Katya Assaf, Magical Thinking in Trademark Law
We’re supposed to be rational, but in fact Westerners are just as likely to believe in magical thinking as members of supposedly less rational cultures. Modern advertising is premised on magic: promises beauty, success, etc. from minimal action of buying, just as a magic spell promises.
Consumers usually say they don’t believe advertising claims. Theoretically, they should be especially skeptical of exaggerated claims. Yet such claims are empirically very effective. Can convince us that bitter coffee isn’t bitter, etc. They create distinctions between products that can’t in blind testing be distinguished from each other. Branding adds a powerful symbolic dimension to the product, inducing preference. This resonates with Durkheim’s idea of the sacred, just as a totemic mark distinguishes ordinary pieces of wood and stone from the totem.
The puffery defense makes hyperbole nonactionable. Courts in advertising cases treat consumers as rational and skeptical, not easily misled. Based on general legal approach regarding individuals as rational beings.
Trademark law was supposed to protect consumers from confusion, but today focuses on magical thinking: similarity and contagion. Similarity: an effect resembles its cause—something that looks like a sacred object has the same characteristics. In TM, we have a subliminal confusion doctrine that does the same thing, meaning that GUNSMOKE cigarettes are confusing with Marlboro even though there’s no explicit confusion of which consumers are aware.
What explains the consumer’s willingness to pay more for brand extension into a category where the consumer knows the TM owner has no experience? Logic of contagion: famous brands evoke strong feelings. Contagion also explains fear of dilution, despite its lack of empirical grounding (especially w/r/t famous brands which are very resistant to the posited mechanisms by which economic harm might occur). It’s about distinguishing the sacred and the profane.
Tarnishment is especially notable for its deviation from presumptions about human rationality. While the puffery cases presume people aren’t influenced by nonfactual communication, tarnishment assumes they are—it’s about disrespect for the sacred.
One can argue that brands produce real effects. Like totems, they can make the sick feel better, bringing courage and confidence. Brands may give the consumer a feeling of self-confidence and make her happier. This isn’t different from any other magical or religious belief; such beliefs fulfill basic human needs. So is the market just giving consumers what they want?
This can’t justify broad TM protection—all religious beliefs bring such benefits, but no other ones enjoy such legal protections. Legal system usually assumes position of neutrality w/r/t nonrational beliefs, ignoring tendency for people to be influenced—reluctance to enter shaky domain of unconscious wishes. Better to treat people as rational, protecting only the informational dimension of TMs, treating the consumer as a being who uses TMs to make educated purchasing decisions. Real as they may be, magical associations from brands should be left outside the legal system.
Andrea Matwyshyn: Columbia Business School research shows people projecting their own characteristics/sophistication onto brands and vice versa. Relationship between person and brand.
Silbey: what work does Durkheim do v. a theory of the subconscious that’s more individualistic?
A: Brands are not individualistic. She did use Freud as an approach to the paper, but Durkheim’s approach to religion fit very well.
My reaction: I worry about effects of this approach on advertising law: there are lots of ways people can be manipulated and even fooled and if we pretend they’re rational we’ll have a lot of inefficiency and, more to the point, a lot of harm. Maybe these irrationalities do no harm to consumers and society and thus ignoring them would be good for consumers/competition—I believe that--but the larger conclusion seems quite dangerous to me. (Cf. what I’m about to say about cigarette regulation.)
Lunney: psych/behavioral economics has a lot of ways to talk about this—salience, such that your neighbor’s experience that she got better when she took X has more effect than 5 double blinded studies showing that X doesn’t work. Cognitive dissonance: once you’ve decided that Y is true, every bit of evidence you receive is interpreted to correspond to your preexisting worldviews. Bring in parallels in modern behavioral economics. Surprised by conclusion that we should treat people as rational when we know they’re not. Real consumers behave in these ways: if there is positive contagion or negative contagion, why pretend there isn’t?
A: Compare history of blasphemy: you were allowed to preach in favor of Jesus but not against him. Legal system allows you to puff TMs but not to criticize them. This is closely matched to the crime of blasphemy.
Sheff: McKenna’s work on brand extensions complicates the contagion story—some extensions don’t work. Also thinks puffery and dilution are doing two different things; false advertising law is aimed at protecting different things.
Gordon: law as educator: magical thinking isn’t real/doesn’t work.
A: she’s neutral—these beliefs are no better than other magical beliefs; if we don’t interfere with other magical beliefs, why interfere with these ones? (Note that we do interfere with belief in the placebo effect, even per Posner.)
Rebecca Tushnet, Visuals in Trademark and Advertising Law
Images: associated with emotion as opposed to rationality so some inherent tension with the self-assigned project of the law, but less so with Lanham Act to the extent that it claims to be about how people actually think. As a result, Lanham Act isn’t as confused about images as other areas of the law, it’s just haphazard in its treatment of them.
TM: SCt says TM knows no ontology, then realizes that it violated that principle in the very decision in which it was articulated—colors are protectable but only on a showing of secondary meaning, unlike inherently distinctive words; same with product configuration. The social meaning of many nonverbal forms of communication, that is, differs enough from the social meaning of words to justify separate treatment as a matter of trademark law. This may work as a rule of thumb, but it’s important to recognize what kinds of thinking about words v. images are being reinforced.
Product design, according to the Court, often has intrinsic value to consumers apart from source-indicating value. Except that the same is true of words, which is why outside of Hot Topic we see few clothing or makeup colors described as bile yellow or vomit green. Marketers strive to give even completely invented product names a euphonious sound that resonates with the characteristics they want consumers to associate with the product. (Think Viagra.)
Trademark owners are allowed to control terms that invoke or relate to a product because the theory is that plenty of other words remain available to competitors. Words are devalued here by being treated as interchangeable: not particularly tied tightly to the things they are used to identify. And yet, outside the thesaurus, that’s not particularly likely to be true. Connotations can be as or more powerful than denotations.
Formal equivalence—blue dog to image of blue dog in infringement analysis. But then: Trade dress and mistrust of the image—courts require pleading trade dress in words, not in pictures, because different jurors might interpret pictures differently, which we all know never happens with words
Nominative fair use: similar dynamic as with Qualitex: initial articulation of the test said that you had to use as little of the mark as necessary, which included not using the font or other distinctive visual elements; then it turns out that visual aspects of the mark can be necessary for certain purposes and the court walks itself back in Mattel v. Walking Mountain—consequence of not thinking about images as marks rather than bad thinking about images. We should also recognize that the font sends a different message and may be important to other messages. Research finds that consumer perceptions of meaning are affected by typeface style.
Relatedly, compare the treatment of imitative trade dress to “compare to Brand X” messages—courts are not suspicious of the latter on trademark grounds and haven’t been since Smith v. Chanel, whereas if you use the major label trade dress, which sends exactly the same message without the words, it at least goes to a factfinder.
Advertising; people are vulnerable to a wide variety of persuasive techniques; unfortunately, courts due to their greater uncertainty about images are worse at evaluating when images are deceptive.
Images are better both because they are more persuasive than words and because the law governing advertising has not recognized this difference. As a result, images can often make visual claims that would be unsubstantiated and thus unlawful if made in words.
Some people who recognize this want to extirpate images from ads because of their appeal to the irrational or inarticulable, and ban all but informational advertising—only real present motion towards this is w/r/t cigarettes.
Under our current system, however, images are ever-present, and some of them get challenged as conveying specific, actionable false messages. In such cases, courts often proceed with complete certainty, confident that (certain) images speak clearly. In one case, S.C. Johnson & Son, Inc. v. Clorox Co., the defendant’s humorous ads showed two animated goldfish suspended in upside-down plastic storage bags, one safe and sound in its Glad-Lock bag and the other threatened by a leaky Ziploc. Plaintiff’s tests revealed that 37% of Ziploc bags tested under similar conditions didn’t leak at all, and only 10% leaked at the rate depicted in the TV commercials. The court thus found the ads false, including print ads that did not show any leakage rate because they only showed a drop of water forming from the Ziploc. Because the Ziploc bag in each ad was leaking, the court of appeals found a false representation that upside-down Ziploc bags filled with water always leak. This is a leap – the image itself, being a static image, could not make any representation about frequency of leaks, though clearly some comparative claim was being made.
Then a few years later, the same court upheld a finding that certain comparative ads for DirecTV’s HDTV service were false. Their snappy dialogue conveyed the false message that cable HDTV quality was worse. At the same time, the court held that images with an even more aggressive comparative message—showing an incredibly distorted image representing cable’s image quality—were merely puffery. The classic definition of puffery assumes a claim made in words, such as “the best ever!” Puffery is vague and exaggerated, or subjective and nonfalsifiable, and is nonactionable because no reasonable consumer would rely on it. In theory, puffery cannot distort consumer decisions as false advertising does.
The Second Circuit set aside prior definitions of puffery in order to create a new rule for images. Images, unlike words, “cannot be vague or broad,” are generally “‘specific and measurable,’ and can therefore ‘be proven either true or false.’” Under the old definitions, then, images could not be puffery—but the court was convinced that some images, including the ones before it, needed to be defined as nonactionable puffery. A visual depiction of a product can be “so grossly exaggerated that no reasonable buyer would take it at face value.” Its unreality, its defiance of ordinary rules of representation, would simply be apparent. In the case at bar, no reasonable consumer could mistake the defendant’s heavily pixilated image for a real representation about cable’s image quality. The court, relying on its own assessment of the image, reversed the district court’s grant of injunctive relief as to the ads featuring these images.
The Second Circuit’s new rule ensured differential treatment of words and images, but provided little guidance for the next set of images to come along. This uncertainty is only tolerable because of the underlying assumption that all viewers will generally interpret a picture in the same way, allowing the court to recognize the category of the meaningless image (puffery) alongside the category of the exaggerated but especially persuasive image (falsity).
Silbey: we see this kind of overconfidence about images all over the law—what to do? Bring in an expert body of knowledge for courts?
A: Two things—make our theories about images explicit, and then (to the extent possible and justified) make them consistent, instead of surprising us with outcomes.
Sheff: competition policy as a reason to do things differently with trade dress? Making the plaintiff spell out its claims serves a functionality interest by focusing on what’s claimed as protectable.
A: I agree. And we can even see Abercrombie as serving that kind of purpose with respect to word marks. I just want these differences noticed and theorized.
Matwyshyn: sharper articulation of alleged harm might help. With securities regulation, we worry about overstimulating demand—a prospectus can’t be too flashy. Maybe the harm is different in different media?
Heymann: distinguish rules that segregate elements v. interpret them: Abercrombie does segregation work in wordspace. Another example of judges being more confident: Posner on brooms—completely confident of ability to evaluate visual appearance; compare to cases in which linguists testify—you rarely get a visual design expert.
Katya Assaf: ECJ case in which Mars Ice Cream advertised 10% more, but colored the package 30% red, and ECJ overturned German ruling that this was misleading, because the package said 10%.
Saturday, February 12, 2011
WIPIP at BU session 3
Megan M. Carpenter, Calling Bulls**t on the Lanham Act: The 2(a) Bar for Scandalous, Immoral, and Disparaging Marks
Various “bullshit” marks have been refused registration, whereas BLACK TAIL, BIG PECKER’S, and BADASS all made it through.
Can and does the Lanham Act effectively prohibit registration for scandalous/immoral or disparaging marks? Should it? Her answer to the second question is no.
Resource conservation justification—not clear it saves resources to fight about these marks. The consumer protection at the base of TM policy is source quality, not moral quality.
Whose sense of decency or propriety matters? A substantial composite of the general public—all of the key terms of which are debatable. Why is MADONNA for wine scandalous? There are references to wine in the Bible, but the evils of drinking are more widespread today. Madonna = purity in womanhood (this was before the singer) = (public acknowledgement of) drinking as particularly immoral for women. Do you look at the context of wine drinkers, those who don’t drink wine, or both? Affidavits from winedrinkers said they weren’t offended, but that wasn’t enough.
Examiners end up relying on dictionaries; existence of alternate definitions allows the mark to pass even though people who “get it” will understand the intended meaning.
Similarly, disparagement isn’t defined in the Lanham Act. The test is, circularly, whether the mark would be understood as referring to an identifiable group and perceived as disparaging by a substantial composite. Relevant group is ambiguous under existing practice. E.g., HEEB case for magazines—relevant group definition might be dispositive. Against registration: ADL, rabbis, university professor, talk show host, members of general public; on the other side, letters from prominent Jewish organizations, Jewish Fund for Justice, etc.—in the end the mark was rejected. (I don’t see why this is troubling, given that the ban is in there in the statute. True, you have to accept that it is consistent with the First Amendment, but if you take that step (as all courts to date have done), then you have to give it meaning. The standard we have is “disparaging to a substantial composite,” not “not disparaging to a substantial composite,” so the two categories of evidence do not even conflict.)
Sometimes not clear whether mark is rejected because scandalous or disparaging—MOONIES for little toy that drops its pants when you squeeze a ball. TTAB allowed registration of the dolls; the examiner focused on reference to members of Unification Church, but TTAB thought purchasers are more likely to see the reference to “mooning.” TTAB reasoned, oddly, that a major newspaper is unlikely to use disparaging terms.
Determinations are content based and subjective; the application of the standards is inevitably inconsistent, varying with time and tribunal. (My reaction: welcome to the PTO; enjoy your stay. That’s flippant, because unpredictability might be more harmful w/r/t disparagement than to descriptiveness, but it’s not as if the other standards are tons better.) Lack of standards leaves examining attorneys with little to go on. TECHNODYKE registered, DYKES IN THE CITY and SUPERDYKE rejected. Identity of applicant is often not taken into consideration. Reappropriation with the intent of empowerment might make identity very relevant.
BULLSHIT for handbags: rejected. (At which point I left to take a call I couldn’t dodge, but there was more discussion of inconsistency.)
Wendy Gordon, Copyright and Negligence as Mirror Images: On Not Mistaking for the Right Hand What the Left Hand is Doing
Mirror image argument can help copyright novices understand incentive arguments. Torts: start with the proposition that not every harm produces recovery. Causation is never sufficient; you need something else. Recognizes Coasean reciprocity. In a world with transaction costs, externalizing costs to one is internalizing to another. And when you have a whole community, you need to worry about effects on others. Just as tort internalizes negative externalities to make the careless be more careful, copyright works in a mirror image: it makes people more productive by allowing them to capture some of the benefits they generate.
We use negligence when we don’t know the level of activity that is appropriate. We have a similar sense of doubt about how far copyright should go—proper mix of internalizing versus allowing benefits to stay with public for follow-on innovation and inexpensive copies. We have some rules: can internalize benefits from expression during copyright term, but not the benefits from your idea. Like negligence, we allow nonrecovery in order to increase benefits.
Copyright is about increasing productive behavior; tort about decreasing destructive behavior. Copyright is concerned with term limits, fair use, etc. in leaving certain benefits with the nonowner; tort law is concerned with moral hazards etc. in leaving certain incentives to take care with the plaintiff. So it is a mirror image. Thinking copyright and tort are the same, rather than mirror images, leads to mistakes. CCNV case: Court ignored the necessary reversals. CCNV: question was whether sculptor was independent contractor or employee. Court used multifactor test borrowed from the Restatement, but the Restatement’s purpose was to figure out whether vicarious liability should attach, and that raises very different issues. Vicarious liability was pushed by a desire to spread costs for injured plaintiffs—not stuck with the judgment-proof truck driver but with a deep pocket that can insure, pass costs on, and has a declining marginal utility of money, in order to spread the immense losses to an unprepared person (and her family, etc.) when disaster strikes. But the mirror image of spreading is concentration: copyright is about the virtues of concentrating incentives on a particular entity.
Understanding this would allow us, among other things, to make sense of the “teacher exception” to the work for hire doctrine, which now exists only in dicta—since only the author can alter the scholarly article, it makes no sense to give the copyright to the employer. We want to concentrate incentives on those who can respond to them, but given customs of academic freedom, the professor is the only one who can do that, and we shouldn’t split copyright and control.
Another proposal: make plaintiff prove harm as part of her case. The key is the notion of baseline. When you determine, if you can, how many benefits need to be internalized to incentivize a desired set of works, that sets the baseline. Does the defendant’s act cause a shortfall from that baseline?
