Advertising Law - October 2015 #4

Manatt, Phelps & Phillips, LLP

In This Issue:

  • Eleventh Circuit Rejects Application of VPPA to Free App
  • Will the Justices Be Game and Tackle EA’s Cert Petition?
  • Court Refuses to Bend Copyright for Yoga Poses
  • Class Action Over “Compare At” Price Claims Moves Forward

Eleventh Circuit Rejects Application of VPPA to Free App

The latest decision interpreting the application of the Video Privacy Protection Act in the context of twenty-first century technology provides positive news for manufacturers of free apps.

Enacted in the late 1980s in response to revelations about the video rental history of U.S. Supreme Court nominee Robert H. Bork, the VPPA prohibits a “video tape service provider” from knowingly disclosing to a third party “personally identifiable information concerning any consumer.” Aggrieved consumers can recover actual or liquidated damages of at least $2,500, punitive damages, and attorneys’ fees and costs. A “consumer” is defined as “any renter, purchaser, or subscriber of goods or services from a video tape service provider.”

On several occasions, plaintiffs have attempted to apply the VPPA to more recent technology, with limited success. Courts have rejected suits against defendants including Netflix and ESPN, and even a 2012 amendment to the Act intended to modernize it has had limited impact.

In the most recent effort, Mark Ellis sued The Cartoon Network. Without creating a login account, Ellis downloaded the free app and watched various videos. He claimed the company violated the VPPA by maintaining a record of every video clip or episode he watched and sharing the data with a third-party data analytics company.

Cartoon Network moved to dismiss the suit. Although a federal district court found that Ellis was a “subscriber” for purposes of the statute, it found that the data shared by the defendant was not “personally identifiable information” and threw out the lawsuit. Ellis appealed.

The Eleventh Circuit Court of Appeals affirmed, albeit on different grounds.

The VPPA does not define the term “subscriber” but the court looked to the “ordinary meaning of the term,” using dictionary definitions such as a person “registered to pay for and receive a periodical, service, theater tickets, etc. for a specified period of time.” While the panel noted that payment is not a necessary element of subscription, it is a relevant factor in the analysis.

A subscription “involves some type of commitment, relationship, or association (financial or otherwise) between a person and an entity,” the court explained, that includes some factors such as payment, registration, commitment, or delivery. “Mr. Ellis did not sign up for or establish an account with Cartoon Network, did not provide any personal information to Cartoon Network, did not make any payments to Cartoon Network for use of the CN app, did not become a registered user of Cartoon Network or the CN app, did not receive a Cartoon Network ID, did not establish a Cartoon Network profile, did not sign up for any periodic services or transmissions, and did not make any commitment or establish any relationship that would allow him to have access to exclusive or restricted content.”

Instead, Ellis simply downloaded the app onto his smartphone for free and watched video clips.

“In our view, downloading an app for free and using it to view content at no cost is not enough to make a user of the app a ‘subscriber’ under the VPPA, as there is no ongoing commitment or relationship between the user and the entity which owns and operates the app,” the panel wrote. “Importantly, such a user is free to delete the app without consequences whenever he likes, and never access its content again. The downloading of an app, we think, is the equivalent of adding a particular website to one’s Internet browser as a favorite, allowing quicker access to the website’s content.”

The Eleventh Circuit noted a split among the courts that have considered the issue, with federal courts in Massachusetts and New York reaching a similar conclusion, while judges in California and Georgia federal courts have reached the opposite result.

Given its holding as to the meaning of a “subscriber” under the VPPA, the court declined to address the scope of the statute’s definition of “personally identifiable information.”

To read the opinion in Ellis v. The Cartoon Network, click here.

Why it matters: Consumers continue to persist in efforts to make the VPPA applicable to twenty-first century technology with limited success. The Eleventh Circuit opinion provides something of a road map for app manufacturers to avoid liability under the statute by limiting their relationships with consumers, in part by offering an app at no cost.

Will the Justices Be Game and Tackle EA’s Cert Petition?

Electronic Arts is not giving up and has filed a certiorari petition with the U.S. Supreme Court seeking review of the Ninth Circuit Court of Appeals’ decision that the publicity rights of current and former National Football League players trumps the video game maker’s First Amendment right to use their likenesses in Madden NFL.

