Tag Archives: Fee Shifting

Best of 2013: The Lanham Act’s surprising penumbras

First Columns and Roman law statue, First Department Courthousepublished on July 15, 2013.

Here I thought I understood something about the Lanham Act.  But wait, there’s more!  Did you know this?:

The purpose of the Lanham Act is to protect registered and valid copyrights, trademarks, and patents.

That’s from Coach, Inc. v. Southwest Flea Market., 2:10-CV-02410-DKV, 2012 WL 8470191 (W.D. Tenn. Feb. 21, 2012), an important decision concerning, among other things, the circumstances under which a flea market vendor can be held contributorily liable for the sale of counterfeit trademark merchandise by vendors after the Second Circuit’s ruling in Tiffany v. eBay.  Tiffany arguably raised, or at least firmly established, the standard by which a party operating a marketplace has legal responsibility for intellectual property infringment by sellers in that marketplace.

The Western District of Tennessee, in its 2012 opinion, found willful blindness by the flea market operator, and that the extent of its notice was sufficiently specific, unlike the general notice of counterfeiting found insufficient in Tiffany.  Moreover, unlike eBay where there was a record of affirmative remedial measures employed by the online auctioneer,  in Southwest the flea market’s purported remedial measures for discouraging the sale of counterfeits were pretty much a joke.

But the suggestion that the Lanham Act applies to copyrights and patents — what is that about?

And why was it “adopted” when the opinion was affirmed by the Sixth Circuit on May 31, 2013?  Yep, here’s what it says in that opinion:

 The Lanham Act protects registered copyrights, trademarks, and patents.

Really?

When I read the appellate opinion, I kept scratching my head, but not over that.  I just glossed over it.  But I did wonder:  Why was it worth it to the defendant to litigate over the other main issue in the appeal, namely the imposition of attorneys’ fees against the defendant for willful infringement?

The amount of fees sought was under $200,000.  What, I wondered, could be the point of litigation over this when there’s already a $5 million damages award out there?  Is this flea market going to pay that, really?   On reflection, and after discussion with the person in my house who brings these things (and who brought the Lanham Act “expansion) to my attention, we started to wonder if the answer hinged on the question of whether a finding of “willful blindness” — a component of contributory liability that is deemed to be constructive knowledge of infringement ineluctably leads to a finding of “willful conduct” relevant to the award of attorneys’ fees.

This, in turn — a finding of willfulness — might be very relevant to the dischargeability of a judgment debt based on trademark statutory damages, much less where there was (as in Southwest Flea Market) and element of default, in bankruptcy.

That’s not such a clear question.   Read More…

The Lanham Act’s surprising penumbras

Columns and Roman law statue, First Department CourthouseHere I thought I understood something about the Lanham Act.  But wait, there’s more!  Did you know this?:

The purpose of the Lanham Act is to protect registered and valid copyrights, trademarks, and patents.

That’s from Coach, Inc. v. Southwest Flea Market., 2:10-CV-02410-DKV, 2012 WL 8470191 (W.D. Tenn. Feb. 21, 2012), an important decision concerning, among other things, the circumstances under which a flea market vendor can be held contributorily liable for the sale of counterfeit trademark merchandise by vendors after the Second Circuit’s ruling in Tiffany v. eBay.  Tiffany arguably raised, or at least firmly established, the standard by which a party operating a marketplace has legal responsibility for intellectual property infringment by sellers in that marketplace.

The Western District of Tennessee, in its 2012 opinion, found willful blindness by the flea market operator, and that the extent of its notice was sufficiently specific, unlike the general notice of counterfeiting found insufficient in Tiffany.  Moreover, unlike eBay where there was a record of affirmative remedial measures employed by the online auctioneer,  in Southwest the flea market’s purported remedial measures for discouraging the sale of counterfeits were pretty much a joke.

But the suggestion that the Lanham Act applies to copyrights and patents — what is that about?

And why was it “adopted” when the opinion was affirmed by the Sixth Circuit on May 31, 2013?  Yep, here’s what it says in that opinion:

 The Lanham Act protects registered copyrights, trademarks, and patents.

Really?

When I read the appellate opinion, I kept scratching my head, but not over that.  I just glossed over it.  But I did wonder:  Why was it worth it to the defendant to litigate over the other main issue in the appeal, namely the imposition of attorneys’ fees against the defendant for willful infringement?

