Empire Brewing Co. wants to trademark a German lager it calls "Empire Strikes Bock," which has grown in popularity over the last seven years. But Lucasfilm is objecting to the trademark saying that consumers are likely to confuse it with the Star Wars franchise. To continue reading, click: Lucasfilm Opposes “Empire Strikes Bock” Beer Trademark
The Examining Attorney refused registration under Sections 1, 2, and 45 of the Trademark Act on the ground that the title of a work fails to function as a trademark. Applicant for some reason focused on the issue of whether the specimens of use were acceptable, but that was not the basis for the refusal.
The Board observed that, although the registration of a title has often been refused registration under Sections 1, 2, and 45, the proper basis for refusal is Section 2(e)(1) because the title describes the work. A title is capable of registration if it is used for a second work (i.e., as the title of a series), and courts have protected the title of a single work once secondary meaning has been established. So a title is capable of functioning as a trademark.
Of course, a Section 2(e)(1) refusal can be overcome by a showing of acquired distinctiveness under Section 2(f). And so the question here became whether applicant's mark had acquired distinctiveness.
Applicant had a "significant burden" under Section 2(f) because a title is highly descriptive of a book or DVD. Was there "sufficient public exposure of ROCK YOUR BODY in such a manner that consumers would view ROCK YOUR BODY not merely as a title of the book and DVD, but as a trademark indicating source?"
Applicant sold only 884 sets of the book and DVD. Its website showed the mark used with apparel and workshops, which would convey to consumers that ROCK YOUR BODY plays a role beyond that of a title, but the evidence failed to show the extend of exposure of the website (e.g., the number of hits or visitors). The Board found that evidence insufficient to establish acquired distinctiveness, and so it affirmed the refusal under Section 2(e)(1).
Read comments and post your comment here
TTABlog note: Was the applicant aware that the Board would turn this appeal into a hunt for acquired distinctiveness?
Text Copyright John L. Welch 2014.
The parties agreed to Accelerated Case Resolution (ACR), which resulted in a faster, although perhaps less expensive, defeat for applicant.
Because the goods overlap, the Board presumed that they travel through the same, normal channels of trade to the same classes of consumers. Applicant argued that opposer sells only clothing, while opposer's goods are ancillary to its sports training services. So, applicant maintained, its customers are athletes who train with applicant. That argument, the Board found, had little merit because the Board must make its determination based on the goods identified in the opposed application, regardless of what other goods and services applicant offers. Here there were no limitations on the channels of trade or classes of consumers.
Applicant further contended that its goods are purchased with an enhanced degree of care because a visitor to its website must register for a workout or nutritional plan before he or she can purchase any clothing item. The Board again pointed out there was corresponding limitation in applicant's identification of goods, and even if there were there was no evidence that purchasers of opposer Hale's products exercise extra care, and they may be confused by the marks.
As to the marks, applicant attempted to distinguish them by pointing to the dietary supplements and sports training services that it provides in connection with its mark, as if that significantly change the meaning of the mark. The Board again observed that applicant's supplements and training services are not part of this proceeding.
The Board found the marks to be similar in sound, appearance, meaning, and commercial impression. Notably, opposer's GO PRO s mark is contained in its entirety in applicant's mark and appears as the first part of the latter mark.
Applicant's assertion that GO PRO is in common use in the marketplace was not supported by the evidence. Applicant pointed to some three years of concurrent use of the involved marks with no evidence of actual confusion, but the Board pooh-poohed that argument. Three years is a relatively short period of time, and the fact that both parties' goods are sold on the Internet does not establish that there has been a meaningful opportunity for confusion to occur. Moreover, evidence of actual confusion is notoriously difficult to obtain, and the test is likelihood of confusion, not actual confusion.
To the extent that applicant argued that opposer's use of his mark was minimal and therefore confusion was unlikely, the Board noted that the rights flowing from a federal registration "do not vary with the size of the registrants."
The Board concluded that, even if GO PRO is a weak mark, it is entitled to protection, since "likelihood of confusion is to be avoided, as much between 'weak' marks as between 'strong' marks, or as between a 'weak' and 'strong' mark."
Read comments and post your comment here
TTABlog note: In short, the Board told applicant to GO HOME.
Text Copyright John L. Welch 2014.
Even in a small town in Germany or Mumbai, India, you will find a Starbucks Coffee Company (“Starbucks”) on the corner.
Starbucks sells a billion dollars of my favorite Frappuccino drink a year throughout the world.