Michael Davis sued in 2010, alleging that the use of thousands of likenesses of current and former NFL players in the popular video game violated their right of publicity. A federal court judge ruled that EA’s use was not sufficiently transformative to receive First Amendment protection, as the video game depicted them realistically, with their actual height, weight, team, position, uniform number, skill set, and skin tone, among other characteristics.

In January, the federal appellate panel sided with the players, ruling that EA’s use of their images was not transformative enough to trigger the protections of the First Amendment.

Not taking no for an answer, EA recently filed a writ of certiorari with the justices, arguing that other courts use a different test and do not rely strictly on the “transformative” factor, or handle such claims on a case-by-case basis.

“These conflicting legal rules have real-world consequences: without this court’s guidance, artists, musicians and other content creators will remain unsure what standards apply to their expression and, in particular, whether realistic depiction of real individuals is tortious,” EA wrote. “This court’s review also is warranted because the Ninth Circuit’s decision—which allows a state to impose tort liability for non-commercial expression that portrays a person realistically—is both wrong and dangerous.”

Allowing the ruling to stand would create a chilling effect on the creative industry, EA told the Court, and adversely impact depictions of historical figures or events, unauthorized biographies, and works of historical fiction, among other examples.

To read the writ of certiorari in Electronic Arts v. Davis, click here.

Why it matters: In its cert petition, EA framed the question for the Court as: “Whether the First Amendment protects a speaker against a state-law right-of-publicity claim that challenges the realistic portrayal of a person in an expressive work.” The company argued that the collision of the state law tort and the First Amendment “has engendered conflict and disarray among the lower courts,” adding that the “Court’s guidance is urgently needed.” Whether the justices accept the case remains to be seen.

Court Refuses to Bend Copyright for Yoga Poses

Yoga poses are not copyrightable, the Ninth Circuit Court of Appeals has ruled in rejecting Bikram Choudhury’s attempt to copyright the 26 poses that make up the “Bikram Sequence” of yoga performed in a heated room, because it is an idea, process, or system designed to improve health. In so ruling, the federal appellate panel declined to twist the law to fit Choudhury’s position.

The dispute arose after a pair of former Choudhury students opened their own yoga studio and led clients through 26 poses just like those in the Bikram sequence in a room heated to 105 degrees. Choudhury sued, alleging a violation of the copyright he was issued for his 1979 book, Bikram’s Beginning Yoga Class.

In codifying the “idea/expression dichotomy,” Section 102(b) of the Copyright Act expressly excludes protection for “any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” Accordingly, the protection for his 1979 book did not extend to the sequence itself.

“Though Choudhury emphasizes the aesthetic attributes of the Sequence’s ‘graceful flow,’ at bottom, the Sequences is an idea, process, or system designed to improve health,” the three-judge panel wrote. “Copyright protects only the expression of this idea—the words and pictures used to describe the Sequences—and not the idea of the Sequence itself. Because the Sequence is an unprotectable idea, it is also ineligible for copyright protection as a ‘compilation’ or ‘choreographic work’.”

A book describing how to perform a complicated surgery does not give the holder the exclusive right to perform the surgery, the court said. “Like the series of movements a surgeon makes, the Sequence is, as Choudhury tells readers, a method designed to ‘cure, heal, or at least alleviate’ physical injuries and illness,” and monopoly protection for such a method can only be secured—if at all—by a patent.

Section 102(b) similarly precluded copyright protection for the sequence as a compilation or choreographic work. Both of those categories—found in Sections 103 and 102(a)(4), respectively—complement Section 102(b), so that while a compilation or choreographic work “may be eligible for copyright protection, it must nevertheless satisfy the requirements of Section 102,” the panel wrote.

“[A]s Congress has responded to new technologies and evolving understandings of creative expression, the idea/expression dichotomy has remained firmly in place,” the court said. “This dichotomy, as this case illustrates, polices the uncertain boundaries of copyrightable subject matter.”

To read the opinion in Bikram’s Yoga College of India v. Evolation Yoga, LLC, click here.

