Tuesday, September 7, 2010

eBay Gets a Price Reduction

Ceux qui me connaissent savent que j’aime n'importe quoi français. En effet, mon hantise pour le pays et la culture est si ridicule que j'ai décidé d'écrire ce “post” en français. Vous pouvez me remercier maintenant.

Comme vous vous rappelez, il y a deux ans de Louis Vuitton Moet Hennessy a obtenu une victoire cuisante sur eBay, recevant un jugement €38.6 million (de $49.6 millions) basé sur de tiers ventes (quoiqu'énuméré sur eBay) des marchandises de luxe de contrefaçon de LVMH.
Spécifiquement, en 2008, la cour a ordonné qui eBay était responsable de l'infraction de marque déposée directe ou indirecte basée sur l'utilisation de son site Web de vendre les produits d'imitation de Louis Vuitton, de Christian Dior, de Guerlain, de Givenchy et de Kenzo. La cour a ordonné qu'eBay a eu une responsabilité intensifiée d'empêcher la fraude sous forme de ventes contrefaites sur son emplacement. (Notez-vous que c'est énormément différent du situation aus Etats-Unis, ou en eBay de Tiffany [2d Cir., Avril 2010], la cour a ordonné presque l'opposé.)

Bonnes nouvelles pour eBay! La semaine dernière, une cour française a ramené cette récompense à €5.7 million ($7.3 millions). Malgré cette reduction, la cour de Paris de l'Appel a confirmé la conclusion que eBay avait violé les marques déposées de LVMH par en listant et ventant des marchandises de contrefaçon.

Dans la mode française quintessencielle, eBay et le LVMH a déclaré l'acte une victoire absolue.

Jonathan Pink is a commercial litigator, and business attorney with a specialty in copyright and trademark infringement. He is also an unabashed Francophile. He can be reached – in French or English – at jonathan.pink@bryancave.com; 949-223-7173.

Monday, August 30, 2010

Ansel Adams and the First Sale Doctrine

Eric Goldman (http://blog.ericgoldman.org), whom I respect a great deal, suggested I consider whether the "first sale" doctrine would apply to Ansel Adams’ alleged long lost negatives dispute. (See post of 8/27/2010 -- http://www.jonathanpinkesq.com/ansel-adams-or-not-the-story-of-a-trademark-dispute.) I now have, and don't believe it does.

While trademark law prohibits some uses of another's trademark, that prohibition is not unlimited. Under the first sale doctrine, when a trademarked product lawfully enters the stream of commerce, typically there is no right to claim infringement against a lawful reseller of the product if the mark is used to identify the goods. See Storz Endoscopy-America, Inc. v. Surgical Technologies, Inc., 285 F.3d 848 (9th Cir. 2002). This is similar to the fair use concept mentioned in my previous, related post, but not identical.

Here, if the photo negatives Rick Norsigian bought truly were the work of Ansel Adams, there is an argument that the Ansel Adams Trust could not prohibit him from selling prints made from those negatives while using the Adams trademark (assuming he uses the mark for purposes of advertising and identifying the goods he's peddling).

The problem is that, from the Trust's perspective, the goods aren't Adams' even if the prints were made from his negatives. The Trust claims Ansel worked his magic in the darkroom (haven't we all?), and that his finished images consisted of more than merely the image photographed, its composition, captured moment, etc.. According to the Trust (and many casual viewers of AA’s work), the art comes equally from how Mr. Adams’ developed those images, selected the tones of lights and darks, etc.. Accordingly to the Trust, without that component, the “work” (e.g. any print made from the found negatives) simply is not the work of Ansel Adams, even if the negatives were created by him. To this end, the Trust will likely argue that the first sale rule does not apply, and Norsigian is not entitled to use the Adams' mark pursuant to that doctrine.

The Trust's argument should carry some punch. While the first sale rule may immunize a traditional reseller from infringement liability, it loses its effect where the goods have been altered, or are materially different from those created by the trademark owner. See Storz, supra, 285 F.3d 848. Also, I am not sure the negatives ever lawfully came onto the market when Norsigian bought them at that garage sale 10 years ago. You will recall that Norsigian claims the glass photographic plates were saved from a fire at AA's studio 70 years ago, but even if this is so, did the garage sale seller gain legal right to their possession, and the concomitant right to resell them? I don't know. In any event, given the foregoing, I suspect Norsigian won't find much safety in the first sale "port" from this legal storm.

