incontestable LIZZIE BORDEN registration + actual confusion insufficient to overcome weight of history, 1st Circuit rules

US Ghost Adventures, LLC v. Miss Lizzie’s Coffee LLC, No. 23-2000 (1^st Cir. Nov. 15, 2024)

The Lizzie Borden House “bears a storied history that originates with the still-unsolved murders — in 1892 — of Lizzie Borden’s father and stepmother.” Ghost Adventures “provides ghost tours and related hospitality services across the United States.” It owns a bed and breakfast operated out of the Lizzie Borden House featuring a museum, “ghost tours,” and kindred activities. 

bed & breakfast sign

Its success “depends in large part on the Lizzie Borden name and lore.” Ghost Adventures owns incontestable trademark registrations for both the name “Lizzie Borden” for hotel and restaurant services and for a realistic hatchet logo displaying a notched blade (a reference to the implement that allegedly killed Borden’s parents).

Ghost Adventures' registered logo

Miss Lizzie’s Coffee LLC recently opened a coffee shop next door to the Lizzie Borden House. You will not be surprised to learn that it, too, markets itself by reference to the Lizzie Borden saga. One sign says “Miss Lizzie’s Coffee” between a cup of coffee and a stylized bloody hatchet. A second sign advertises Miss Lizzie’s as “The Most Haunted Coffee Shop in the World!” “The hatchets on both signs include handles and dramatic blood splatters.”

2 hatchets and blood splatters, "The Most Haunted Coffee Shop in the World!"

Miss Lizzie's Coffee in Sweeney Todd-like font and a bloody hatchet

Some visitors have incorrectly assumed that the Lizzie Borden House and Miss Lizzie’s are affiliated or asked about whether such a relationship existed. Some guests of the Lizzie Borden House were frustrated to learn that they could not bring Miss Lizzie’s coffee on their tours of the Lizzie Borden House, having bought the coffee under the erroneous impression that the coffee shop was affiliated with the historical site. A Fall River city official called Ghost Adventures to discuss its “new business in the building next door named Miss Lizzie’s.”

Ghost Adventures sought to enjoin Miss Lizzie’s from using either the “Lizzie Borden” trademark or the hatchet logo in the coffee shop’s trade names, trade dress, and marketing materials.

The core problem here was causation. Ghost Adventures needed to show that Miss Lizzie’s used its mark in commerce in a way that caused confusion, not the Lizzie Borden mythos. The district court found that the hatchet displayed on Miss Lizzie’s signage was “not at all the hatchet trademarked by Ghost Adventures” nor even “a colorable imitation of it.” It continued: “Miss Lizzie’s mark associates its business with the historical story of Lizzie Borden, not the mark ‘Lizzie Borden’” that Ghost Adventures owns. Although “Ghost Adventures has an ‘incontestable’ trademark in ‘Lizzie Borden’ and its hatchet, Miss Lizzie’s is using neither the mark ‘Lizzie Borden’ nor the Ghost Adventures hatchet.” “Ghost Adventures has not demonstrated that its mark bears the strength which might give it the ‘secondary meaning’ reach that, for example, ‘Sam Adams Beer’ might claim regarding the historical figure Sam Adams.”

The court found the consumer confusion “limited” and caused mainly by physical proximity, their common but independent reliance on the shared Lizzie Borden mythos, and the tendency to associate services related to a historical site with the site itself, not by the similarity of the businesses’ marks. After all, “the same issues would arise if Miss Lizzie’s called its cafe ‘Forty Whacks Coffee’ and used a different image as its logo.”

The district court also noted that the parties’ services were different: “on one hand, sophisticated buyers who come from afar with tickets or reservations to experience the Lizzie Borden House; and the other, buyers seeking food or coffee.”

The parties also rely on different forms of advertising, and a sign on Miss Lizzie’s storefront explicitly disclaimed any relationship with the neighboring Lizzie Borden House. Such a disclaimer can “tip the scales to a finding of no likelihood of confusion and no infringement” where, as here, “the multi-factor analysis points to a low likelihood of confusion.”

disclaimer of affiliation or association in window

The court of appeals affirmed, noting, for example, that “Miss Lizzie’s hatchet spews blood, whereas Ghost Adventures’ is spotless. Indeed, it appears that the only similarity between the hatchet logos is that they both depict hatchets. The court, then, did not clearly err in finding that the hatchet logos are facially dissimilar.” Also, “the district court supportably found that Miss Lizzie’s reference to ‘Lizzie’ was to the lore of Lizzie Borden — which Ghost Adventures does not own — rather than to the mark ‘Lizzie Borden.’ Thus, the meaning associated with the name ‘Miss Lizzie’s Coffee’ is only incidentally similar to that of the ‘Lizzie Borden House.’” Ghost Adventures didn’t persuade the court of appeals that consumers would associate “Lizzie Borden” with its services rather than with Lizzie Borden herself.

Likewise, the district court permissibly viewed the parties’ differences as more important than their joint presence in the broad hospitality industry. “Ghost Adventures’ registration of the mark ‘Lizzie Borden’ did not prohibit other businesses in the hospitality industry from setting up shop in the vicinity of the Lizzie Borden House. Nor did it prohibit such businesses from marketing themselves by the use of Lizzie Borden’s story.”

What about actual confusion?

The relevant consumer confusion in a trademark infringement action is confusion caused by an infringing mark. Consumer confusion due to non-trademarked similarities between businesses or products does not indicate infringement. For example, if two outdoor Saturday farmers’ markets opened on the same block, causing wandering shoppers to think that they were affiliated, their proximity and similar business models, without more, would not be suggestive of trademark infringement. This basic principle tracks a core purpose of trademark law: to prevent a copycat from appropriating the goodwill of a brand by wrongly copying the brand’s mark. Because the district court supportably found that the source of consumer confusion was not the similarity of their marks, but something else altogether, the evidence of confusion relied upon by Ghost Adventures is of no consequence. (emphasis added)

Of course, this means that we have to be very sure what you can and can’t own as a mark! The foundational proposition of the district court and court of appeals here is “Ghost Adventures can’t own the Lizzie Borden mythos, even if consumers think they do.” I agree! But apparently a beer company might own the Sam Adams mythos, at least for sufficiently beer-related activities? This is of course related to the difference between owning a mark for something and confusion about affiliation, which is a very different animal.

What about intent? Ghost Adventures argued that the coffee shop “opened a location in immediate proximity to [Ghost Adventures’] business” and “intentionally used the word ‘Lizzie’ and a hatchet in [its] name and signage.” The district court supportably found that Miss Lizzie’s sought to benefit from the Lizzie Borden story in its own right, “not from the manner in which Ghost Adventures used that story.” It was not clear error to decide, “given the historical significance of the location,” neither Miss Lizzie’s acts alone nor those acts “considered in light of the entire record” evinced an intent to appropriate Ghost Adventures’ trademark.