To protect its ability to cash in on this yummy drink, Starbucks owns the FRAPPUCCINO® trademark in the U.S. (and likely in other countries around the world). Not surprisingly when Mexican Company Procesadora Salvic SA de CV applied for the mark “FRIOCCINO” in connection with beverages made of coffee and coffee-based iced beverages, among other beverages, Starbucks opposed the application.
In the opposition, Starbucks touted its forty years of experience in the business. It alleged that there was a likelihood of between the strikingly similar “FRIOCCINO” mark and its valuable FRAPPUCCINO® marks. Starbucks further complained that the opposer’s proposed “FRIOCCINO” mark so resembled Starbucks’ famous FRAPPUCCINO® marks that it was likely to cause dilution of the distinctive quality of its mark.
We will have to wait and see if Starbucks can defeat this application. Do you think Starbucks will prevail?
Hain has staved off class actions several times, but not here: the court certified a class of purchasers of Avalon Organics and Jason cosmetic products, based on allegations that they were labeled “organic” when they weren’t, in violation of California’s Organic Products Act (COPA), the UCL, the CLRA, and express warranty. Before 2011, the product lines contained less than 70% organic ingredients, with few exceptions. In 2011, Hain changed the formulations and labels of substantially all the products. Plaintiffs bought products from the two lines, in the belief that they were completely/mostly made from organic ingredients, and were willing to pay more for that feature.
Federal law governing foods requires that food labeled “organic” or “made with organic” must be at least 70% organic. This doesn’t apply to cosmetics, but plaintiffs alleged that the federal definition shaped consumer expectations for all organic products, including cosmetics. Moreover, COPA requires that cosmetic products advertised, marketed, sold, labeled, or represented as organic in California be made of at least 70% organic ingredients; plaintiffs alleged that COPA was a “legislative determination” that it is deceptive to represent as organic cosmetic products that have insufficient organic content.
Jason’s tagline “Pure, Natural & Organic” and Avalon Organics’s name and “pro-organic” pledge on their front labels allegedly misled consumers, given that they didn’t comply with the 70% rule, whether measured by weight or volume. For example, only the 9th out of 19 listed ingredients in Jason Face Wash was certified organic, which can’t possibly be 70%. (Hain argued that after the 2011 reformulation, Avalon Organics products contained more than 70% organic ingredients; plaintiffs disagreed. The answer turned on whether one could count water added to reconstitute dehydrated aloe powder as part of the percentage of organic ingredients. If yes, then the products all had more than 70% organic ingredients; if no, they didn’t.)
Hain challenged the class definitions as containing non-actionable products and as non-ascertainable because based on self-identification without receipts. The court found that the class definition for Jason products tracked the temporal use of the “Pure, Natural, & Organic” tagline, and properly excluded products that are USDA-certified as organic. The Avalon Organics class was similar; post-June 2011 purchasers were part of the class, but if water used to rehydtrate aloe powder counts towards the 70% threshold, they’d lose on the merits—something the court wasn’t going to resolve before certification.
As for ascertainability, the court rejected the Third Circuit rule requiring receipts or external identification of class members as gutting the Rule 23(b)(3) class action precisely where it’s most needed—where individual harm is small but aggregate impact significant. While reliance on affidavits can be problematic, the analysis must be case by case. Extreme variety in covered products might make memory and affidavits unreliable, but here all but 8 of 362 products were the same with regard to the organic claims and product formulations used as the basis for the claims; the 8 were Jason products that weren’t popular. Consumers could reasonably be expected to recall the word “organic,” which was even part of the Avalon Organics name. Given the likelihood that consumers could correctly recall their purchases, self-identification by affidavit was acceptable for a small-ticket claim, especially since the alternative would be lack of redress for false advertising. This conclusion was bolstered by the fact that “total damages” would be proved and fixed at trial, because they were restitutionary. Hain’s profit “will be measured without regard to any individual plaintiff; then, after the total figure is set, individual claimants will divide the award.”