On a related, but totally non-legal note: I had a funny and similar experience this weekend. While visiting some friends who were in town at a beach house that had been in their family since the 1930s (which is mostly used as a rental when the family/cousins, etc. aren’t there in the summers), I noticed an oil painting on the wall that was rather nice. Now this place is your typical rental, with mostly your typical rental artwork (stained and tattered reproductions that you’d mostly overlook). But this work was an original oil, and quite nice. My friend said he’d never paid much attention to it; it had been hanging there his entire life, and he assumed that it had been placed there by his grandfather in the 1930s.
As I was taking a close look at it (my mom’s an art dealer, and somehow this is how I learned to closely examine art – plus, my vision is abysmal), I asked “Who did it?”
My friend, now at least a little curious – or very polite – looked for the signature and said “Edgar . . . .” I interjected: “Don’t say Payne.”
“Payne,” he said.
I couldn’t believe it. An Edgar Payne? I told him a little about the artist and suggested that the painting had to be worth at least $45K. “No!” He couldn’t believe it. I told him I was guessing, but suggested we call my mom to see what she thought.

I phoned. She was cooking dinner. I described the work. She asked if was a landscape, I told her no, it had boats, and looked like Newport Harbor. “Oh, it’s one of his seascapes!” Now she is a longtime L.A. art dealer, and has sold Payne’s work to some very well off collectors. I told her the size, a few more details, and said I had guessed its value at at least $45,000. No, she said, “It’s worth at least $150,000.”

My friends were amazed. I felt like we were living an episode of The Antique Road Show. Now they need to get that thing out of the rental! So, just to make a point, . . . these things do happen.

Jonathan Pink is an intellectual property attorney at Bryan Cave, LLP. He is also a member of the firm’s Art Law Team. He can be reached at 949-223-7173, or at jonathan.pink@bryancave.com

Friday, August 27, 2010

Ansel Adams - The Art of the Trademark Dispute

Yes, it’s been a while since I’ve written. Yes, when I extol the virtues of a blog, I always say write often. I’ll save excuses. (OK, fine; twist my arm: in a nutshell, I became despondent when I took a friend’s offer to jazz up my site and saw my ranking plummet, plummet! From showing up on the first page of a search result to something like the 1,000,000th page! Sheesh!)

In any event, here I am. Surprise!

So where was I? Yes, new case that I just love. God knows why, just one of those cases. It’s styled The Ansel Adams Publishing Rights Trust v. PRS Media Partners, LLC, et. al. (ND CA, Case No. CV 103740 EDL – link should be here, but it isn’t, so stop looking). The complaint runs like 180 pages if you print it (thanks Latham & Watkins; helping out the environment, are we?), asserts ten causes of action: four under the Lanham Act, the same four – drafted as 5 -- under California law, and a claim for violation of publicity under Cal Civ. Code Section 3344.1. Over kill? No, I like it.

So the facts of this one are what I really love. Ten years ago, a resident of Fresno, CA (ouch!) claims to have purchased at a garage sale what he insists are the long lost negatives of pix shot by famed photographer Ansel Adams. Cool. If it’s true. Rick Norsigian says he paid $45 for the box of negs, and is now seeking to sell prints of these “long lost” photos for what could ultimately amount to millions (up to $200 million, according to a July 27, 2010 press conference convened by Norsigian’s team). Gotta admire that.

Well, my friends, the Ansel Adams Publishing Rights Trust does not admire this. No one bit. Not only little bit. Not even a little bit. They claim that none of the 65 negatives that Norsigian claims will make him a mint – uh, I mean are AA originals – are indeed Mr. Adams' early work. The Trust claims that the photos belong to a photographer of lesser talent, or at least lesser financial worth. In any event, according to them, Mr. Adams (“an American icon,” “America’s best-known photographer,” recipient of “the Presidential Medal of Freedom, our nation’s highest civilian honor,”) did not take them. According to the Trust “Plaintiff believes the evidence will ultimately show that Ansel Adams was not the photographer who created the negatives Norsigian claims to have purchased at the garage sale.” At least they hope so! $200 million times!

Covering their basis, the Trust goes on to say, well, ahem, “even if Mr. Adams created the negatives, the prints and posters Defendants are selling are, at most, derivative works – made without authority, direction, control, or permission of the Ansel Adams Trust.” To this end, the Trust asserts that the defendants’ use of Mr. Adams’ name and likeness and the Ansel Adams trade mark “are likely to cause confusion, mistake, and/or deception as to the source, origin, endorsement and approval of Defendants’ products. This is really where the rubber hits the road, or photographic image hits the plate, in this case. That is, if the works weren’t done by the master, fair enough, game over, no $200 mil (except maybe for the lawyers). But if they were, then it would seem that Norsigian and company have a pretty good defense based on fair use, at least as to the TM claims.

