mistaken the role, even if they feel real shame/outrage about how they’ve been treated. (4) Doug Kysar’s Preferences for Processes is an interesting exploration of the consumer frame.

A: Any platform could occupy multiple social roles, which help us connect harm to expectations to behaviors. Use FB, Google and Amazon b/c those are in the press and stir up controversy, but don’t mean to talk just about them except as monopolies.

The implications of the various bills frame platforms in various ways, and that highlights dimensions that may be problematic. Technological due process sounds good but may also accept the authoritarian constitutionalism frame. [Which I think deserves attention—if we convince enough people that the “role” of a democratic institution is carried out by providing individuals with individual due process on specific rulings but no ability to set the rules, that’s really bad for democracy.] Privilege: if a person needs to know what the role of the place is, then they do need to know what’s appropriate, and knowledge needs to be provided by normal social channels or by law. [Fair enough, but our current mechanisms of doing that—including law!—clearly do convey different messages to different groups about their social status/ability to speak back/dignity interests/etc.]

Role definitions can render certain interpretations “irrational.” If the law says that Google is a common carrier, expecting more speech governance is irrational. [I’m not sure anyone is unclear on that, though—different politicians/groups just want conflicting things from regulation and Republicans in particular are presently pushing common carrier while Democrats are presently not.]

Sharon Sandeen: Unfair competition is a different potential frame than either business or antitrust. Law of warranties is another example of an apparently obvious analogy of how we might regulate.

A: doesn’t see that as a path forward b/c that goes to price, etc. and harms that are physical or financial—a more holistic approach to dignity. [This is part of my “platforms aren’t FB” hobby horse. I just don’t see Ravelry as having the same relationship to dignitary interests.]

Jess Miers: Think about services’ countermoves to these regulations. Removing UGC aspects of services is often a reasonable response, not the expected “moderate more/moderate less.”

Gary Myers, Old Wine in New Bottles: Applying Antitrust Law’s Aspen Skiing and “Essential Facilities” Doctrines to Address Big Tech Challenges

As an antitrust lawyer, does antitrust have anything specific to say about the situation? Trinko case limits idea of access to essential facilities. Aspen Skiing/essential facilities were traditional antitrust doctrine that the SCt basically said were possible avenues for dealing w/large firm. Trinko, dealing w/highly regulated telecom industry, said that Verizon’s duty to deal w/competitors was governed by complex regulatory scheme and antitrust can’t be allowed to add anything to that. There are exceptions, which the Ct said were not overruled: Aspen Skiing/essential facilities.

Does Aspen Skiing indicate that a large tech firm might have duties to competitors/consumers? Possibly yes. If monopoly power is shown, which is possible, and barriers to entry, and significant network effects, FB might be monopoly; there are also attempted monopolization claims which don’t require as much market power, only a dangerous probability of success.

Likewise, essential facilities doctrine, edging toward common carrier—firms that control essential/important bottleneck for market participation can be required to give access. Similar to Aspen Skiing: access requirements can be imposed. Potential First Amendment issues, though. Business justifications are also a defense, but usually create jury questions. In Aspen Skiing, D claimed that P’s mountain was lower quality, which made it unworthy of cooperation; its facilities were older/not quite as nice. Jury rejected that business justification.

Would I take this case as an antitrust lawyer? It’s up in the air; an uphill battle partly b/c antitrust has become so narrow and business justifications get so much weight; having to prove each element is hard—tech cos will say they aren’t monopolies and the market is so dynamic that things can change tomorrow. The precedent is there despite today’s judges’ skepticism.

RT: What are the key differences between Aspen Skiing and essential facilities that make them different doctrines?

A: they are very close. Essential facilities is designed to deal w/a specific kind of bottleneck—telecom, bridge, road—a channel that’s needed. Aspen Skiing isn’t about a bottleneck but about changing a course of dealing, doing something harmful to consumers, etc. You could often assert both claims in parallel and Aspen did also feature an essential facilities claim. Their general monopoly claim was stronger.

Sandeen: can you find bad acts in terms of service especially as to businesses using the platforms to conduct business?