The amount of fees sought was under $200,000.  What, I wondered, could be the point of litigation over this when there’s already a $5 million damages award out there?  Is this flea market going to pay that, really?   On reflection, and after discussion with the person in my house who brings these things (and who brought the Lanham Act “expansion) to my attention, we started to wonder if the answer hinged on the question of whether a finding of “willful blindness” — a component of contributory liability that is deemed to be constructive knowledge of infringement ineluctably leads to a finding of “willful conduct” relevant to the award of attorneys’ fees.

This, in turn — a finding of willfulness — might be very relevant to the dischargeability of a judgment debt based on trademark statutory damages, much less where there was (as in Southwest Flea Market) and element of default, in bankruptcy.

That’s not such a clear question.   Read More…

An opinion to Di for

Originally posted 2010-05-05 21:28:31. Republished by Blog Post Promoter

I do a lot of bellyaching around here about how there are never any consequences for filing frivolous trademark and copyright lawsuits. What’s the worst thing that can happen to a well-heeled plaintiff that wants to use the expense of defending, even meritoriously, against a “federal case” as a way to effectuate a “business message” (namely, you’re out of business, because we say so)? Usually, nothing. Not just usually. Really pretty much a lot usually.

"Do you have Princess Di in the can?"

Not this time.  This is a little dense if you’re not used to reading judicial opinions, but the payoff is worthwhile.  Emphasis is mine:

The Franklin Mint Company and its principals, Stewart and Lynda Resnick, (collectively, Franklin Mint) appeal from a judgment dismissing their malicious prosecution action against the law firm Manatt Phelps & Phillips LLP and attorney Mark S. Lee (collectively, Manatt). Manatt represented the executors of the estate of Diana, Princess of Wales and the trustees of The Diana, Princess of Wales Memorial Fund (collectively, the Fund) in a lawsuit filed against Franklin Mint alleging claims related to Franklin Mint’s use of Princess Diana‟s name and image in connection with merchandise Franklin Mint advertised and sold. . . .

We conclude that, based on the record before us, no reasonable attorney could find tenable the false advertising claim as it was alleged and litigated in the underlying action. Therefore, we hold there was no probable cause to prosecute that claim. We also hold there was no probable cause to prosecute the trademark dilution claim because no reasonable attorney could conclude that the claim could satisfy two fundamental, long-standing principles of trademark law. First, to be protectable as a trademark, a word, phrase, name, or symbol must be used in commerce to identify goods or services and their source. Although Manatt contends that Princess Diana used her name in connection with her appearances at charitable events, that use does not demonstrate trademark use. Second, a trademark that is descriptive — such as a personal name — must acquire secondary meaning to be protectable in a trademark dilution action. In other words, the primary meaning of the mark (i.e., the descriptive meaning) must in the minds of the public be subordinate to its meaning as the source of goods or services. Because “Diana, Princess of Wales” has such an extraordinarily strong primary meaning as descriptive of Princess Diana as a person, the contention that it had acquired secondary meaning at the time of the underlying lawsuit was, as the district court in the underlying lawsuit observed, “absurd.” (Cairns v. Franklin Mint Co. (C.D. Cal. 2000) 107 F.Supp.2d 1212, 1222 (Cairns III).) Therefore, we conclude that the trademark dilution claim was untenable.

Now this is really interesting on several levels.  One is the obvious one I’ve already alluded to–a court calling attorneys out and saying, “Stop the baloney.  You knew what you were doing here was fallacious, but you just kept doing it.  If malice and damages are proved, that’s actionable.”  It’s astonishing to read that.  Don’t even ask what has happened, in my own experience in the vaunted federal courts facing just such claims, that leaves me so dumbstruck reading this.

But then there’s the substantive legal stuff.  Diana, Princess of Wales, not a “trademark”?  Just because she’s mostly really a person (no longer a living one, granted, but you get the idea)?  But what about all those other celebrity trademark names? Read More…

Best of 2012: Fees, won’t you stay

Originally posted March 30, 2012.Courthouses arrayed, Foley Square

The Second Circuit, just yesterday (March 29, 2012) has issued an opinion called Louis Vuitton v. Ly USA, Inc. (08-4483-cv(L)) sure to bring joy to the hearts of trademark counterfeiting enforcers everywhere.  This was one of those major counterfeiting-ring busts, and there have been lawyers and federal marshals scuttling about for a long time on all this business.  The defendants were convicted of trafficking in counterfeit goods, conspiring to do so, and smuggling.  The appealed all the bad things that happened to them in the civil case — massive damages, attorneys’ fees, the usual.