The fair use defense is available to one who, in good faith, fairly uses a descriptive term that has acquired a secondary meaning and is now protected by trademark, in a descriptive sense rather than its trademark sense. See e.g. Sunmark, Inc. v. Ocean Spray Cranberries, Inc., 64 F.3d 1055 (7th Cir., 1995); United States She Corp. v. Broucn Group Inc., 740 F. Supp. 196 (S.D.N.Y.), aff’d 923 F.2d 844 (2d Cir. 1990); Cairns v. Franklin Mint Co., 292 F.3d 1139, 1150 (9th Cir. 2002) (“classic fair use” concerns the defendant’s use of the plaintiff’s mark to describe the defendant’s own product); Playboy v. Welles, 279 F.3d 796 (9th Cir. 2002) (House-of-Hef sued its former top bunny, Terri Welles, for using the words "Playboy" and "Playmate of the Year" in her website’s metatags; Welles won, arguing that these terms were necessary to describe her as "Playboy Playmate of the Year 1981.")

For this defense to work for Norsigian et Co, they’ll have to establish three elements. First, that the Ansel Adams name is used in its descriptive sense; second that it used the mark in good faith; and third that it has not used the mark as a trademark. See Car-Freshner Corp. v. S.C. Johnson & Son, Inc. 70 F.3d 267 (2d Cir. 1995); Packman v. Chicago Tribune, Co., 267 F.3d 628, 641 (newspaper’s use of “ The joy of six” as headline to describe the happiness associated with basketball team’s sixth championship held to be descriptive use); EMI Catalogue Partnership v. Hill, Holliday, Connors, Cosmopulos Inc., 228 F.3d 56, 66 (2d Cir. 2000); TCPIP Holding, Co., Inc. v. Haar Communications, Inc., 244 F.3d 88, 104 (2d Cir. 2001) (use of term as name of portal website precluded finding of fair use).

Courts have also found that nominative fair use exists where the defendant used the plaintiff’s mark simply to describe the plaintiff’s own product. Cairns, supra, 292 F.3d at 1150; Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350, 352 (9th Cir., 1969) (defendant permitted to advertise that he repaired Volkswagen vehicles as long as he indicated his independent nature and did not use logo or script of plaintiff); Wells, supra, 279 f. 3d 796 (defendant’s title “Playmate of the Year 1981” could be used to identify herself on her website and to index the content of his website, but stylized use of “PMOY ’81” abbreviation held not a nominative use because it was not necessary to describe defendant).

Based on this, and assuming arguendo the photos are legitimately the work of Ansel Adams, it would seem to me that Norsigian has a right to use the Ansel Adams mark to describe the product he’s shilling. See Rock and Roll Hall of Fame and Museum, Inc. v. Gentile Productions, 134 F.3d 749, 756 (6th Cir. 1998) (use of the words “Rock N’ Roll Hall of Fame – Cleveland” underneath photo of museum on poster may constitute fair use of Museum’s registered mark). I mean, how else are they going to describe the work? “They’re by that guy, the one with the beard, the broad brimmed hat, who used to take photos of Yosemite. You know who I mean? Think the first letter of the alphabet . . . times two!” I don’t think so. If they were taken by Adams, I think the trademark and unfair competition claims fail. Nice try.

As to the name and likeness claim, I like that one a bit more. California Civil Code section 3344.1 provides for recovery of damages for the unauthorized use of a “deceased personality’s name, voice, signature, photograph, or likeness, in any manner, on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of, products, merchandise, goods, or services, without prior consent. . . .” It appears for the advertising or promotional material that plaintiffs attached to the complaint in this matter that the defendants did indeed use Ansel Adam’s photo in promoting what they claim are his photographs. Notably, this statute allows for a recovery of “the greater of seven hundred fifty dollars ($750) or the actual damages suffered . . and any profits for the unauthorized use.” It also allows for a recovery of attorneys fees, which may drive this claim in a big, bad way. That is, I doubt plaintiff can establish that Norsigian’s reprints of the negatives at issue sold because the defendants’ used Ansel Adams’ mug on their promo material. That brings the damage number for this claim down to $750, plus attorneys fees. Did I mention that Latham is handling this matter?

So by my score keeping, the game goes like this: if works are proved to be legit, the plaintiff loses on everything but name and likeness, and then gets only a fraction of its legal fees for that portion. Big win for defendants. If the works are shown not to be those of Ansel Adams, it’s a big win for plaintiff, a big, big loss for the defendant. In any event, it should be fun to see if these really are Ansel Adams’ works (frankly, I’m betting against it, but then I Star Wars was going to bomb when I first saw the trailer), and to see whether the fair use defense comes to defendants’ rescue if the works are legit.

Jonathan Pink is an intellectual property attorney at Bryan Cave, LLP. He can be reached at jonathan.pink@bryancave.com.

Friday, June 25, 2010

Social Media Barriers, Benefits and Bombshells

I’ve given my “SOCIAL MEDIA Barriers, Benefits and Bombshells” talk quite a lot lately. In light of this, I’ve decided to simply post it here.

