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Legal News GavelInternet users are constantly creating new content. Sometimes, new content finds wide distribution on social media platforms—commonly known as “going viral”—and therefore gains commercial value for the creators. Trademark law can protect content creators’ exclusive rights to names, logos, and designs, and it allows them to license the use of the same to others. A jury in a California federal court recently found in favor of the owners of a trademark involving a cat, who has gained worldwide fame for her unique look. The trademark covers the cat’s likeness and her internet nickname, “Grumpy Cat.” The case involved a licensee who, according to the trademark owner, infringed the trademark by using the cat’s nickname and likeness in more ways than were allowed by the terms of the license. Grumpy Cat Limited v. Grenade Beverage LLC, No. 8:15-cv-02063, complaint (C.D. Cal., Dec. 11, 2015). After a five-day trial in January 2018, the jury awarded the trademark owner $710,001 in damages.

The federal Lanham Act defines a “trademark” as “any word, name, symbol, or device, or any combination thereof,” which a person is using or “has a bona fide intention to use” for business or commercial purposes. 15 U.S.C. § 1127. It prohibits the unauthorized use of a trademark in connection with the marketing, advertising, or sale of goods or services if it “is likely to cause confusion, or to cause mistake, or to deceive.” Id. at § 1114(1). It also prohibits unauthorized uses of a trademark that falsely designate the origin of goods or services, or that dilute the “distinctiveness” of a famous trademark. Id. at §§ 1125(a), (c).

License agreements allow individuals or businesses to use someone else’s trademark for commercial purposes, usually in exchange for a license fee or other compensation. Businesses may choose to do this in order to capitalize on a trademark’s popularity or goodwill. Trademark owners are responsible for monitoring not only compliance with the license agreement but also the quality of the goods and services that bear the trademark. Failing to do so is known as “naked licensing,” and it can result in the loss of trademark protection. Barcamerica Intern. v. Tyfield Importers, Inc., 289 F.3d 589, 596 (9th Cir. 2002).

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Legal News GavelA wide range of regulatory agencies monitor business activities, investigate alleged violations, and bring civil actions against companies they believe have committed unlawful acts. Many businesses designate executives or managers as compliance officers, in the hopes of identifying and preventing regulatory violations before they become actionable. Companies in some industries create separate organizations to serve as watchdogs over their members. Self-regulatory organizations offer the benefit of keeping official regulators at something of a distance, but their reliability depends on vigorously fulfilling their purpose. One example is the Advertising Self-Regulatory Council (ASRC), which has several divisions monitoring different aspects of the advertising business. One of these, the National Advertising Division (NAD), monitors national advertising campaigns to look for false or misleading claims and other deceptive practices. If it is unable to resolve a claim, it may refer the matter to a government agency. This recently happened with a company based in Northern California, which was accused of failing to disclose fees to consumers. The NAD referred the claims to the Federal Trade Commission (FTC).

The ASRC was founded in 1971 as an alliance between two advertising trade organizations and the Council of Better Business Bureaus (CBBB). Originally known as the National Advertising Review Council (NARC), the organization changed its name to the ASRC in 2012. The NAD conducts investigations based on its own monitoring of truth and accuracy in advertising, and it also receives claims of false advertising from competitors and consumers. In addition to the NAD, the ASRC has divisions monitoring advertising directed at children and various forms of online advertising. The National Advertising Review Board hears appeals of decisions made by the other divisions.

The FTC is a federal agency charged with enforcing multiple statutes dealing with consumer protection. The agency was created by the FTC Act of 1914, 15 U.S.C. § 41 et seq., which contains many of the provisions the FTC enforces. The statute prohibits numerous anti-competitive, deceptive, fraudulent, and otherwise unfair business practices. This includes the dissemination of “any false advertisement…for the purpose of inducing…the purchase in or having an effect upon commerce, of food, drugs, devices, services, or cosmetics.” Id. at § 52(a). The FTC is authorized to seek injunctive relief preventing the further dissemination of allegedly false advertising, and to bring suit for damages. Liability under these provisions is limited to a “manufacturer, packer, distributor, or seller” of a good or service, instead of an advertising agency or broadcaster. Id. at § 54(b).

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Legal News GavelCalifornia real estate development involves numerous potential risks, ranging from lost money on an investment to legal liability for injuries caused by hazards or defects. Determining who is liable for an injury often requires an extensive examination of ownership and any improvements made to the property. The owner of a piece of real estate might be liable for an injury caused by a hazard on their property under the theory of premises liability. Injuries—both personal injuries and financial losses—could also be a result of negligence by someone hired to work on the property. In 2014, the California Supreme Court ruled on a dispute between a homeowners association (HOA) for a San Francisco condominium project and two architectural firms involved in designing the project. The plaintiff alleged, on behalf of all of the homeowners, that negligent architectural designs led to defects that “made the condominium units uninhabitable and unsafe during certain periods due to high temperatures.” Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP, 59 Cal.4th 568, 572 (2014). The court ruled in the plaintiff HOA’s favor.