What about incontestability? It didn’t affect the marketplace strength of the mark, which was not strong enough to displace consumers’ association with the real Lizzie Borden. 

The district court also pointed to a sign taped to the physical storefront that conspicuously reads: “Miss Lizzie’s Coffee is NOT ASSOCIATED, NOR AFFILIATED in any way with the Lizzie Borden Museum or Bed and Breakfast next door, nor any other business.” The district court supportably found that this clarification “further distinguish[ed] the businesses,” noting that effective disclaimers can “tip the scales to a finding of no likelihood of confusion and no infringement.”

allegations of copied instructions lead to finding of noninfringement and possible 512(f) violation

MFB Fertility, Inc. v. Action Care Mobile Veterinary Clinic, LLC, --- F.Supp.3d ----, 2024 WL 1719347, No. 23 cv 3854 (N.D. Ill. Apr. 22, 2024)

MFB sued Action Care for copyright and trademark infringement; Action Care counterclaimed for misrepresentation under 17 U.S.C. § 512(f), tortious interference, defamation per se and per quod, and cancellation of Plaintiff’s “PROOV” trademark. Defendant won dismissal of the copyright claim and plaintiff won partial dismissal of the counterclaims.

MFB was founded by fertility expert Dr. Amy Beckley, who invented PROOV to measure the presence of progesterone (PdG) metabolites in urine and to allow women to confirm successful ovulation by tracking their PdG levels. Through Amazon and its website proovtest.com, MFB “promotes, offers for sale, and sells products ... under the trademark PROOV.” Proov products include ads and instructions, such as FDA-required labels and their website’s Frequently Asked Questions page, so that Proov can be readily used by unskilled persons at home.

Competitor Action Care also specializes in the sale of PdG ovulation test strips. Action Care’s PdG test is called OvuProof, using Amazon  and buyovuproof.com.

MFB sent a DMCA takedown notice to Amazon in 2023 targeting Action Care, resulting in at least 174 units of Action Care’s products being stranded or lost. MFB’s DMCA Takedown Notice included, along with the statutorily required language, the following statements:

They [Action Care] found a cheap Chinese manufacturer to copy our tests then used all of our wording on the product page and product inserts. Copyrighted content: They copied all of our FAQs and product description from this product page [ ] They also took wording from our FAQ on our website: https://proovtest.com/products/proov-test-strips including the ‘who might have a problem with ovulation, comment FAQ, when to test, and what is successful ovulation.

Action Care counternoticed, but MFB sued, sent its complaint to Amazon, and got Amazon to take down OvuProof again. The putative copyright infringement is here:

 

comparison of instructions (far from identical)

Action Care’s legal strategy (waiting on the trademark part, which courts are often reluctant to decide on a motion to dismiss) was good here, and Amazon might well be willing to restore its storefront, though I have no insight into its decisionmaking. The court reasoned that MFB’s works were “scientific and factual,” “entitled to the narrowest copyright protections.”

It is “axiomatic” that copyright law denies protection to “fragmentary words and phrases” and to “forms of expression dictated solely at functional considerations” on the grounds that “these materials do not exhibit the minimal level of creativity necessary to warrant copyright protection.” “[L]anguage describing what a product does and how it is used is generally noncopyrightable; and even where it is copyrightable, infringement can be demonstrated only by precise copying.” Even assuming validity of MFB’s copyright and access, there was no substantial similarity given the highly factual nature of the works and the lack of striking similarity, a limit imposed to avoid “monopolistic stagnation.” There was no verbatim copying here; any overlap was necessary to describe an unprotected process.

MFB’s own claims of similarity showed their weakness:

• “The term ‘Cycle’ is identical to the term ‘Cycle.’ ”

• “The phrase ‘Works Great with Tests’ is substantially similar to the phrase ‘Works Well with Ovulation/LH Tests.’ ”

• “The term ‘PdG Test Strips’ is identical to the term “ ‘PdG Test Strips.’ ”

• “The term ‘CONFIRM OVULATION’ is identical to the term ‘CONFIRM OVULATION,’ and both are used in the first paragraphs of their respective works as a way to distinguish from predicting ovulation.”

• “The phrases ‘THE ONLY FDA-CLEARED PdG Test’ is substantially similar to the phrase ‘OvuProof is FDA registered,’ and each work includes that point in the third paragraph of their respective works.”

“In fact, under MFB’s construction, Action Care would ostensibly be required to violate the FDA’s labeling requirements for in vitro diagnostic products to bypass MFB’s copyright.” The court cited Feist in support of the idea that regulatorily mandated statements may not be original; here the FDA requires name and intended use(s), a statement of warnings or precautions, and other key details. “This functional, regulated language is precisely the ‘expression’ that MFB improperly claims intellectual property over.” Any copying was “limited to fragments that are descriptive of its product and is compelled by the legislature. MFB cannot claim ownership of medical terms such as ‘cycle’ or ‘PdG Test Strips’ no more than Pfizer or Moderna can claim ownership over ‘COVID-19 vaccine.’”

512(f) misrepresentation: Given the lack of binding precedent, the court looked at Lenz; did Action Care plausibly plead a lack of good faith? MFB’s DMCA notification represents that Action Care copied “all” of MFB’s Copyrighted Works. The word “all” means 100 percent, or verbatim. That was false as a matter of law, rendering Action Care’s allegations significantly more plausible than in other cases, and Lenz makes willful blindness actionable as well. “[W]hether a copyright owner formed a subjective good faith belief is, in most instances, a factual issue that is not appropriate for resolution on a motion to dismiss.” Thus, “a DMCA notice submitter like MFB must proactively consider the potential that similarities in materials are unprotectable. … Given the discrepancy between ‘all’ and, apparently, no copying …, there is a triable issue as to whether the MFB formed a subjective good faith belief that Action Care’s sale of its OvuProof was infringing, or if instead MFB were willfully blind to the fact that Action Care was not infringing in violation of 512(f).”

Defamation and tortious interference claims based on statements to Amazon also proceeded.  (It does not appear that MFB argued that 512(f) had preemptive effect.)

But the trademark cancellation claim failed because Action Care argued that there was no likelihood of confusion, depriving Action Care of standing.

Right of publicity question of the day, Duolingo edition

 Should Rogers apply to this language learning app? What about the transformative use test? 