Why it matters: The decision provides an important reminder about the boundaries of copyright protection, particularly the idea/expression dichotomy. “Although there is no cause to dispute the many health, fitness, spiritual and aesthetic benefits of yoga, and Bikram yoga in particular, they do not bring the Sequence into the realm of copyright protection,” the court said. “Choudhury thus attempts to secure copyright protection for a healing art: a system designed to yield physical benefits and a sense of well-being. Simply put, this attempt is precluded by copyright’s idea/expression dichotomy, codified by Section 102(b).”

Class Action Over “Compare At” Price Claims Moves Forward

A retailer’s motion to dismiss a putative class action challenging price advertising with “compare at” claims was rejected by a California federal court.

Kevin Branca filed suit against Nordstrom Rack, alleging that the retailer used deceptive pricing claims to trick consumers into thinking they were saving money. Price tags featured the price for an item next to a higher price, with the statement “compare at.” For example, while shopping at a San Marcos, Calif. Nordstrom Rack, Branca purchased a pair of pants for $79.97 with a “compare at” price of $150 and a hooded sweatshirt for $29.97 with a “compare at” price of $65.

Branca claimed the defendant made up the “compare at” price in violation of multiple state laws because the retailer never sold or intended to sell the items at the mainline Nordstrom store. Accordingly, there could not be a legitimate former price or prevailing market price for the items.

Nordstrom countered with a motion to dismiss, contending that Branca lacked standing to represent a class of consumers that purchased different items with different “compare at” statements. While the court agreed that standing could not be based simply on the Nordstrom Rack name, website, and general advertising, the plaintiff’s allegations about the price tags were sufficient to establish standing.

Courts focus on whether the alleged misrepresentations are sufficiently similar across product lines in applying a “substantial similarity” test between the various products and alleged misrepresentations at issue, U.S. District Court Judge Michael M. Anello wrote.

“[T]he differences across the products are of little import to the alleged misrepresentations,” the court said. “Here, Plaintiff does not allege that his claims depend on what type of product a consumer purchased from Nordstrom Rack; it is immaterial for the purposes of his claims whether one purchased a pair of shoes versus a hat, so long as the item bore a ‘Compare At’ tag. His allegations do not relate to the exact prices, percentages of savings listed on the tags, or specific characteristics of the underlying products, which would vary by product. Rather, his claims relate to the consistent format of the tags, i.e., the juxtaposition of two prices, one higher than the other, the term ‘Compare At’ and a percentage, labeled ‘% Savings.’ Moreover, all of the products are marketed to the same consumers, Nordstrom Rack shoppers. Thus, product composition is of little importance and the similarity amongst the purported misrepresentations is most important.”

Nordstrom’s argument that the plaintiff failed to identify a false or misleading statement made by the company also failed to sway the court.

“The Court finds Plaintiff sufficiently alleges his claim that the tags are deceptive,” Judge Anello wrote. “Plaintiff pleads with particularity how and why he was personally deceived by the ‘Compare At’ tags.” His claims are subject to the reasonable consumer test, a standard the plaintiff was able to satisfy for purposes of the state’s Unfair Competition Law, False Advertising Law, Consumers Legal Remedies Act, and Business and Professions Code.

“Plaintiff sufficiently alleges that reasonable consumers would be deceived by Nordstrom’s tags,” the court said. “He states reasonable consumers would be deceived in the same way and for the same reasons as he was,” and presented survey evidence that demonstrated 90 percent of 206 participants interpreted the “compare at” tag to mean that the associated item was previously sold for the “compare at” price.

Branca also alleged that the “compare at” prices were false because they were never intended for sale at a location other than a Nordstrom Rack store and that Nordstrom actually intended them to be misleading, the court said.

The court denied Nordstrom’s motion to dismiss, moving the suit forward. To read the order in Branca v. Nordstrom, Inc., click here.

Why it matters: Deceptive pricing suits are the latest trend in consumer class actions. In addition to Nordstrom, retailers operating outlet stores have faced similar complaints, with Michael Kors agreeing to an almost $5 million settlement over the pricing at its outlet locations. The issue has also attracted attention from federal legislators, with a group of senators writing to the Federal Trade Commission to request an investigation into whether outlet stores are engaging in deceptive advertising and pricing.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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