Tort is made of causation, duty, wrongfulness. Causation has its parallel in copyright in copying: would the work look and sound any different had the defendant had no contact with the plaintiff’s work? Copying is simply causation: that would resist the temptation to collapse two tests into one (copying and substantial similarity/wrongful copying). Duty has a parallel: what right does the statute confer? Wrongfulness: substantial similarity of taking. Setting these out separately works for torts; in copyright courts conflate the tests.
Term limits and trespass: trespass doesn’t require proof of harm. Has been explained as a way to allow owner to internalize all externalities. Poor analogy for copyright because continual monitoring of externality over lifetime of resource differs markedly from copyright’s needs. Copyright focuses on a particular moment in time, where the decision is made to create the new work. There is a natural end to the amount of future income that can be relevant to the particular point in time. We can look to the scope of the plaintiff’s expectations when s/he created the work to figure out what recovery s/he should get. Christina Bohannon and Shyam Balganesh have proposed foreseeability requirements, getting at this same point: you can’t be incentivized by the unforeseeable. But Gordon thinks that foreseeability is too expandable. In Eldred, Justice Ginsburg speculates that authors could reasonably expect that copyright terms would keep expanding. Better question; whether you are serving or stand ready to serve the particular market or have good business reasons for holding off.
Lemley: think about mental state and the negligence analogy. If copyright is strict liability (given volitional)—I don’t have to know I’m doing something wrong, or even that I’m copying—then should the analogy be strict liability in tort? And how would we think about causation then?
A: think about the law of unconsented benefits—if I paint your house without bargaining, you don’t owe me anything. Copyright: can’t make bargains with the whole world ahead of time. In ordinary situations, denying benefit generator the ability to recover generates thick markets (negotiating ahead of time). But in copyright, we want the benefit generator to have the ability to recover. But that’s not the question—she wants to use torts to critique copyright.
Negligence model would be best because of our uncertainty about who should be internalizing and who externalizing (who has the most control over the situation, in tort—the person blasting or controlling dangerous animals); when you come to activities with positives and negatives, like driving, we use negligence. Precisely because not all spillover benefits should be captured, we should use a model sensitive to allowing such spillovers.
When player pianos came in, people stopped making music at home. This substitution effect should be taken into account in allocating rights. What about unanticipated uses that make a work more valuable? Should people be entitled to collect? This is horizontal equity—the person seeking recovery for a use he never could have contemplated is seeking a windfall where there’s no substitution. To justify giving that windfall, you have to believe that the horizontal equities are strong enough to be worth the excess resources given to the initial author.
Dogan: what about Texaco?
A: Hard question, but dangers of ignoring horizontal equity are not as great as dangers of systemic overprotection.
Jeremy N. Sheff, Veblen Brands and Invisible Hands: How Trademarks Create a Market for Suppressed Speech
He’s interested in post-sale confusion: what is it and what’s its relation to status goods? Bystander confusion, downstream confusion, and status confusion: he doesn’t think any of these suffice, and the doctrine should be abolished.
Theory of injury in bystander cases: starts with a nonconfused sale to someone who knows exactly what she’s getting. Then courts presume the purchaser uses/consumes in the view of others, potential consumers of plaintiff’s product. Then the potential purchasers will be confused, and form beliefs about the quality of plaintiff’s product, which influence their purchasing behavior. This seems reasonable basis for imposing liability if the later steps were ever proven. But none of them ever are. The “potential purchasers will be confused” step is found to be likely based on the usual test, and then courts layer three or four layers of causal inference on top of what is already an inference.
Downstream confusion: two starting points—defendant sells a replica/knockoff to someone who knows what she’s getting, or defendant sells to a nonconfused purchaser a geniune, but modified, article originally made by plaintiff. Then, the purchaser will give the article as a gift to a confused recipient, or will resell the purchased article in a secondary market to a confused consumer. The problem: conflicts with longstanding Supreme Court precedent on secondary infringement liability set in Inwood Labs. These should be understood as contributory infringement claims and required to meet their standards. Second, this can interfere with first sale: Prestonettes v. Coty--quality control/material differences requirements disappear from this analysis when the issue is framed as post-sale downstream confusion. Au-tomotive Gold v. Volkswagen (9th Cir. 2009) required court to tie itself in knots because of this switch.
Status confusion: purchaser of defendant’s product acquires status of plaintiff’s product without playing the higher price. Injury is (1) to past purchasers of the genuine article who paid full price and (2) to the general public, irrespective of potential future purchases—public won’t know who’s entitled to the status of the genuine article and may accord status to the wrong people. He finds this intensely problematic both politically and as a matter of TM theory.
Information theory: market for lemons. To stop it, impose costs on sellers who mislead about quality. One way to do this is with a brand, allowing consumers to punish bad quality.
What’s the info asymmetry here? It’s not about the products. Purchasers are not confused and in fact don’t care about quality; no info asymmetry between buyers and sellers. Rather, the asymmetry is between purchasers and social audience—the “lemons” in post-sale confusion law aren’t products, they’re people.
Why do people use consumption to signal status? Social class: it’s bad manners just to say “I’m very wealthy and therefore you should respect me,” but more persuasive is the info economics explanation—status is scarce but speech isn’t: Veblen’s Theory of the Leisure Class. Courts have replaced Veblen goods http://en.wikipedia.org/wiki/Veblen_good with Veblen brands. Sheff argues this is wrong: government interference with claims to social status. The message couldn’t be sent without the assistance of TM law. Enforced scarcity—social speech leaves the commons and goes into the market. Inconsistent with idea that gov’t should not suppress the speech of some to enhance the relative voice of others.
What’s the gov’t’s interest in taking sides? Social policy—social norms. Misappropriation/free riding—incentivizing new forms of symbolic expression. Regulation of commerce—channeling social competition away from naturally scarce resources into artificially scarce brands.
Issues: what about the merchandising cases, some of which use post-sale confusion and some of which don’t? What are the details of the First Amendment issue—who would have standing to raise the issue? TM defendant: could it stand for its customers? Finally, false speech: the person who buys the knockoff is, at least according to some views, lying; does that change the free speech analysis.
My unfocused thoughts: effect on the law of the modern shift to being able to compare self to most well-off in the US/world, versus most well-off in one’s community and heightened feelings of relative deprivation; relationship between that and the idea of the “tournament” culture of rewards increasing inequality; possibility of a stronger claim that the message could be sent without TM’s help but only to those who were “in the know” and capable of making fine distinctions, which would counteract the importance of the masses seeing the bag on one’s arm.
Jim Gibson: if we view TM as propping up status competition, is it clear that the absence of post-sale confusion would help? That is, people might invest more in cycling.
A: Beebe makes this argument—that it’s a losing game to turn rights to this purpose; the cycle gets faster and faster and meaning dilutes faster. He’s not sure about the natural endpoint.
Q: But think about the literature on fashion—lack of protection seems not to have changed the status competition.
A: at least we’d channel into naturally scarce resources instead of artificially (e.g., I guess, handmade beading/lace, etc.).
Lemley: are we following consumer expectations or setting them? A lot of expansion has come from the “following” idea, but here the story is the opposite. There’s no evidence of confusion, and even if there were evidence for the defendant we’d still make sure the defendant lost a counterfeiting case. In the service of TM expansion, we are saying we don’t need to look at what consumers believe, creating a legal norm instead.
A: Beebe argues this too; it’s just misappropriation and a counterfeiter is not allowed to get away with it irrespective of effects on consumers. What is misappropriated is not reputation for the quality of the article but information that other people will assume about you if you carry the good.
Q: it’s kind of like tortious interference: I promised my consumers that they’d be elite and you’re taking that away.
A: but it’s circular: you can only make that promise if you have the right.
Q: isn’t this just dilution even if called confusion?
A: Plausible, for a given definition of blurring/tarnishment.
Irina Manta: what about the car salesman wearing a fake Rolex, who uses it to increase trust in customers?
A: from the First Amendment standpoint, I’d want to draw distinctions between commercial and noncommercial speech. In general these cases are about social speech, even a used car salesman. The government has less role to play in regulating that kind of expression. (My comments: my father just wrote an essay on the topic of the First Amendment regulation of lies in themselves. Also, “seeming trustworthy” is puffery; advertising law doesn’t regulate almost any of the vague presentation-oriented techniques that salespeople can use, like using your first name or getting you a snack; to say we’re regulating this one particular technique in the name of consumer protection is simply disingenuous.)
Various “bullshit” marks have been refused registration, whereas BLACK TAIL, BIG PECKER’S, and BADASS all made it through.
Can and does the Lanham Act effectively prohibit registration for scandalous/immoral or disparaging marks? Should it? Her answer to the second question is no.
Resource conservation justification—not clear it saves resources to fight about these marks. The consumer protection at the base of TM policy is source quality, not moral quality.
Whose sense of decency or propriety matters? A substantial composite of the general public—all of the key terms of which are debatable. Why is MADONNA for wine scandalous? There are references to wine in the Bible, but the evils of drinking are more widespread today. Madonna = purity in womanhood (this was before the singer) = (public acknowledgement of) drinking as particularly immoral for women. Do you look at the context of wine drinkers, those who don’t drink wine, or both? Affidavits from winedrinkers said they weren’t offended, but that wasn’t enough.
Examiners end up relying on dictionaries; existence of alternate definitions allows the mark to pass even though people who “get it” will understand the intended meaning.
Similarly, disparagement isn’t defined in the Lanham Act. The test is, circularly, whether the mark would be understood as referring to an identifiable group and perceived as disparaging by a substantial composite. Relevant group is ambiguous under existing practice. E.g., HEEB case for magazines—relevant group definition might be dispositive. Against registration: ADL, rabbis, university professor, talk show host, members of general public; on the other side, letters from prominent Jewish organizations, Jewish Fund for Justice, etc.—in the end the mark was rejected. (I don’t see why this is troubling, given that the ban is in there in the statute. True, you have to accept that it is consistent with the First Amendment, but if you take that step (as all courts to date have done), then you have to give it meaning. The standard we have is “disparaging to a substantial composite,” not “not disparaging to a substantial composite,” so the two categories of evidence do not even conflict.)
Sometimes not clear whether mark is rejected because scandalous or disparaging—MOONIES for little toy that drops its pants when you squeeze a ball. TTAB allowed registration of the dolls; the examiner focused on reference to members of Unification Church, but TTAB thought purchasers are more likely to see the reference to “mooning.” TTAB reasoned, oddly, that a major newspaper is unlikely to use disparaging terms.
Determinations are content based and subjective; the application of the standards is inevitably inconsistent, varying with time and tribunal. (My reaction: welcome to the PTO; enjoy your stay. That’s flippant, because unpredictability might be more harmful w/r/t disparagement than to descriptiveness, but it’s not as if the other standards are tons better.) Lack of standards leaves examining attorneys with little to go on. TECHNODYKE registered, DYKES IN THE CITY and SUPERDYKE rejected. Identity of applicant is often not taken into consideration. Reappropriation with the intent of empowerment might make identity very relevant.
BULLSHIT for handbags: rejected. (At which point I left to take a call I couldn’t dodge, but there was more discussion of inconsistency.)
Wendy Gordon, Copyright and Negligence as Mirror Images: On Not Mistaking for the Right Hand What the Left Hand is Doing
Mirror image argument can help copyright novices understand incentive arguments. Torts: start with the proposition that not every harm produces recovery. Causation is never sufficient; you need something else. Recognizes Coasean reciprocity. In a world with transaction costs, externalizing costs to one is internalizing to another. And when you have a whole community, you need to worry about effects on others. Just as tort internalizes negative externalities to make the careless be more careful, copyright works in a mirror image: it makes people more productive by allowing them to capture some of the benefits they generate.
We use negligence when we don’t know the level of activity that is appropriate. We have a similar sense of doubt about how far copyright should go—proper mix of internalizing versus allowing benefits to stay with public for follow-on innovation and inexpensive copies. We have some rules: can internalize benefits from expression during copyright term, but not the benefits from your idea. Like negligence, we allow nonrecovery in order to increase benefits.
Copyright is about increasing productive behavior; tort about decreasing destructive behavior. Copyright is concerned with term limits, fair use, etc. in leaving certain benefits with the nonowner; tort law is concerned with moral hazards etc. in leaving certain incentives to take care with the plaintiff. So it is a mirror image. Thinking copyright and tort are the same, rather than mirror images, leads to mistakes. CCNV case: Court ignored the necessary reversals. CCNV: question was whether sculptor was independent contractor or employee. Court used multifactor test borrowed from the Restatement, but the Restatement’s purpose was to figure out whether vicarious liability should attach, and that raises very different issues. Vicarious liability was pushed by a desire to spread costs for injured plaintiffs—not stuck with the judgment-proof truck driver but with a deep pocket that can insure, pass costs on, and has a declining marginal utility of money, in order to spread the immense losses to an unprepared person (and her family, etc.) when disaster strikes. But the mirror image of spreading is concentration: copyright is about the virtues of concentrating incentives on a particular entity.
Understanding this would allow us, among other things, to make sense of the “teacher exception” to the work for hire doctrine, which now exists only in dicta—since only the author can alter the scholarly article, it makes no sense to give the copyright to the employer. We want to concentrate incentives on those who can respond to them, but given customs of academic freedom, the professor is the only one who can do that, and we shouldn’t split copyright and control.
Another proposal: make plaintiff prove harm as part of her case. The key is the notion of baseline. When you determine, if you can, how many benefits need to be internalized to incentivize a desired set of works, that sets the baseline. Does the defendant’s act cause a shortfall from that baseline?
Tort is made of causation, duty, wrongfulness. Causation has its parallel in copyright in copying: would the work look and sound any different had the defendant had no contact with the plaintiff’s work? Copying is simply causation: that would resist the temptation to collapse two tests into one (copying and substantial similarity/wrongful copying). Duty has a parallel: what right does the statute confer? Wrongfulness: substantial similarity of taking. Setting these out separately works for torts; in copyright courts conflate the tests.
Term limits and trespass: trespass doesn’t require proof of harm. Has been explained as a way to allow owner to internalize all externalities. Poor analogy for copyright because continual monitoring of externality over lifetime of resource differs markedly from copyright’s needs. Copyright focuses on a particular moment in time, where the decision is made to create the new work. There is a natural end to the amount of future income that can be relevant to the particular point in time. We can look to the scope of the plaintiff’s expectations when s/he created the work to figure out what recovery s/he should get. Christina Bohannon and Shyam Balganesh have proposed foreseeability requirements, getting at this same point: you can’t be incentivized by the unforeseeable. But Gordon thinks that foreseeability is too expandable. In Eldred, Justice Ginsburg speculates that authors could reasonably expect that copyright terms would keep expanding. Better question; whether you are serving or stand ready to serve the particular market or have good business reasons for holding off.
Lemley: think about mental state and the negligence analogy. If copyright is strict liability (given volitional)—I don’t have to know I’m doing something wrong, or even that I’m copying—then should the analogy be strict liability in tort? And how would we think about causation then?
A: think about the law of unconsented benefits—if I paint your house without bargaining, you don’t owe me anything. Copyright: can’t make bargains with the whole world ahead of time. In ordinary situations, denying benefit generator the ability to recover generates thick markets (negotiating ahead of time). But in copyright, we want the benefit generator to have the ability to recover. But that’s not the question—she wants to use torts to critique copyright.
Negligence model would be best because of our uncertainty about who should be internalizing and who externalizing (who has the most control over the situation, in tort—the person blasting or controlling dangerous animals); when you come to activities with positives and negatives, like driving, we use negligence. Precisely because not all spillover benefits should be captured, we should use a model sensitive to allowing such spillovers.
When player pianos came in, people stopped making music at home. This substitution effect should be taken into account in allocating rights. What about unanticipated uses that make a work more valuable? Should people be entitled to collect? This is horizontal equity—the person seeking recovery for a use he never could have contemplated is seeking a windfall where there’s no substitution. To justify giving that windfall, you have to believe that the horizontal equities are strong enough to be worth the excess resources given to the initial author.
Dogan: what about Texaco?
A: Hard question, but dangers of ignoring horizontal equity are not as great as dangers of systemic overprotection.
Jeremy N. Sheff, Veblen Brands and Invisible Hands: How Trademarks Create a Market for Suppressed Speech
He’s interested in post-sale confusion: what is it and what’s its relation to status goods? Bystander confusion, downstream confusion, and status confusion: he doesn’t think any of these suffice, and the doctrine should be abolished.