Duolingo screenshot showing response to perfect lesson: "Are you Beyonce? You made 0 mistakes. You're flawless."

individual pitches/RFPs are advertising/promotion, but not user support/FAQ pages

Spotlight Ticket Management, Inc. v. Concierge Live LLC, No. 2:24-cv-00859-WLH-SSC, 2024 WL 4866813 (C.D. Cal. Aug. 30, 2024)

Spotlight provides ticket and event management enterprise solutions. It entered into an exclusive agreement with Ticketmaster, a ticket sales and distribution company, giving it “the exclusive right to directly integrate its technology with Ticketmaster’s software and systems platform.” Integration means “the ability to access Ticketmaster’s application programming interfaces (‘API’) to automatically and directly move Ticketmaster tickets without needing to go through the Ticketmaster website....” In exchange, Spotlight pays Ticketmaster an annual fee and a percentage of its revenue—millions of dollars for “a significant competitive edge in relation to its competitors.”

Concierge competes with Spotlight to provide similar ticket and event management services. Spotlight alleged that Concierge falsely advertised through its “public website, marketing materials, and direct communications with potential clients” in pitch meetings that it has the same functionality and integration capability with Ticketmaster as Spotlight does, and falsely characterizes Spotlight’s relationship with Ticketmaster as merely a marketing agreement, and not an exclusive agreement.

For example, Spotlight alleged that it lost out on a pitch to an online food ordering and delivery company because Concierge “falsely represented... that it could perform all the same functionality as [Plaintiff]—including integrations with Ticketmaster—but for a lower cost.” It brought false advertising claims under California and federal law along with tortious interference claims.

When brought by competitors, California UCL/FAL claims are basically Lanham Act claims, so they were analyzed together; the court applied Rule 9(b)’s heightened pleading standard, and found that the complaint passed it because it identified several specific pitches/requests for proposals. “While Plaintiff fails to allege the ‘who’ including the individuals present at the meetings (other than the Defendant and the entity issuing the RFP), the ‘where’ including the location or place of the pitches/RFPs, and the specific content of the allegedly false representations including a statement about why each statement is false, this is because Plaintiff was not in the room during the pitches.”) Spotlight provided enough, including discussing whether the statements were contained in marketing materials, the RFP, or were provided orally.

However, applying the Lanham Act’s “commercial advertising or promotion” requirement to both state and federal claims, some of the alleged false statements didn’t qualify. Specifically, Concierge’s public website’s user support articles weren’t advertising. The titles included “How do I add Ticketmaster inventory into Concierge Live?” and “How do I add Ticketmaster inventory into Concierge Live?” Plaintiff’s characterization of these as “marketing materials” did not persuade the court, since they were under the support subdomain, and the content was “written in a question-and-answer format suggesting that this material is a guide for users of Defendant’s platform.” These were “more akin to guides or instruction manuals and not commercial advertisement.”

Tortious interference with contractual relations: Spotlight didn’t sufficiently allege Concierge’s knowledge of its contract with Ticketmaster or the exclusive agreement; it wasn’t enough to allege that Ticketmaster issued a public letter in 2021 stating that it was in an exclusive partnership with Spotlight.

Tortious interference with prospective economic advantage: There was no independent tort alleged other than the alleged misrepresentations on Concierge’s website, which the court had just held not actionable.

 

omitting serving size on package front may mislead if dosage suggests per-gummy dose

Tarvin v. Olly Pub. Ben. Corp., 2024 WL 4866271, --- F.Supp.3d ----, No. 2:24-cv-06261-WLH-PD (C.D. Cal. Nov. 12, 2024)

Olly makes dietary supplements, e.g., “Sleep Extra Strength Melatonin 5 mg.” Each product includes the dosage amount and the net quantity of units per container on its front label. But, unlike some other brands, Olly Products do not state the serving size on the front label or that the dosage amount is per serving. Serving size and servings per container information is on the back label. This means that a consumer must ingest two units of gummies of Olly Extra Strength Sleep Product, rather than one, to obtain the 5 mg of melatonin that is advertised on the product’s front label. Tarvin brought the usual California statutory and other claims.

Statutory claims: Would a reasonable consumer have consulted the back label? This wasn’t the rare situation in which the claim could be dismissed on the pleadings. In addition to the labels themselves, Tarvin pled images of competitor labels as points of comparison to demonstrate “appropriate labeling conduct” and establish the expectations of a reasonable consumer. Misleadingness was plausible.

Olly argued that the labels were at most ambiguous, and that consumers are required to consult the back in cases of ambiguity. But a front label may be “unambiguously deceptive” for Rule 12(b)(6) purposes “even if it has two possible meanings, so long as the plaintiff has plausibly alleged that are reasonable consumer would view the label as having one unambiguous (and deceptive) meaning.” Representation of dosage amount on the front label without qualifying serving information may be considered “unambiguously deceptive” on a motion to dismiss.

Warranty claims, however, failed for want of an unequivocal promise that the dosage was per gummy. Likewise, negligent and intentional misrepresentation claims failed, because they required actual falsity: a “perfectly true statement couched in such a manner that is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information” may be actionable under consumer protection statutes but not common law fraud.

 

My latest acquisition

 They're even in my size! Heavy, but not as hard to walk in as I feared.

Reading list: Mala Chatterjee, Property, Speech, and Authorship: A Dilemma for Personhood Theories of Copyright

 Recommended! Short and thought-provoking.

Property, Speech, and Authorship: A Dilemma for Personhood Theories of Copyright

Cambridge Volume on Intellectual Property & Private Law (forthcoming 2024)

15 Pages Posted: 2 Aug 2024

Mala Chatterjee

Columbia Law School

Date Written: July 22, 2024

Abstract

In the theoretical literature on the normative foundations of copyright law, a substantial body of work has endeavored to justify the legal institution by grounding it in the allegedly “special” relationship that authors have with their expressive works. Often drawing from cultural or philosophical views about authorship, art, and expression, much of this scholarship seeks to explain and vindicate copyright law with the idea that, in some way or another, authorial works are distinctly personal—and perhaps even parts or extensions of their authors—by their very nature. Typically, legal scholars approach this task by plucking ideas from influential philosophers about personhood, property, or speech to serve as their theoretical starting points and then venturing to expand or adapt these ideas into a justification for copyrights. In the most prominent (and promising) of such interventions, scholars have advanced personhood-based defenses of copyright law adapted from Wilhelm Friedrich Hegel’s self-formation argument for private property rights and Immanuel Kant’s compelled speech argument against unauthorized publication. This essay argues that the task of bridging the gap between personhood and copyright is not so easy—if it is even possible at all. I first argue that, properly understood, neither Hegel’s self-formation argument nor Kant’s compelled speech argument can be adapted or extended into a justification for anything like copyrights. I then argue that these attempted adaptations—and their shortcomings—ultimately reveal a fundamental normative conflict between personhood and copyright.  It will follow that, even if authors have distinctly “personal” relationships with their works in the strongest possible sense, personhood-based arguments cannot be used to justify copyright law. Indeed, if anything, the idea that an author has a distinctly personal connection to her work—one that must be recognized and protected by the law—ultimately cuts against the existence of copyrights and might even render them unjustifiable.