One of the fastest growing forms of residential property is the “common-interest development,” in which separately owned residential units share common areas such as elevator lobbies, fitness centers, and pools. Developers create HOAs as private nonprofit organizations to handle the management and maintenance of common areas. An HOA has a legal duty, under premises liability law, to maintain common areas that are reasonably free of defects or hazards, and to warn residents, their guests, and others of known hazards on the premises. The Beacon case, in contrast, was about duties owed to an HOA with regard to defects on the property.

The plaintiff in Beacon was the HOA created for a 595-unit residential condominium project in San Francisco. The developer hired the defendants to “provide architectural and engineering services.” Beacon, 59 Cal.4th at 571. The defendants were aware “that the finished construction would be sold as condominiums.” Id. The plaintiff’s lawsuit alleged negligent design, which caused “several defects, including extensive water infiltration, inadequate fire separations, structural cracks, and other safety hazards.” Id. at 572. The allegation of uninhabitability during summer months arose from “solar heat gain” caused by a lack of ventilation and substandard windows. Id.

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Legal News GavelCalifornia businesses that sell goods or services to the public have a duty to deal fairly with consumers and other businesses. Statutes like the California Consumers Legal Remedies Act (CLRA) and the Unfair Competition Law (UCL) prohibit a variety of deceptive or unfair practices and allow civil claims for damages by aggrieved businesses or consumers. A lawsuit filed late last year in a Northern California federal court alleges violations of the CLRA and the UCL by a major technology company. Harvey v. Apple, Inc., et al., No. 3:17-cv-07274, complaint (N.D. Cal., Dec. 21, 2017). The complaint, which includes class action allegations, claims that the defendant allowed one of its signature products to go to market with a known defect, failed to disclose this defect to consumers, and made misleading statements about the nature of the defect and possible solutions for problems caused by the defect. Lawsuits filed in other California federal courts and other states make similar allegations, and the court is reportedly considering consolidation of some or all of the complaints.

The CLRA prohibits a wide range of deceptive practices involving the sale of goods or services to consumers. The deceptive practices alleged in Harvey include “representing that goods…have…characteristics,…uses, benefits, or quantities that they do not have”; “representing that [they]…are of a particular standard, quality, or grade,…if they are of another”; and “advertising [them] with intent not to sell them as advertised.” Cal. Civ. Code §§ 1770(a)(5), (7), (9). Damages under the CLRA may include injunctive relief, actual damages, punitive damages, and restitution. Id. at § 1780.

The UCL also establishes broad prohibitions on unfair or deceptive business practices under various provisions of state law, but its coverage is not limited to consumers. California law states that a person is liable for damages that result from “willfully deceiv[ing] another with intent to induce him to alter his position to his injury or risk.” Id. at § 1709. “Deceit” includes acts like “the suppression of a fact, by one who is bound to disclose it.” Id. at § 1710(3). An act of deceit that is intended “to defraud the public” can potentially result in liability to every person “who is actually misled by the deceit.” Id. at § 1711. An individual can file suit for violations of the UCL if the alleged unfair act has caused them to “suffer[] injury in fact and…los[e] money or property.” Cal. Bus. & Prof. Code §§ 17203, 17204.

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Legal News GavelAs a legal concept, “ownership” has long been fraught with complexity. The increasing use of digital technologies has raised questions about what it means for consumers to “own” a device like a car or smartphone. The owner of such a device unquestionably has the exclusive right to possession of the device. Their use of the device, or the software and other digital technology contained within the device, is subject to multiple legal restrictions. This includes limitations on the ability to repair devices and equipment. Some consumers are pushing back, asserting their right to repair property that they arguably own. The right-to-repair movement might have started with Northern California’s tech industry, but it has expanded to include a wide range of products and populations. Farmers, for example, are now pushing back against companies like John Deere, which they claim have prevented them from repairing their own farm equipment.

Using the iPhone as an example, a consumer “owns” the device itself. They could use it as a coaster or a doorstop if they wanted, but if they decide to use it as a smartphone, they do not own the technology that allows the device to function as advertised. They only hold a license to use that technology. The Digital Millennium Copyright Act (DMCA) prohibits “circumvention of copyright protection systems,” which refers to various systems used in electronic devices to protect copyrighted materials, including software and firmware. 17 U.S.C. § 1201. End-User License Agreements (EULAs) also restrict consumers’ use of various devices. Consumers may risk legal consequences for modifying a device, or even merely by trying to repair it. Many iPhone repairs require a trip to the Apple Store to have a technician do the work, which can be inconvenient and expensive.