Numerosity, commonality, typicality, and adequacy were satisfied. Because COPA, the UCL, and the CLRA all use an objective reasonable consumer standard, once the claim was proved material to that objective reasonable consumer, inferences of reliance and causation would arise. Hain argued that both Avalon Organics and Jason products bore “other label statements (such as ‘no parabens’ and ‘no animal testing’) that surely influenced some consumers’ purchase decisions.” But that didn’t destroy typicality, given the inference of reliance that would arise from material misrepresentations. One plaintiff bought from an online vendor and paid less than wholesale; this didn’t make him atypical, only affected his individual damages. Here, as distinct from in cases where certification was denied for want of typicality, uniform misrepresentations about one word on the products’ labels were at issue across the entire class:
Whatever the precise formulations and uses of Hain’s various products, and whatever additional reasons consumers had for buying them, the plaintiffs’ claims against them are simple and uniform: the products were presented as organic when, under COPA, they were not. The plaintiffs’ claims, in other words, have nothing to do with the unique characteristics of the various Hain products; they have to do only with what is allegedly shared by all those products. The court thus thinks that the plaintiffs’ core claims can be adequately proved, for example, by someone who has bought shampoo for someone who has bought hand cream.
For similar reasons, the court found predominance. While, accepting Hain’s characterizations, 6 of 184 Jason products had no organic representation, and 2 had 70% organic content, that represented only a small percentage of products that could be easily excluded and didn’t destroy predominance.
Nor would materiality, reliance, and causation raise individual issues under California law given the objective reasonable consumer standard. This standard “reflects the UCL’s focus on the defendant’s conduct, rather than the plaintiff’s damages, in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices.” Moreover, even if other representations also motivated purchases, there can be more than one material reason for purchase. “This is how consumers shop: they buy products all the time for more than one reason.” In addition, plaintiffs adequately showed that, if they proved their claims on the merits, they could show that an “organic premium” existed and would’ve been paid by all consumers, regardless of their reasons for purchase. Thus all would have suffered injury regardless of purchase motive.
This brought the court to the issue of damages models. The plaintiffs offered the declaration of Dr. Stephen Hamilton, chair of the Department of Economic s at California Polytechnic State University, San Luis Obispo. He calculated Hain’s revenue/profit from sales of the products at issues, and also calculated a price premium for the “organic” attribute, not based on individualized information about class members. Hain challenged Hamilton’s models with testimony from an economist, arguing that his methods wrongly defined restitutions and flunked the Supreme Court’s requirements for damages models set forth in Comcast.
Under circuit precedent, plaintiffs needed to present a damages model that ties damages to their theory of liability. And, to comport with due process, the court must “preserve” the defendant’s right “to raise any individual defenses it might have at the damages phase.” The court concluded that plaintiffs adequately showed that damages could be calculated on a classwide basis in a way adequately tied to the plaintiffs’ liability theory. Hamilton used three different methods to separate out the “organic” premium from other product features. The fact that he hadn’t performed the calculations dictated by his models wasn’t dispositive; in part this was apparently because discovery was ongoing. “The point for Rule 23 purposes is to determine whether there is an acceptable class-wide approach, not to actually calculate under that approach before liability is established.” Hain could offer any defenses to individual claims in the damages phase.
The class action, naturally, was superior to no lawsuit, which was the only realistic alternative.
ALI Webinar Dec 4th: "Trademarks, Trade Dress and False Advertising: Recent Developments for Business and IP Lawyers"
Prof. Ken Germain
This practical program is specifically designed for business and IP lawyers who need to stay current with the recent trends in trademark, trade dress, and false advertising laws. Join us as our expert faculty provides a concise update and review of the latest cases from the United States Supreme Court, United States Courts of Appeals (including the Federal Circuit) and the U.S. Patent and Trademark Office Trademark Trial and Appeal Board.
- recent federal registration decisions on issues such as dilution-by-blurring, fraud, proof of lack-of-bona fide intent, disparagement, and specimens of use.
- possible resuscitation of a dead “generic term”
- likelihood of confusion, distinctiveness of marks, sponsored links
- dilution vs. confusion
- what's new in trade dress/product design and functionality
- injunctive relief, whether trademark causes deserve a presumption of irreparable harm
- monetary remedies: damages and attorney's fees under Lanham Act sec 35(a)
- consumer surveys: still in vogue or under suspicion
- insurance coverage for 'advertising injury' claims
The usual suspects did it again Tuesday. My Minnesota friends who, like me, tend to indulge in a bit too much Minnesota-centric navel gazing took high interest to a Minneapolis Star Tribune column that posed an interesting question: “Does Minnesota’s region have an identity crisis?” My Facebook feed lit up with links to Kim Ode’s column, which previews an event happening tonight at the Walker Art Center in Minneapolis titled, “Midwest? The Past, Present, and Future of Minnesota’s Identity.”
The headline to the Star Tribune column alone makes me chuckle. We (Minnesotans, ever-polite), fearful of excluding anyone, pose the question with the entire region in mind, not just Minnesota proper.