coordinated campaign to disparage grain-free & other pet food not actionable under Lanham Act

Ketonatural Pet Foods, Inc. v. Hill’s Pet Nutrition, Inc., 2024 WL 4679219, No. 24-2046-KHV (D. Kan. Nov. 4, 2024)

Ketonatural is a start-up that sells grain-free pet food, treats, and supplements. Hill’s is a large pet food company that makes traditional grain-containing products, one of the big three that does. Hill’s markets to vets, including by offering free continuing education courses, product literature, and incentive programs. It funds research at vet schools and also funds non-profit entities and influential professional organizations, such as the American Veterinary Medical Association. Some nonprofits are largely funded by Hill’s, and Ketonatural labels them “cut-outs.” One provided more than $149 million to fund approximately 3,000 veterinary studies. Another produces textbooks, continuing education courses and veterinary nutrition courses, complete with credentialed faculty, course materials and lectures. Through the years, Hill’s officers, directors and other agents have served on their boards. Hill’s also partners with vets in support of its marketing, such as Dr. Freeman is a veterinary professor at Tufts University and co-founder of the “Petfoodology” web site, which Hill’s actively promotes. Other vet partners have authored various articles on pet nutrition.

Grain-free foods started to gain a foothold in the last decade, and Hill’s market share fell by more than 20%. Ketonatural alleged that Hill’s and individual vets began a coordinated campaign to raise concerns about the risks of grain-free pet foods. Hill’s described these foods as “BEG” diets: boutique, exotic or grain-free. “Boutique” refers to the company size and “exotic” describes the ingredients used. “Exotic ingredients can include kangaroo, lentils, duck, pea, fava bean, buffalo, tapioca, salmon, lamb, barley, bison, venison and chickpeas. This definition describes every pet food sold in America except for those made by defendant and two other companies.”

In 2018, the FDA announced that it had begun an investigation into a potential link between canine dilated cardiomyopathy and diets containing peas, lentils, other legume seeds, or potatoes as main ingredients,” which “appear to be more common in diets labeled as ‘grain-free.’ ” As a result of a FOIA request, Ketonatural discovered that some of Hill’s pet vets had set up a meeting to discuss their “clinical observations and concerns concerning a potential relationship between grain-free canine diets and Dilated Cardiomyopathy.” Since 2014, 80% of cases reported to the FDA (triggering the investigation) came from two vets affiliated with Hill’s. They allegedly didn’t send an unbiased, representative sample of the canine DCM cases that they encountered in their respective professional practices, but withheld cases involving grain-containing diets, without initially disclosing their selection protocol to the FDA. The FDA investigation attracted mainstream media attention, which also featured statements by Hill’s pet vets.

Allegedly because of the biased reporting, in 2018 the FDA issued a warning about repots of DCM in dogs “eating certain pet foods containing peas, lentils, other legume seeds, or potatoes as main ingredients.” This allegedly “created panic among pet owners, resulting in a disproportionate number of new cases reported to the FDA on dogs fed grain-free diets when compared to dogs fed diets that contained grain.” In 2022, the FDA issued a press release saying it didn’t intend to release further public updates until there was meaningful new scientific information to share. After four and a half years, it allegedly had not found a causal relationship between BEG diets and DCM. “Even so, the panic, media attention and misinformation surrounding the investigation caused massive financial and reputational harm to manufacturers of BEG pet food.”

Scholarly journals were allegedly a big part of the problem. Individual Hill’s-affiliated ets wrote at least 15 different journal articles that allegedly featured intentionally false or misleading statements about DCM, including a non-peer reviewed article asserting that grain-free diets contributed to DCM that was widely read. Another study was, after publication, the subject of an “Expression of Concern” written by the editors of the journal in which it was published. “The journal did not retract the article but provided a statement describing undisclosed financial conflicts (including defendant and MMI), methodology irregularity, faulty reasoning and other misconduct.” Hill’s also moderated, sponsored and controlled a private Facebook group on diet-associated DCM in dogs with more 129,000 members. “The moderators have repeatedly blocked, banned and deleted comments by individuals who contradict the assertion that BEG diets are correlated with higher rates of canine DCM, even when the commenters are board-certified veterinary nutritionists, tenured professors at veterinary schools or others highly qualified in pet nutrition.”

Challenged statements included:

• “[H]eart problems [are] linked to grain-free food.”

• “What seems to be consistent is that it [DCM] does appear to be more likely to occur in dogs eating boutique, grain-free, or exotic-ingredient diets.”

• “The FDA, researchers, and individual clinicians and pet owners have all reported reversal of disease with a diet change.”

• “We want to be extremely clear that the FDA advisory does not apply solely or exclusively to grain-free foods. It applies to any foods that are generally un(der)tested or un(der)studied as long-term dog diets. We sometimes talk about them as ‘BEG’ diets.”

• “DCM is caused by boutique brands, exotic proteins, or grain-free or a combination thereof...”

After the FDA investigation, Hill’s revenues grew by more than 50 per cent to $3.3 billion per year, while Ketonatural lost business and market value: “former customers stopped buying its products, veterinarians advised pet owners not to purchase its products and members of its target market chose not to do so.”

For purposes of its Lanham Act analysis, the court assumed that defendant would vicariously liable for statements by the cut-out nonprofits and the individual veterinarians.

The big problem was commercial advertising or promotion. “Courts have consistently concluded that scientific articles do not constitute commercial speech and therefore cannot be the basis for false advertising claims under the Lanham Act, even when a commercial entity has funded the research.” However, “the secondary dissemination of scientific and academic research can constitute actionable commercial speech under the Lanham Act if defendant uses the material to promote its product and influence purchasers.” Likewise, “web site links to other commercial sites, which are one step removed from defendant’s own web site, do not render defendant’s web site commercial speech.”

Thus, the court dismissed any claims related to statements in scholarly journals and statements on the respective web sites of Hill’s and its captive nonprofit which linked to articles, interviews and or/blog posts of the individual veterinarians. (I really don’t get excusing Hill’s website here—it’s definitely a commercial site, and linking to others’ messages is the same as a for-profit company disseminating scientific articles in purpose and effect.)

Also, allegedly false statements by Hill’s-associated veterinarians to mainstream media and pet owners and statements by Hill’s in educational programs for veterinarians and on Facebook and its web sites were not commercial speech. “At best, plaintiff alleges that the statements influenced consumers to purchase products other than its own grain-free products— but not to specifically purchase defendant’s products.” (This again seems wrong: giving people reasons to avoid an entire category of competitors does promote sales, even if there’s some leakage—that’s why disparagement of a competitor is generally actionable.)