Companies like Apple must balance their intellectual property rights with customer satisfaction. Some companies have noted that restricting certain repairs protects both their customers and the integrity of their products, such as by limiting the ability of hackers to get too familiar with their systems. Manufacturers of wearable devices like fitness trackers may sell user data to third parties—with consent through an EULA. Restricting consumers’ ability to tinker with their devices protects those additional revenue streams.

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Legal News GavelCalifornia employment law prohibits discrimination against employees and job applicants on the basis of sex or gender. In the Northern California tech industry, gender discrimination has been a subject of numerous recent allegations and complaints. Last fall, a group of women employed by Google filed a class action alleging disparities in wages based on sex. Ellis, et al. v. Google, Inc., No. CGC-17-561299, complaint (Cal. Super. Ct., San Francisco Cty., Sep. 14, 2017). The company is also facing another discrimination lawsuit with a different, but related, angle. This lawsuit, filed in January 2018 by a male former employee, alleges discrimination on the basis of sex and political viewpoint. Damore, et al. v. Google, LLC, No. 18CV321529, complaint (Cal. Super. Ct., Santa Clara Cty., Jan. 8, 2018). California is one of the few states with an employment discrimination statute that addresses employees’ “political activities or affiliations.” Cal. Lab. Code § 1101 et seq. The plaintiff alleges that he experienced California employment discrimination as a male employee with politically conservative views.

The California Fair Employment and Housing Act (FEHA) generally prohibits discrimination on the basis of sex, gender, and other factors. Cal. Gov’t Code § 12940(a). The California Equal Pay Act (EPA) more specifically prohibits disparities in pay based on gender when the work, working conditions, and qualifications are “substantially similar.” Cal. Lab. Code § 1197.5(a). The statute makes exceptions when a pay disparity is based on certain “bona fide factor[s] other than sex,” including merit- or seniority-based systems and systems that base pay on “quantity or quality of production.” Id.

The statute dealing with employees’ political views prohibits employers from “[c]ontrolling or directing…the political activities or affiliations of employees,” id. at § 1101(b); and from using the “threat of discharge or loss of employment” to compel an employee to follow, or not follow, “any particular course or line of political action or political activity,” id. at § 1102. The California Supreme Court ruled that this statute allows private civil actions for alleged violations in Lockheed Aircraft Corp. v. Superior Court, 28 Cal.2d 481 (1946). The court later affirmed a claim of political viewpoint discrimination based on employees’ advocacy for “the struggle of the homosexual community for equal rights,” when claims of sexual orientation discrimination were not tenable under state law. Gay Law Students Assn. v. Pacific Tel. & Tel. Co., 24 Cal.3d 458, 488 (1979).

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Legal News GavelA plaintiff must establish that the court in which they are filing suit has jurisdiction over their claims. Questions of jurisdiction can quickly become complicated, especially when a lawsuit cites multiple sources of law. The Alien Tort Statute (ATS) gives foreign citizens the right to file suit in U.S. district courts for certain tort claims. U.S. courts have allowed claims against individuals. The U.S. Supreme Court is now considering whether the ATS allows claims against foreign corporations in Jesner v. Arab Bank, PLC. While the case is not likely to have much effect on California business litigation, it offers a useful look at how U.S. courts can exercise jurisdiction over international business disputes.

The Judiciary Act of 1789, one of Congress’ very first laws, created the ATS. The statute gives federal district courts jurisdiction over “causes where an alien sues for a tort only in violation of the law of nations or a treaty of the United States.” 1 Stat. 77 (1789), 28 U.S.C. § 1350. It does not define “alien.” Federal law defines that term elsewhere as “any person not a citizen or national of the United States.” 8 U.S.C. § 1101(a)(3). The term “law of nations” refers to international law, which mostly consists of treaties, conventions, and other agreements.

The ATS was largely forgotten until 1980, when the Second Circuit ruled on a claim by the parents of a teenager who had been “kidnapped and tortured to death” in 1976 by the defendant, who was the “Inspector General of Police in Asuncion, Paraguay” at the time. Filártiga v. Peña-Irala, 630 F.2d 876, 878 (2d Cir. 1980). After the defendant moved to New York in 1978, the plaintiffs filed suit against him under the ATS for violations of the United Nations Charter, the Universal Declaration on Human Rights, and other sources of international law. The Second Circuit affirmed the verdict in favor of the plaintiff, which included a damages award of $10.4 million.

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Legal News GavelCalifornia sexual harassment has gained unprecedented attention in recent months, starting in Hollywood and expanding to include nearly every type of employer in the country. Sexual harassment is considered a form of sex discrimination under both federal and state laws. It can take two main forms. Quid pro quo sexual harassment occurs when a supervisor or manager makes sexual conduct of some sort a condition of employment, such as when an employee will receive better shift assignments if they date the boss. A hostile work environment occurs when the sexually inappropriate conduct of one or more other people in the workplace interferes with the ability to do one’s job. Federal and state laws require proof that the allegedly offensive conduct was “pervasive or severe.” See Cal. Civ. Code § 51.9(a)(2). A California state senator held a hearing in January 2018 to consider whether this standard is too stringent, looking at New York City’s employment statute for possible revisions to state law that could affect many California employers.