This talk usually lasts about an hour, so read this post s-l-o-w-l-y.

Also, the talk is punctuated by cartoons of my own creation. So laugh heartily every 5 minutes or so.

First slide: Title.

Second slide: “But First”: The big points: (1) With nearly limitless boundaries, social media gives consumers unprecedented engagement with the brand; (2) historically this engagement was controlled by the brand owners, but social media has changed that, giving consumers even-increasing control over how a brand is perceived; (3) smart and forward-looking companies are adopting social media policies in light of this; (4) every company should develop a social media plan; (5) the basic rules of the road are: engage, participate, influence and monitor.

Third: The Road Map. What we’re going to talk about: what is Social Media; barriers; benefits; bombshells (e.g. issue spotting); creating a policy.

Fourth: Social Media. Everyone thinks of Facebook, LinkedIn, Twitter, MySpace, and YouTube, but there are actually thousands of social media sites including blogs, Google Groups, Chatroulette, haul sites, review sites, etc.

Fifth: Facts and Opinions. Because it is so inexpensive and accessible, social medial enables anyone to publish, provides a fast, scalable and cost-efficient way of connecting worldwide. But this global conversation can cut both ways: marketing goldmine and minefield of liability. Participation in social media sites now accounts for 11 percent of all time spent online in the US.

Sixth: Useless (But Interesting) Statistics. Facebook has 400 Million users (at 350million it would have constituted the 4th largest country in the world); LinkedIn has 60 Million users, but just announced its IPO (with a pre-money valuation of $1.3 billion); Twitter has 105 million registered users; 50 million tweets/day; Yelp (a great place to gripe!) has 30+ million visitors a month; YouTube is the 6th largest site on the Internet, with 71 million unique users per day (meaning that more people watch its content on a daily basis than they do network and cable TV combined). Add to all of this more than 200,000,000 blogs, and you get the “tip” of the social media “iceberg.”

Seventh: Barriers. First hilarious cartoon, but other than that, not much. There are no barriers, so move along.

Eighth: Benefits. Next cartoon (more belly laughs), and a list of the benefits. Basically, psychological research shows that feelings of connection to other people lead to longer, healthier, happier lives. Also, employees seem to like the ability to use it while at work, and a recent Wired article suggests that it makes them happier and more productive. Add to this, the ability to build brand awareness, monitor what customers are saying, respond to their needs, wants and comments. All in all, social media = good. Next slide, please.

Ninth through Twenty-Ninth: Bombshells: Cartoon and parade of horribles. Copyright infringement, trademark infringement, disclosure of trade secrets, SEC violations, defamation and business, libel, not to mention the various employment-centric pitfalls. It’s a wonder anyone uses social media without being sued.

Also: How to keep from being sued in light of the bombshells – Don’t engage in copyright infringement, trademark infringement, disclosure of trade secrets, SEC violations, defamation and business, libel, or the various employment-centric pitfalls. It’s a wonder anyone uses social media and gets sued.

Thirtieth Slide: Funny cartoon and “Embrace it.” This slide suggest that social media isn’t going away, so you need to engage it using all levels of your organization. This means, first and foremost, and in all seriousness, having a social media policy.

Next slide (who’s counting?): The Social Media Policy. There is no one-side fits all, but this should include:

• Employees cannot do anything online that they cannot do offline

• Personal use of SM cannot interfere with work. No different than reading magazines all day.

• Employees should use common sense about what they post.

• Employees identify themselves and must not purport to be posting on behalf
of the company.

• If employees make personal comments about any aspect of the organization’s business, their profiles must carry a disclaimer that the views expressed are their own, and not the organizations.

• Posts may not contain confidential or proprietary information of the company or third parties.

• Any use of the organization’s name, trademarks, logos or other intellectual property must be approved.

• Employees must get company approval to use SM to conduct business.

• Delineate privacy rights…no expectation of privacy while at work.

• Posts should not violate any federal or state laws.

• Posts should not harass or attack anyone, especially based on inclusion in protected category.

• Posts should not violate any other applicable policy of the Company.

Which slide are we on?: Rolling out the policy: Be fair. Explain it clearly. Have it apply to all, from CEO to the person who waters the plants.

Final slide: Remember that the FTC passed new guidelines in 2009 that create possible liability for those who make endorsements and testimonials, and for the companies on whose behalf these are made. Social media is a tool that should be used wisely. Being wise starts with having a policy. So go, now – yes now – and work on getting a policy in place.

That’s it. Show’s over. Back to work.

Jonathan Pink is an intellectual property and business litigator resident in the Irvine (Orange County) office of Bryan Cave, LLP. He is Chair of the firm’s Internet and New Media Team, and a really funny cartoonist. He can be reached at 949-223-7173 or at jonathan.pink@bryancave.com.