Using the traditional Bolger factors for identifying commercial speech, these weren’t traditional advertisements. “[N]one of the allegedly false statements expressly promote defendant’s products relative to plaintiff’s products or relative to the products of other grain-based pet food manufacturers.” They weren’t sent directly to consumers or on product packaging. Thus, Ketonatural didn’t plausibly allege that the statements in question “proposed a transaction or offered certain goods or services, let alone for defendant’s products.” Also, “[t]he statements by individual veterinarians in blog posts, to mainstream media and to pet owners are too attenuated to deem them promotional in nature because plaintiff’s allegations assume multiple levels of promotion before reaching an end consumer. Plaintiff has not alleged that statements by defendant to veterinarians in educational programs were anything but educational in nature, and the Court cannot reasonably infer that a continuing educational program on the safety of a pet food diet is an advertisement.”

Nor did the statements reference specific pet food manufacturers or products. (Because they disparaged an entire category of competitors.)

Ketonatural did allege Hill’s economic motive, but that wasn’t enough.

Hill’s also challenged Ketonatural’s claim of literal falsity. Ketonatural argued that Hill’s made false establishment claims about the correlation between DCM and BEG diets. A plaintiff challenging “tests prove” or “establish” claims does not need to affirmatively prove that defendant’s assertions are false, but only that the studies do not support the conclusions. But the court found that this standard (which the court called “more lenient” even though it’s not, it’s just focusing on the falsity of the “tests prove” claim) didn’t apply, because (1) the statements weren’t made in advertising (this makes no sense) and (2) Hill’s never claimed that studies “proved” a link between DCM and BEG. (Reason (2) is at least coherent, though it conflicts with cases holding that statements about scientific/health matters are often inherently establishment claims, because they don’t make sense otherwise—why are you invoking the FDA or “links”?)

But the court did not further agree with Hill’s that Ketonatural’s claims were barred on the pleadings by laches. Ketonatural filed suit within a year of the FDA announcing that it had insufficient data to establish a causal relationship between BEG diets and DCM, and it alleged that Hill’s did not make costly expenditures in reliance on the purported delay. Thus, Ketonatural sufficiently alleged that its delay was reasonable, and that Hill’s did not suffer undue prejudice.

 

Another ROP amicus

Nolen v. PeopleConnect, arguing that ROP laws applied to noncommercial speech like reprinting high school yearbooks are generally unconstitutional. 

Timeshare company's own "exit" program for "qualified" owners isn't misleading even if broadly unavailable

Wesley Financial Gp. v. Westgate Resorts, Ltd., 2024 WL 4581512, No. 6:23-cv-2347-RBD-LHP (M.D. Fla. Aug. 28, 2024)

A rare timeshare exit company lawsuit against a timeshare developer, alleging false advertising and related claims. It’s unsuccessful but points to practices that the FTC or AGs might have something to say about.

At one point, plaintiff WFG obtained accreditation and an A+ rating from the Better Business Bureau, which it advertised with the AARP, allegedly bringing in more than $10 million in revenue. Its methods to secure exits do not include the use of attorneys or the provision of legal services.

Meanwhile, Westgate will not repossess financed timeshare interests with outstanding loan balances if owners are current on their payments. “Only paid-off (or inherited) timeshares qualify for voluntary repossession or termination with Westgate, and only at its discretion.” WFG’s advice is apparently to stop making payments and then wait for the developer to foreclose on an interest and offer to take it back, because the credit hit is better than the costs of other paths.

In response to exit companies, timeshare developers have rebranded their existing voluntary repossession procedures as developer-backed “exits.” Westgate has tried to divert consumers to its own “exit” program along with suing exit companies. In addition, it “stopped taking back interests from owners whom the developer even suspected of consulting an exit company, conditioning its repossessions on an affidavit swearing the owner has not worked with ‘any timeshare exit company, lawyer or law firm’ in seeking cancellation, or if they have, disclosing the third party, handing over any contract with them, and promising to cooperate in any future lawsuit against them.” WFG responded to this development with a confidentiality clause in its contracts requiring its customers not to reveal they are working with an exit company. Westgate has in fact sued owners it later discovered were WFG customers and signed the affidavit anyway. (I don’t understand why one would get into a relationship with a timeshare developer.)

Anyway, the timeshare coalition ARDA, on whose board two Westgate executives sit, allegedly got the BBB to revoke plaintiff’s accreditation, despite the exit company’s five-star rating based on more than a hundred customer reviews. Then, it successfully lobbied AARP to stop running WFG’s ads because it lost its accreditation. “Westgate later sued the exit company in its home state for violating the Tennessee Consumer Protection Act, which WFG violated by engaging in the unlicensed practice of law, the district court ruled.”

This lawsuit followed.

Lanham Act false advertising: WFG argued that Westgate’s exit program was not in fact available to most owners. It challenged the statement that “[b]y working with Westgate Resorts, owners who chose to relinquish their timeshare have been able to do so with very little effort and have been able to relieve themselves of all future maintenance fee obligations” because this offer is open only to a very limited subset of owners.

The court rejected this claim because the ads truthfully stated that direct “exits,” like voluntary repossession and contract termination, were available to “qualified owners” and “qualifying accounts,” “but without detailing those qualifications.” Given the reference to qualifications, the “owners have been able to relinquish” claim wasn’t likely to be materially misleading, even if “exit” is not available to most owners regardless of loan balance. The court reasoned that “qualified owners” does not mean or imply “most owners.”

This is where the FTC might well disagree: if the conditions are mostly unattainable and the qualifications are possible to explain—like “you’ve paid off the purchase”—then further disclosure is required to prevent consumers from wasting their time/money on something that won’t help them.

But, the court reasoned, “[f]alsely advertising an available ‘exit’ cannot deceive owners into no longer seeking an exit,” so it couldn’t have harmed the plaintiff if hopeful owners inquired further and found Westgate’s program unavailable. I don’t get this logic. Why wouldn’t the failure of the supposedly best option (as other parts of the ad campaign touted) plausibly lead at least some consumers to despair and give up? If I try a headache remedy that’s “the best available” and it doesn’t work, why would I try lesser versions?

Anyway, antitrust claims failed because they were antitrust claims.

FDUTPA prohibits “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.” But, as explained above, “[a]dvertising the Legacy Program—which is undisputedly the only developer-backed way to cancel a Westgate timeshare—does not injure consumers substantially, even if the ads lead consumers to phone trees or high-pressure sales pitches before learning Westgate will not let them out.” So too with lobbying the BBB, and anyway that was the developer coalition, not Westgate directly, and FDUTPA doesn’t “extend indirect liability to third parties for the unfair and deceptive acts of another, regardless of their relationship.”