A: yes, you could definitely find problems there—restrictive terms, deplatforming, refusal to deal on nondiscriminatory basis. Amazon’s interactions w/ 3d party sellers are possible examples.

Tyler Ochoa: has essential facilities ever been applied to a telecom or other company where there could be a 1A compelled speech claim?

A: Not sure. Miami Herald v. Tornillo is not an antitrust case [but does mention the newspaper’s dominance in Miami, as emphasized by the recent Florida case striking down that state’s pro-spam law].

Rosenblatt: are all these situations (FB, Amazon) the same? This question arose w/net neutrality—access to the underlying pipes—versus kicking someone off of Twitter. When is this a useful tool?

A: there could be a myriad of possible situations, which is why this area isn’t amenable to broad brush statutory or regulatory rulemaking.  Does the D have enough power for us to be concerned? Not all tech companies have power that make their actions an antitrust issue. Power is a big deal; secondly, is it doing something that looks exclusionary/anticompetitive v. legit competition on the merits.  

Q: As a marketing professor, the word I say every day is Google. What are you going to do instead, advertise on Bing? [cue laughter; I did just see a TM case entirely about Bing, but that was probably dumb] Isn’t that an essential facility?

A: quite likely. Access to organic results for sure, though that shouldn’t disable them from putting sponsored ads up top.

Sandeen: a unique dynamic online: use consumers to make the decisions about whether or not somebody is going to be kicked off. If your ranking goes down to 1 star on FB, you get kicked off. FB would claim that wasn’t their decision.

A: they would! They have a case for that, too.

Jess Miers: Reddit is now a big search engine; Tik Tok has surpassed Google.

A: it is a dynamic market! One irony of antitrust law is its slowness.

1130:

Kristen Osenga, Can Antitrust Learn Something from IP? (working title)

Rep. Jayapal says that Amazon harms competition with its private labels. Collects data on sellers and produce competing goods. 60% of overall sales according to Amazon are 3d parties; they say only 1% is private label products. Europe has complained about this too. Also allegedly favors its own products in search results.

What nonpublic data are we concerned about? Sales, revenue, consumer claims/warranty claims, etc. Lets Amazon focus retail competition on best-selling products. EU has proposed prohibiting use of sellers’ data and prohibiting self-preferencing. The US is following suit in proposed bills. One would prohibit self-preferencing; one would prohibit offering both first- and third-party offerings. Amazon says this would hurt consumers.

As an IP person, has qualms. If something isn’t protected by IP, it’s free for copying. We like copying! Gives consumers more choice, lower prices. We have provisions to get generic drugs to market. Confusion is what we try to avoid, not copying. Why treat Amazon private label products differently?

What’s really bad here? Amazon’s ability to collect lots of data and use it to decide what products to make; Amazon preferences itself in ads. But the same activity happens in brick & mortar stores and no one is calling for CVS and Wal-Mart to stop making private label goods. We know it’s riding on coattails of national brand’s research and development and advertising. But we have recognized their benefits when not deceptive. CVS has lots of data on sales, when Vaseline is having sales, etc. CVS is not going to make unpopular generic products. They are going to use the data to ensure they’re underpricing third party sellers.

Is Amazon different b/c of scale/type of data? You can see how long something waited in a person’s cart or how long they spent on site. But you can get the same data if you’re CVS on your website. Putting them side by side decreases the likelihood of confusion.

Focusing only on these aspects—possible that Amazon is doing really bad things.

Justin Hughes: isn’t the answer that by all estimates Amazon controls 36-49% of ecommerce, and CVS etc. don’t have anything like that, not even Wal-Mart? [Wal-Mart is pretty big though in bricks & mortar.] Amazon is the bottleneck.

A: would accept the point, but maybe market share is ok.

Hughes: but don’t abuse your market power.

A: but what is abuse given the benefits of data.