There were two key holdings, both buffeted by extensive and thoughtful discussion.  One was that there’s just about no way the Circuit Court will second-guess a District Court’s refusal to enter a stay of a civil action pending resolution of parallel criminal proceedings, and the court is not shy about saying so.  The second concerned the split among courts as to whether a prevailing plaintiff in a trademark counterfeiting case may be awarded both statutory damages and attorneys’ fees.

First, the stay question… if “question” is the right word; this opinion sure doesn’t leave much room for doubt.  After explaining all the reasons a stay of a civil case, with all that required disclosure, might be a good idea for someone concerned about compromising his Fifth Amendment rights, the court says, well, still, it would be “extraordinary” to really go ahead and enter one:

[T]he Constitution rarely, if ever, requires such a stay.  .  .  .  The existence of a civil defendant’s Fifth Amendment right arising out of a related criminal proceeding thus does not strip the court in the civil action of its broad discretion to manage its docket. . .

District courts have formulated multi-factor tests to apply in deciding whether, in light of these hazards to the defendants in the civil proceedings against them, to grant a stay of those proceedings. . . .  We think the tests do little more than serve as something of a check list of factors we ought to consider as we review the district court’s action for abuse of its discretion.  Even if we were to choose or formulate a test and apply it, we would not be able to reverse the district court solely because we disagreed with its application of the test. . . . A decision so firmly within the discretion of the district court will not be disturbed by us absent demonstrated prejudice so  great that, as a matter of law, it vitiates a defendant’s constitutional rights or otherwise gravely and unnecessarily prejudices the defendant’s ability to defend his or her rights.  There may well be cases where the Constitution requires a stay.  But a plausible constitutional argument would be presented only if, at a minimum, denying a stay would cause “substantial prejudice” to the defendant.

Indeed, so heavy is the defendant’s burden in overcoming a district court’s decision to refrain from entering a stay that the defendants have pointed to only one case in which a district court’s decision to deny a stay was reversed on appeal, and that case was decided more than thirty years ago.

Bill of Rights …. docket management.  Hmm.  There’s a compelling juxtaposition for you!  I suppose it’s the kind of “juxtaposition” that a defendant appealing a civil verdict gets when he’s been convicted of every act claimed in the civil case.  This enabled the court to note the significant public benefit arising from not staying the civil case, which had already been under steam for a year before the indictment.  Moreover, the District Court evidently offered significant alternatives to managing confidentiality issue to the defendants, who weren’t too eager to avail themselves of it.  Plus there were lots of things — record, merchandise, computers — that got “lost.”  Plus these guys were evidently well layered with lawyers.

Bad facts, or certainly bad defendants, make “bad law.”  These were bad defendants, and now the Circuit is trying to be pretty clear on this:  Crooks, stay away from complaining about a stay.  It won’t play.  Okay? [UPDATE:  On the other hand, I have recently asked the Circuit to consider drawing the line at some point, in particular where all charges were dropped against my client.  Still waiting for an argument date.]

The second is an important, and more groundbreaking (if unsurprising), decision on an important question:   Read More…

Best of 2012: Not my money

Blind justice and plaza, Federal courthouse, Newark

Originally posted February 21, 2012.

Last June, blogging about my presentation to the Copyright Society on the Righthaven litigation, I wrote the following:

This brings us to the issue of mass enforcement a la RIAA and MPAA

  • Mass enforcement sweeps
    • Complete de-linking from any concept of blameworthiness, much less intent
  • Disproportionate penalties and fees
  • Results of mass enforcement:
    • Consensus is that it is ineffectual
      • Continual calls for enhancement of procedural and penal “tools”
      • Effects some unknown quantum of in terrorem deterrent
      • Crystallizes an anti-copyright, anti-establishment sensibility among militant downloaders
      • By targeting non-militants who act out of either ignorance or as casual scofflaws, makes anti-copyright, anti-enforcement
      • RIAA supposedly paid its lawyers more than $16,000,000 in 2008 to recover only $391,000*
        • Reminder about motivation for our criticisms here icon wink Massive Attack:  Analyzing mass copyright infringement campaigns

Now, note that asterisk at the hyperlinked bullet point.  The footnote in my blog post said:

* At the conference, a person in the position to know stated in the question-and-answer session that this figure was utterly innaccurate.  I am looking forward to receiving more accurate information.

Actually, it was two persons, but I never did get any information.  Still, even as I wrote this I remember acknowledging that the argument itself was flawed, regardless of the empirical truth of the factual claim at its base.  And just because I never got the information, which I was thinking would be an appropriate launching point for me to acknowledge my logical flaw, doesn’t mean I shouldn’t do so anyway.

