Antitrust Law Daily Wrap Up, ADVERTISING—C.D. Cal.: CNN’s erroneous article about Michael Jackson hologram did not give rise to claims against interviewee, (Sep 19, 2014)

By Cheryl Beise, J.D.

Pulse Entertainment Corp. failed to state Lanham Act false advertising and reverse passing off claims against Alkiviades David and his technology companies based on a CNN interview giving the false impression that the defendants—rather than Pulse—had created the holographic animation of Michael Jackson used during the 2014 Billboard Music Awards, the federal district court in Los Angeles has ruled (Pulse Entertainment Corp. v. David, September 17, 2014, Wilson, S.). Pulse’s claims were dismissed, with leave to amend.

The 2014 Billboard Music Awards featured a lifelike holographic animation of Michael Jackson performing a previously-unreleased song (the “Michael Jackson Animation”). Pulse alleges that its team of animators and technicians developed and produced the Michael Jackson Animation over the course of eight months.

On approximately May 19, 2014, CNN aired an interview with David under the caption “MICHAEL JACKSON HOLOGRAM: HOW’D THEY DO IT? Company behind hologram gives CNN demonstration.” In the interview, David allegedly misrepresented that he and his company, Hologram USA, created and produced the Michael Jackson Animation and the underlying animation techniques and technology. While the Michael Jackson Animation was playing on screen, the interviewer said, “This MJ likeness used at the Billboard Music Awards was created by Hologram USA.” After being informed that neither David nor Hologram created the Michael Jackson Animation, CNN took the interview segment down from its website. However, David republished the segment on his companies’ websites and on his Twitter account.

Pulse filed suit against David, Hologram USA, and FilmOn.com, Inc., asserting claims for reverse passing off and false advertising under section 43(a) of the Lanham Act. The defendants’ moved to dismiss the complaint for failure to state a claim under Fed. R. Civ. P. 12(b)(6).

Reverse passing off. Section 43(a)(1)(a) of the Lanham Act prohibits using false designations of origin in commerce in connection with any goods or services. The Supreme Court has held that this section encompasses reverse passing off. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 30 (2003). Reverse passing off occurs when the wrongdoer removes the name or trademark on another party's product and sells that product in an unbranded state or under a name chosen by the wrongdoer. Section 43(a) prohibits false designations of “the producer of the tangible goods that are offered for sale,” but it does not prohibit false designations of “the author of any idea, concept, or communication embodied in those goods.”

Pulse asserted that the defendants “publicly stated that David and Hologram USA are the source, origin, and owners of the Michael Jackson Animation.” Pulse did not allege that the defendants marketed as their own Pulse’s physical embodiment of the Michael Jackson Animation. “Thus, the thrust of Pulse’s complaint is that Defendants falsely designated themselves as the authors of an intangible communication,” the court said. “This is precisely the sort of claim foreclosed by Dastar.” The court therefore dismissed Pulse’s reverse passing off claim for failure to state a claim.

False advertising. To state a false advertising claim under Section 43(a)(1)(B) of the Lanham Act, a plaintiff must allege, among other things, that the defendant made a materially false statement either about the plaintiff's or the defendant’s product, in the context of commercial advertisement or promotion, which actually deceived, or had the tendency to deceive, a substantial segment of its audience, and which caused or was likely to cause harm to the plaintiff.

Pulse’s false advertising claim was based on the defendants’ alleged misrepresentation that they created the Michael Jackson Animation. Pulse alleged David “launched a false media campaign,” including giving the CNN interview. Where a claim for false advertising alleges a course of fraudulent conduct as its basis, the claim must be pleaded with the particularity required by Fed. R. Civ. P. 9(b).

Without specifying David’s exact statements, Pulse alleged that on the segment David falsely took credit for the Michael Jackson Animation. (Id.). Pulse also identifies other purportedly misleading statements made by David: (1) “What you saw at the Billboard, you saw a digital head connected to an actor. We capture the body and the head in real time. And, we have the sync marks and we can attach the two together[,]”; (2) “What you saw at the Billboard was ‘Super Michael.’ You saw Michael beyond the controversy, beyond the problems that he faced in his real life[,]”; (3) that the animation could be adapted for “education, military, politics—it can apply—be applied across the board; and (4) that “there is no end to how you can apply this, all we really need to do is apply our imagination[.]”

To the extent that Pulse’s false advertising claim was based on the original CNN broadcast, Pulses failed to state a claim and failed to satisfy Rule 9(b), the court determined. Most of the obviously false and deceptive statements were made by CNN. There was no evidence that David knew of or participated in the false caption or the interviewer’s false statement before the broadcast aired. Pulse did not allege that any of the specific statements attributed to David—which related only to the methods used to create the Michael Jackson Animation, descriptions of the Animation, and statements relating to the potential uses for the technology—were false.

To the extent that Pulse’s false advertising claim relied on the defendants’ republication of the interview segment, it came closer to meeting the mark, but still fell short. Although the defendants arguably adopted the false statements from the CNN interview, Pulse failed to plead sufficient facts or context—such as exactly when the segment was reposted, all of the websites to which it was reposted, for how long it was made available—that satisfied the heightened pleading standard mandated by Rule 9(b). Pulse’s false advertising claim was dismissed pursuant to Rules 9(b) and 12(b)(6).

Compulsory counterclaim. The defendants also asserted that Pulse’s claims were compulsory counterclaims which, under Rule 13(a), should have been brought in an action Hologram USA and other plaintiffs filed in the District of Nevada against Pulse and other parties. In that suit, Pulse and the other defendants were accused of infringing patented projection technology in connection with the Michael Jackson Animation.

The court held that Pulse’s claims were not compulsory counterclaims in the Nevada lawsuit because they did not share the same operative facts or legal issues. The Nevada action related to patent infringement occurring before and during the Billboard awards, while this suit related to alleged false representations made in an interview after the Billboard awards. Pulse’s Lanham Act claims were properly before the court.

The case is No. CV 14-4732-SVW-MRW.

Attorneys: Martin D. Singer (Lavely and Singer APC) for Pulse Entertainment Corp. Ryan G. Baker (Baker Marquart LLP) for Alkivlades David, Hologram U.S.A., Inc., and Filmon.com, Inc.

Companies: Pulse Entertainment Corp.; Hologram U.S.A., Inc.; Filmon.com, Inc.

Cases: Advertising CaliforniaNews