Tuesday, June 8, 2010

Something to Chat About – Are Letters and Conversations Protected by Copyright?

I admit, I can never keep straight these categories of potential copyright protection. Ok, for the record, and so that I have something to look back at the next time I’m feeling utterly confused on the topic, here it is for once and for all (um, or at least until some higher court says otherwise).

Letters, lectures, speeches are all protected by copyright. See e.g. Salinger v. Random House, Inc., 811 F.2d 90, 94-95 (2d Cir. 1987) (author of letter owns the copyright in its contents, while the recipient of the letter retains ownership over the physical document); Jackson v. MPI Home Video, 694 f. Supp. 483 (N.D. Ill 1988) (Jesse Jackson’s speech at the 1988 Democratic Party Convention found protectable as a literary work).

Now what about simple conversations? Well, there my friends, I’m afraid the law is unclear. A conversation is considered something different from a lecture, which is generally written prior to its delivery. That is, just think of a politician at the podium absent a carefully crafted speech. Most of them would be as dumbfounded as say Dan Quayle or George Bush (Version II). I’m not counting Obama in this, of course. The man is a master orator. He’s also refreshingly intelligent.

In any event, the trend appears to be that conversations are not protected by copyright except in extraordinary circumstances. Like when, you ask? Well, the classic conversation case is Estate of Hemingway v. Random House, Inc., 23 N.Y.2d 341, 296 N.Y.s. 2d 771 244 N.E. 2d 250 (1969). In that case, the NY Court of Appeal stated that while there is a presumption that conversations are not copyrightable subject matter, there may be limited an special circumstances where that presumption may be overcome. Specifically, the court said that where the speaker indicates that he/she intends to mark off the utterance at issue from his/her ordinary stream of speech, and further indicates that he/she wishes to exercise control of the statement’s publication. Uh-huh, that happens all the time.

Other courts have taken a more narrow view of things (as if this were possible). See e.g. Falwell v. Penthouse International, Ltd., 521 F. Supp. 1204. 1207-1208 (W.D. Va. 1981) (“Plaintiff’s claim of copyright presupposes that every utterance he makes is a valuable property right. If this were true, the courts would be inundated with claims from celebrities and public figures all of whom may argue that their expressions should also be afforded the extraordinary protection of copyright. Such a result . . . would run counter to the firmly established constitutional guarantees of freedom of speech and of the press.”) E.g., a judicially delivered body slam with the implicit message: no!

So now that we’ve gotten this straight, we return to something important: a hot cup of coffee and looking for food in the office fridge.

Jonathan Pink litigates copyright, trademark and patent infringement cases in courts throughout the country. He also handles business litigation disputes and occasionally publishes cartoons worthy of the New Yorker (if only the New Yorker would agree). He can be reached at 949-223-7173.

Friday, June 4, 2010

Something to Yelp About!

I have broken one of my own rules of blogging: e.g. to post often and with some regularity. Fortunately, my other rule is don't sweat rule No. One. After all, blogging is great, but life is short and there are plenty of other things to get done.

Which brings me to nearly pointless point No. Two: I'm writing this on my BBerry, while attending my child's elementary school, Spring Concert. (The budding cellist has already left the stage, so I'm keeping my priorities straight.) Just like the fact that I'm drafting on the BBerry. Ain't modern conveniences grand?

Ah, so much to talk about since last we chatted -- so little screen. Also, alas, I don't have my research at my side, so my usual useless drivel will be a little less useful with this post. So bear with me (and just remember: you're not paying for this, so you get ... Well, you get the idea).

The main point of this ramble is simply this: I have seen a significant uptick in lawsuits filed by disgruntled service providers and assorted business entities who are peeved by comments made about them on review sites such as Yelp! Interesting because, well, these companies are lashing back at those who have lashed out.

Is this legally acceptable? Sure. If the first lasher engaged in any unlawful conduct, such as defaming the second lasher (the lash-backer?) then a claim by the latter would be fair play. Brief Internet primer: the same rules of the road apply even if the highway has changed.

Now, will some companies try to silence legitimate speech by filing meritless claims? Oh please. No, that would never happen ... everyday. So, this is simply to be expected. The take-away? Post, gripe, complain, kvetch, but don't defame. Got that?

This is all of particular interest to me as I posted a complaint on Yelp just this week. I will never go back to Great Clips in Irvine again! Will the loss of my business hurt them one bit? No, plenty of people will continue to have their hair butchered there because it is cheap (and not worth a penny more), bit it sure felt good to lay into them on Yelp.

Ok. That's it for now. Shuffle some papers so the boss thinks you're working!