The gist of the column and the discussion happening tonight at the Walker Art Center is this: should Minnesota really be lumped in with the entirety of the Midwest when it comes to “concerns about geographic legitimacy, cultural identity and economic vitality?” Ode asks, “How can we sound more cool?”
Legal recruiters (any recruiters, really) have an almost self-imposed tough sell when they’re trying to lure top legal talent to Minneapolis from the coasts. The “how cold?” question must come up all the time. Never mind that it gets dang cold in New York, too.
So, the column and perhaps tonight’s panel at the Walker ask, why not own “the North” as our distinct identity? Forget the rest of the Midwest — let Chicago, Cleveland, Detroit, St. Louis, etc., fight for Midwestern dominance, we’ll be the capital of the North.
This makes business sense more than it is about mere pride, Ode’s column suggests:
Leading the talk is Richard Florida, a business professor at the University of Toronto and urban theorist who founded a think tank, the Creative Class Group. Florida contends that the most dynamic regions have urban centers that attract a creative class of technology workers, artists, entrepreneurs and others who foster an environment that attracts more creatives, which attracts investment, which fuels business.
A Twin Cities-based region could boast a high concentration of R&D-oriented companies, an educated populace, high voter turnout, a spirit of volunteerism, active residents.
I’ve always wondered why those who market Minnesota on a regular basis don’t try and capitalize on the spirit of this discussion. One factor is clearly the aversion to winter. Winter is only cool if you like outdoor sports, the prevailing narrative suggests. Perhaps we need to get over that and consider all the amazing cultural, culinary, and social activities that go on here in Minneapolis 12 months a year, not just the seven or eight months that make it into all the photos. In other words, couldn’t we take a winter photo that doesn’t depict evergreen tree or frozen lake?
Explore Minnesota, the state’s effective marketer-in-chief, is running a campaign called “#OnlyInMN” right now. My issue with the campaign and all of the Instagram photos that pop up when you search that hashtag, for example, is that the things we’re seeing don’t just happen “only in Minnesota.” They could be a lot of places in the Midwest — absent a recognizable landmark like the Spoonbridge and Cherry, the shots could be taken in Michigan. So the promise of “Only in Minnesota” rings just a bit hollow sometimes. Speaking of Michigan, I’ve always been a huge fan of their long-running tourism campaign, “Pure Michigan.” Pure Michigan captures a mood or a spirit with its branding or advertising, and nothing about its promise can be duplicated anywhere else, the messaging suggests. They achieve that without telling us it “only” happens in Michigan.
Anyway — that’s all for today. We’ll be back to navel-gazing about our Minnesota identities sometime soon here on DuetsBlog. We’re proud of it.
In re Wildgame Innovations, LLC, Serial No. 85651686 (November 17, 2014) [not precedential]. [Refusal to register the mark FLEXTONE GAME CALLS DIRTY LIL’ HEN for "hunting game calls" [GAME CALLS and HEN disclaimed] in view of the registered mark DIRTY LITTLE DOE, also for hunting game calls [DOE disclaimed].
In re SuperShuttle International, Inc., Serial No. 85765129 (November 14, 2014) [not precedential]. [Refusal to register MyECar, in standard character form, for "transportation services, namely, airport ground, charter, and door-to-door transportation services of passengers by motor vehicles, and not car leasing or reservation services for vehicle rental," in view of the mark ECAR, registered for vehicle leasing, rental, and reservations services, and for automobile dealership services.
In re Brar Business Enterprises, Serial No. 85641460 (November 13, 2014) [not precedential]. [Refusal to register SLICE OF ITALY for "bar services, restaurant services, restaurants featuring home delivery; take-out restaurant services" [ITALY disclaimed], in view of the registered mark A LITTLE SLICE OF ITALY for pizza.]
Read comments and post your comment here.
TTABlog query: How did you do? Any WYHAs here?
Text Copyright John L. Welch 2014.
- Chuck Sanchez, BatesMeron Sweet Design
Comcast. Electronic Arts. AT&T. Walmart. Dell. Time Warner. Fox News. McDonald’s.
Chances are, at least one of those company names kind of pissed you off just now.
Despite this likelihood, each of these brands is immediately recognizable due to widespread financial success in its respective industry. So must a brand be liked in order to be successful? Obviously not. But while likability is a subjective notion, it can still impact a business’s viability in the marketplace.
Consider this: a light dislike of a brand can earn it a dark horse, underdog or even bad-boy image that might even play into the product or service offering. Example: AXE Body Spray, the popular jerk of the personal products category.