What about the affidavit of non-involvement with exit companies? The court agreed that the language was “sweeping.” “Blocking consumers from speaking with attorneys about a contract as a condition of bargaining, and punishing consumers if they have done so, offends public policies favoring ‘access to redress,’ ‘access to courts,’ and the uninhibited ability to engage in ‘full and frank communication’ with an attorney about potential legal matters.” But Westgate denied that the affidavit’s language encompasses “all lawyers, law firms, or third parties”—only the ones that potential clients are likely to find and ones that have developed expertise.

Still, the court found that WFG couldn’t succeed, because a prohibition on contracting a non-lawyer exit company was fine. “[E]mploying contracts of adhesion is not an unfair trade practice on its own.”

Timeshare contract terminations are not some overriding consumer good whose blanket availability the law protects. It is not plausible to suggest that it is unethical, unscrupulous, or substantially injurious to consumers for Westgate to change its termination and repossession policies and procedures—even intending to nullify exit outfits’ methods that rely on getting the developer’s owners to stop payments.

This is true even if WFG is forced to refund a client’s money, because of its full refund guarantee, if Westgate finds out about its involvement. Refunds don’t harm consumers.

Tortious interference/civil conspiracy claims also failed, especially since WFG inserted its own nondisclosure provision after Westgate changed its practice—forcing disclosure can’t cause tortious interference under those circumstances.

when weak TM claims do better than seemingly strong false advertising claims

Sanho Corp. v. Kaijet Technol. Int’l, 2024 WL 4553279, --- F.Supp.3d ----, No. 1:18-cv-05385-SDG (N.D. Ga. May 20, 2024)

Note: A jury found Kaijet liable for design patent and copyright infringement after this opinion, but rejected the TM claims, which I guess says something about a jury’s ability to distinguish claims. It didn’t get a chance to decide the false advertising claims, which I think reflects courts’ relatively lax approach to TM compared to the rigors to which false advertising claims are subjected before reaching a jury; personally, I likely would have gone the other way.

Sanho sells accessories under the HyperDrive name, including MacBook dongles. Kaijet sells competing UltraDrive MacBook dongles. 

Kaijet product

Sanho product

(My spouse uses a third competitor that looks basically indistinguishable; FWIW, he says that he would not buy the same product again because it's easy to whack it in a way that detaches it from the laptop and that a cable connection would have been a better choice.)

Sanho has a registration for HYPERDRIVE.

HyperDrive logo

UltraDrive logo

The court first found that there was a factual issue about whether the hubs were “power adapters” as specified in the trademark registration. The hubs can be used “to transmit[ ] power from a ‘source’ (MacBook Pro) to a ‘sink’ (a cell phone being charged).”

The court also found a factual issue on likely confusion between UltraDrive and HyperDrive, reasoning that because a power hub is not a drive (and also that there’s a Star Wars reference), the mark was suggestive. Third-party use of the weak components “hyper” and “drive” didn’t reduce the strength of the mark (but somehow that didn’t make confusion less likely just because the overlap was in “drive”). Although the marks weren’t similar in appearance, they were “similar in sound, meaning, and usage,” since they both had a two-syllable prefix followed by the word “drive,” and “hyper” and “ultra” were roughly synonymous. They were directly competing. Although there’s a distinction between bad “[i]ntent to benefit from a competitor’s goodwill” and good “intent to copy,” they’re often related and bad can be inferred from good, as it could be here. Email communications repeatedly referenced Sanho’s design, and expressed a desire to use similar elements in its own product. Kaijet US changed its existing product name from “ultrastation” to “UltraDrive” after Sanho began selling its hubs, and as Kaijet US was preparing to introduce a competing product into the same market.

Whether there was evidence of actual confusion was a contested issue about interpreting consumer complaints.

Sanho’s false advertising claim  alleged that the defendants falsely advertised a hub as an “8-in-1” product, when it contains only seven ports. But the court agreed that this wasn’t literally false, and Sanho offered no evidence of likely confusion. It seems like a jury should at least have addressed the literal falsity issue, because it’s hard to say that no reasonable jury could have found literal falsity, when there are eight numbers for ports and the numbers don’t correspond to, or even add up to as far as I can tell, eight distinct functions. But the court reasoned that “labels do, in fact, count out eight functions. Several of those functions do seem duplicative—(5) and (6) are both labeled ‘USB 3.0.,’ (7) and (8) are both labeled ‘Memory Card’—but that suggests the labels are misleading, not literally false.” I would instead have said that means that both possible meanings—number of functions or number of ports—are literally false.  

neither eight functions nor eight ports shown

There were also factual disputes on the copyright infringement claim based on the parties’ packages.  Sanho’s packaging contained both protectable and non-protectable elements: 

Sanho packaging

Non-protectable are Sanho’s product name and description, the packaging’s selection of typographies and colors, and familiar images such as MacBooks and laptop ports.

Also non-protectible are functional elements like the listing of product information and specifications. The way in which the product-shaped cutout or window on the front of the packaging allows consumers to view the product without opening the packaging is likewise functional and therefore non-protectable.

However, there was “a spark of creativity here in Sanho’s arrangement and coordination of the packaging’s otherwise unprotectible constituent elements—most notably in the alignment of the right side of the product-shaped cutout with the left edge of a depiction of a MacBook to suggest the physical docking of the hub to the laptop.” Packaging for similar products contained “more or less the same elements—product name and description, specifications and features, cutouts or windows—but in a variety of arrangements, none of them resembling Sanho’s in overall layout, and none of them suggesting its product’s physical compatibility with another device in the way that Sanho’s does.”

packaging front comparison

packaging side comparison

The court found that defendants

appropriated the most original element of Sanho’s design: the cutout in the center showing the product hub physically interfacing with a depiction of a MacBook to the right. In addition, the front of [defendants’] packaging presents mostly the same information as Sanho’s, and in the same layout: product name at top, product description at bottom, “4K” and “50 Gbps” callouts at bottom right. The back of j5create’s packaging, like Sanho’s, depicts a MacBook, open at a similar angle and viewed from a similar perspective, with the product hub attached and its ports labeled, followed by a bulleted list detailing the ports’ capabilities. The left side panel of [defendants] packaging, like Sanho’s, depicts and labels the hub’s ports. These are significant similarities in the packagings’ arrangement and coordination of dominant design features.

But they were also “far from identical,” including differences in color and font, as well as defendants’ product carrying product specifications in four languages and depicting the product’s side profile on the side of the package. Because substantial similarity is qualitative, this was for the jury.