Jonathan Pink is an intellectual property and commercial litigation attorney resident in Orange County, California. He specializes in copyright, trademark, patent and business disputes (including claims arising out of alleged defamation on the Internet). He can be reached at 949-223-7173.

Tuesday, March 9, 2010

Upper Deck Safe From Infringement Claim

You know, I’m so b-a-d (oh, uh, that spells “bad” for those not yet awake) about getting new posts up here. (Oh please, it’s not like anyone’s paying me for this stuff, so lay off!) But I’ve been meaning to write about this one for a while, so – although it may be a little stale – here it is anyway.

This is the story of a patent suit. (The patents-in-suit are Numbers 5,803,501 and 6,142,532.) And the story involves entrepreneurs who sought protection for attaching sports memorabilia to baseball cards. Sort of like, buy the card, get the ball – or a shred of the player’s jersey. (What ever happened to buy the cards get the cardboard gum? I loved that stuff. It was filled with mystery – like the meat Jack-in-the-Box puts in its tacos. Anyway, I always liked the gum more than the cards, or the game for that matter, but then that’s me.)

So back our story. You know what they say, Federal Judges are the speed bumps on the road to commercial success. (“They” in that last sentence is “me” as in this blog, but go with it.) Specifically, the Court of Appeals for the Federal Circuit voted earlier this month to affirm summary judgment that Media Technologies Licensing LLC's patents were obvious based on pre-existing cards that featured entertainment memorabilia including, among others, the Fab Four, James Dean and Marilyn Monroe. Given this, the court stated that anyone with skill in the card/memorabilia area could have come up with the idea of attaching sports memorabilia to sports cards.

Easy come, easy go. The original patent-in-suit covered sports trading cards with a piece of that player’s uniform or other noteworthy item attached. (Maybe they should have attached steroid prescriptions and urine samples. Now that would have been interesting. Sports nuts – I just don’t get ‘em.) In any event, the Upper Deck Co. started selling something similar, Media Tech sued, claiming patent infringement. The district court granted summary judgment on the grounds that the patents were obvious, and now the Court of Appeals has agreed.

The net result? Upper Deck makes it home, safe from an infringement claim. Now if only these card makers would try something new, like inserting little strips of cardboard-like chewing gum in with the cards. Now there’s an idea!

Jonathan Pink is an intellectual property and commercial litigation attorney resident in the Irvine (Orange County) and Los Angeles offices of Bryan Cave, LLP. He specializes in handling high states copyright, trademark, patent and business disputes, and can be reached at 949-223-7173 or jonathan.pink@bryancave.com.

Monday, March 1, 2010

Supreme Court Changes Diversity Test

The question of what constitutes “diversity” for purposes of diversity jurisdiction in Federal Court pursuant to under 28 U.S.C. § 1332 has been the topic of some disagreement amongst the Circuit Courts. That’s about to change.

Last week, the U.S. Supreme Court ruled in Hertz Corporation v. Friend that a corporation’s principal place of business is where its “high-level officers direct, control and coordinate the corporation’s activities.” In other words, the location sometimes referred to as the company’s “nerve center.”

28 U.S.C. §1332(c)(1) provides that a corporation is deemed a citizen of any State in which it has been incorporated (that’s the easy one), and anywhere it has its principal place of business. That last provision has given many courts pause, as they try to decipher where a company has its “principal place of business.” For example, the Ninth Circuit, along with the (Fifth, Sixth, Eighth, Tenth and Eleventh) followed a “totality” approach that looked at the location of the corporation’s overall activities, treating the “never center” as only one of several factors.

In Hertz, the District Court used this approach, ruling that Hertz’s principal place of biz was California, notwithstanding the fact that its executives, its headquarters and of course many of its cars were located outside of California. So why the Golden State, the 9th Circuit reasoned that Hertz earned the most money in California, and the majority of its employees were located here.

The Supreme Court took a different approach, chiefly focusing on the meaning and context of §1332’s use of the words “principal” and “place.” First, the Court noted “place” is singular, not plural, meaning that courts should consider if there is a “main, leading or most important” location within a state, not at the company’s activities throughout the state, and then ask whether those activities are “significantly larger” than they are in the next state where the company has a presence. The Court said that the “nerve center” test met the goal of administrative simplicity because it focused on finding the corporation’s “brain,” rather than deciding where the majority of the body parts might lie. The Court explained that it would not be enough for a company to claim that its “headquarters” was the state where it had nothing more than a “mail drop box, a bare office with a computer, or an annual executive retreat.” Rather, the “nerve center” is where “actual direction, control, and coordination” of corporate activities take place.

We’ll have to see how this test works in the Internet age, where the “never center” may be telecommuting from different states.