A middling amount of brand aversion can split opinions, pitting a rabid core of brand loyalists against opposing outliers. Example: Apple, the too-cool-for-school hipster that even self-defined “PCs” pick for their mobile preference.
Brands that gather enough ire however, can fall victim to far more than public disdain or outcry. They often feel the pain of falling stocks or, in the worst of cases, permanently closed doors. Example: Ed Hardy, the tattoo-inspired frat boy of the fashion industry whose star burned brightly before burning out in an inferno stoked with the hatred of a thousand suns.
How do some big brands become so universally disliked?
Harkening back to a golden rule of Marketing 101, a company may only be successful at one or two of the following three aspects of its product: Quality, Service or Price. Only one, sometimes two, but never all three may be present for a company to thrive. It’s easy to see how some companies earn their bad reputations by focusing on quality or price, leaving service in a distant third.
As a result, brands are quickly learning that service is not as easily ignored as it was when word of mouth was the primary consumer access point. But while part of it is that big brands represent the corporate giant we love to hate, the other is that we’re reaching more of our peers with more effective platforms. The advent of online reviews, rant forums, Facebook status updates and Tweets have seen to that.
Yet, in an age in which branding can make or break a company’s future, far too many businesses put branding on the back-burner by forgetting that such a wired world is influential in maintaining a positive public image. Resist that urge. In the words of my agency’s namesake Becka Bates, “love your brand and it will love you back.”
Despite Lack of Documentation, Applicant Had Bona Fide Intent to Use "HARD CANDY" for Luggage, Says TTAB
Applicant relied on a pre-filing email to a potential licensing representative, in which it stated its goal of extending HARD CANDY into a "lifestyle brand." The only products specifically mentioned, however, were cosmetics. Applicant's witness testified that applicant had some communications with the potential representative in which handbags were discussed. Several post-filing emails did refer to leather goods, including one that concerned a meeting with Walmart, to whom applicant had sold cosmetic products since 2008.
The Board found that applicant's documentation and testimony were consistent and supportive. It was applicant's intention in talking to potential licensees and representatives to build a lifestyle brand. "In fact, ... the crux of Applicant's efforts was expansion into those product lines which Walmart would agree to purchase and sell, whether leather goods, jewelry, watches or perhaps something else."
Applicant ultimately succeeded in expanding its use of HARD CANDY into 'other categories such as sunglasses, cosmetic bags and apparel,' ... and that would not have happened unless Applicant intended it to happen.
Although applicant's intention to sell leather goods hinged on Walmart's agreement to buy them, that still qualified as a bona fide intention to use the mark. Moreover, post-filing documentation is admissible to corroborate the existence of a pre-filing bona fide intent.
Although applicant intention may have been focused more on expansion generally than on leather goods specifically, "that does not mean that Applicant's intent to use its mark on leather goods (and other products) was not bona fide." Given applicant's experience and demonstrated ability to expand its product line, its expansion into leather goods is entirely credible.
Finally, as to the dozens of abandoned trademark applications, the Board recognized that this may, in some circumstances, evidence a lack of bona fide intent. However, intent to use applications are often abandoned, for a variety of legitimate reasons. Here, it is undisputed that applicant did expand its business line from cosmetics to other products, and at the time of filing it intended to expand into leather goods.
And so the Board dismissed the opposition.
Read comments and post your comment here
TTABlog note: Reminds one of the ROLL-X case, in which the applicant had a bona fide intent to use the mark on x-ray tables, although it lacked pre-filing documentation. There, the filing of the ROLL-X application was consistent with an extension of applicant's product line, and applicant had the capacity to manufacture and market the goods. [TTABlogged here].
Text Copyright John L. Welch 2014.
The Board agreed with Examining Attorney Charles L. Jenkins, Jr., that TOKYO is the dominant part of each mark, and that consumers will focus on that word as the first part of each mark. The Board did not buy applicant's arguments that the two marks create very different commercial impressions: "while 'rods' may conjure the term hotrod' or a vehicle modified for speed, the mark TOKYO RODS remains suggestive of a retail automotive parts and accessories source, albeit one with an emphasis on Japanese cars and performance. Likewise, Applicant’s TOKYO MOTORS will be understood by consumers as indicating a retail source for Japanese automobile parts and accessories."
And so the Board found the marks to be very similar in sound, appearance, and meaning.
Applicant "curiously" argued that "the relevant field is crowded with registered marks utilizing the term 'MOTORS' for retail services related to sales of automobiles and automobile parts and accessories." That argument actually supported the refusal, but the Board already decided that TOKYO is the dominant part of each mark.