Finally, the court rejected Kaijet’s false advertising counterclaim based on Sanho’s allegedly false “fake review campaign” of positive product reviews on Amazon, based on failure to show materiality. It was insufficient to provide:

1. A study showing that 74% of respondents “read online reviews” from online stores like Amazon and BestBuy;

2. A study showing that 32.7% of respondents cited “[p]roduct reviews and recommendations as a “[m]ain reason for shopping at Amazon”; and

3. Sanho CEO Daniel Chin’s declaration testimony that “The UltraDrive is an inferior and lower quality version of the HyperDrive. It receives less favourable customer rating reviews on Best Buy’s website and has many complaints.”

“Evidence about where consumers read online reviews is not probative of what they do with the information in those reviews. Likewise, evidence about why consumers choose to shop at Amazon is not probative of why they would choose the HyperDrive over the UltraDrive, when the latter was sold exclusively through Best Buy.” There was no evidence tending to prove that Sanho’s alleged fake reviews caused consumers to buy Sanho’s products instead of defendants’, and self-interested testimony on superiority was insufficient. (This is a bit of conflating materiality with harm causation, but ok. Imagine a court finding evidence that consumers generally care about brand names, or other general testimony about branding, insufficient in a TM case!)

Also, defendants failed to rebut Sanho’s evidence of immateriality, which was deposition testimony that No such evidence has been produced. Furthermore, the Kaijet Defendants have failed to meaningfully rebut Sanho’s evidence of immateriality: deposition testimony that the Sanho product had a better aggregate rating on Best Buy (where it is actually sold) than it did on Amazon, and Sanho’s expert’s testimony that the sales metrics of its products, both of themselves and relative to the sales metrics of Kaijet, were uncorrelated with the timing of Sanho’s alleged fake review campaign. No reasonable jury could find, on this record, that Sanho’s fake review campaign was material.

Revisiting Ty v. GMA

 Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167 (7th Cir. 1997), features dueling bean bag animals. I've never been convinced the two pigs at issue were substantially similar, even in staged pictures, but Harvard's amazing librarians finally dug up a color picture of the two cows at issue, and they're a lot more similar .... which plausibly influenced the court's reasoning on the pigs.

Ty's Daisy the cow and GMA's Louie the Cow

Laches as to direct liability also precludes contributory liability

Hawaii Foodservice Alliance, LLC v. Meadow Gold Dairies Hawaii, LLC, --- F.Supp.3d ----, 2024 WL 2834159, No. 21-00460 LEK-WRP (D. Hawai’I Jun. 4, 2024)

Interesting contributory liability issue in its interaction with laches. At the core, plaintiff alleged that defendant MGDH’s use of phrasing and imagery suggesting that Meadow Gold brand products are sourced in Hawai’i was misleading and deceptive because Meadow Gold products contain milk and other products, such as whipping cream, imported from the continental United States. The other defendants, Hollandia, Heritage, and Saputo, supplied products to MGDH. The operative claims were false designation of origin/false advertising in violation of the Lanham Act and coordinate state-law claims.

The court previously granted partial summary judgment to MGDH for all claims based on “Hawai’i-Themed Images and Phrases” (e.g., a Hawai’ian themed mascot and the tagline “Hawaii’s Dairy” as well as “Made with Aloha”) on laches grounds, although the court denied summary judgment for claims based on the use of text that represents that Meadow Gold products are manufactured fresh in Hawai’i:

In 1897 seven O‘ahu dairy farms united as the Dairymen’s Association, Ltd., to manufacture fresh milk for the community. Through the support of Hawai‘i families, we grew to become Meadow Gold Dairies in 1959. Today we operate statewide and continue to manufacture fresh milk, dairy, juice and nectar products in Hawai‘i. Generations of loyal Island families enable us to maintain our tradition of giving back to the communities we serve.

The court previously denied the supplier defendants’ request for summary judgment on the grounds that the laches defense was personal to MGDH. Now, it essentially reverses that holding for purposes of contributory liability. The court accepted the suppliers’ argument that they couldn’t have “‘contribute[d]’ to a Lanham Act violation that never occurred.” This Court agrees. [But that’s not what laches means: a violation (may have) occurred, but it is no longer redressable. Had they sued in time, it would have been found to be a violation.]

But the court applied a plaintiff-focused rule:

“The affirmative defense of laches ‘is an equitable time limitation on a party’s right to bring suit, which is derived from the maxim that those who sleep on their rights, lose them.’ ” Plaintiff did not merely lose the ability to obtain a remedy against MGDH for its use of the Hawai’i-Themed Images and Phrases, Plaintiff lost any rights it may have had under the Lanham Act regarding the use of the Hawai’i-Themed Images and Phrases.

Permitting plaintiff to prove contributory liability by establishing a primary violation by MGDH would allow plaintiff to avoid the “effect” of laches.

In addition, Hawai’i-themed images and phrases suggested a connection to the state, but didn’t make a representation about the origin of the milk. Thus, plaintiff couldn’t show falsity for false designation of origin/false advertising. (For the same reasons, it couldn’t show a violation of the state law prohibition on unfair methods of competition from those words/images.)

Remaining claims against suppliers (only two of whom could have been held to make the remaining accused claims): They argued that a defendant has to falsely designate origin of their own goods, contrasting the language of Section 1125(a)(1)(A) (prohibiting false designation of origin that “is likely to cause confusion, or to cause mistake, or to deceive as to ... the origin ... of his or her goods”), with that of Section 1125(a)(1)(B) (covering misrepresentations of “the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods ....”). AvePoint, Inc. v. Power Tools, Inc., 981 F. Supp. 2d 496 (W.D. Va. 2013), held that §1125(a)(1)(A), “by its plain terms, does not extend to misrepresentations regarding the geographic origin of another person’s goods ...,”

Even if that was so, there was at least a genuine issue of material fact as to whether the products that the remaining supplier defendants provided to MGDH were their own goods.

The court described the accused text as “a trademark of MGDH,” which seems dubious (it doesn’t seem like the kind of thing that functions as a mark, coming within a block of text as it does). But the larger point—in preparing the packaging for the dairy products they sold to MDGH, the suppliers engaged in “bona fide” use of the text—seems right regardless of whether it was a trademark use. If the products had been defective, we’d certainly say they were the supplier’s products even if they were also the licensor’s products.

Damage: The supplier defendants argued that the evidence showed that, after MGDH took over, plaintiff “did not lose any customers, and retained its 65% market share” during the period it used the relevant text. But that didn’t prove it couldn’t have had more. Likewise, that its sales didn’t increase after the text was removed didn’t indicate that MGDH didn’t lose potential profits as compared to a world in which the text was never used. Also, plaintiff provided a damages expert; the motion to exclude was the proper forum for dealing with the expert.