The flaws are pretty obvious.  The obvious one is that you can get a lot of injunctions for $16 million.  And as we know, it is an axiom of chancery practice that the remedies of equity are typically, and usually when referring to injunctions, utilized in situations where those seeking them “have no remedy at law” — i.e., no money could, in theory, substitute for an order forbidding the complained-of behavior.  Lots of parties spend lots of money suing defendants, and in meritorious causes, where there is no prospect of a concomitant recovery.

The less obvious flaw in my argument flows from the obvious one:  Whether we put a $100 million value on the non-monetary relief obtained by these lawsuits or a $100 value, it’s not our money.  Companies routinely decide on litigation as part of a legal and business strategy which, even in a more general sense than set out above, is not evaluated solely from the point of view or even at all from the point of view of whether it will bring in dollars directly.

Protecting a right, or a perceived right, typically comes at a cost.  If that right enables massive profits, the incurring of massive costs to protect it — whether by recovering damages, achieving cessation of activities that threaten those rights or merely as an in terrorem policy — is entirely rational.

Indeed, I have argued in connection with trademark bullying and in connection with copyright overreaching that the problem is not with litigants or even, unless they act unethically in the performance of their duties, with the lawyers who represent them in pursuing these rational policies:  It is with the judges who fail to ask “what is really going on here?” and a lapdog Congress that, notwithstanding the recent hesitation concerning SOPA, doesn’t even seem to care.

So it may make perfect sense for the RIAA to spend whatever it spends to get whatever its management and members deem worth getting (and at the price they’re getting it).  Who am I to say?  Strike that argument from the bullet points.

Best of 2010: An opinion to Di for

Originally posted 2010-12-24 01:30:01. Republished by Blog Post Promoter

First posted on May 5, 2010.

I do a lot of bellyaching around here about how there are never any consequences for filing frivolous trademark and copyright lawsuits. What’s the worst thing that can happen to a well-heeled plaintiff that wants to use the expense of defending, even meritoriously, against a “federal case” as a way to effectuate a “business message” (namely, you’re out of business, because we say so)? Usually, nothing. Not just usually. Really pretty much a lot usually.

"Do you have Princess Di in the can?"

Not this time.  This is a little dense if you’re not used to reading judicial opinions, but the payoff is worthwhile.  Emphasis is mine:

The Franklin Mint Company and its principals, Stewart and Lynda Resnick, (collectively, Franklin Mint) appeal from a judgment dismissing their malicious prosecution action against the law firm Manatt Phelps & Phillips LLP and attorney Mark S. Lee (collectively, Manatt). Manatt represented the executors of the estate of Diana, Princess of Wales and the trustees of The Diana, Princess of Wales Memorial Fund (collectively, the Fund) in a lawsuit filed against Franklin Mint alleging claims related to Franklin Mint’s use of Princess Diana‟s name and image in connection with merchandise Franklin Mint advertised and sold. . . .

We conclude that, based on the record before us, no reasonable attorney could find tenable the false advertising claim as it was alleged and litigated in the underlying action. Therefore, we hold there was no probable cause to prosecute that claim. We also hold there was no probable cause to prosecute the trademark dilution claim because no reasonable attorney could conclude that the claim could satisfy two fundamental, long-standing principles of trademark law. First, to be protectable as a trademark, a word, phrase, name, or symbol must be used in commerce to identify goods or services and their source. Although Manatt contends that Princess Diana used her name in connection with her appearances at charitable events, that use does not demonstrate trademark use. Second, a trademark that is descriptive — such as a personal name — must acquire secondary meaning to be protectable in a trademark dilution action. In other words, the primary meaning of the mark (i.e., the descriptive meaning) must in the minds of the public be subordinate to its meaning as the source of goods or services. Because “Diana, Princess of Wales” has such an extraordinarily strong primary meaning as descriptive of Princess Diana as a person, the contention that it had acquired secondary meaning at the time of the underlying lawsuit was, as the district court in the underlying lawsuit observed, “absurd.” (Cairns v. Franklin Mint Co. (C.D. Cal. 2000) 107 F.Supp.2d 1212, 1222 (Cairns III).) Therefore, we conclude that the trademark dilution claim was untenable.

Now this is really interesting on several levels.  One is the obvious one I’ve already alluded to–a court calling attorneys out and saying, “Stop the baloney.  You knew what you were doing here was fallacious, but you just kept doing it.  If malice and damages are proved, that’s actionable.”  It’s astonishing to read that.  Don’t even ask what has happened, in my own experience in the vaunted federal courts facing just such claims, that leaves me so dumbstruck reading this.