Theory of injury in bystander cases: starts with a nonconfused sale to someone who knows exactly what she’s getting. Then courts presume the purchaser uses/consumes in the view of others, potential consumers of plaintiff’s product. Then the potential purchasers will be confused, and form beliefs about the quality of plaintiff’s product, which influence their purchasing behavior. This seems reasonable basis for imposing liability if the later steps were ever proven. But none of them ever are. The “potential purchasers will be confused” step is found to be likely based on the usual test, and then courts layer three or four layers of causal inference on top of what is already an inference.
Downstream confusion: two starting points—defendant sells a replica/knockoff to someone who knows what she’s getting, or defendant sells to a nonconfused purchaser a geniune, but modified, article originally made by plaintiff. Then, the purchaser will give the article as a gift to a confused recipient, or will resell the purchased article in a secondary market to a confused consumer. The problem: conflicts with longstanding Supreme Court precedent on secondary infringement liability set in Inwood Labs. These should be understood as contributory infringement claims and required to meet their standards. Second, this can interfere with first sale: Prestonettes v. Coty--quality control/material differences requirements disappear from this analysis when the issue is framed as post-sale downstream confusion. Au-tomotive Gold v. Volkswagen (9th Cir. 2009) required court to tie itself in knots because of this switch.
Status confusion: purchaser of defendant’s product acquires status of plaintiff’s product without playing the higher price. Injury is (1) to past purchasers of the genuine article who paid full price and (2) to the general public, irrespective of potential future purchases—public won’t know who’s entitled to the status of the genuine article and may accord status to the wrong people. He finds this intensely problematic both politically and as a matter of TM theory.
Information theory: market for lemons. To stop it, impose costs on sellers who mislead about quality. One way to do this is with a brand, allowing consumers to punish bad quality.
What’s the info asymmetry here? It’s not about the products. Purchasers are not confused and in fact don’t care about quality; no info asymmetry between buyers and sellers. Rather, the asymmetry is between purchasers and social audience—the “lemons” in post-sale confusion law aren’t products, they’re people.
Why do people use consumption to signal status? Social class: it’s bad manners just to say “I’m very wealthy and therefore you should respect me,” but more persuasive is the info economics explanation—status is scarce but speech isn’t: Veblen’s Theory of the Leisure Class. Courts have replaced Veblen goods http://en.wikipedia.org/wiki/Veblen_good with Veblen brands. Sheff argues this is wrong: government interference with claims to social status. The message couldn’t be sent without the assistance of TM law. Enforced scarcity—social speech leaves the commons and goes into the market. Inconsistent with idea that gov’t should not suppress the speech of some to enhance the relative voice of others.
What’s the gov’t’s interest in taking sides? Social policy—social norms. Misappropriation/free riding—incentivizing new forms of symbolic expression. Regulation of commerce—channeling social competition away from naturally scarce resources into artificially scarce brands.
Issues: what about the merchandising cases, some of which use post-sale confusion and some of which don’t? What are the details of the First Amendment issue—who would have standing to raise the issue? TM defendant: could it stand for its customers? Finally, false speech: the person who buys the knockoff is, at least according to some views, lying; does that change the free speech analysis.
My unfocused thoughts: effect on the law of the modern shift to being able to compare self to most well-off in the US/world, versus most well-off in one’s community and heightened feelings of relative deprivation; relationship between that and the idea of the “tournament” culture of rewards increasing inequality; possibility of a stronger claim that the message could be sent without TM’s help but only to those who were “in the know” and capable of making fine distinctions, which would counteract the importance of the masses seeing the bag on one’s arm.
Jim Gibson: if we view TM as propping up status competition, is it clear that the absence of post-sale confusion would help? That is, people might invest more in cycling.
A: Beebe makes this argument—that it’s a losing game to turn rights to this purpose; the cycle gets faster and faster and meaning dilutes faster. He’s not sure about the natural endpoint.
Q: But think about the literature on fashion—lack of protection seems not to have changed the status competition.
A: at least we’d channel into naturally scarce resources instead of artificially (e.g., I guess, handmade beading/lace, etc.).
Lemley: are we following consumer expectations or setting them? A lot of expansion has come from the “following” idea, but here the story is the opposite. There’s no evidence of confusion, and even if there were evidence for the defendant we’d still make sure the defendant lost a counterfeiting case. In the service of TM expansion, we are saying we don’t need to look at what consumers believe, creating a legal norm instead.
A: Beebe argues this too; it’s just misappropriation and a counterfeiter is not allowed to get away with it irrespective of effects on consumers. What is misappropriated is not reputation for the quality of the article but information that other people will assume about you if you carry the good.
Q: it’s kind of like tortious interference: I promised my consumers that they’d be elite and you’re taking that away.
A: but it’s circular: you can only make that promise if you have the right.
Q: isn’t this just dilution even if called confusion?
A: Plausible, for a given definition of blurring/tarnishment.
Irina Manta: what about the car salesman wearing a fake Rolex, who uses it to increase trust in customers?
A: from the First Amendment standpoint, I’d want to draw distinctions between commercial and noncommercial speech. In general these cases are about social speech, even a used car salesman. The government has less role to play in regulating that kind of expression. (My comments: my father just wrote an essay on the topic of the First Amendment regulation of lies in themselves. Also, “seeming trustworthy” is puffery; advertising law doesn’t regulate almost any of the vague presentation-oriented techniques that salespeople can use, like using your first name or getting you a snack; to say we’re regulating this one particular technique in the name of consumer protection is simply disingenuous.)
Friday, February 11, 2011
WIPIP at BU session 2
Stacey Dogan and Wendy Gordon, Functionality
Dogan: Project: IP protection for product design more generally; functionality is a key concept here, and on the copyright side separability. Tentative conclusion: both doctrines moving in a direction stingy from designers’ perspectives, and appropriately so. End of project will be that burden ought to be on those seeking to fill the gap that there is a need for design protection, but neither area of law (copyright or TM) is appropriate for protecting design that blends form and function.
Structuring assumption: need of patent system to distinguish protectable from unprotectable reigns supreme in conflict with TM and copyright. Traffix did not end the debate over what the standard was with respect to competing designs. You end up backing into a competitive necessity test: is this type of spring mechanism essential to road signs? Federal Circuit has left open the relevance of the need to copy in order to sell a competing product.
We fear error costs. If we focus on competitive necessity, there will be false positives and false negatives. Costs of false positives will chill entry by competitors. Costs of false negatives, however, are much less weighty for product configuration, as Wal-Mart and even Dastar suggest—to what extent do purchasing decisions really turn on source indicating features? Not much, especially when labeling is available. Combination of risk of error costs and disparity in costs between false positives and negatives is significant reason for Court’s strict approach in Traffix.
Gordon: 102(b) is a way of keeping patent sovereign: does not have a competitive necessity test, it’s a straight ban. Likewise merger prevents monopolizing ideas, though there competitive necessity may play a role. Separability: also does not ask about competitive necessity. Stay away from the cliff; don’t ask about alternatives unless there is actual separability.
Two tests: process oriented, Pivot Point and Brandir, asking whether utilitarian concerns influenced the design sufficiently to prevent copyrightability. Traffix/fine grained approach looks at whether the object, if utility were stripped away, would still be art, and vice versa—see most clearly in Carol Barnhart. If you stripped away the art, would the object still be as sturdy/useful/inexpensive and so on? Mannequin: the artistic part is the width of the shoulder and configuration of the body—inextricable with the function (as in Traffix, it’s the reason the product works). Statute seems to put art over function—whether art is left when function is subtracted. Alternate question would be whether function is left when art is subtracted, and that would be a better fit to the policies we are trying to further, but it’s not clear how to get that from the language.
Language about art existing on its own in the statute arguably pertains to the basic originality requirement: separability isn’t enough; you need originality. Second question: separable from what? Statute may imply we’ve already taken away the functional aspect before we start analyzing. Mazer v. Stein--take away the lamp and you still have the dancer. Esquire v. Ringer--not so much. This looks like it favors the process approaches—aim at rewarding creative people who don’t have too much of the engineer in them.
Proposal: Read the statute to say that art and utility need to be able to exist on their own. Utility is equal to art. Remember purpose of deference to patent: deference to utility.
Laura Heymann: Importance of markets to each of these parts? How do you define the market each of these things aims at? Has an impact on each question—is the market spring-mounted road signs or road signs? Is the market statues or lamps?
Dogan: if you did accept competitive necessity, market definition is key, but antitrust shows us that it’s nearly impossible, so that’s another reason to shy away from that inquiry—we don’t want to risk defining the market too broadly. De jure/de facto functionality: cases are really talking about functionality of object v. functionality of feature, and we want to draw out that distinction.
Gordon: we’re trying to avoid that question—not whether there are other mannequins that can do the job but whether this mannequin will do the job if you strip away the shoulders. People doing process analysis have to engage in market definition.
Q: Can we succeed by focusing on whether there is a way to strip stuff away from the object? Flatten out the spoon, and so on. (But you could strip stuff away from the lamp in Esquire and end up with a lamp.)
Gordon: “Stripping” is a hard call because, for example, a knit sweater may be impossible to strip off the pattern, but it can easily be done imaginatively, in which case you’d have a design you could frame and a colorless sweater you could still wear.
Q: so what’s the result in Brandir?
Gordon: nonprotectable under all approaches.
Dogan: other regimes do grant sui generis design protection. This project suggests that from an institutional competence perspective, neither TM nor copyright are appropriate for responding to a “design gap.”
My question: Query whether separability can ever really be made to ignore competitive necessity. Seems to me the Bonazoli case went off the rails by resting on separability rather than merger, because the key issue was whether the appropriate market was one for measuring spoons or for measuring spoons with heart-shaped bowls and fletched arrows as shafts (notably, the spoons would work a lot better as measuring spoons if you stripped away the fletching). Whereas competitive necessity can do some work in harmonizing Brandir, Kieselstein-Cord and Carol Barnhart. The more I hear about this the more I think it’s ultimately about merger/competitive necessity, simply because we don’t know how to do any other kinds of analysis.
Also: Playtime Novelties--separable? http://williampatry.blogspot.com/2006/11/novelty-claim.html
Raizel Liebler (with William Ford, not presenting), Games are not Coffee Mugs: Games and the Right of Publicity
Games aren’t just merchandising, but are closer to traditional forms of media. Restatement of Unfair Competition talks about appropriating identity “for purposes of trade.” Lawyers have listed video games along with coffee mugs as if they were the same. McCarthy used to say that board games and wall posters are not traditional media in which ideas are conveyed and should usually be viewed as more exploitative than informational or educational; most uses should be infringements. He removed this section in the recent edition.
Merchandise is viewed as closer to advertising, but Liebler & Ford argue that they are closer to traditional media. Books and shoes are on opposite ends of the spectrum; why are board games in the middle? Posner: “We are in the world of kids’ popular culture”—people think about what children do.
But the CBC case held that fantasy baseball leagues superseded the right of publicity. Many pending game cases followed! Ranging from amateur athletes to present and retired athletes claiming rights. Can you include demographic stats? Hairstyles? Names? Can you allow players to modify their initially generic characters to be more like the existing athlete?
Transformativeness: right of publicity “continues to shield celebrities from literal depictions or imitations for commercial gain by works which do not add significant new expression” in California (Cal. Ct. App. 2006).
Putting Paris Hilton’s face on checkers doesn’t add anything to the gameplay; it would work the same. But Who Can Beat Nixon?, a 1970 game, might be a clear case the other way. Game: 1960: The Making of the President--uses a lot of historical figures, not all politicians. Can it use Martin Luther King Jr.? Historical wargames with reenactments should be easy cases, even including an image of Patton and his role in the war. But now we are seeing claims over things like the “Dillinger Tommy Gun.” This should be viewed as transformative.
As games get more elaborate, they get more creative/transformative—Grand Theft Auto. Playable characters in Guitar Hero etc. Gwen Stefani sued because her character was able to do things she didn’t approve of; in the latest version, players are no longer allowed to participate as celebrity characters.
One case: retired players were made less realistic, but sued anyway. Even if their names aren’t incorporated, people can add in mods to include players’ names attached to their numbers and physical appearances, including having them announced in the game. It wasn’t by random chance that a football player who was 5’5” showed up in the game with a particular number on a particular team.
Dogan: What should happen in these cases?
A: football player cases are more realistic, and we could thus argue that it’s more protected, but you could also argue that it’s therefore not transformative because it doesn’t refigure the football players as half-worms. We haven’t figured out what to do about this. For political figures, where use of person within the game has a role within the narrative of the game, that should be allowed.
Mark Lemley: you seem to be distinguishing (or the cases do) between politics/history and unimportant stuff. Is this defensible as a matter of First Amendment theory?
A: McCarthy specifically makes this distinction (but, as I expect Mark might say, that just reflects the fact that IP lawyers long thought the First Amendment didn’t apply to them, and they are (descriptively and normatively) wrong—remember that heightened protection for corporate speech Jessica Silbey was talking about on the last panel?).
Bruce Boyden: can put games on a spectrum of complexity from checkers to simulation type video games. Both ends give you trouble. For the video games, seems like the thing can be analogized more to fictional works, like TV shows/books; the relevant test there is whether there’s a reasonable relationship between the use in the fictional work and the work itself. For the historical video games, that seems obvious. The sports games: more of a problem when they’re not reenacting actual games. (As if you reenacted actual battles in WWII games any more than you reenact football games? I’m pretty sure it’s possible for the Allies to lose most WWII games. In both cases you step into the shoes of some group/person. Boyden seems to me to be doing what Lemley just identified—Patton is important and thus has no rights, whereas Peyton Manning isn’t and thus has rights.) He sees this as more of an ad.
A: Difficulty in playing “as” a person: fantasy football leagues—people do play out the role of the “what if” in many contexts.
Heymann: simulations add an extra layer—if you’re allowed to be Gwen Stefani, you can fix that as a video. Conflict between autonomy of gameplayer and interest of celebrity, which no one would ever notice in a board game involving roleplaying.
Dogan: Project: IP protection for product design more generally; functionality is a key concept here, and on the copyright side separability. Tentative conclusion: both doctrines moving in a direction stingy from designers’ perspectives, and appropriately so. End of project will be that burden ought to be on those seeking to fill the gap that there is a need for design protection, but neither area of law (copyright or TM) is appropriate for protecting design that blends form and function.
Structuring assumption: need of patent system to distinguish protectable from unprotectable reigns supreme in conflict with TM and copyright. Traffix did not end the debate over what the standard was with respect to competing designs. You end up backing into a competitive necessity test: is this type of spring mechanism essential to road signs? Federal Circuit has left open the relevance of the need to copy in order to sell a competing product.
We fear error costs. If we focus on competitive necessity, there will be false positives and false negatives. Costs of false positives will chill entry by competitors. Costs of false negatives, however, are much less weighty for product configuration, as Wal-Mart and even Dastar suggest—to what extent do purchasing decisions really turn on source indicating features? Not much, especially when labeling is available. Combination of risk of error costs and disparity in costs between false positives and negatives is significant reason for Court’s strict approach in Traffix.
Gordon: 102(b) is a way of keeping patent sovereign: does not have a competitive necessity test, it’s a straight ban. Likewise merger prevents monopolizing ideas, though there competitive necessity may play a role. Separability: also does not ask about competitive necessity. Stay away from the cliff; don’t ask about alternatives unless there is actual separability.
Two tests: process oriented, Pivot Point and Brandir, asking whether utilitarian concerns influenced the design sufficiently to prevent copyrightability. Traffix/fine grained approach looks at whether the object, if utility were stripped away, would still be art, and vice versa—see most clearly in Carol Barnhart. If you stripped away the art, would the object still be as sturdy/useful/inexpensive and so on? Mannequin: the artistic part is the width of the shoulder and configuration of the body—inextricable with the function (as in Traffix, it’s the reason the product works). Statute seems to put art over function—whether art is left when function is subtracted. Alternate question would be whether function is left when art is subtracted, and that would be a better fit to the policies we are trying to further, but it’s not clear how to get that from the language.