Jonathan Pink is an intellectual property and commercial litigator. He specializes in trademark, copyright, patent and contract disputes, having litigated such cases in state and federal courts across the nation. He is resident in the Irvine (Orange County) and Los Angeles offices of Bryan Cave, LLP. He can be reached at 949-223-7173 or at jonathan.pink@bryancave.com.

Wednesday, February 24, 2010

State Courts Should Follow 9th Circuit's Lead in Taking Judicial Notice

A dichotomy exists between California state procedural law and Ninth Circuit case law with respect when a court make take judicial notice of a document in connection with ruling on a motion to strike or demurrer/motion to dismiss. As discussed below, the rule adopted by the California state courts can lead to an injustice that does a disservice to the public and wastes judicial resources. The California state courts should follow the federal rule, which simply makes much more sense.

With respect to both a motion strike and a state court demurrer, the court is limited to the facts alleged on the face of the complaint, as well as those matters of which the court may take judicial notice pursuant to Section 452 or 453 of the Evidence Code. Code Civ. Proc. §§ 430.70, 437(b). California Evidence Code Section 452(h) provides that the court may take judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” Cal. Evid. Code § 452(h).

For purposes of this diatribe, let’s assume that parties entered into an agreement for the purposes of seeking a possible early settlement of a brewing (not yet filed) dispute. Assume the agreement provides that any settlement discussions would be confidential, and not disclosed in any proceeding between the parties. Now assume that, when plaintiff eventually files its lawsuit, and that lawsuit violates terms of the parties’ agreement by basing its claims on the contractually protected settlement discussions. Finally, assume the plaintiff omits any reference to that agreement in its complaint, and when the defendant moves to strike portions of the pleading because they violate the agreement (and are thus “irrelevant . . . or improper matter inserted in any pleading” under Code of Civil Procedure section 436A), the plaintiff objects that the court may not take judicial notice of the agreement. See CLD Const., Inc. v. City of San Ramon, 120 Cal.App.4th 1141, 1145 (2004) (Section 436 gives court discretion to strike all or any part of a pleading not filed in conformity with California law).

Under California state law, where the plaintiff omitted a pre-litigation agreement from inclusion in the complaint, and in opposition to a motion challenging the pleadings, disputes the validity of that agreement (even without legitimate basis), the court may deny the defendant’s motion on the grounds that it is unable to take judicial notice of the documents’ preclusive effect. Gould v. Maryland Sound Industries (1995) 31 Cal. App. 4th 1137 and Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal. App. 4th 97 would arguably support that ruling.

Both Gould and Fremont involved contracts, the terms of which were disputed by the parties. For example, in Fremont, the court held that the contents of a letter should not have been judicially noticed at the demurrer stage because the parties disputed the meaning of their contractual relationship and the enforceability of the contract. Id. at 115-117.

While both cases have been used to support the proposition that the court may not take judicial notice of a disputed contract, it should be noted that Gould is not so Draconian in its holding. It expressly limited its decision “to attempts to establish the existence of a contract under the ‘indisputable facts’ provision of Evidence Code section 452, subdivision (h). . . . We do not rule out the possibility the existence of a contract could be established by judicial notice under different circumstances, e.g. through reference to the plaintiff’s pleadings or discovery responses in the same or a different action. [Citations omitted.].” 31 Cal. App. 4th at 1145, n. 1. It is not clear, however, how much “reference” in plaintiff’s pleadings is sufficient (does it satisfy Evidence Code section 452(d) that the plaintiff acknowledges the agreement in its opposition to a motion to strike and demurrer?); nor how much acknowledgment in response to discovery might be required to overcome the bar (is it enough that plaintiff acknowledges the existence of the agreement?).

Gould is consistent with Stormedia Inc. v. Superior Court (1999) 20 Cal. 4th 449, 457, fn. 9, which states “We deem it appropriate to [take judicial notice] here as real parties in interest also refer to some of the documents in their briefs.” Also, courts have held that the truth of statements made by a party is a matter subject to judicial notice. C.R. v. Tenet Healthcare Corp. (2009) 169 Cal. App. 4th 1094, 1103 (citing to Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal. App. 3d 593, 604-605). In Del E. Webb, the court held that judicial notice could be taken of records such as admissions, answers to interrogatories, affidavits, and the like, if they contained statements made by the plaintiff which were inconsistent with the allegations of their pleadings. Del E. Webb, supra, 123 Cal. App. 3d at 604-605.

So, back to the hypothetical: Suppose that plaintiff has admitted in discovery responses that it entered into the parties’ agreement, and even quoted in its Opposition to defendant’s motion the very language defendant is relying upon. It would seem that the agreement’s content, like a party’s own statements, cannot be reasonably disputed and may be judicially noticed. Notwithstanding the caveats in Gould and the ruling from Stormedia and Del E. Webb, many state courts simply won’t go out on a judicial ledge and take judicial notice of the document at issue. Fair enough: Fremont is a leading case, but it is worth the court’s time to recognize that it and some of the other cases addressing this issue place too much emphasis on stare decisis where those earlier cases have similarly failed to dig into the public policy underpinning and effect – not to mention the federal approach in this area. This inevitably leads to bad law born of bad basics.