Applicant's services are broad enough to encompass those of the cited registration. Moreover, third-party use-based registrations showed that both "retail" and "online retail" store services featuring automotive parts and accessories may be offered under the same mark.
The Board therefore affirmed the refusal.
Read comments and post your comment here
TTABlog note: Well, how did you do?
Text Copyright John L. Welch 2014.
There’s probably a good magazine article or two in this story. William Koch, the “litigious younger brother” of Charles and David, bought over 2600 bottles of rare French wine consigned by Eric Greenberg to an auction house. He subsequently determined that 24 were counterfeit, and sued Greenberg for fraud (both affirmative misrepresentation and fraudulent concealment) and violations of New York’s General Business Law. A three-week jury trial resulted in a verdict for Koch on all his claims, awarding compensatory damages of $355,811 (the purchase price for the 24 bottles) and an additional $24,000 in statutory damages on one of Koch’s GBL claims ($1000 per bottle, pursuant to §349’s authorization of treble damages up to $1000 per violation). In addition, the jury awarded Koch $12 million in punitive damages.
The court reduced the compensatory damages award to $212,699 to take account of Koch’s prior settlement with the auction house Zachys. It also remitted the punitive damages award to $711,622, denied Koch’s requests for attorneys’ fees and injunctive relief, and granted him pre- and post-judgment interest.
The court denied Greenberg’s motions for judgment as a matter of law and for a new trial. Of interest to me, Greenberg argued that the statements at issue were non-actionable statements of opinion, and that Zachys, not Greenberg, made the relevant statements. Opinion: the jury was properly instructed that statements of opinion are non-actionable unless the opinion is not sincerely held. And the jury was properly instructed that puffery is non-actionable. The jury is presumed to follow instructions, and along with vague superlatives, “the record contains several additional potential statements of fact, or potentially insincerely held opinions, that the jury could have reasonably construed as actionable misstatements.
As for statements in the Zachys auction catalogue, fraudulent misrepresentations don’t need to be made directly to the plaintiff as long as the plaintiff is among the class of persons intended to rely on the statement. The jury could conclude that misrepresentations made to Zachys were intended to be communicated to purchasers like Koch and that the misrepresentations in the catalogue could ultimately be traced to Greenberg as the “driving force.” The jury apparently rejected contrary evidence, apportioning blame for Koch’s GBL claims at 100% for Greenberg and 0% for Zachys with respect to the § 349 claim and at 75% for Greenberg and 25% for Zachys with respect to the § 350 claim.
Likewise, the jury could properly have found fraudulent concealment, on the theory that Greenberg possessed superior knowledge with respect to material facts about the bottles and that therefore his silence or omission could constitute fraud. Greenberg’s counsel repeatedly emphasized that Koch had the opportunity to inspect the bottles at issue, and could have seen apparent indicators of their counterfeit status. But the jury was free to reject that argument. The record did indicate “surface-level problems with the bottles of wine—aberrational labels or irregular cork striations, for example,” but it also included numerous references to information Greenberg knew but chose not to share. The jury could agree that no amount of inspection would’ve revealed what Greenberg knew. It was properly instructed that buyers, especially sophisticated ones, have a duty to protect themselves in business transactions. But it was also properly instructed that “a buyer is not required to conduct investigations to unearth facts and defects that are present, but not obvious,” meaning that “a buyer is not expected to discover that a house is infested with termites.”
Nor was Koch’s reliance unreasonable as a matter of law. There was an “as-is” clause in the auction catalog, disclaiming the authenticity, provenance, and merchantability of the wine. The jury was instructed that specific disclaimers ordinarily “preclude a finding of justifiable reliance,” as required for a fraud claim. But not always: where the material facts upon which a plaintiff relies are “peculiarly within the [defendant’s] knowledge,” and not discoverable by the plaintiff through “the exercise of ordinary intelligence,” such an “As–Is” clause will not act as a bar to a fraud claim. The jury was also properly instructed that in determining whether Greenberg had “peculiar knowledge” it should consider the buyer’s sophistication and the accessibility of the underlying information.
Greenberg argued that, even if it was difficult to inspect over 2000 bottles of wine, that was a difficulty of Koch’s own making, and Koch’s wealth and sophistication weighed against a finding of peculiar knowledge. But it was reasonable for the jury to conclude that, in light of all the circumstances, and despite Koch’s sophistication and his right to inspect the bottles, it was unreasonably difficult or impossible for him to have discovered what Greenberg knew. Under the circumstances, Koch wasn’t unreasonable as a matter of law to fail to recognize various indicia of inauthenticity or hire an expert to spend 25 minutes per bottle on inspection at the time of purchase. The jury could therefore find fraud notwithstanding the presence of an explicit disclaimer.