Language about art existing on its own in the statute arguably pertains to the basic originality requirement: separability isn’t enough; you need originality. Second question: separable from what? Statute may imply we’ve already taken away the functional aspect before we start analyzing. Mazer v. Stein--take away the lamp and you still have the dancer. Esquire v. Ringer--not so much. This looks like it favors the process approaches—aim at rewarding creative people who don’t have too much of the engineer in them.
Proposal: Read the statute to say that art and utility need to be able to exist on their own. Utility is equal to art. Remember purpose of deference to patent: deference to utility.
Laura Heymann: Importance of markets to each of these parts? How do you define the market each of these things aims at? Has an impact on each question—is the market spring-mounted road signs or road signs? Is the market statues or lamps?
Dogan: if you did accept competitive necessity, market definition is key, but antitrust shows us that it’s nearly impossible, so that’s another reason to shy away from that inquiry—we don’t want to risk defining the market too broadly. De jure/de facto functionality: cases are really talking about functionality of object v. functionality of feature, and we want to draw out that distinction.
Gordon: we’re trying to avoid that question—not whether there are other mannequins that can do the job but whether this mannequin will do the job if you strip away the shoulders. People doing process analysis have to engage in market definition.
Q: Can we succeed by focusing on whether there is a way to strip stuff away from the object? Flatten out the spoon, and so on. (But you could strip stuff away from the lamp in Esquire and end up with a lamp.)
Gordon: “Stripping” is a hard call because, for example, a knit sweater may be impossible to strip off the pattern, but it can easily be done imaginatively, in which case you’d have a design you could frame and a colorless sweater you could still wear.
Q: so what’s the result in Brandir?
Gordon: nonprotectable under all approaches.
Dogan: other regimes do grant sui generis design protection. This project suggests that from an institutional competence perspective, neither TM nor copyright are appropriate for responding to a “design gap.”
My question: Query whether separability can ever really be made to ignore competitive necessity. Seems to me the Bonazoli case went off the rails by resting on separability rather than merger, because the key issue was whether the appropriate market was one for measuring spoons or for measuring spoons with heart-shaped bowls and fletched arrows as shafts (notably, the spoons would work a lot better as measuring spoons if you stripped away the fletching). Whereas competitive necessity can do some work in harmonizing Brandir, Kieselstein-Cord and Carol Barnhart. The more I hear about this the more I think it’s ultimately about merger/competitive necessity, simply because we don’t know how to do any other kinds of analysis.
Also: Playtime Novelties--separable? http://williampatry.blogspot.com/2006/11/novelty-claim.html
Raizel Liebler (with William Ford, not presenting), Games are not Coffee Mugs: Games and the Right of Publicity
Games aren’t just merchandising, but are closer to traditional forms of media. Restatement of Unfair Competition talks about appropriating identity “for purposes of trade.” Lawyers have listed video games along with coffee mugs as if they were the same. McCarthy used to say that board games and wall posters are not traditional media in which ideas are conveyed and should usually be viewed as more exploitative than informational or educational; most uses should be infringements. He removed this section in the recent edition.
Merchandise is viewed as closer to advertising, but Liebler & Ford argue that they are closer to traditional media. Books and shoes are on opposite ends of the spectrum; why are board games in the middle? Posner: “We are in the world of kids’ popular culture”—people think about what children do.
But the CBC case held that fantasy baseball leagues superseded the right of publicity. Many pending game cases followed! Ranging from amateur athletes to present and retired athletes claiming rights. Can you include demographic stats? Hairstyles? Names? Can you allow players to modify their initially generic characters to be more like the existing athlete?
Transformativeness: right of publicity “continues to shield celebrities from literal depictions or imitations for commercial gain by works which do not add significant new expression” in California (Cal. Ct. App. 2006).
Putting Paris Hilton’s face on checkers doesn’t add anything to the gameplay; it would work the same. But Who Can Beat Nixon?, a 1970 game, might be a clear case the other way. Game: 1960: The Making of the President--uses a lot of historical figures, not all politicians. Can it use Martin Luther King Jr.? Historical wargames with reenactments should be easy cases, even including an image of Patton and his role in the war. But now we are seeing claims over things like the “Dillinger Tommy Gun.” This should be viewed as transformative.
As games get more elaborate, they get more creative/transformative—Grand Theft Auto. Playable characters in Guitar Hero etc. Gwen Stefani sued because her character was able to do things she didn’t approve of; in the latest version, players are no longer allowed to participate as celebrity characters.
One case: retired players were made less realistic, but sued anyway. Even if their names aren’t incorporated, people can add in mods to include players’ names attached to their numbers and physical appearances, including having them announced in the game. It wasn’t by random chance that a football player who was 5’5” showed up in the game with a particular number on a particular team.
Dogan: What should happen in these cases?
A: football player cases are more realistic, and we could thus argue that it’s more protected, but you could also argue that it’s therefore not transformative because it doesn’t refigure the football players as half-worms. We haven’t figured out what to do about this. For political figures, where use of person within the game has a role within the narrative of the game, that should be allowed.
Mark Lemley: you seem to be distinguishing (or the cases do) between politics/history and unimportant stuff. Is this defensible as a matter of First Amendment theory?
A: McCarthy specifically makes this distinction (but, as I expect Mark might say, that just reflects the fact that IP lawyers long thought the First Amendment didn’t apply to them, and they are (descriptively and normatively) wrong—remember that heightened protection for corporate speech Jessica Silbey was talking about on the last panel?).
Bruce Boyden: can put games on a spectrum of complexity from checkers to simulation type video games. Both ends give you trouble. For the video games, seems like the thing can be analogized more to fictional works, like TV shows/books; the relevant test there is whether there’s a reasonable relationship between the use in the fictional work and the work itself. For the historical video games, that seems obvious. The sports games: more of a problem when they’re not reenacting actual games. (As if you reenacted actual battles in WWII games any more than you reenact football games? I’m pretty sure it’s possible for the Allies to lose most WWII games. In both cases you step into the shoes of some group/person. Boyden seems to me to be doing what Lemley just identified—Patton is important and thus has no rights, whereas Peyton Manning isn’t and thus has rights.) He sees this as more of an ad.
A: Difficulty in playing “as” a person: fantasy football leagues—people do play out the role of the “what if” in many contexts.
Heymann: simulations add an extra layer—if you’re allowed to be Gwen Stefani, you can fix that as a video. Conflict between autonomy of gameplayer and interest of celebrity, which no one would ever notice in a board game involving roleplaying.
WIPIP at BU
Laura A. Heymann, The Law of Reputation and the Interest of the Audience
Running late, so missed the beginning; Heymann discussed various theories behind protection of reputation, including property-based, dignity-based and honor-based. But they miss the relational nature of the interest: audience’s interest in accurate information flows and use of information. Property doesn’t explain why plaintiffs are interested in retractions; infants don’t have honor, though they may have dignity.
Audience interest reminds us of utilitarian functions of reputation: useful signals, as when franchisee uses reputation of national chain to avoid startup costs. Audience participates in creating this value and thus has interest in ensuring its activities are based on solid/robust info and that its use of the info will be beneficial.
Audience focus can also unify disparate areas of doctrine. Helps explain why we exclude truthful statements from defamation, or public figure doctrine in general. Truthful information is useful to the audience (is this always true?); allowing false facts to circulate absent culpable state of mind for public figure because there will be enough responsive info to give the audience what it needs in the end.
How do we recognize the audience in doctrine? Focus courts’ attention on this interest. Perhaps a separate tort, the reputation tort—ambitious/unlikely. Hustler v. Falwell, attempt to get around defamation limits by pleading IIED, but the same First Amendment limits apply. If the interest is really reputational, then it shouldn’t be pled as copyright or right of publicity, but only defamation/TM—those are the causes of action that incorporate audience interest. This would be a good move if it could only gain traction; would need a constitutional hook or a doctrine such as copyright misuse to channel the cases in this way. Post-eBay, the traditional allowance for presumed harm/injunction may influence our perspective on audience interests as well. Courts should look for harm within the relevant audience, not just harm to the particular plaintiff—like the materiality standard for false advertising.
Look also to the nature of the remedy. If the interest is one of accurate flow of information, then disclaimers/retractions will be preferred remedies as opposed to monetary damages.
This all rests on a certain conception of the audience: rational, capable of assessing and responding to information flows. This is normatively attractive but descriptively false. Also: How much our modern communication has changed how we think about reputation flow—hard to assemble the initial audience to correct the record.
Lunney: was Dastar wrongly decided, then?
Heymann: Yes. Consumers care about the intellectual content of the videotape, not the plastic videotape.
Me: why is this concept of the audience normatively attractive?
Heymann: it’s normatively attractive to treat the audience as having the capacity to understand—as with descriptive fair use or parody cases, even though we know there are people out there who won’t get the joke; other interests are more important. Doesn’t mean we allow falsehoods to circulate in any particular case.
Xuan-Thao Nguyen, Apologies as IP Remedies? A Comparative Review of China and the United States Approaches to IP Remedies
Plaintiff often wants an apology instead of a lawsuit. This is not a cultural thing—there are people who attribute the value of apology to Asian/Chinese culture, but look in the US as well. People in US say “I’m sorry” all the time and teach it to our children. Judges have ordered apologies, including in ads and on YouTube. Legal scholarship has looked at apology in Japan in the US, suggesting that apologies can be better used in law. Mediation, conflict resolution; scholarship also in critical race theory, particularly in relation to reparations. Formal apology to Japanese American survivors of US internment. More valuable to some victims than money is. Money can’t heal communities.
Evidence scholarship covers this too.
Chinese reaction: Apology is very American! (Just as Americans said apology was Asian.)
Remedies: injunction, compensatory damages, statutory damages of up to 500,000 RMB, defendant’s profits; reasonable costs; and court-ordered apology is explicitly available as statutory remedy. But what about the case law?
Things in China are changing very fast. Court ordered apologies have been part of remedies: TM defendant to make a public apology within 10 days after judgment. Must be published in Kunming Daily Newspaper (where the offense occurred) “to eliminate the bad effect of infringement.” Another TM case, apology requested but denied. No intentional use of the TM; no bad faith—injunction ordered but no damages or public apology.
Copyright case, infringement of software, large award of damages and costs: public apology ordered in Computer World, the trade press for software. Another case: photojournalist plaintiff whose photo of a festival was published in Nantong Daily, his employer’s newspaper. Defendant publishing house published books containing the photo without permission. Asserted “textbook” or “teaching book” exemption, but the court found that the types of books at issue were not textbooks/teaching books. Remedy: injunctions, damages for economic loss (not very high), public apology within 15 days, content approved by court. If defendants fail to do so, plaintiff will publish apology in Nantong Daily in name of defendants and defendants will pay the expenses. “Sorry for using”—not legal terminology.
Why is apology important? It’s like punitive damages: it’s shameful to have an apology printed in the newspaper. But it also creates the conditions for forgiveness: restorative aspects.
Supreme Court patent case: overturned apology remedy—apologies should be related to plaintiff’s personal interest or commercial credit standing; patents are largely property interests. Not appropriate unless plaintiff proved that the defendant’s conduct caused heavy losses to the plaintiff’s commercial credit standing. Note that in the patent statute there is no specific provision for apologies! But the court still was willing to allow it.
Lessons for US? US cases recognize effects of apology, could do more.
Heymann: Private v. public apology—medical malpractice cases seem to involve private apologies. How important is it that the public know the identity of the defendant? If it’s a small infringer no one’s ever heard of, who cares?
A: With malpractice, there is an interest in settling through apologies; less important that it be public. China: if the conduct is intentional, then the public apology is warranted. If we did that, private apology wouldn’t be satisfactory; would worry about sincerity of “I’m sorry,” whereas publishing it in a newspaper has much more impact.
Mary LaFrance: UK statute—if defendant offers to make amends, with retraction, automatically lowers damage awards even if offer isn’t accepted.
Nguyen: demand for apology is routine in China, but only granted for willful etc.; plaintiffs will routinely send out a press release when they’ve obtained an apology.
Sandra L. Rierson, The Moral Right of Dilution
Not an advocate, but seeking to provide a better diagnosis of why we have dilution and how that might affect remedies. Reports of dilution’s death have been greatly exaggerated: Visa Int’l v. JSL Corp. (9th Cir. 2010) found dilution even though the term was a standard word with a dictionary meaning relevant to defendant’s business; Starbucks v. Wolfe’s Borough Coffee (2d Cir. 2009)—minimal similarity wasn’t enough to defeat dilution claim; intent to associate with Starbucks should have been weighed more heavily even if there was no bad faith. Last week’s Levi Strauss v. Abercrombie & Fitch (9th Cir. 2011)—district court put too much emphasis on the fact that the two trade dresses didn’t look a lot alike; that’s just one factor to be weighed. Victoria’s Secret v. Moseley (6th Cir. 2010)—if there was a semantic association, and the new mark has a lewd or offensive-to-some sexual association, that raises a strong inference of tarnishment.
Current statute has real possibility of damages (and profits and fees) if defendant willfully intended to trade on the recognition of the famous mark or willfully intended to harm the reputation of the famous mark. Recent case: Mattel defending See ‘n Say mark; defendant lost a jury trial on TM infringement/dilution and jury awarded $400,000; judge increased the award and found an exceptional case, awarding $2.6 million in attorneys’ fees. Real risks to small defendants. It’s not easy to get summary judgment on a federal dilution claim for a defendant. So it’s a powerful weapon for TM holders with a strong impact on others’ behavior.
Dilution is supposed to be directed at an economic harm: the distinctiveness of the mark/its source identification function. There are some problems with that though, if people are perfectly capable of distinguishing meanings. If that’s not a satisfactory explanation, why do we have laws prohibiting TM dilution?
Interest groups: Big TM owners make claims to have Congress change the statute, and only the ACLU opposes them; not like patents where there are strong groups on both sides. But why do these TM owners want dilution protection to begin with? Steamrolling little guys still costs some money and may give you a reputation as a bully.
Her explanation: what we’ve done is to extend a moral right to the holders of famous TMs. But why do we do this when the US is so stingy with moral rights generally?
First, we don’t admit that this is what we’re doing. We pretend that there’s harm. Fair use in copyright blocks a lot of moral rights; fair use in TM does not, though fair use is specifically set out as a defense in the TDRA. Moral rights in copyright bump up against rights of owners of objects/copyrights to do what they want with them. Dilution though is squarely in line with US notions of property rights. There’s no transfer of ownership between Victoria’s Secret and Victor Moseley.
Also consistent with an anti-free-riding impulse in US law.
Implications: maybe we don’t need dilution at all. Owners are already protected under other laws. Given the power of modern TM infringement, Kodak pianos/Harry Potter drycleaners would be found infringing. To the extent reputation is at issue, we have state law torts to protect those interests. It’s surprising to see the difference between defamation and dilution a la Victoria’s Secret, where the presumption is one of harm and the burden is basically on the defendants to disprove it. We have a club to swat a fly.
If we accept that dilution is here to stay as a cause of action, we could focus on the question of remedies. She tells students not to expect damages in a TM case, but the possibility is there. Given what dilution is, we should take a look at reducing or changing the scope of remedies available—disclaimer designed to mitigate reputational impact or association. Injunctive relief is also misplaced in these cases without a showing of harm to the plaintiff. Indirect comparison, as in the Charbucks case—admitted indirect reference to Starbucks’ dark roasted coffee—also deserves our consideration.
Glynn Lunney: we can never know whether these defendants caused any harm. Maybe dilution is there for when there’s no justification for the defendant picking a similar name and they could have picked something else; if there’s a risk of harm, why not at least enjoin them?
If you go with moral rights, why doesn’t Levi Strauss come out the other way? For moral rights, wouldn’t you want a high standard of similarity? If the theory is that you’re impugning the integrity of the original, shouldn’t it be clearly associated with the original?
(Stacey Dogan agrees, but the moral right here is not so much a dignity interest as it is a right of publicity. It’s a control over ways in which reputation is used as opposed to control of reputation. And maybe there is evocation of the reputation even without much similarity. My note: wow, this just sounds worse and worse as we spin it out.)
A: The harm of injunctive relief when the plaintiff can’t prove actual harm, which is a given in dilution cases, is that it imposes a burden on the defendant that is in contrast to traditional civil litigation; potential harm to competition when people can’t use identifiers that have referents to a famous TM; also a free speech interest, especially with famous TMs. There is a cost to taking words out of the language, even in a commercial context.