The U.S. Supreme Court has defined the “severe or pervasive” standard for hostile work environment claims under federal law as requiring evidence of “an environment that a reasonable person would find hostile or abusive.” Harris v. Forklift Systems, Inc., 510 U.S. 17, 21 (1993). California courts apply the same standard for hostile work environment claims under the California Fair Employment and Housing Act (FEHA). See, e.g., Hughes v. Pair, 46 Cal.4th 1035, 1048 (2009). Determining whether the alleged offensive conduct was “severe or pervasive” has both a subjective and an objective component. It requires consideration of “a constellation of surrounding circumstances, expectations, and relationships,” rather than “a simple recitation of the words used or the physical acts performed.” Lyle v. Warner Bros. Television Prod., 42 Cal.Rptr.3d 2, 16 (2006).

A dissenting appellate court justice in the Hughes case cited above criticized the “severe or pervasive” standard, noting that the statute that uses that language, the Unruh Civil Rights Act (UCRA), “is not an employment discrimination statute,” and nothing indicates that the state legislature intended to mix this statute and the FEHA. Hughes v. Pair, 65 Cal. Rptr. 3d 619, 632 (Cal. App., 2d Dist. 2007) (Armstrong, Acting P.J., dissenting). The justice advocated for an “interpret[ation] based on the plain and ordinary meaning of the words” in the statute. Id. at 633. Other critics of the “severe or pervasive” standard point to the reportedly high percentage of sexual harassment complaints dismissed by the courts, arguing that the standard imposes too high a burden on complainants.

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Legal News GavelCalifornia real estate law allows the creation of homeowner associations (HOAs) to govern certain types of properties, known as “common interest developments” (CIDs). An HOA is responsible for maintaining a CID’s common areas, and it has the authority to collect fees from homeowners to pay for maintenance. When an HOA negligently fails to maintain a common area, the HOA may be liable for injuries that occur as a result. A recent appellate court decision from New Jersey addressed HOAs’ duty of care to residents and others. It is worth revisiting California law on this issue.

Determining a property owner’s liability for an injury occurring on their premises involves two important distinctions:

– First, did the injured person have permission to be on the property? A property owner owes a minimal duty of care to a trespasser, meaning someone who enters their property without permission.

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Legal News GavelIn order to sustain a California consumer lawsuit, a plaintiff must be able to demonstrate that they have standing to sue. “Standing” refers to the legal capacity to bring a claim in a particular capacity. Statutes that permit civil lawsuits to recover damages for violations often establish criteria for standing, and the courts have identified general rules for determining whether a plaintiff has standing, including the requirement of an “injury-in-fact.” See Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). A case arising in California under the Fair Credit Reporting Act (FCRA) resulted in a question about the “injury-in-fact” requirement. The Ninth Circuit ruled that the plaintiff had established standing, Robins v. Spokeo, Inc. (“Spokeo I”), 742 F.3d 409 (9th Cir. 2014), but the Supreme Court vacated this ruling and remanded the case. Spokeo, Inc. v. Robins (“Spokeo II”), 578 U.S. ___ (2016). Earlier this year, the Ninth Circuit again ruled in the plaintiff’s favor. Robins v. Spokeo, Inc. (“Spokeo II”), 867 F.3d 1108 (9th Cir. 2017).

The FCRA regulates the collection, use, and distribution of consumer information related to matters like “credit worthiness,…character, general reputation, [and] personal characteristics.” 15 U.S.C. § 1681a(d)(1). This type of information regularly appears in credit reports, which are used not only in credit and lease applications but also by potential employers. The statute requires “consumer reporting agencies” (CRAs), defined as businesses that collect consumer information and package it in reports for a fee, to “follow reasonable procedures to assure maximum possible accuracy” of the reports they produce. Id. at § 1681e(b). It allows consumers to seek damages in court for violations, with additional penalties for willful or knowing noncompliance. Id. at §§ 1681n, 1681o.

The defendant in Spokeo “operates a website that provides users with information about other individuals.” Spokeo I, 742 F.3d at 410. This may include contact information, economic and work history, and other personal details. The plaintiff filed suit under the FCRA for allegedly failing to confirm the accuracy of the information provided about him by the website. The district court dismissed the lawsuit for lack of standing, finding that he had failed to demonstrate an injury-in-fact. He had not, according to the court, alleged that the information on the website had actually caused him an injury, but instead that the presence of allegedly inaccurate information only created the risk of future harm.