But then there’s the substantive legal stuff.  Diana, Princess of Wales, not a “trademark”?  Just because she’s mostly really a person (no longer a living one, granted, but you get the idea)?  But what about all those other celebrity trademark names? Read More…

Fees, won’t you stay

Courthouses arrayed, Foley SquareThe Second Circuit, just yesterday (March 29, 2012) has issued an opinion called Louis Vuitton v. Ly USA, Inc. (08-4483-cv(L)) sure to bring joy to the hearts of trademark counterfeiting enforcers everywhere.  This was one of those major counterfeiting-ring busts, and there have been lawyers and federal marshals scuttling about for a long time on all this business.  The defendants were convicted of trafficking in counterfeit goods, conspiring to do so, and smuggling.  The appealed all the bad things that happened to them in the civil case — massive damages, attorneys’ fees, the usual.

There were two key holdings, both buffeted by extensive and thoughtful discussion.  One was that there’s just about no way the Circuit Court will second-guess a District Court’s refusal to enter a stay of a civil action pending resolution of parallel criminal proceedings, and the court is not shy about saying so.  The second concerned the split among courts as to whether a prevailing plaintiff in a trademark counterfeiting case may be awarded both statutory damages and attorneys’ fees.

First, the stay question… if “question” is the right word; this opinion sure doesn’t leave much room for doubt.  After explaining all the reasons a stay of a civil case, with all that required disclosure, might be a good idea for someone concerned about compromising his Fifth Amendment rights, the court says, well, still, it would be “extraordinary” to really go ahead and enter one:

[T]he Constitution rarely, if ever, requires such a stay.  .  .  .  The existence of a civil defendant’s Fifth Amendment right arising out of a related criminal proceeding thus does not strip the court in the civil action of its broad discretion to manage its docket. . .

District courts have formulated multi-factor tests to apply in deciding whether, in light of these hazards to the defendants in the civil proceedings against them, to grant a stay of those proceedings. . . .  We think the tests do little more than serve as something of a check list of factors we ought to consider as we review the district court’s action for abuse of its discretion.  Even if we were to choose or formulate a test and apply it, we would not be able to reverse the district court solely because we disagreed with its application of the test. . . . A decision so firmly within the discretion of the district court will not be disturbed by us absent demonstrated prejudice so  great that, as a matter of law, it vitiates a defendant’s constitutional rights or otherwise gravely and unnecessarily prejudices the defendant’s ability to defend his or her rights.  There may well be cases where the Constitution requires a stay.  But a plausible constitutional argument would be presented only if, at a minimum, denying a stay would cause “substantial prejudice” to the defendant.

Indeed, so heavy is the defendant’s burden in overcoming a district court’s decision to refrain from entering a stay that the defendants have pointed to only one case in which a district court’s decision to deny a stay was reversed on appeal, and that case was decided more than thirty years ago.

Bill of Rights …. docket management.  Hmm.  There’s a compelling juxtaposition for you!  I suppose it’s the kind of “juxtaposition” that a defendant appealing a civil verdict gets when he’s been convicted of every act claimed in the civil case.  This enabled the court to note the significant public benefit arising from not staying the civil case, which had already been under steam for a year before the indictment.  Moreover, the District Court evidently offered significant alternatives to managing confidentiality issue to the defendants, who weren’t too eager to avail themselves of it.  Plus there were lots of things — record, merchandise, computers — that got “lost.”  Plus these guys were evidently well layered with lawyers.

Bad facts, or certainly bad defendants, make “bad law.”  These were bad defendants, and now the Circuit is trying to be pretty clear on this:  Crooks, stay away from complaining about a stay.  It won’t play.  Okay?

The second is an important, and more groundbreaking (if unsurprising), decision on an important question:   Read More…

Litigation as competition by other means

Appellate Division, Second DepartmentAnyone involved in intellectual property litigation, whether as a party or an attorney, is aware that it has become a method for eliminating competition or threats to competition, without  regard to legalities.  I’ve written about this so many times here that it is tiresome even to link to myself.  (UPDATE:  But I went back, and I did.)  Even under the best of circumstances — where judges really perceive, substantively, what a meritless lawsuit is really about — the legal system is hopeless skewed against innovation and free enterprise.  Under the American Rule, the cost of maintaining a meritorious defense to relentless litigation is prohibitive and what fee-shifting is available favors is applied with sickening asymmetry, virtually always favoring the party to which legal fees mean the least.  And that, again, is the “good judge” scenarios.  There are others.