There is a parallel to the right of publicity.
Q: how can corporations have dignity interests in a meaningful philosophical sense?
Silbey: no one wants to admit that this is exactly what’s going on in the corporate speech context.
Running late, so missed the beginning; Heymann discussed various theories behind protection of reputation, including property-based, dignity-based and honor-based. But they miss the relational nature of the interest: audience’s interest in accurate information flows and use of information. Property doesn’t explain why plaintiffs are interested in retractions; infants don’t have honor, though they may have dignity.
Audience interest reminds us of utilitarian functions of reputation: useful signals, as when franchisee uses reputation of national chain to avoid startup costs. Audience participates in creating this value and thus has interest in ensuring its activities are based on solid/robust info and that its use of the info will be beneficial.
Audience focus can also unify disparate areas of doctrine. Helps explain why we exclude truthful statements from defamation, or public figure doctrine in general. Truthful information is useful to the audience (is this always true?); allowing false facts to circulate absent culpable state of mind for public figure because there will be enough responsive info to give the audience what it needs in the end.
How do we recognize the audience in doctrine? Focus courts’ attention on this interest. Perhaps a separate tort, the reputation tort—ambitious/unlikely. Hustler v. Falwell, attempt to get around defamation limits by pleading IIED, but the same First Amendment limits apply. If the interest is really reputational, then it shouldn’t be pled as copyright or right of publicity, but only defamation/TM—those are the causes of action that incorporate audience interest. This would be a good move if it could only gain traction; would need a constitutional hook or a doctrine such as copyright misuse to channel the cases in this way. Post-eBay, the traditional allowance for presumed harm/injunction may influence our perspective on audience interests as well. Courts should look for harm within the relevant audience, not just harm to the particular plaintiff—like the materiality standard for false advertising.
Look also to the nature of the remedy. If the interest is one of accurate flow of information, then disclaimers/retractions will be preferred remedies as opposed to monetary damages.
This all rests on a certain conception of the audience: rational, capable of assessing and responding to information flows. This is normatively attractive but descriptively false. Also: How much our modern communication has changed how we think about reputation flow—hard to assemble the initial audience to correct the record.
Lunney: was Dastar wrongly decided, then?
Heymann: Yes. Consumers care about the intellectual content of the videotape, not the plastic videotape.
Me: why is this concept of the audience normatively attractive?
Heymann: it’s normatively attractive to treat the audience as having the capacity to understand—as with descriptive fair use or parody cases, even though we know there are people out there who won’t get the joke; other interests are more important. Doesn’t mean we allow falsehoods to circulate in any particular case.
Xuan-Thao Nguyen, Apologies as IP Remedies? A Comparative Review of China and the United States Approaches to IP Remedies
Plaintiff often wants an apology instead of a lawsuit. This is not a cultural thing—there are people who attribute the value of apology to Asian/Chinese culture, but look in the US as well. People in US say “I’m sorry” all the time and teach it to our children. Judges have ordered apologies, including in ads and on YouTube. Legal scholarship has looked at apology in Japan in the US, suggesting that apologies can be better used in law. Mediation, conflict resolution; scholarship also in critical race theory, particularly in relation to reparations. Formal apology to Japanese American survivors of US internment. More valuable to some victims than money is. Money can’t heal communities.
Evidence scholarship covers this too.
Chinese reaction: Apology is very American! (Just as Americans said apology was Asian.)
Remedies: injunction, compensatory damages, statutory damages of up to 500,000 RMB, defendant’s profits; reasonable costs; and court-ordered apology is explicitly available as statutory remedy. But what about the case law?
Things in China are changing very fast. Court ordered apologies have been part of remedies: TM defendant to make a public apology within 10 days after judgment. Must be published in Kunming Daily Newspaper (where the offense occurred) “to eliminate the bad effect of infringement.” Another TM case, apology requested but denied. No intentional use of the TM; no bad faith—injunction ordered but no damages or public apology.
Copyright case, infringement of software, large award of damages and costs: public apology ordered in Computer World, the trade press for software. Another case: photojournalist plaintiff whose photo of a festival was published in Nantong Daily, his employer’s newspaper. Defendant publishing house published books containing the photo without permission. Asserted “textbook” or “teaching book” exemption, but the court found that the types of books at issue were not textbooks/teaching books. Remedy: injunctions, damages for economic loss (not very high), public apology within 15 days, content approved by court. If defendants fail to do so, plaintiff will publish apology in Nantong Daily in name of defendants and defendants will pay the expenses. “Sorry for using”—not legal terminology.
Why is apology important? It’s like punitive damages: it’s shameful to have an apology printed in the newspaper. But it also creates the conditions for forgiveness: restorative aspects.
Supreme Court patent case: overturned apology remedy—apologies should be related to plaintiff’s personal interest or commercial credit standing; patents are largely property interests. Not appropriate unless plaintiff proved that the defendant’s conduct caused heavy losses to the plaintiff’s commercial credit standing. Note that in the patent statute there is no specific provision for apologies! But the court still was willing to allow it.
Lessons for US? US cases recognize effects of apology, could do more.
Heymann: Private v. public apology—medical malpractice cases seem to involve private apologies. How important is it that the public know the identity of the defendant? If it’s a small infringer no one’s ever heard of, who cares?
A: With malpractice, there is an interest in settling through apologies; less important that it be public. China: if the conduct is intentional, then the public apology is warranted. If we did that, private apology wouldn’t be satisfactory; would worry about sincerity of “I’m sorry,” whereas publishing it in a newspaper has much more impact.
Mary LaFrance: UK statute—if defendant offers to make amends, with retraction, automatically lowers damage awards even if offer isn’t accepted.
Nguyen: demand for apology is routine in China, but only granted for willful etc.; plaintiffs will routinely send out a press release when they’ve obtained an apology.
Sandra L. Rierson, The Moral Right of Dilution
Not an advocate, but seeking to provide a better diagnosis of why we have dilution and how that might affect remedies. Reports of dilution’s death have been greatly exaggerated: Visa Int’l v. JSL Corp. (9th Cir. 2010) found dilution even though the term was a standard word with a dictionary meaning relevant to defendant’s business; Starbucks v. Wolfe’s Borough Coffee (2d Cir. 2009)—minimal similarity wasn’t enough to defeat dilution claim; intent to associate with Starbucks should have been weighed more heavily even if there was no bad faith. Last week’s Levi Strauss v. Abercrombie & Fitch (9th Cir. 2011)—district court put too much emphasis on the fact that the two trade dresses didn’t look a lot alike; that’s just one factor to be weighed. Victoria’s Secret v. Moseley (6th Cir. 2010)—if there was a semantic association, and the new mark has a lewd or offensive-to-some sexual association, that raises a strong inference of tarnishment.
Current statute has real possibility of damages (and profits and fees) if defendant willfully intended to trade on the recognition of the famous mark or willfully intended to harm the reputation of the famous mark. Recent case: Mattel defending See ‘n Say mark; defendant lost a jury trial on TM infringement/dilution and jury awarded $400,000; judge increased the award and found an exceptional case, awarding $2.6 million in attorneys’ fees. Real risks to small defendants. It’s not easy to get summary judgment on a federal dilution claim for a defendant. So it’s a powerful weapon for TM holders with a strong impact on others’ behavior.
Dilution is supposed to be directed at an economic harm: the distinctiveness of the mark/its source identification function. There are some problems with that though, if people are perfectly capable of distinguishing meanings. If that’s not a satisfactory explanation, why do we have laws prohibiting TM dilution?
Interest groups: Big TM owners make claims to have Congress change the statute, and only the ACLU opposes them; not like patents where there are strong groups on both sides. But why do these TM owners want dilution protection to begin with? Steamrolling little guys still costs some money and may give you a reputation as a bully.
Her explanation: what we’ve done is to extend a moral right to the holders of famous TMs. But why do we do this when the US is so stingy with moral rights generally?
First, we don’t admit that this is what we’re doing. We pretend that there’s harm. Fair use in copyright blocks a lot of moral rights; fair use in TM does not, though fair use is specifically set out as a defense in the TDRA. Moral rights in copyright bump up against rights of owners of objects/copyrights to do what they want with them. Dilution though is squarely in line with US notions of property rights. There’s no transfer of ownership between Victoria’s Secret and Victor Moseley.
Also consistent with an anti-free-riding impulse in US law.
Implications: maybe we don’t need dilution at all. Owners are already protected under other laws. Given the power of modern TM infringement, Kodak pianos/Harry Potter drycleaners would be found infringing. To the extent reputation is at issue, we have state law torts to protect those interests. It’s surprising to see the difference between defamation and dilution a la Victoria’s Secret, where the presumption is one of harm and the burden is basically on the defendants to disprove it. We have a club to swat a fly.
If we accept that dilution is here to stay as a cause of action, we could focus on the question of remedies. She tells students not to expect damages in a TM case, but the possibility is there. Given what dilution is, we should take a look at reducing or changing the scope of remedies available—disclaimer designed to mitigate reputational impact or association. Injunctive relief is also misplaced in these cases without a showing of harm to the plaintiff. Indirect comparison, as in the Charbucks case—admitted indirect reference to Starbucks’ dark roasted coffee—also deserves our consideration.
Glynn Lunney: we can never know whether these defendants caused any harm. Maybe dilution is there for when there’s no justification for the defendant picking a similar name and they could have picked something else; if there’s a risk of harm, why not at least enjoin them?
If you go with moral rights, why doesn’t Levi Strauss come out the other way? For moral rights, wouldn’t you want a high standard of similarity? If the theory is that you’re impugning the integrity of the original, shouldn’t it be clearly associated with the original?
(Stacey Dogan agrees, but the moral right here is not so much a dignity interest as it is a right of publicity. It’s a control over ways in which reputation is used as opposed to control of reputation. And maybe there is evocation of the reputation even without much similarity. My note: wow, this just sounds worse and worse as we spin it out.)
A: The harm of injunctive relief when the plaintiff can’t prove actual harm, which is a given in dilution cases, is that it imposes a burden on the defendant that is in contrast to traditional civil litigation; potential harm to competition when people can’t use identifiers that have referents to a famous TM; also a free speech interest, especially with famous TMs. There is a cost to taking words out of the language, even in a commercial context.
There is a parallel to the right of publicity.
Q: how can corporations have dignity interests in a meaningful philosophical sense?
Silbey: no one wants to admit that this is exactly what’s going on in the corporate speech context.
Wednesday, February 09, 2011
The offensive internet, or at least a corner
Blogger does content analysis of comments received on the topic of videogames and rape culture, with visualizations. Interesting stuff.
Friday, February 04, 2011
Recent reading: ships passing
The Next Digital Decade: Essays on the Future of the Internet (ed. Berin Szoka & Adam Marcus): free download available. A good survey of a certain segment of thinking about the internet, with some big names represented (Yochai Benkler, Jonathan Zittrain, Tim Wu) condensing and de-footnoting things they’ve said elsewhere. Largely antiregulatory in its thrust, with occasional representatives of other views. The free market can fix anything! Even bad regulations or at least cross border regulatory conflicts. Key quote: “Insofar as collective governance is necessary and unavoidable, a denationalized liberalism strives to make Internet users and suppliers an autonomous, global polity, with what might be called neodemocratic rights to representation and participation in these new global governance institutions. ...Such a liberalism is not interested, however, in using global governance institutions to redistribute wealth.” Whew. I was a little worried for a second there.
No one but Ann Bartow seems aware that Kathy Sierra exists, likewise that internet freedom works differently for different people. The authors mostly think that individuals need no non-market help navigating complex products offered by sophisticated businesses; the only entities that can fool consumers are non-businesses with their crafty non-businessy agendas: “During the last few years, Facebook has repeatedly landed in trouble for its mostly-admirable efforts to craft a working privacy regime for its now 500 million users. The generally poor response to these efforts, I think, stems from a growing privacy paranoia fueled by the media and governments….”
The Offensive Internet: Privacy, Speech, and Reputation, ed. Saul Levmore & Martha C. Nussbaum: This is the equally frustrating inverse of the previous book; unfortunately, this one’s not available for free download. This time, the internet is full of haters, attacking people—mostly women—and violating their privacy (with occasional assists from institutions engaging in privacy violations for very different, commercial reasons). There are some thoughtful essays on the meaning of free speech, some elitist condemnations of the proles who speak online, and one very good analytic piece by Nussbaum on what it means to try to drag someone (again, most likely a woman) down with words—even though I don’t agree with the piece’s conclusions about legal reform.
The reform most of the contributors agree on is amending Section 230 of the Communications Decency Act so that internet service providers would risk liability if they didn’t take down material on their sites posted by users that was (alleged to be) defamatory or invasive of privacy. I was uncertain about this fix the first time I encountered it, and further experience (with, among other things, the notice and takedown provisions of the DMCA, which have the same regime applied to copyright, not with great results) has only hardened me further against it. The proponents of such a change are, as far as I can tell, basically indifferent to the argument that ISPs won’t investigate claims of legal violation; if they may be liable if the content is defamatory etc., they will simply take that content down and avoid any risk. We know well from the DMCA that even people with good fair use claims rarely counternotify to restore the material, and if you think fair use can be tricky, take a look at how hard it is to determine whether content is defamatory or invasive of privacy. I would support a change in the law that 230 immunity should not cover instances in which the person seeking the takedown has in hand a ruling from a court of competent jurisdiction that the material at issue is unlawful, but without some requirement other than an unadjudicated claim of unlawfulness this is just another way for people to shut each other up.
What would be pretty interesting would be to get some of the main contributors to each book together and have them engage in a dialogue. Unfortunately, that didn’t happen.
No one but Ann Bartow seems aware that Kathy Sierra exists, likewise that internet freedom works differently for different people. The authors mostly think that individuals need no non-market help navigating complex products offered by sophisticated businesses; the only entities that can fool consumers are non-businesses with their crafty non-businessy agendas: “During the last few years, Facebook has repeatedly landed in trouble for its mostly-admirable efforts to craft a working privacy regime for its now 500 million users. The generally poor response to these efforts, I think, stems from a growing privacy paranoia fueled by the media and governments….”
The Offensive Internet: Privacy, Speech, and Reputation, ed. Saul Levmore & Martha C. Nussbaum: This is the equally frustrating inverse of the previous book; unfortunately, this one’s not available for free download. This time, the internet is full of haters, attacking people—mostly women—and violating their privacy (with occasional assists from institutions engaging in privacy violations for very different, commercial reasons). There are some thoughtful essays on the meaning of free speech, some elitist condemnations of the proles who speak online, and one very good analytic piece by Nussbaum on what it means to try to drag someone (again, most likely a woman) down with words—even though I don’t agree with the piece’s conclusions about legal reform.
The reform most of the contributors agree on is amending Section 230 of the Communications Decency Act so that internet service providers would risk liability if they didn’t take down material on their sites posted by users that was (alleged to be) defamatory or invasive of privacy. I was uncertain about this fix the first time I encountered it, and further experience (with, among other things, the notice and takedown provisions of the DMCA, which have the same regime applied to copyright, not with great results) has only hardened me further against it. The proponents of such a change are, as far as I can tell, basically indifferent to the argument that ISPs won’t investigate claims of legal violation; if they may be liable if the content is defamatory etc., they will simply take that content down and avoid any risk. We know well from the DMCA that even people with good fair use claims rarely counternotify to restore the material, and if you think fair use can be tricky, take a look at how hard it is to determine whether content is defamatory or invasive of privacy. I would support a change in the law that 230 immunity should not cover instances in which the person seeking the takedown has in hand a ruling from a court of competent jurisdiction that the material at issue is unlawful, but without some requirement other than an unadjudicated claim of unlawfulness this is just another way for people to shut each other up.
What would be pretty interesting would be to get some of the main contributors to each book together and have them engage in a dialogue. Unfortunately, that didn’t happen.
Tuesday, February 01, 2011
Association of National Advertisers promo
From the ANA, at whose conference I will be moderating a panel on social media:
The advertising world looks dramatically different than it did just ten years ago. The social media, mobile, and digital marketing revolution continues. Stay ahead of the game, and find out what you need to know about the law and policy changes in the new marketing landscape.