Notably, even Stormedia did not spend much time analyzing this issue, and Gould v. Maryland contains some fairly significant carve-out language that courts should heed. Moreover, even Gould does not account for the obvious short coming of the hard-line rule by ignoring the calculating plaintiff who intentionally ignores the preclusive effect of an agreement when drafting the complaint, then claims to “dispute” that agreement when the court is asked to take judicial notice of it for purposes of trimming the complaint to fit the contractual limitations set by the parties themselves. Of course, that is asking a lot of those who take the bench, and I recognize that most don’t want to be overturned on appeal. But that’s the risk that comes from exerting intellectual courage and blazing judicial trail.

The 9th Circuit’s approach makes more sense, is founded on better public policy, and provides for greater judicial efficiency. Recognizing that a plaintiff may try to skate past the pleading stage by withholding any mention of a preclusive pre-litigation agreement, it has ruled that “documents critical to plaintiff’s claims, but not explicitly incorporated in his complaint” may be considered by a district court when ruling on a motion to dismiss provided neither party questions the authenticity of that document. Parrino v. FHP, Inc. et. al 146 F.3d 699, 705-706 (9th Cir. 1997).

In Parrino, Mr. Parrino’s estate sued FHP, his HMO, alleging the defendants had improperly denied his initial claim for therapy. The defendants asserted that the plaintiff’s claims were preempted by ERISA, and sought to introduce the FHP Master Group Application (in support of that defense) when ruling on their motion to dismiss. The district court considered that plan – which had not been referenced in or attached to the complaint – and based in part thereon, granted the defendants’ 12(b)(6) motion to dismiss. Plaintiff appealed.

In ruling on this issue, the Ninth Circuit stated that public policy supported a rule that prevented “plaintiffs from surviving a 12(b)(6) motion by deliberately omitting references to documents upon which their claims are based. [Citations omitted.] At least one other circuit has held that if a plaintiff’s claims are predicated upon a document, the defendant may attach the document to his Rule 12(b)(6) motion, even if the plaintiff’s complaint does not explicitly refer to it. See Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 47 (2d Cir. 1991) . . . . We therefore hold that a district court ruling on a motion to dismiss may consider a document the authenticity of which is not contested, and upon which the plaintiff’s complaint necessarily relies.” 146 F.3d at 706.

Based on the foregoing, Parrino held that because the plaintiff’s claims rested on his membership in the FHP plan, documents governing that plan were “essential to his complaint.” Id. Since that ruling, Parrino has been followed by a number of other courts in the Ninth Circuit. See e.g. Mehmet v. Paypal, Inc., 2008 U.S. Dist. Lexis 64018, *6 (“court may take notice of a document outside the complaint if [it] is referenced in, or relied on by, the complaint”); Wietschner v. Monterey Pasta Co., 294 F. 2d 1102, 1110 (where plaintiff fails to attach document upon which complaint is premised, defendant may attach a copy of same to its motion to dismiss in order to show that document does not support plaintiff’s claim.)

The California state courts should look closely at Parrino and its progeny, and take careful note of the policy unpinning those rulings. Where a document is integral to the plaintiff’s claims and its authenticity is not disputed, the plaintiff should not be heard to complain when the defendant asks the court to take judicial notice of it. (Indeed, the court should consider the plaintiff’s omission with some degree of skepticism, much as we ask our triers of fact to consider inconsistent statements when ruling on a witnesses’ credibility.) Public policy dictates that we not waste judicial resources, or permit parties to waste each others financial resources, by allowing claims to proceed beyond the pleading stage where a clear, uncontested written agreement between the parties precludes such an action.

While it is true that, under the facts I’ve proposed, the agreement will – at some point in the litigation – have the preclusive effect urged by the defendant, does it really advance the interest of justice to force the defendant to go deeper into the legal woods to get there? I don’t think so. California states courts should adopt the 9th Circuit’s approach and consider a document whose authenticity is not contested, and upon which the plaintiff’s complaint necessarily relies, when ruling on an initial challenge to the complaint.

Jonathan Pink is a commercial litigator with a specialty in high-stakes copyright, trademark and patent infringement lawsuits. He is Co-Chair of the Internet and New Media Team at Bryan Cave, LLP, and is resident in the firm’s Los Angeles and Irvine (Orange County) offices. He can be reached at 949-223-7173, or at jonathan.pink@bryancave.com.