RT: Counterargument: The price differential with the strong brand is empirically robust over decades because of the consumer preference for national brands. With the current subjects of complaint—small businesses—Amazon is the real brand driving sales for most of these products, and so the free riding is less sustainable for a business that doesn’t (yet) have a strong brand. If you think about misappropriation rationales, whether the product would still be produced w/the free riding is a consideration. Maybe we’re wrong about the empirics, but I don’t think we can exclude the possibility that more damage will be done to weak brands that can’t continue to command a price premium. For one thing, Amazon is not free riding on the advertising of these producers, because there isn’t any off Amazon; most of them aren’t like Head & Shoulders, which can advertise and sustain its brand despite the house brands. I’m not convinced that this is a distinction that makes a difference, but I’m not convinced it doesn’t.

A: two buckets—small and medium companies may be different. Batteries often comes up.

Sharon Sandeen: Trade secrecy background—these bills have no definition of what nonpublic information is. Small producers are mad at Amazon and want something done, and this is something, but it may not address what is really going on. Amazon may also be able to redefine information by contract.

Q: the complaint is that we don’t have patents or trade secrets, and we don’t yet have a brand [secondary meaning in the making!] and so Amazon swoops in. One question is whether that’s what Amazon is doing—appropriating innovative products that aren’t protected by IP—or whether they’re making batteries and towels, which I would care less about.

A: it’s popular goods—not clear about size. But Wal-Mart does the same thing!

Lunney: Generic house brand just creates price discrimination where otherwise there would be a [tiny little] monopoly; the parties can split the resulting surplus as they see fit.

Hughes: Wal-Mart has been accused of the exact same behavior [of getting into the OEM space and demanding supply at lower prices] [Lunney: that’s where Wal-Mart v. Samara came from!]

False advertising-based antitrust claims against Facebook survive motion to dismiss

Klein v. Facebook, Inc., 2022 WL 141561, No. 20-CV-08570-LHK (N.D. Cal. Jan. 14, 2022)

Once in a blue moon, a false advertising-based antitrust claim survives a motion to dismiss in a circuit that imposes a list of excessive requirements on such claims.  That time has come for Facebook. Consumers and advertisers adequately alleged that Facebook has monopoly power in social network/social media (consumers) and social advertising markets. Though I’ll detail the advertising-based claims below, I will also note that the court did dismiss claims based on Facebook’s “Copy, Acquire, Kill” strategy as untimely. Advertiser claims based on Facebook’s Network and Bidding Agreement with Google also survived, while the court dismissed consumers’ unjust enrichment claims with leave to amend.

Plaintiffs successfully alleged that “Facebook acquired and maintained monopoly power by making false representations to users about Facebook’s data privacy practices.” The complaint pled a lot of specifics about how much consumers cared about privacy; how much Facebook advertised its privacy practices as better than they were; and how bad they actually were.

False advertising can violate the Sherman Act if a monopolist’s representations about its own products or its rivals’ products “were [1] clearly false, [2] clearly material, [3] clearly likely to induce reasonable reliance, [4] made to buyers without knowledge of the subject matter, [5] continued for prolonged periods, and [6] not readily susceptible of neutralization or other offset by rivals.”

Falsity: There’s a lot of detail I’m skipping, but in essence, Facebook knew that users wanted privacy and advertisers wanted users not to have privacy, so it concealed the extent of its data use, allowing it to “beat out companies that were truthful about their user data practices or did not collect and sell user data.” “Indeed, Facebook’s initial success in the Social Network and Social Media Markets arose directly from competitors’ failure to keep users’ data private,” particularly Myspace’s. Representative Zuckerberg quote (of which there are many): “I founded Facebook on the idea that people want to share and connect with people in their lives, but to do this everyone needs complete control over who they share with at all times.” Meanwhile, it was collecting and selling user data to third parties in ways that did not match its public representations. E.g., it used Beacon to track users who clicked “No, Thanks” to purportedly opt out; provided user data—and the data of users’ friends—to third party developers despite claiming in multiple fora that “Facebook does not give advertisers access to people’s personal information”; etc. etc. Even after the 2011 FTC settlement, it deceptively tracked users and gave data to third party developers.