How are the new regulatory efforts in Washington, top-level domains, managing talent agreements, and the industry’s self-regulatory efforts affecting how you conduct business? Learn about these topics and more at the 2011 ANA Advertising Law and Public Policy Conference. Hear from top speakers including Texas Chief Justice Wallace Jefferson, FTC Commissioner Edith Ramirez, FDA Regulatory Counsel Bryant Godfrey, and Andy Pincus of Mayer Brown who will discuss the major implications and implementation of the new Wall Street reform law, and other top-notch legal experts and client-side marketers.
For ANA members, your registration includes a free, private members-only session on March 14, 2011, on crisis management in the cyber world.
CLE will be provided. To view the complete list of speakers, please visit ANA's website.
Details:Date: March 15-16, 2011
Location: Park Hyatt, 24th M Streets, NW, Washington, DC
Member rate: $1,095
Nonmember rate: $1,295
Register: For additional industry experts, agenda details, and to register, visit our website or email [email protected].
Sunday, January 30, 2011
Copyright in maps: graphic elements or compilation, or both?
Nielsen Company (US), LLC v. Truck Ads, LLC, 2011 WL 221838 (N.D. Ill.)
Nielsen has created maps that divide the US into geographically-distinct marketing regions, known as "designated marketing areas" or DMAs. Nielsen sued Truck Ads for reproducing Nielsen’s DMA maps on Truck Ads’ website. Truck Ads counterclaimed for a declaratory judgment that the DMA data and regions depicted on the maps are not copyrightable and alleging copyright misuse. The court granted Nielsen’s motions to dismiss.
Nielsen alleged that it designed its maps using “a set of proprietary criteria and testing devices, as well as the experience and judgment of its analysts, to partition regions of the United States into geographically-distinct marketing regions, or designated marketing areas (the 'DMA Regions')...." The maps graphically depict its proprietary DMA regions and "are the product of a creative selection, arrangement and expression of variables and data sets" because the regions are ones that “Nielsen has determined constitute meaningful marketing areas." Nielsen also "produces statistical and demographic data and analyses based on its proprietary testing and research methods for each DMA Region," known as DMA data.
So far as the court was aware, it was only on the Truck Ads website that an internet user can find up-to-date nationwide DMA maps broken down to the county level. Truck Ads uses the maps to define advertising regions that it and its affiliates use to provide ads on the sides of trucks.
Nielsen alleged that Truck Ads’ use of the maps violated its copyright rights.
Nielsen argued that it was not now claiming that Truck Ads violated any copyright in DMA regions or DMA data, such that there was no subject matter jurisdiction over the validity counterclaim. Truck Ads argued that it currently uses and displays demographic and ranking data associated with DMA regions, obtained from the same place Nielsen gets it—the Census Bureau.
There was no justiciable controversy over census data, copyright to which was not claimed by Nielsen (nor, of course, could it be). The lawsuit is focused on the maps, which Nielsen contends are original compositions warranting copyright protection. Maps can be protected regardless of whether the underlying data are in the public domain or not. (Thus, creative choices in coloring the regions might be protected, in which case all a secondary user would need to do would be to take its own map of the US and color it in differently—if, and this is a big if under current doctrine, the choices in identifying the regions are noncopyrightable.)
Truck Ads argued that DMA regions don’t exist in any expressible form other than DMA maps, but the court accepted that it was plausible that region information could be represented in non-graphical form, such as a list of zip codes.
Nielsen alleged that Truck Ads created its map “not by reviewing and analyzing publicly-available data on its own and presenting that data in graphic form, but instead by simply copying Plaintiff's work.” In fact, Truck Ads’ CEO “effectively acknowledges that this is exactly what he has done. ‘If I saw a map that I thought was more accurate on the internet, I would--and more of a consensus that it was the market for the particular designated market area, then I would use--I would make an adjustment, a change.... But, again, all I'm doing is I'm just changing the color of the background of the county. I'm not doing anything else. There's no insignia, no indication there of anything except a county line and some color.’" Treating this statement (if there’s nothing else in the record) as an admission of copying copyrightable content, as contrasted to “reviewing and analyzing publicly-available data on its own” seems dangerously close to a sweat of the brow analysis. We really need to know what’s copyrightable about the maps; it’s not the outline of the states and counties, so if the color is different, what’s left?
The court somewhat puzzlingly quoted Emerson v. Davies, 8 F.Cas. 615 (C.C.Mass.1845) to the effect that a second-comer “has no right to publish a map taken substantially and designedly from the map of the other person, without any such exercise of skill, or labor, or expense,” then said that sweat of the brow was no longer valid. Copyright still extends to non-fact features of a map. “Essentially, Plaintiff and Defendant disagree about whether the DMA Maps themselves depict simple facts that are in the public domain and are represented without the requisite originality to warrant copyright protection, or whether the DMA Maps present an original compilation of public domain facts and proprietary market research in a form that warrants copyright protection.” In other words, they don’t seem to be fighting about the graphic elements; they are fighting about whether the choices that went into designating the regions convert the selection of the regions into copyrightable expression, something also implied by the court’s conclusion that the relevant data might be non-graphically represented.
Nielsen nonetheless argued that the court should not reach the issue of whether the DMA regions and data were protectable, because Truck Ads doesn’t possess or use any of that data other than by publishing the maps. But Nielsen’s threat letters and initial complaint did mention the regions and data separate from the maps. The court suggested that “[b]ecause there is no basis for the conclusion that Defendant actually possesses Plaintiff's DMA Maps or DMA Regions, there may well be no controversy that supports jurisdiction over the declaratory judgment counterclaim.”
Again, I’m puzzled. If the map copyrightability claim depends on selection/coordination, then Truck Ads has copied the copyrightable elements alleged to exist; it doesn’t matter whether Truck Ads possessed the underlying datafiles. But the court also correctly pointed out that the counterclaim merely restates an issue already before the court. To win, Nielsen will have to show that the maps consist of an original compilation, selection, and arrangement of facts. “Making such a case will necessarily require the court to review and consider the data underlying the maps, including the DMA Regions and DMA Data.” Counterclaim dismissed as redundant. Overall, the discussion indicates that this area of the law is really confusing, and if you don't start from a really specific identification of the allegedly copyrighted/original elements, you will likely spin your wheels to little effect.
The copyright misuse counterclaim was that, despite knowing that there was no valid copyright, Nielsen sued anyway. The Seventh Circuit has held that it could be copyright misuse to assert a copyright claim to prevent others’ access to public domain data. However, to constitute misuse, the underlying infringement claim must be wholly lacking in merit.
“A designated market area is not, however, a fixed idea capable of only one form of expression.” Different interpretations of the underlying data can lead to different DMAs. (It is also true that different interpretations of history can lead to different conclusions about what really happened, as in Hoehling, but that doesn’t make those conclusions protectable by copyright. If Nielsen’s DMA is best for purpose—and I wonder what its ads say about that—then there should be no protection. This is not to say that a court won’t ultimately find it protectable, because courts are very incoherent about these kinds of judgment-generated facts outside the context of history.)
Anyway, Nielsen will have the burden of proof on copyrightability, “but at this stage, the court is not prepared to say that its claim of copyright is abusive.”
The ultimate questions will be whether Nielsen’s selection and arrangement reflected sufficient creativity under Feist and whether Truck Ads copied without making its own selection and arrangement decisions.
There may be no copyright if a mapmaker “displays basic factual information and ‘employs standard cartographic features without originality.’" Truck Ads argued that the DMAs are “simple facts incapable of expression in any form other than that in which they have been expressed by Truck Ads and Nielsen,” but didn’t demonstrate that the “inescapable similarities” between its map and Nielsen’s were a function of having translated public-domain data into map form. Moreover, Truck Ads’ own reference to different versions of DMA maps belied any such claim. “It may not be possible to portray a street of a definite slope in two different ways using standard cartographic features; but it is possible to portray a DMA with shifting, manmade, and artificial boundaries in myriad ways.” Note again the slippage between graphic representation (the pictorial element of the work) and definition of the DMA boundaries (the compilation element of the work): if the boundaries of a particular DMA constitute unprotectable facts, then—unless we’re talking about line color and thickness, which the Copyright Office considers generally insufficient to make a map protectable—it’s pretty much like a street with a definite slope.
But anyway, at this stage, the allegations weren’t frivolous, even if Truck Ads has various paths to victory.
Finally, the court found that Truck Ads was unable to show damages from the alleged misuse other than the costs of defense. While it alleged that a potential business partner balked when it learned of the pending lawsuit, the record testimony showed that this was not true.
Nielsen has created maps that divide the US into geographically-distinct marketing regions, known as "designated marketing areas" or DMAs. Nielsen sued Truck Ads for reproducing Nielsen’s DMA maps on Truck Ads’ website. Truck Ads counterclaimed for a declaratory judgment that the DMA data and regions depicted on the maps are not copyrightable and alleging copyright misuse. The court granted Nielsen’s motions to dismiss.
Nielsen alleged that it designed its maps using “a set of proprietary criteria and testing devices, as well as the experience and judgment of its analysts, to partition regions of the United States into geographically-distinct marketing regions, or designated marketing areas (the 'DMA Regions')...." The maps graphically depict its proprietary DMA regions and "are the product of a creative selection, arrangement and expression of variables and data sets" because the regions are ones that “Nielsen has determined constitute meaningful marketing areas." Nielsen also "produces statistical and demographic data and analyses based on its proprietary testing and research methods for each DMA Region," known as DMA data.
So far as the court was aware, it was only on the Truck Ads website that an internet user can find up-to-date nationwide DMA maps broken down to the county level. Truck Ads uses the maps to define advertising regions that it and its affiliates use to provide ads on the sides of trucks.
Nielsen alleged that Truck Ads’ use of the maps violated its copyright rights.
Nielsen argued that it was not now claiming that Truck Ads violated any copyright in DMA regions or DMA data, such that there was no subject matter jurisdiction over the validity counterclaim. Truck Ads argued that it currently uses and displays demographic and ranking data associated with DMA regions, obtained from the same place Nielsen gets it—the Census Bureau.
There was no justiciable controversy over census data, copyright to which was not claimed by Nielsen (nor, of course, could it be). The lawsuit is focused on the maps, which Nielsen contends are original compositions warranting copyright protection. Maps can be protected regardless of whether the underlying data are in the public domain or not. (Thus, creative choices in coloring the regions might be protected, in which case all a secondary user would need to do would be to take its own map of the US and color it in differently—if, and this is a big if under current doctrine, the choices in identifying the regions are noncopyrightable.)
Truck Ads argued that DMA regions don’t exist in any expressible form other than DMA maps, but the court accepted that it was plausible that region information could be represented in non-graphical form, such as a list of zip codes.
Nielsen alleged that Truck Ads created its map “not by reviewing and analyzing publicly-available data on its own and presenting that data in graphic form, but instead by simply copying Plaintiff's work.” In fact, Truck Ads’ CEO “effectively acknowledges that this is exactly what he has done. ‘If I saw a map that I thought was more accurate on the internet, I would--and more of a consensus that it was the market for the particular designated market area, then I would use--I would make an adjustment, a change.... But, again, all I'm doing is I'm just changing the color of the background of the county. I'm not doing anything else. There's no insignia, no indication there of anything except a county line and some color.’" Treating this statement (if there’s nothing else in the record) as an admission of copying copyrightable content, as contrasted to “reviewing and analyzing publicly-available data on its own” seems dangerously close to a sweat of the brow analysis. We really need to know what’s copyrightable about the maps; it’s not the outline of the states and counties, so if the color is different, what’s left?
The court somewhat puzzlingly quoted Emerson v. Davies, 8 F.Cas. 615 (C.C.Mass.1845) to the effect that a second-comer “has no right to publish a map taken substantially and designedly from the map of the other person, without any such exercise of skill, or labor, or expense,” then said that sweat of the brow was no longer valid. Copyright still extends to non-fact features of a map. “Essentially, Plaintiff and Defendant disagree about whether the DMA Maps themselves depict simple facts that are in the public domain and are represented without the requisite originality to warrant copyright protection, or whether the DMA Maps present an original compilation of public domain facts and proprietary market research in a form that warrants copyright protection.” In other words, they don’t seem to be fighting about the graphic elements; they are fighting about whether the choices that went into designating the regions convert the selection of the regions into copyrightable expression, something also implied by the court’s conclusion that the relevant data might be non-graphically represented.
Nielsen nonetheless argued that the court should not reach the issue of whether the DMA regions and data were protectable, because Truck Ads doesn’t possess or use any of that data other than by publishing the maps. But Nielsen’s threat letters and initial complaint did mention the regions and data separate from the maps. The court suggested that “[b]ecause there is no basis for the conclusion that Defendant actually possesses Plaintiff's DMA Maps or DMA Regions, there may well be no controversy that supports jurisdiction over the declaratory judgment counterclaim.”
Again, I’m puzzled. If the map copyrightability claim depends on selection/coordination, then Truck Ads has copied the copyrightable elements alleged to exist; it doesn’t matter whether Truck Ads possessed the underlying datafiles. But the court also correctly pointed out that the counterclaim merely restates an issue already before the court. To win, Nielsen will have to show that the maps consist of an original compilation, selection, and arrangement of facts. “Making such a case will necessarily require the court to review and consider the data underlying the maps, including the DMA Regions and DMA Data.” Counterclaim dismissed as redundant. Overall, the discussion indicates that this area of the law is really confusing, and if you don't start from a really specific identification of the allegedly copyrighted/original elements, you will likely spin your wheels to little effect.
The copyright misuse counterclaim was that, despite knowing that there was no valid copyright, Nielsen sued anyway. The Seventh Circuit has held that it could be copyright misuse to assert a copyright claim to prevent others’ access to public domain data. However, to constitute misuse, the underlying infringement claim must be wholly lacking in merit.
“A designated market area is not, however, a fixed idea capable of only one form of expression.” Different interpretations of the underlying data can lead to different DMAs. (It is also true that different interpretations of history can lead to different conclusions about what really happened, as in Hoehling, but that doesn’t make those conclusions protectable by copyright. If Nielsen’s DMA is best for purpose—and I wonder what its ads say about that—then there should be no protection. This is not to say that a court won’t ultimately find it protectable, because courts are very incoherent about these kinds of judgment-generated facts outside the context of history.)
Anyway, Nielsen will have the burden of proof on copyrightability, “but at this stage, the court is not prepared to say that its claim of copyright is abusive.”
The ultimate questions will be whether Nielsen’s selection and arrangement reflected sufficient creativity under Feist and whether Truck Ads copied without making its own selection and arrangement decisions.
There may be no copyright if a mapmaker “displays basic factual information and ‘employs standard cartographic features without originality.’" Truck Ads argued that the DMAs are “simple facts incapable of expression in any form other than that in which they have been expressed by Truck Ads and Nielsen,” but didn’t demonstrate that the “inescapable similarities” between its map and Nielsen’s were a function of having translated public-domain data into map form. Moreover, Truck Ads’ own reference to different versions of DMA maps belied any such claim. “It may not be possible to portray a street of a definite slope in two different ways using standard cartographic features; but it is possible to portray a DMA with shifting, manmade, and artificial boundaries in myriad ways.” Note again the slippage between graphic representation (the pictorial element of the work) and definition of the DMA boundaries (the compilation element of the work): if the boundaries of a particular DMA constitute unprotectable facts, then—unless we’re talking about line color and thickness, which the Copyright Office considers generally insufficient to make a map protectable—it’s pretty much like a street with a definite slope.
But anyway, at this stage, the allegations weren’t frivolous, even if Truck Ads has various paths to victory.
Finally, the court found that Truck Ads was unable to show damages from the alleged misuse other than the costs of defense. While it alleged that a potential business partner balked when it learned of the pending lawsuit, the record testimony showed that this was not true.
Friday, January 28, 2011
Kwikset reversed; misrepresentation about production can lead to lost money or property
Kwikset Corporation v. The Superior Court of Orange County, --- Cal.Rptr.3d ----, 2011 WL 240278 (Cal.)
Kwikset sold a number of locksets labeled “Made in U.S.A,” which a court found to be false. The question was how Proposition 64 affected the class action. The trial court enjoined Kwikset from labeling any lockset intended for sale in California “Made in USA” or the like if it contained any article, unit, or part that is made, manufactured, or produced outside of the United States. While it also ordered notification of California retailers and distributors that they could return or get replacements for improperly labeled locksets, the court denied Benson’s request for restitution on the grounds that it would be very expensive and that the equities weighed against it, given that the violations had ceased and that the misrepresentations were not “so deceptive or false as to warrant a return and/or refund program or other restitutionary relief to those who have been using their locksets without other complaint.” (Some parts came from and some assembly took place outside the US, but not a lot.)