As for the GBL claims, GBL § 349 claim requires that (1) “the defendant has engaged in an act or practice that is deceptive or misleading in a material way”; (2) the “plaintiff has been injured by reason thereof”; and (3) the deceptive act or practice is “consumer oriented.” Consumer-oriented conduct has to be more than a private contract dispute, but it need not involve repetition or a pattern as long as it was aimed at the public at large. Given the large number of bottles Greenberg consigned, other consumers at the auction could have been affected by the alleged misconduct. The finding of liability under §349 also survived.
The court then found that the exclusion of Greenberg’s refund offers as evidence during the liability phase was proper, though it was properly admitted when the jury was considering whether to award punitive damages. Refunds as a remedy for counterfeits might provide limited insight into wine industry practices, but not necessarily into Greenberg’s state of mind at the time of the key events, but their probative value was outweighed by the prejudicial effects of portraying Koch as unreasonable and litigious in not accepting the money.
The court also upheld the award of punitive damages; the jury heard sufficient evidence from which it could conclude that Greenberg acted with wanton disregard for potential buyers’ rights, and that this auction was not the first time Greenberg had sold counterfeit wine. However, the award was reduced because of due process concerns.
The reprehensibility of the conduct at issue was the most important factor: the harm was economic as opposed to physical or potentially physical (these bottles were collector’s items, not for drinking), and the targets—Koch and other potential buyers—were not financially vulnerable, and the subject wasn’t a core asset like a home or business. “Greenberg deceived a wealthy collector whose hobby involves expenditures that most people will never contemplate.” Some punitive award was nonetheless appropriate, given that “[t]o deceive for one’s personal, pecuniary gain and exploit one’s superior knowledge—the gravamen of the fraud here—reflects reprehensibility that warrants some sanction.” The jury evidently rejected Greenberg’s argument that his refund offer proved his good faith.
The high ratio of the jury’s award to its compensatory award (33x the initial amount, and 56x the reduced amount) signalled a constitutional problem. Given the economic nature of the fraud, its lack of relation to liberty or dignity, and its lack of disruption of Koch’s life, this wasn’t a case that justified going up to the limits of the Due Process Clause. A six-figure compensatory award was already significant in the absolute sense, but less so in the relative sense, “particularly in the context of high-end wine auctions where a single bottle may sell for $20,000, and in light of the wealth of the inevitable participants in such auctions, including Greenberg.” Thus, a punitive award less than the compensatory award wouldn’t likely have much deterrent effect. Thus, the court remitted the award to $711,622, twice the initial compensatory damages award. The court didn’t use the setoff from the Zachys settlement in its calculation, given that the jury awarded punitive damages on the fraud claim—a claim brought only against Greenberg when Zachys settled—and given that the jury allocated 100% liability to Greenberg (and 0% to Zachys) on the GBL § 349 claim.
Attorneys’ fees: Koch sought nearly $7.9 million in attorneys’ fees. The GBL allows an award of reasonable fees to a prevailing plaintiff, at the trial court’s discretion. The court declined to do so, for several reasons. The fees “bore no relationship to the amount of actual damages at issue,” given the aggressive “battle royale” fought by the parties for six years, for a compensatory damage award of only $355,811. In addition, the compensatory damages for Koch’s commercial injury did capture the extent of his success at trial, as opposed to other situations in which intangible rights are vindicated.
Also, the purposes of the GBL didn’t support an award of fees; the potential for punitive damages on the fraud claim was the only reason the case wasn’t mooted by Greenberg’s refund offers, but only the GBL claims provided a basis for fee-shifting. This wasn’t a case within the heartland of GBL fee-shifting, because it didn’t involve vulnerable or disadvantaged consumers, and it didn’t involve conduct with a broad impact on consumers in general, even though Greenberg’s conduct was consumer-oriented.
Plus, Koch did refuse a full refund and insist on trial, “in the hopes of sending a message and exposing what he perceived as Greenberg’s wrongdoing.” He did so, and the court accepted that Koch felt strongly about the matter, but this was really “a litigation of choice and of principle, rather than of necessity or monetary recompense.” Though neither Koch’s wealth nor his sophistication barred an award of fees, it was still relevant that Koch could’ve gotten his compensation years earlier but chose to spare no expense in litigation.