The complaint also alleged in detail how these deceptions helped FB obtain and maintain monopoly power. For example, it defeated Google+ in part because of privacy concerns, along with network effects. In fact, “Facebook realized that it could not allow users to find out about Facebook’s privacy practices while Google+ was a viable alternative,” e.g. an executive stating that “it would be unwise to remove privacy protections because ‘IF ever there was a time to AVOID controversy, it would be when the world is comparing our offerings to G+.’” The executive stated that FB could remove those protections after “the directive competitive comparisons begin to die down.”

This “clear[]” falsity was alleged with sufficient particularity. Analogizing to securities fraud, the court required clear falsity to be a material misrepresentation/omission that was capable of objective verification, as opposed to puffery. “Indeed, the Ninth Circuit’s statement that misrepresentations are anticompetitive only if they are ‘clearly false’ and ‘clearly material’ mirror the basic requirements of a securities fraud claim.” Likewise, Rule 9(b) pleading requirements provided a structure for identifying the requisite clarity. Although several of the representations identified were puffery (“[k]eeping the global community safe is an important part of our mission – and an important part of how we’ll measure our progress going forward”), many were not, specifically representations that FB wasn’t sharing private information with third parties; statements about the Beacon tool; and statements that FB didn’t use cookies to collect users’ data for commercial purposes.

Were the claims timely? Non-original observation: If techniques are used to obtain monopoly power, that seems inherently in tension with requiring claims to be brought very quickly. Anyway, the claims weren’t time-barred on the face of the complaint. The limitations period is four years, but the “period of limitations for antitrust litigation runs from the most recent injury caused by the defendants’ activities rather than from the violation’s inception.” To qualify as an “overt act,” the act that restarts the limitations period must satisfy “two criteria: 1) It must be a new and independent act that is not merely a reaffirmation of a previous act; and 2) it must inflict new and accumulating injury on the plaintiff.” (The argument that each misrepresentation about privacy is a mere reaffirmation seems inherently in tension with the big claim of big tech that competition is "only a click away," since continued belief in the representations is necessary to avoid that click.)

The relevant date here was December 3, 2016, and the consumer plaintiffs adequately alleged at least two false representations after then. First, on February 2, 2017, Facebook stated in an SEC filing that Facebook provides only “limited information to [third party application developers] based on the scope of services provided to us.” Second, in March 2018, Zuckerberg called the Cambridge Analytica incident a “mistake,” pledged to take action against “rogue apps,” and stated that “[w]e have a responsibility to protect your data, and if we can’t then we don’t deserve to serve you.” These were adequately alleged to be clearly false, since the 2017 statement “would have given reasonable users the impression that Facebook was not providing third party applications with private information,” whereas Facebook had in fact provided users’ private information to numerous third party applications, including applications for which users were not registered. “For example, although Cambridge Analytica had only 270,000 users, Cambridge Analytica ‘was able to access the personal data of up to 87 million Facebook users.’” Zuckerberg’s statement likewise would have given reasonable users the impression that Cambridge Analytica was a “rogue app” and that Facebook had not been systematically providing users’ private information to third party application developers, but at least 10,000 applications had been able to access similar data for the entire period since the FTC settlement.

FB argued that its false statements after 2016 were mere reaffirmations of a previous strategy, not new and independent acts.  But an act is not a reaffirmation “simply because the defendant has previously committed the same type of act as part of a unified anticompetitive strategy.” The Ninth Circuit has clearly held that “if a defendant commits the same anticompetitive act multiple times, each new act restarts the statute of limitations for all the acts.”

The complaint also sufifciently alleged that the new false representations allowed Facebook to maintain a “critical mass of users” “by convincing users that Facebook was protecting their data.” After all, “improperly prolonging a monopoly is as much an offense against the Sherman Act as is wrongfully acquiring market power in the first place.”