As amended to meet Proposition 64’s new standing requirements (enacted while the case was on appeal), the complaint alleged that each class representative read and relied on Kwikset’s misrepresentations in deciding to purchase the locksets, thus causing each plaintiff to spend and lose the money paid for the locksets. The trial court held that plaintiffs adequately alleged standing when they pled that they were induced to buy products that they didn’t want and that were therefore unsatisfactory to them.
The court of appeal, reversing, reasoned that plaintiffs hadn’t alleged that their locksets were overpriced or defective, even if their desire to buy fully American-made products was frustrated. The allegation that plaintiffs would not have purchased the locksets but for the false labeling was insufficient to establish standing because it didn’t satisfy the requirement of “lost money or property.”
The California Supreme Court reversed. “Proposition 64 should be read in light of its apparent purposes, i.e., to eliminate standing for those who have not engaged in any business dealings with would-be defendants and thereby strip such unaffected parties of the ability to file ‘shakedown lawsuits,’ while preserving for actual victims of deception and other acts of unfair competition the ability to sue and enjoin such practices. Accordingly, plaintiffs who can truthfully allege they were deceived by a product's label into spending money to purchase the product, and would not have purchased it otherwise, have ‘lost money or property’ within the meaning of Proposition 64 and have standing to sue.”
The California Supreme Court began with the broad consumer-protective purposes of the UCL and FAL. The stubstantive reach of the statutes remains expansive even though the electorate “materially curtailed the universe of those who may enforce their provisions.” To prevail post-Proposition 64, a party must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.”
The text of Proposition 64 established expressly that in selecting the phrase “injur[y] in fact” the drafters and voters intended to incorporate the established federal meaning. Under federal law, injury in fact is an invasion of a legally protected interest which is concrete and particularized, and actual or imminent, not conjectural or hypothetical. Particularized means simply that the injury must affect the plaintiff in a personal and individual way. Proof of injury in fact will in many instances overlap with proof of “lost money or property.”
This phrase clearly requires plaintiffs to show some form of economic injury. “There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary,” and that’s not an exhaustive list. Economic injury is a “classic” form of injury in fact; though intangible injuries may also constitute injury in fact, Proposition 64 precludes reliance on purely non-economic injuries.
However, while Prop. 64 is qualitatively more restrictive, there was no justification in its text for considering it quantitatively more difficult to satisfy than federal injury in fact. “Rather, we may infer from the text of Proposition 64 that the quantum of lost money or property necessary to show standing is only so much as would suffice to establish injury in fact; if more were needed, the drafters could and would have so specified.” An “identifiable trifle” is enough.
And, of course, the plaintiff must show that his or her economic injury came as a result of the unfair competition or violation of the FAL. As to that:
Comments: Compare this reasoning to that in Amestoy, where the court said that the legislature could not require disclosure of the use of rBST in producing milk just because consumers thought that it made a difference, where the legislature had not itself found that real differences existed (and of course such findings would be resisted by our trade partners in this case). Also, nice to see Doug Kysar’s excellent article recognized.
Moving on: how is this lost money or property? “For each consumer who relies on the truth and accuracy of a label and is deceived by misrepresentations into making a purchase, the economic harm is the same: the consumer has purchased a product that he or she paid more for than he or she otherwise might have been willing to pay if the product had been labeled accurately.” But what if the product works just as well?
The dissent didn’t like considering a plaintiff’s subjective motivations in this way. But such considerations are “a routine part of common law deceit actions: we will allow one party who subjectively relied on a particular deception in entering a transaction to sue, while simultaneously precluding another who subjectively did not so rely from suing.” Once the pleading threshold has been crossed, the plaintiff has the burden of proof in his or her case, and a court can exercise its discretion in determining which, if any, of the various equitable and injunctive remedies provided for by the law are warranted in a given case.
The alternative would be to end private consumer enforcement with respect to many label misrepresentations. “That public prosecutors can still sue is of limited solace, given the significant role we have recognized private consumer enforcement plays for many categories of unfair business practices. … [I]f we were to deny standing to consumers who have been deceived by label misrepresentations in making purchases, we would impair the ability of consumers to rely on labels, place those businesses that do not engage in misrepresentations at a competitive disadvantage, and encourage the marketplace to dispense with accuracy in favor of deceit.”
None of the court of appeal’s arguments to the contrary sufficed. First, plaintiffs didn’t allege any overcharge or functional defects in the locksets. But cognizable economic harm is not confined by the phrase “lost money or property” to objective functional differences. Also, “the economic injuries the Court of Appeal would require in order to allow one to sue for misrepresentation are in many instances wholly unrelated to any alleged misrepresentation. An allegation that Kwikset's products are of inferior quality, for example, even if it might demonstrate lost money or property, would not demonstrate lost money or property ‘as a result of’ unfair competition or false advertising about the product's origins.”
The core of the argument is that plaintiffs received the benefit of their bargain, even if they relied on misrepresentations in purchasing. But the problem with this argument is that plaintiffs didn’t. They bought Kwikset locksets at least in part because they were “Made in U.S.A.”; they wouldn’t have bought the locksets otherwise; and we can infer that they value what they actually received less than the money they spent or less than working locksets actually made in the U.S. “They bargained for locksets that were made in the United States; they got ones that were not.… The observant Jew who purchases food represented to be, but not in fact, kosher; the Muslim who purchases food represented to be, but not in fact, halal; the parent who purchases food for his or her child represented to be, but not in fact, organic, has in each instance not received the benefit of his or her bargain.” [Any bets on whether this decision will be cited to show “creeping sharia” in US law?]
The court went on to unpack the benefit-of-the-bargain argument as resting on one of two unstated assumptions—that the misrepresentation at issue should be deemed immaterial, or that, “even if the consumer does not value what he or she received as much as what he or she paid, the marketplace would, and its valuation should be dispositive.”
As to the first, a misrepresentation is material if a reasonable person would attach importance to its existence or nonexistence in determining a choice about the transaction at issue (or if the maker of the representation knows or has reason to know that the recipient thinks of the misrepresentation as important to his or her choice, even if a reasonable person wouldn’t). “Here, the Legislature has by statute made clear that whether a product is manufactured in the United States or elsewhere is precisely the sort of consideration reasonable people can and do attach importance to in their purchasing decisions,” and the U.S. government even requires its agencies to privilege U.S.-made goods. In fact, Kwikset itself used labels like "All American Made & Proud Of It" and "Made in U.S.A." because it concluded that such marketing might sway reasonable people in their purchasing decisions. Anyway, as materiality is generally a question of fact, it wasn’t a basis for dismissing the case on the pleadings.
The second theory is that a consumer hasn’t lost money or property if the marketplace would continue to value the product as highly as the amount the consumer paid for it, whether or not he or she would do so. In theory, the deceived consumer could turn around and sell the locksets to someone else for the same price.
The court identified four problems with this theory:
In a footnote, the court further characterized this second argument as one that “the materiality of a representation must be proven by reference to a market that charges more for products that carry a particular label.” As the court recognized, this would have significant effects on the scope of consumer protection law. “In any market with generally parallel pricing (whether through conscious parallelism or otherwise), where competitors use representations about features principally to increase market share rather than to charge a premium, any deception in such representations would no longer be privately enforceable by consumers. We do not see expressed in Proposition 64 any intent to deregulate the commercial speech marketplace of ideas to this extent.”
Kwikset argued by analogy to real property fraud cases measuring the damages for fraud by the difference in the actual value of what was parted with and what was received. But that rule provided the measure of damages, not a limit on standing or on the availability of equitable remedies, a conclusion actually made explicit in California’s Civil Code. Civ. Code, § 3343, subd. (b)(2) (damages rule shall not be used to "[d]eny to any person having a cause of action for fraud or deceit any legal or equitable remedies to which such person may be entitled"). Especially since a damages remedy is unavailable under the UCL, there was no reason to think that the electorate intended to borrow this rule for a wholly unrelated purpose, a restriction on standing:
Finally, the court of appeal relied on a line of cases reading “lost money or property” to confine standing under section 17204 to people who suffer losses eligible for restitution. Because plaintiffs weren’t entitled to restitution, they then necessarily lacked standing. However, the standards for standing and for eligibility for restitution under section 17203 are “wholly distinct.” Prop. 64 amended both sections; it would have been easy to make standing under section 17204 expressly dependent on eligibility for restitution, but that’s not what happened. (By comparison, the CLRA requires that a consumer be able to prove damages in order to have standing.) The court refused to conflate standing with the question of the remedies to which a party might be entitled.
Standing should not be dependent on eligibility for restitution for another reason: restitution is confined to restoration of money taken from the plaintiff by the defendant. But unfair business practices may cause economic injury without any corresponding gain to the defendant, such as diminished value of a plaintiff’s assets from defamation. Such injuries are lost money or property and permit injunctive relief even without any basis for restitution.
The larger point was that to make standing dependent on eligibility for restitution “would turn the remedial scheme of the UCL on its head.” Injunctions are the primary form of relief under the UCL, with restitution a form of ancillary relief. Tobacco II noted that Prop. 64 didn’t amend the remedies provision of the UCL, and so there was no reason to conclude that standing should depend on eligibility for restitution, making injunctive relief an appendage.
Judge Chin (also a dissenter in Kasky) dissented. The voters unequivocally intended to narrow the category of persons who could sue under the UCL. “By failing to expressly define ‘lost money or property’ and instead equating it with economic injury, the majority effectively collapses the two separate requirements of section 17204 into one.” The dissent argued that plaintiffs’ subjective purchase motivations shouldn’t count. “Whatever value the consumer may subjectively assign to the product …, plaintiffs have failed to allege that their personal preference is reflected in any cost differential between the mislabeled and correctly labeled products.” This objection is not directed at reliance, but at the fact that now a plaintiff must only allege “‘I would not have bought the product but for the misrepresentation,’ to establish not only causation but also an injury cognizable under section 17204. An allegation that merely identifies the party's subjective motivation clearly does not track the language of the section.”
The dissent found it unclear what constituted the “extra money paid” in this context. The counterfeit Rolex and mislabeled kosher, halal, or organic food examples were inapposite. “One can hardly dispute that these genuine products have greater value placed on them than on their mislabeled counterparts, and consumers who buy the latter may allege and prove they actually paid (and therefore, lost) extra money based on the mislabeling.” However, under the majority’s rule, plaintiffs need not allege any price differential, even though counterfeit Rolexes are “clearly overpriced” because a typical counterfeit is inferior in quality, just as kosher, halal, and organic foods are typically more expensive.
Comments: But what if the watch is not inferior? Also, I don’t think that Campbell’s halal soups cost more than its non-halal soups—this is the majority’s point about markets where the issue is market share, or consumers’ willingness to participate in the market at all. It’s a little disconcerting to see efficient markets theory, positing that prices are already exactly where they should be, creep into an area of the law that is entirely about how bad information distorts markets and prevents efficiency. I can in fact see a partial defense of the dissent that goes to the question of whether the material misrepresentation prevents the plaintiff from making any economically significant use of the product—with respect to the kosher/halal example, you really do have to give or throw the stuff away when you find out the truth, regardless of any price differential, whereas you probably don’t stop using the lockset. But even this seems like a weird description of the harm in the kosher/halal case, which generally involves food that’s already been consumed before the deception was discovered and in which the economic harm is really that you paid money for a product that you would not have purchased had you known the truth—not the price differential, but the resource misallocation. I think the proper rule is that the product need not be worthless to you; it need only be worth less.
Back to the dissent: An allegation that the consumer wouldn’t have bought the product but for the misrepresentation is too low a threshold to meet. The issue “is not that a plaintiff must show that he or she personally suffered harm, but that the harm alleged must be an actual measurable loss of money or property.” The majority conflated "injury in fact" with "lost money or property,” and focused too heavily on the genesis of Prop. 64, misuse of UCL lawsuits, instead of its actual language. Indeed, proponents of Prop. 64 “included the underlying action on their Web site as an example of a ‘shakedown’ lawsuit,” and newspapers mentioned it as well. “While these may not constitute official materials presented to voters, these materials, at the very least, undermine the majority's assertion that voters were concerned only about suits by parties who had no business dealings with a given defendant and, more importantly, they underscore the question we must answer here--what does ‘lost money or property’ mean in this context?”
The dissent also rejected the idea that its interpretation would sound the death knell for private enforcement against label misrepresentations. In other situations, plaintiffs could allege that a mislabeled product was overpriced and that they did lose money. Moreover, Kwikset’s competitors could sue: “A competitor who properly labeled its locksets ‘Made in U.S.A.’ and alleges it was forced to charge higher prices for such locksets, and another who manufactured its locksets outside the United States and alleges it lost customers to Kwikset, could both claim they were at a competitive and economic disadvantage to Kwikset. In each instance, these competitors could allege not only injury in fact, but also economic injury for lost sales and profits due to Kwikset's misrepresentation.” (Interestingly, as I recall, plaintiffs argued that they could replead to allege that competing foreign-made and properly labeled locksets were cheaper, but the court denied them leave to do so; as it turns out the defendants’ bar probably would have preferred that scenario!)
Kwikset sold a number of locksets labeled “Made in U.S.A,” which a court found to be false. The question was how Proposition 64 affected the class action. The trial court enjoined Kwikset from labeling any lockset intended for sale in California “Made in USA” or the like if it contained any article, unit, or part that is made, manufactured, or produced outside of the United States. While it also ordered notification of California retailers and distributors that they could return or get replacements for improperly labeled locksets, the court denied Benson’s request for restitution on the grounds that it would be very expensive and that the equities weighed against it, given that the violations had ceased and that the misrepresentations were not “so deceptive or false as to warrant a return and/or refund program or other restitutionary relief to those who have been using their locksets without other complaint.” (Some parts came from and some assembly took place outside the US, but not a lot.)
As amended to meet Proposition 64’s new standing requirements (enacted while the case was on appeal), the complaint alleged that each class representative read and relied on Kwikset’s misrepresentations in deciding to purchase the locksets, thus causing each plaintiff to spend and lose the money paid for the locksets. The trial court held that plaintiffs adequately alleged standing when they pled that they were induced to buy products that they didn’t want and that were therefore unsatisfactory to them.
The court of appeal, reversing, reasoned that plaintiffs hadn’t alleged that their locksets were overpriced or defective, even if their desire to buy fully American-made products was frustrated. The allegation that plaintiffs would not have purchased the locksets but for the false labeling was insufficient to establish standing because it didn’t satisfy the requirement of “lost money or property.”
The California Supreme Court reversed. “Proposition 64 should be read in light of its apparent purposes, i.e., to eliminate standing for those who have not engaged in any business dealings with would-be defendants and thereby strip such unaffected parties of the ability to file ‘shakedown lawsuits,’ while preserving for actual victims of deception and other acts of unfair competition the ability to sue and enjoin such practices. Accordingly, plaintiffs who can truthfully allege they were deceived by a product's label into spending money to purchase the product, and would not have purchased it otherwise, have ‘lost money or property’ within the meaning of Proposition 64 and have standing to sue.”
The California Supreme Court began with the broad consumer-protective purposes of the UCL and FAL. The stubstantive reach of the statutes remains expansive even though the electorate “materially curtailed the universe of those who may enforce their provisions.” To prevail post-Proposition 64, a party must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.”
The text of Proposition 64 established expressly that in selecting the phrase “injur[y] in fact” the drafters and voters intended to incorporate the established federal meaning. Under federal law, injury in fact is an invasion of a legally protected interest which is concrete and particularized, and actual or imminent, not conjectural or hypothetical. Particularized means simply that the injury must affect the plaintiff in a personal and individual way. Proof of injury in fact will in many instances overlap with proof of “lost money or property.”
This phrase clearly requires plaintiffs to show some form of economic injury. “There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary,” and that’s not an exhaustive list. Economic injury is a “classic” form of injury in fact; though intangible injuries may also constitute injury in fact, Proposition 64 precludes reliance on purely non-economic injuries.