Koch also requested broad injunctive relief against Greenberg, barring him from (among other things) engaging in deceptive acts or practices in selling wine. The GBL allows private parties to obtain injunctive relief, but it wasn’t clear whether eBay applied. The case law suggested that, while government entities didn’t need to meet the traditional equitable requirements in seeking injunctions, private plaintiffs did. Just because the New York statute specifically authorized injunctive relief didn’t mean eBay’s equitable principles were displaced; so too does the Lanham Act. The alternative would be absurd: automatic injunctive relief for any prevailing plaintiff, no matter how small the violation. Given the absence of specific statutory conditions for injunctive relief, the court applied the ordinary rules.
Koch didn’t suffer irreparable injury; money fully compensated him. Though Koch argued that Greenberg consigned more than the 24 counterfeits proven at trial, that was beyond the scope of the trial and not the proper subject of a permanent injunction. Compensatory and punitive damages were adequate to make Koch whole.
As to the balance of hardships, Koch requested extensive and damaging mandatory disclosures not required of other consigners in the wine industry. “Koch has made efforts to change the auction practices in the industry that permit this type of deceit to occur. However, it does not follow from the jury’s finding that Greenberg engaged in GBL violations that he must now be the symbol for changed norms within the wine industry.” An injunction wouldn’t serve the overall public interest. Rather, “this costly litigation, intense public scrutiny, and a punitive damages award are sufficient to dissuade Greenberg from engaging in deceptive acts or practices in the future.”
- James Mahoney, Razor’s Edge Communications
This past summer, The Hollywood Reporter wrote about the challenge to the copyright of the Happy Birthday tune (and the lucrative licensing revenue that it enables). That reminded me of another copyright question that I’ve wondered about.
Awhile ago, I bought a box of greeting cards featuring vintage travel photographs. Here are the front and back-matter of one of them.
Given my understanding of copyright, I was puzzled by the © of a photo by anonymous, and one that could well be old enough to be in the public domain. Over the years, I’ve seen many examples of this type of thing, so decided to investigate.
In response to my query, the U.S. Copyright Office provided this information:
“Since the author is unknown regarding the photograph, it would be difficult to determine who the copyright owner might be. It is a perfect example of what is considered an orphan work, and you may wish to read about that: copyright.gov/orphan
And, “Mere ownership of the work (found or purchased) does not give the possessor the copyright…Only the author or those deriving their rights through the author can rightfully claim copyright.”
As far as that tricksy little © goes, here’s what they had to say:
“The United States Copyright Office does not regulate the use of the copyright notice. Anyone can apply the copyright notice, without registering a work in the Copyright Office or contacting the Copyright Office … whether or not the notice is truthful or pertaining to the photographs, we cannot advise you on that.”
In other words, anyone can scatter ©s around willy nilly, like so much confetti, especially when it’s unlikely that an actual © owner would emerge from the shadows.
So that, generally speaking, is that. But, like pulling a thread on a sweater, tugging at the question leads to more puzzling elements. For example:
Copyright varies around the world. The rule in one country doesn’t necessarily apply in others. So what’s the case when a business in a foreign country claims appropriate copyright there, but distributes material in the US that would be considered orphaned or in the public domain here?
What’s the situation for archives, such as the Hulton Archive collection that Getty Images offers for a licensing fee and considers copyrighted? Clearly some of these images are old enough to be in the public domain. Yet they are offered for licensed use.
Others who are more dogged than I, more interested, or more knowledgeable may be able to shed further light.
Some well-heeled person with an expensive sense of humor might even pick a fight, like the Happy Birthday one, by using of one of those images without permission. I expect Getty Images or whomever would rigorously defend their right to licensing fees. It seems to me, in my naivete, that at least in the U.S., they wouldn’t prevail.
Separately, I have to give a resounding tip o’ the hat to the copyright office. I submitted my email inquiry through their website form, expecting to get an automated pointer to pamphlets or other info sources; a nonspecific, innocuous response after some time had passed; or no response at all.
Instead, within a day, I got an email from RyB at the Copyright Office that provided relevant information to my specific question. Not only that, but RyB also quickly responded to follow-up emails. This taxpayer is mightily impressed with the Copyright Office’s customer service.
In contrast, I also emailed Getty Images, asking about their rationale that supports charging licensing fees for images that clearly qualify as public domain in the U.S. (Their order form requires identifying the country where you’ll use the image.) The company’s automated response acknowledged receipt of the query and said they strive to reply within one business day.
So far, ©rickets.