Eric Goldman links to a heart-rending account of a particular high-profile version of this all-too-familiar narrative, a piece by Dmitry Shapiro, founder of Veoh Networks.  He says it better than I can (or did), and puts his company’s experience (and his sad personal experience) into the framework of the SOPA / PIPA debate:

We did EVERYTHING that we could to make sure that our business was sound, legal, and good for the world at large.

Unfortunately, Universal Music (UMG), the world’s largest music company didn’t agree [he is giving them an undeserved benefit of the doubt -- RDC] and in September 2007 they sued Veoh in federal court claiming that we are infringing on their copyrights. Even though we had worked with many big media companies in protecting their copyrights, following the provisions of the DMCA, UMG scoffed at their responsibilities to notify us of infringement and refused to send us a single DMCA take down notice. They believed that the DMCA didn’t apply. They were not interested in making sure their content was taken down, but rather that Veoh was taken down!

As you can imagine the lawsuit dramatically impacted our ability to operate the company. The financial drain of millions of dollars going to litigation took away our power to compete, countless hours of executive’s time was spent in dealing with various responsibilities of litigation, and employee morale was deeply impacted with a constant threat of shutdown. Trying to convince new employees to join the company in spite of this was extremely challenging.

To make sure that our money supply was cut off, in an unprecedented move, UMG sued not only the company, but our investors (Michael Eisner, Art Bilger, and Spark Capital) personally. This move raised lot of eyebrows in the legal community, and at one point was thrown out by a judge, only to continue to be appealed and litigated by UMG. This completely choked off all of our financial oxygen, as trying to convince investors to invest with the threat of them personally being sued is insurmountable.

There were many a times when we thought about simply giving up and moving on, but my father taught me early in life that you “never back down from bullies”, and we really felt that we were fighting not only for ourselves but for the very freedom of the Internet. I was so fortunate to have brave people by my side to get me through those tough times.

With money running out, we had to “reduce our staff” (fire people that worked their asses off for years, at startup pace, people that were our family). Doing this was by far the hardest thing that I have ever had to do, and makes me emotional to this day!

We reduced our workforce from over 120 people to under 20 and continued to operate the company in “hibernation mode” to live out the lawsuit, as we expected a decision to come down in our favor.

In Sept 2009, the decision did come down with the judge ruling in our favor, but there was no time to celebrate, as UMG with their practically infinitely deep pockets simply appealed.

With the appeal looming, financing continued to be choked off for us, and in April 2010 we had to sell the company in a fire sale to a small startup. The company that we had built, that was once valued at over $130 Million was gone. Along with it went the livelihoods of over 120 people and their families, $70 million of money entrusted to us by investors, and a big part of me. I had sacrificed so much to live the life of an entrepreneur. My marriage couldn’t stand the strain of this lifestyle and ended in 2009, and while all of this was going on, my father was dying. Instead of spending time with him at his bedside, I was sitting in depositions with lawyers, and stressing over the lawsuit. He died July 13 2009, two months before we won the original judgement on the lawsuit. He would have been proud of me for following through with the fight.

I felt so beaten down after this experience, that I couldn’t imagine going back to being an entrepreneur. I was disenchanted, disgusted by the system that would allow these kinds of behaviors to go on, and it is not until recently that I have been able to come up to bat again. In fact, you are reading this on my new endeavor

I hope that this one will not meet the fate of Veoh :)

Coincidentally, last month a federal appeals court once again ruled in Veoh’s favor. The DMCA works, but proponents of SOPA / PIPA want something else, because they feel that the DMCA doesn’t give them the power they need to stifle innovation and protect their turfs!

It’s not just SOPA and PIPA stuff.  Every day plain old garden-variety business disputes and threats to established businesses and business models are responded to by lawsuits dressed up as intellectual property claims, sold by law firms as cure-alls for obsolete business models, cloaked price-fixing or tone-deaf customer service and responsiveness, and dressed up with outrage over the audacity of the upstarts’ ethics, “free riding,” “diversion” or other phony offenses.

For every Righthaven situation where not only a single judge, but an entire court, decides that enough is enough and makes a plaintiff pay for its abuse of the courts, a hundred plaintiffs either drive a legitimate startup into the ground by securing a legally indefensible ruling — whether in an injunction hearing, a discovery dispute or in some pathetic parody of a trial — or providing the lawyers for such companies the dubious chance to achieve that bitterwseet folk glory that comes with accumulating Pyrrhic legal victories for companies that, like Veoh, can’t afford enough justice to keep the lights on by the time it arrives.