However, while Prop. 64 is qualitatively more restrictive, there was no justification in its text for considering it quantitatively more difficult to satisfy than federal injury in fact. “Rather, we may infer from the text of Proposition 64 that the quantum of lost money or property necessary to show standing is only so much as would suffice to establish injury in fact; if more were needed, the drafters could and would have so specified.” An “identifiable trifle” is enough.
And, of course, the plaintiff must show that his or her economic injury came as a result of the unfair competition or violation of the FAL. As to that:
Simply stated: labels matter. The marketing industry is based on the premise that labels matter, that consumers will choose one product over another similar product based on its label and various tangible and intangible qualities they may come to associate with a particular source. An entire body of law, trademark law, exists to protect commercial and consumer interests in accurate label representations as to source, because consumers rely on the accuracy of those representations in making their buying decisions.Specifically, “Made in U.S.A.” matters to some consumers. “A range of motivations may fuel this preference, from the desire to support domestic jobs, to beliefs about quality, to concerns about overseas environmental or labor conditions, to simple patriotism.” The legislature responded to the materiality of this representation by specifically outlawing deceptive “Made in U.S.A.” representations.
To some consumers, processes and places of origin matter. (See Kysar, Preferences for Processes: The Process/Product Distinction and the Regulation of Consumer Choice (2004) 118 Harv. L.Rev. 525, 529["[C]onsumer preferences may be heavily influenced by information regarding the manner in which goods are produced."]; ibid. [Although the circumstances of production "generally do not bear on the functioning, performance, or safety of the product, they nevertheless can, and often do, influence the willingness of consumers to purchase the product."].) Whether a particular food is kosher or halal may be of enormous consequence to an observant Jew or Muslim. Whether a wine is from a particular locale may matter to the oenophile who values subtle regional differences. Whether a diamond is conflict free may matter to the fiancée who wishes not to think of supporting bloodshed and human rights violations each time she looks at the ring on her finger. And whether food was harvested or a product manufactured by union workers may matter to still others.
Comments: Compare this reasoning to that in Amestoy, where the court said that the legislature could not require disclosure of the use of rBST in producing milk just because consumers thought that it made a difference, where the legislature had not itself found that real differences existed (and of course such findings would be resisted by our trade partners in this case). Also, nice to see Doug Kysar’s excellent article recognized.
Moving on: how is this lost money or property? “For each consumer who relies on the truth and accuracy of a label and is deceived by misrepresentations into making a purchase, the economic harm is the same: the consumer has purchased a product that he or she paid more for than he or she otherwise might have been willing to pay if the product had been labeled accurately.” But what if the product works just as well?
This economic harm … is the same whether or not a court might objectively view the products as functionally equivalent. A counterfeit Rolex might be proven to tell the time as accurately as a genuine Rolex and in other ways be functionally equivalent, but we do not doubt the consumer (as well as the company that was deprived of a sale) has been economically harmed by the substitution in a manner sufficient to create standing to sue. Two wines might to almost any palate taste indistinguishable--but to serious oenophiles, the difference between one year and the next, between grapes from one valley and another nearby, might be sufficient to carry with it real economic differences in how much they would pay. Nonkosher meat might taste and in every respect be nutritionally identical to kosher meat, but to an observant Jew who keeps kosher, the former would be worthless.As a result, consumers who rely on misrepresentations can have standing by alleging, as plaintiffs did here, that they wouldn’t have bought the product but for the misrepresentation. “From the original purchasing decision we know the consumer valued the product as labeled more than the money he or she parted with; from the complaint's allegations we know the consumer valued the money he or she parted with more than the product as it actually is; and from the combination we know that because of the misrepresentation the consumer (allegedly) was made to part with more money than he or she otherwise would have been willing to expend, i.e., that the consumer paid more than he or she actually valued the product. That increment, the extra money paid, is economic injury and affords the consumer standing to sue.”
The dissent didn’t like considering a plaintiff’s subjective motivations in this way. But such considerations are “a routine part of common law deceit actions: we will allow one party who subjectively relied on a particular deception in entering a transaction to sue, while simultaneously precluding another who subjectively did not so rely from suing.” Once the pleading threshold has been crossed, the plaintiff has the burden of proof in his or her case, and a court can exercise its discretion in determining which, if any, of the various equitable and injunctive remedies provided for by the law are warranted in a given case.
The alternative would be to end private consumer enforcement with respect to many label misrepresentations. “That public prosecutors can still sue is of limited solace, given the significant role we have recognized private consumer enforcement plays for many categories of unfair business practices. … [I]f we were to deny standing to consumers who have been deceived by label misrepresentations in making purchases, we would impair the ability of consumers to rely on labels, place those businesses that do not engage in misrepresentations at a competitive disadvantage, and encourage the marketplace to dispense with accuracy in favor of deceit.”
None of the court of appeal’s arguments to the contrary sufficed. First, plaintiffs didn’t allege any overcharge or functional defects in the locksets. But cognizable economic harm is not confined by the phrase “lost money or property” to objective functional differences. Also, “the economic injuries the Court of Appeal would require in order to allow one to sue for misrepresentation are in many instances wholly unrelated to any alleged misrepresentation. An allegation that Kwikset's products are of inferior quality, for example, even if it might demonstrate lost money or property, would not demonstrate lost money or property ‘as a result of’ unfair competition or false advertising about the product's origins.”
The core of the argument is that plaintiffs received the benefit of their bargain, even if they relied on misrepresentations in purchasing. But the problem with this argument is that plaintiffs didn’t. They bought Kwikset locksets at least in part because they were “Made in U.S.A.”; they wouldn’t have bought the locksets otherwise; and we can infer that they value what they actually received less than the money they spent or less than working locksets actually made in the U.S. “They bargained for locksets that were made in the United States; they got ones that were not.… The observant Jew who purchases food represented to be, but not in fact, kosher; the Muslim who purchases food represented to be, but not in fact, halal; the parent who purchases food for his or her child represented to be, but not in fact, organic, has in each instance not received the benefit of his or her bargain.” [Any bets on whether this decision will be cited to show “creeping sharia” in US law?]
The court went on to unpack the benefit-of-the-bargain argument as resting on one of two unstated assumptions—that the misrepresentation at issue should be deemed immaterial, or that, “even if the consumer does not value what he or she received as much as what he or she paid, the marketplace would, and its valuation should be dispositive.”
As to the first, a misrepresentation is material if a reasonable person would attach importance to its existence or nonexistence in determining a choice about the transaction at issue (or if the maker of the representation knows or has reason to know that the recipient thinks of the misrepresentation as important to his or her choice, even if a reasonable person wouldn’t). “Here, the Legislature has by statute made clear that whether a product is manufactured in the United States or elsewhere is precisely the sort of consideration reasonable people can and do attach importance to in their purchasing decisions,” and the U.S. government even requires its agencies to privilege U.S.-made goods. In fact, Kwikset itself used labels like "All American Made & Proud Of It" and "Made in U.S.A." because it concluded that such marketing might sway reasonable people in their purchasing decisions. Anyway, as materiality is generally a question of fact, it wasn’t a basis for dismissing the case on the pleadings.
The second theory is that a consumer hasn’t lost money or property if the marketplace would continue to value the product as highly as the amount the consumer paid for it, whether or not he or she would do so. In theory, the deceived consumer could turn around and sell the locksets to someone else for the same price.
The court identified four problems with this theory:
First, it assumes there is a functioning aftermarket for resale that would allow a plaintiff to liquidate the good in question by reselling it to those for whom the misrepresentation is immaterial. This plainly is not so in many instances. While there are certainly consumers for whom the kosher or halal or organic quality of food is immaterial, there is no functioning aftermarket that would permit easy resale of, for example, perishable foodstuffs and small-ticket consumer goods. A gallon of nonorganic "organic" milk cannot be resold. A consumer who has purchased products mislabeled in this fashion cannot recoup his or her purchase price.
Second, it assumes a consumer has no qualms--religious, ethical, or otherwise--that would preclude his or her partaking in resale of the mislabeled product, or at least none that the law should respect.
Third, it assumes that resale will not involve transaction costs and that an individual consumer will be able to resell the mislabeled product at the same price. But even for goods where there is a functioning aftermarket, resale will generally require the deceived buyer to sell at a reduced price to account for the facts the good is being resold and the source (an individual consumer) is less reliable than the original seller (a commercial establishment). In such instances, there still has been a loss of money.
Fourth, it ignores that the law generally disregards such "pass-on" sales. Kwikset's argument, that a deceived buyer has lost nothing because he or she has the value of the item still possessed, can be viewed as a pass-on defense in disguise: the buyer has an item that, through a presumed functioning aftermarket, he or she could convert back into an equivalent amount of money, recouping through the subsequent sale any perceived loss. But in the eyes of the law, a buyer forced to pay more than he or she would have is harmed at the moment of purchase, and further inquiry into such subsequent transactions, actual or hypothesized, ordinarily is unnecessary.
In a footnote, the court further characterized this second argument as one that “the materiality of a representation must be proven by reference to a market that charges more for products that carry a particular label.” As the court recognized, this would have significant effects on the scope of consumer protection law. “In any market with generally parallel pricing (whether through conscious parallelism or otherwise), where competitors use representations about features principally to increase market share rather than to charge a premium, any deception in such representations would no longer be privately enforceable by consumers. We do not see expressed in Proposition 64 any intent to deregulate the commercial speech marketplace of ideas to this extent.”
Kwikset argued by analogy to real property fraud cases measuring the damages for fraud by the difference in the actual value of what was parted with and what was received. But that rule provided the measure of damages, not a limit on standing or on the availability of equitable remedies, a conclusion actually made explicit in California’s Civil Code. Civ. Code, § 3343, subd. (b)(2) (damages rule shall not be used to "[d]eny to any person having a cause of action for fraud or deceit any legal or equitable remedies to which such person may be entitled"). Especially since a damages remedy is unavailable under the UCL, there was no reason to think that the electorate intended to borrow this rule for a wholly unrelated purpose, a restriction on standing:
Indeed, doing so would render standing under the UCL and false advertising law substantially more difficult to establish than standing to assert common law deceit: As Kwikset's counsel properly acknowledged at oral argument, a consumer who purchased a product in reliance on an alleged misrepresentation would under the common law have standing to sue for fraud, misrepresentation, and rescission without having first to prove, as Kwikset argues the UCL and false advertising law now require, that the product received was worth less than the money paid for it. While Proposition 64 clearly was intended to abolish the portions of the UCL and false advertising law that made suing under them easier than under other comparable statutory and common law torts, it was not intended to make their standing requirements comparatively more onerous.The court pointed to Prop. 64’s findings and declarations of purposes in the voter information guide (as its precedent dictated in interpreting propositions, by analogy to legislative history). These expressed concerns that UCL suits were being brought by clients who hadn’t used the defendant’s product or service, viewed the targeted ads, or had any other business dealing with the defendants, as in the Kasky case. “In short, voters focused on curbing shakedown suits by parties who had never engaged in any transactions with would-be defendants. No corresponding concern was expressed about suits by those who had had business dealings with a given defendant, and nothing suggests the voters contemplated eliminating statutory standing for consumers actually deceived by a defendant's representations.”
Finally, the court of appeal relied on a line of cases reading “lost money or property” to confine standing under section 17204 to people who suffer losses eligible for restitution. Because plaintiffs weren’t entitled to restitution, they then necessarily lacked standing. However, the standards for standing and for eligibility for restitution under section 17203 are “wholly distinct.” Prop. 64 amended both sections; it would have been easy to make standing under section 17204 expressly dependent on eligibility for restitution, but that’s not what happened. (By comparison, the CLRA requires that a consumer be able to prove damages in order to have standing.) The court refused to conflate standing with the question of the remedies to which a party might be entitled.
Standing should not be dependent on eligibility for restitution for another reason: restitution is confined to restoration of money taken from the plaintiff by the defendant. But unfair business practices may cause economic injury without any corresponding gain to the defendant, such as diminished value of a plaintiff’s assets from defamation. Such injuries are lost money or property and permit injunctive relief even without any basis for restitution.
The larger point was that to make standing dependent on eligibility for restitution “would turn the remedial scheme of the UCL on its head.” Injunctions are the primary form of relief under the UCL, with restitution a form of ancillary relief. Tobacco II noted that Prop. 64 didn’t amend the remedies provision of the UCL, and so there was no reason to conclude that standing should depend on eligibility for restitution, making injunctive relief an appendage.
Judge Chin (also a dissenter in Kasky) dissented. The voters unequivocally intended to narrow the category of persons who could sue under the UCL. “By failing to expressly define ‘lost money or property’ and instead equating it with economic injury, the majority effectively collapses the two separate requirements of section 17204 into one.” The dissent argued that plaintiffs’ subjective purchase motivations shouldn’t count. “Whatever value the consumer may subjectively assign to the product …, plaintiffs have failed to allege that their personal preference is reflected in any cost differential between the mislabeled and correctly labeled products.” This objection is not directed at reliance, but at the fact that now a plaintiff must only allege “‘I would not have bought the product but for the misrepresentation,’ to establish not only causation but also an injury cognizable under section 17204. An allegation that merely identifies the party's subjective motivation clearly does not track the language of the section.”
The dissent found it unclear what constituted the “extra money paid” in this context. The counterfeit Rolex and mislabeled kosher, halal, or organic food examples were inapposite. “One can hardly dispute that these genuine products have greater value placed on them than on their mislabeled counterparts, and consumers who buy the latter may allege and prove they actually paid (and therefore, lost) extra money based on the mislabeling.” However, under the majority’s rule, plaintiffs need not allege any price differential, even though counterfeit Rolexes are “clearly overpriced” because a typical counterfeit is inferior in quality, just as kosher, halal, and organic foods are typically more expensive.
Comments: But what if the watch is not inferior? Also, I don’t think that Campbell’s halal soups cost more than its non-halal soups—this is the majority’s point about markets where the issue is market share, or consumers’ willingness to participate in the market at all. It’s a little disconcerting to see efficient markets theory, positing that prices are already exactly where they should be, creep into an area of the law that is entirely about how bad information distorts markets and prevents efficiency. I can in fact see a partial defense of the dissent that goes to the question of whether the material misrepresentation prevents the plaintiff from making any economically significant use of the product—with respect to the kosher/halal example, you really do have to give or throw the stuff away when you find out the truth, regardless of any price differential, whereas you probably don’t stop using the lockset. But even this seems like a weird description of the harm in the kosher/halal case, which generally involves food that’s already been consumed before the deception was discovered and in which the economic harm is really that you paid money for a product that you would not have purchased had you known the truth—not the price differential, but the resource misallocation. I think the proper rule is that the product need not be worthless to you; it need only be worth less.
Back to the dissent: An allegation that the consumer wouldn’t have bought the product but for the misrepresentation is too low a threshold to meet. The issue “is not that a plaintiff must show that he or she personally suffered harm, but that the harm alleged must be an actual measurable loss of money or property.” The majority conflated "injury in fact" with "lost money or property,” and focused too heavily on the genesis of Prop. 64, misuse of UCL lawsuits, instead of its actual language. Indeed, proponents of Prop. 64 “included the underlying action on their Web site as an example of a ‘shakedown’ lawsuit,” and newspapers mentioned it as well. “While these may not constitute official materials presented to voters, these materials, at the very least, undermine the majority's assertion that voters were concerned only about suits by parties who had no business dealings with a given defendant and, more importantly, they underscore the question we must answer here--what does ‘lost money or property’ mean in this context?”
The dissent also rejected the idea that its interpretation would sound the death knell for private enforcement against label misrepresentations. In other situations, plaintiffs could allege that a mislabeled product was overpriced and that they did lose money. Moreover, Kwikset’s competitors could sue: “A competitor who properly labeled its locksets ‘Made in U.S.A.’ and alleges it was forced to charge higher prices for such locksets, and another who manufactured its locksets outside the United States and alleges it lost customers to Kwikset, could both claim they were at a competitive and economic disadvantage to Kwikset. In each instance, these competitors could allege not only injury in fact, but also economic injury for lost sales and profits due to Kwikset's misrepresentation.” (Interestingly, as I recall, plaintiffs argued that they could replead to allege that competing foreign-made and properly labeled locksets were cheaper, but the court denied them leave to do so; as it turns out the defendants’ bar probably would have preferred that scenario!)
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