Further, the consumers adequately alleged that the false statements were “ ‘not readily susceptible of neutralization or other offset by rivals.’ ”  From the existing cases, the court derived a perfectly understandable principle that technical product aspects that are difficult for customers to confirm are “not readily susceptible of neutralization.” When “any customer who tried to obtain the defendant’s services could discover that this representation was false,” by contrast, the falsity was readily capable of neutralization. Plaintiffs successfully alleged that the deceptive privacy practices could not have been revealed “by anybody without significant technical expertise.” Indeed, plaintiffs pled that “even sophisticated third parties, such as developers and search engines, cannot access user data without Facebook’s permission, let alone determine what Facebook is doing with user data.”

While FB argued that other firms “could have improved their own policies, or called attention to Facebook’s supposed misstatements,” it didn’t explain how rival firms could have known that Facebook’s statements were false when Facebook made them. “[T]here was no publicly available information that Facebook’s rival could have consulted to determine whether Facebook’s representations about its data privacy practices were true.”

Clearly material: FB argued that the consumers didn’t explain how “Facebook’s alleged misrepresentations prevented other well-resourced firms—like Google or Snapchat—from competing effectively.” Plus, there were other “competing theories for Facebook’s success,” “including Facebook’s ‘realness,’ which is alleged to be Facebook’s ‘distinguishing feature.’ ” But the Ninth Circuit has set out a comprehensive test for whether false advertising can violate the Sherman Act, see above, and alternative explanations aren’t part of the test where materiality is present. Both securities fraud and Lanham Act cases extensively address materiality, and the court used them as guidance: materiality means likelihood of influencing consumer decisions, so “clearly material” requires plaintiffs to show that “customers would consider the representation important in deciding whether to use the defendant’s product or that the representation was likely to influence customers to use the defendant’s product.”

Plaintiffs did that. For example, consumer surveys showed the importance of privacy, and FB’s own statements repeatedly recognized that users would not use Facebook unless Facebook promised privacy protections. E.g., Zuckerberg explained that the reason “Facebook became the world’s biggest community online” was that Facebook “made it easy for people to feel comfortable sharing things about their real lives.” Under these circumstances, it was “more than plausible” that users would have considered these representations important in determining whether to use Facebook.  

There was no requirement that the falsity be the “but-for” or sole cause of consumer behavior, as FB argued. And indeed, FB’s argument ignored that privacy was the foundation of its purported alternative causes—the consumers alleged that FB’s representations about its data privacy practices were essential to creating Facebook’s “realness,” starting with its initial limitation to people who could verify that they were part of college communities.

Causal antitrust injury: The consumers alleged that Facebook’s monopolization of the Social Network and Social Media Markets harmed users because, without competition, Facebook can extract additional “personal information and attention” from users. A cognizable antitrust injury includes harm to a plaintiff’s “business or property.” Consumers adequately alleged that their “information and attention” had sufficient material value to constitute harm to “property,” given that those things have material value to advertisers. “In other words, users provide significant value to Facebook by giving Facebook their information—which allows Facebook to create targeted advertisements—and by spending time on Facebook—which allows Facebook to show users those targeted advertisements.” Indeed, FB’s revenue per user in the US in 2019 was over $41, making the material value of consumers’ information and attention undeniable. Even without FB’s own estimates, the consumers identified other companies willing to pay users for information and attention.

And consumers adequately alleged causation: Had FB not eliminated competition in the social markets, they would have been able to “select a social network or social media application which offers consumers services that more closely align the consumers’ preferences, such as with respect to the content displayed, quantity and quality of advertising, and options regarding data collection and usage practices.” In more competitive markets, some companies pay users for their data. For example, “[w]hen consumers agree to use Microsoft’s ‘Bing’ search engine and allow Microsoft to collect their data, Microsoft ... compensates consumers with items of monetary value.” Plus, with more competition, FB itself would plausibly have collected less data as part of the bargain: The fact that FB acted more hesitantly when G+ was around was indicative of that.

Relatedly, consumers’ request for injunctive relief was not barred by laches, given the timeliness of the claim. FB argued laches because its 2011 FTC settlement was public. But when claims are timely, “the strong presumption is that laches is inapplicable.” Moreover, FB failed to explain why consumers would know, because of the 2011 settlement, that FB continued to deceive them thereafter.