It is relentless, and the real scandal is that while in many cases the plaintiffs in these cases are very much in the drivers’ seats, often it is hard to tell what possible business rationale there could be for their actions.  In the last few months I have, with God’s help, achieved successful outcomes in two, or depending on how you measure it, three post-trial motions seeking fees or the imposition of an appeal bond against parties who could never have paid those fees or posted those bonds if they had been imposed, or imposed as requested by the respective plaintiffs.

In each case, the legal issue of whether the relief sought should, under the applicable statutory standards, have been awarded was not particularly close — in other words, I am not claiming that these “victories” were particularly brilliant legal achievements.  I am just lamenting that they had to be achieved — and that someone had to pay tens of thousands of dollars in legal fees for this patently frivolous motion practice in and of itself.

What exactly is going to be the straw that breaks the camel’s back before the next Veoh?

The “Rube Goldberg” of sanctions motions

Woodrow Pollock reports on the “the Rube Goldberg” of sanctions motions in an IP case — a skein of intertwined Rule 11 motions, counter-motions and what-have-you’s over whether due diligence had been performed prior to filing a patent claim.  He sees no reason to try and improve on the court’s language, so neither do I:

Putting to one side the original motion for sanctions, the Court must now turn to several papers that related to Defendant’s motion in a Rube Goldberg-like manner. [FN - The Official Rube Goldberg Website]

* * *

All-in-all, the Court finds Rube Goldberg’s cartoon of a Self-Operating Napkin more entertaining than the Rube Goldberg-like web of papers submitted in this case. Although both parties have likely spent a great deal of time and money preparing these submissions, neither party has benefitted. The Court has spent too much time addressing them. For future submissions, counsel should note that this Court, like the U.S. Court of Appeals for the Seventh Circuit, “is not inclined to award sanctions in favor of a party that cannot be bothered to follow the rules itself.” Heinen v. Northrop Grumman Corp., 2012 WL 372988, at *2 (7th Cir. Feb. 7, 2012).

Furthermore, as this case remains in its early stages, counsel are advised that the effect of launching a litigation nuclear arsenal directed at peripheral issues not genuinely intended to advance the case toward resolution in an efficient, meaningful way will greatly diminish the credit given by the Court to future filings. Choose your battles wisely lest the early salvos cost you the war.

Motion for sanctions denied.

As they — like so many meritless motions for attorneys fees (full opinion here) — so often are.

It’s that time of day

Originally posted 2010-11-30 08:00:12. Republished by Blog Post Promoter

Chicago

My kind of town

Even a stopped clock is right twice a day.  Duets Blog reports on an all-too rare occurrence in an item entitled, just a bit too gamely, “Trademark Bullies Beware the Seventh Circuit”::

Actually, not just the Seventh Circuit Court of Appeals (governing appeals from the federal district courts in Illinois, Indiana, and Wisconsin), but the Seventh Circuit is the most recent to reaffirm that our current legal system does, in fact, provide protection against real “trademark bullies” — and more generally — those who abuse the legal process with unfounded Lanham Act claims.

Last week, in Nightingale Home Healthcare Inc. v. Anodyne Therapy LLC, after laying out a complete circuit by circuit analysis of what makes a trademark or false advertising case sufficiently “exceptional” to warrant an award of attorneys fees to the prevailing defendant under the Lanham Act, Judge Posner wrote:

We conclude that a case under the Lanham Act is “exceptional,” in the sense of warranting an award of reasonable attorneys’ fees to the winning party, if the losing party was the plaintiff and was guilty of abuse of process in suing . . . .

Actually, if you’d asked me which would be the Circuit where this would be most likely to take place, I would have answered the Seventh.  But that’s just the old law-and-economics guy in me.

Well, let’s hope it’s catchy.

Not my money

Blind justice and plaza, Federal courthouse, NewarkLast June, blogging about my presentation to the Copyright Society on the Righthaven litigation, I wrote the following:

This brings us to the issue of mass enforcement a la RIAA and MPAA

  • Mass enforcement sweeps
    • Complete de-linking from any concept of blameworthiness, much less intent
  • Disproportionate penalties and fees
  • Results of mass enforcement:
    • Consensus is that it is ineffectual
      • Continual calls for enhancement of procedural and penal “tools”
      • Effects some unknown quantum of in terrorem deterrent
      • Crystallizes an anti-copyright, anti-establishment sensibility among militant downloaders
      • By targeting non-militants who act out of either ignorance or as casual scofflaws, makes anti-copyright, anti-enforcement
      • RIAA supposedly paid its lawyers more than $16,000,000 in 2008 to recover only $391,000*
        • Reminder about motivation for our criticisms here icon wink Massive Attack:  Analyzing mass copyright infringement campaigns

Now, note that asterisk at the hyperlinked bullet point.  The footnote in my blog post said:

* At the conference, a person in the position to know stated in the question-and-answer session that this figure was utterly innaccurate.  I am looking forward to receiving more accurate information.

Actually, it was two persons, but I never did get any information.  Still, even as I wrote this I remember acknowledging that the argument itself was flawed, regardless of the empirical truth of the factual claim at its base.  And just because I never got the information, which I was thinking would be an appropriate launching point for me to acknowledge my logical flaw, doesn’t mean I shouldn’t do so anyway.

The flaws are pretty obvious.  The obvious one is that you can get a lot of injunctions for $16 million.  And as we know, it is an axiom of chancery practice that the remedies of equity are typically, and usually when referring to injunctions, utilized in situations where those seeking them “have no remedy at law” — i.e., no money could, in theory, substitute for an order forbidding the complained-of behavior.  Lots of parties spend lots of money suing defendants, and in meritorious causes, where there is no prospect of a concomitant recovery.

The less obvious flaw in my argument flows from the obvious one:  Whether we put a $100 million value on the non-monetary relief obtained by these lawsuits or a $100 value, it’s not our money.  Companies routinely decide on litigation as part of a legal and business strategy which, even in a more general sense than set out above, is not evaluated solely from the point of view or even at all from the point of view of whether it will bring in dollars directly.

Protecting a right, or a perceived right, typically comes at a cost.  If that right enables massive profits, the incurring of massive costs to protect it — whether by recovering damages, achieving cessation of activities that threaten those rights or merely as an in terrorem policy — are entirely rational.  I have argued in connection with trademark bullying and in connection with copyright overreaching that the problem is not with litigants or even, unless they act unethically in the performance of their duties, with the lawyers who represent them in pursuing these rational policies:  It is with the judges who fail to ask “what is really going on here?” and a lapdog Congress that, notwithstanding the recent hesitation concerning SOPA, doesn’t even seem to care.

So it may make perfect sense for the RIAA to spend whatever it spends to get whatever its management and members deem worth getting (and at the price they’re getting it).  Who am I to say?  Strike that argument from the bullet points.

Suing bloggers for dollars

Originally posted 2010-07-23 10:58:24. Republished by Blog Post Promoter

Interior of rotunda, New York Supreme Court, New York CountyGlenn Reynolds links to a an article in Wired about a newspaper “chain”‘s — actually, lawyer Steve Gibson’s — “new business model”:  Suing bloggers who post newspaper articles, evidently more or less intact ones, on their sites.  Glenn says suing bloggers “seems like a poor business plan” — mainly, of course, because most bloggers are broke, or pretty close to it.

The article also explains why these one-off claims by outfits such as the Las Vegas Review-Journal are unlikely, in the long run, to pay off.  One reason is that at least the music industry, through the Recording Industry Association of America, is theoretically going for some degree of bulk in its litigation trawling against unlawful file sharing.  And we did say “theoretically”:  Remember, in 2008 the RIAA managed to spend about $16 million on legal fees to reel in a whopping $391,000.  As the article says, “You’d have to go after a lot of people for a relatively small amount of money,” says Jonathan Band, a Washington, D.C. copyright lawyer. “That is a riskier proposition.”

So, yes, it is hard to comprehend the return on investment here.

There are other reasons this doesn’t seem to make sense.  “Defendants might be less willing to settle a lawsuit stemming from their posting of a single news article, despite the Copyright Act’s whopping damages,” says the article.  But no, not quite on the “whopping damages” stuff.  Contrary to myth — and to the threats routinely uttered by copyright plaintiff attorneys — statutory damages are not meant to be a windfall, as I explain at some length here.  Now it is true that some juries think intellectual property infringement damages are a jackpot unrelated to actual harm — usually because judges don’t instruct them properly.  But other judges in high profile cases are refusing to be part of the copyright shakedown.  Thus in the recent Tannenbaum copyright case, the District Judge reduced the jury’s damages award of $675,000 for infringement of 30 songs to $67,500, ruling that the amount awarded was unconstitutional under the Due Process clause.

Still, $67,500 is a lot of money, a lot, and still pretty darned distant from any plausible quantum of loss to the copyright owner.   Read More…