Direct liability for § 1125(a)(1)(B) false advertising requires that an entity “made ‘the specific, false statement[ ] at issue in the litigation.” This could be shown if they controlled or were involved in creating the statement on the labels. The suppliers argued that this was all MGDH’s doing, and that they only reviewed for compliance with FDA regulations, correct spelling, etc. Witnesses said things like: “when they give us their graphics with their brand equity on it, we are not checking and validating that because it’s not ours to do anything with.”

But plaintiff submitted evidence that supplier-defendant Saputo suggested to MGDH that the accused text be removed, which suggestion was followed, creating a genuine issue of material fact on control. By contrast, supplier-defendant Heritage approved label proofs that included the accused text, but there was no evidence of control over the use of that text in particular, so the direct liability claim against it failed.

Contributory liability also involved contested factual issues. The court adopted the Eleventh Circuit standard: “[f]irst, the plaintiff must show that a third party in fact directly engaged in false advertising that injured the plaintiff. Second, the plaintiff must allege that the defendant contributed to that conduct either by knowingly inducing or causing the conduct, or by materially participating in it.” The second prong requires a plaintiff to “allege that the defendant actively and materially furthered the unlawful conduct — either by inducing it, causing it, or in some other way working to bring it about.”

The court treated the state law claims similarly.

associating two differently named products can't cause dilution, which requires similar marks

In re Soclean, Inc., Marketing, Sales Practices & Prods. Liab. Litig., No. 22-mc-152, MDL No. 3021, 2024 WL 4444819 (W.D. Pa. Oct. 8, 2024)

Previous discussion of MDL. As previously noted, SoClean is a dominant player in the market for medical devices that sanitize continuous positive airway pressure machines (CPAPs), which treat sleep apnea and respiratory conditions. It alleged that the Philips defendants, who make such devices, engaged in false advertising about one of SoClean’s devices in order to deflect blame for the Philips devices’ design defects. Philips counterclaimed for false advertising, trademark dilution, and state-law deceptive trade practices. This opinion adopts in part and rejects in part a special master recommendation that SoClean’s motion to dismiss the counterclaims be denied.

False advertising: SoClean argued that Philips failed to allege adequately causation because there are multiple intervening steps between the alleged consumer deception and Philips’ alleged injury. Philips’ theory was that SoClean’s claim that its device was compatible with the Philips devices was false, which influenced consumers to use SoClean’s device with Philips devices -- thereby damaging Philips’ products by causing the foam to degrade, as well as harming the reputation of Philips’ products, and causing a decline in Philips’ sales.

This satisfied Lexmark and created a factual issue on proximate cause because the alleged harm flowed from SoClean’s own pronouncement that its device was compatible with Philips’ devices. Intervening causes such as the FDA alert about cleaning CPAP machines and Philips’ voluntary recall could affect damages but weren’t enough to warrant dismissal.

Trademark dilution: This requires an association arising from similarities between two marks that causes damage. There is no dilution claim for associating one marked product with a differently marked product. Thus, SoClean’s compatibility chart, which stated that SoClean’s products were “compatible with free adapter” with Philips’ products, could not “lessen the capacity of Philips’ mark to identify and distinguish Philips’ mark from SoClean’s mark.”

New Hampshire Consumer Protection Act: The relevant theories were that (1) SoClean made representations about characteristics its product did not have (i.e., full compatibility); and (2) SoClean made representations about its sponsorship, approval, affiliation or connection with Philips.

As for the first, it was

certainly reasonable to infer that a consumer would understand the references to 'compatibility” to mean that the SoClean device can actually be used with the Philips device without causing harm to the Philips device or to consumers who use both devices together. As Philips analogized, a consumer seeing a claim that a charging cable was compatible with a certain phone would conclude that the cable not only physically fit, but also would “charge their phone without frying the motherboard.”

This was enough at the motion to dismiss stage, as was pleading consumer confusion about affiliation or approval.

SoClean argued that the counterclaims were untimely even under the discovery rule.

Under New Hampshire law, “Once a defendant has established that the statute of limitations would bar an action, the plaintiff has the burden of raising and proving that the discovery rule is applicable to an action that would otherwise be barred by the statute of limitations.” On the face of the counterclaims, the action wasn’t brought within three years (the state consumer protection period). Thus, the burden shifted to Philips to plead sufficient facts to plausibly support the application of the discovery rule, and it didn’t explain why it reasonably took so long to reach the conclusion that SoClean’s product increased the risk that Philips foam would degrade. So the state claims were dismissed with leave to amend.

As for the Lanham Act, laches generally can’t be determined on the basis of the pleadings, despite laches being apparent on the face of the counterclaims because of the relevant dates. The Third Circuit is more plaintiff-friendly: the discovery rule has a “fundamentally plaintiff-friendly purpose” and “is grounded in the notion that it is unfair to deny relief to someone who has suffered an injury but who has not learned of it and cannot reasonably be expected to have done so.” And “a plaintiff is not required to plead, in a complaint, facts sufficient to overcome an affirmative defense.” We don’t yet know when Philips knew or reasonably should have known about its counterclaims; at this stage, that helps Philips.

Another API (c) case with false advertising and contract claims too

Trackman, Inc. v. GSP Golf AB, 2024 WL 4276497, No. 23 Civ. 598 (NRB) (S.D.N.Y. Sept. 24, 2024)

Trackman makes the golf simulator game Perfect Golf, which offers users the ability to virtually play some of the most famous golf courses in the world. Defendants allegedly copied key components of Trackman’s copyrighted software and falsely suggested, in promotions and advertisements, that defendants were authorized to use the well-known courses in their game.

Although the court dismissed a contract claim, copyright and false advertising claims survived.

Plaintiff’s Perfect Golf simulator allows users to design golf courses; has “an API4 for external tournament sites to be able to fully integrate into Perfect Golf for online real-time scoring and tracking”; and allows users to play each other on courses designed in the simulator. Using a combination of radars and cameras, plaintiff’s launch monitors track the full trajectory of a golf shot. Launch monitors incorporated into plaintiff’s simulator technology, which allows users to play golf indoors using real clubs and balls in front of an “impact screen” that displays the simulation and keeps golf balls from ricocheting back at the player after they are hit.

Perfect Golf has a EULA that bans reverse engineering.

Although Perfect Golf used to be compatible with third-party launch monitors, as of August 2020, Perfect Golf users had to buy plaintiff’s launch monitors to play the game.

Defendant saw the compatibility-breaking as an opportunity to replace Perfect Golf and be compatible across a number of launch monitors.

This first required developing golf simulator software, eventually called GSPro. GSPro allegedly copied Perfect Golf’s course-creating code as well as copied Perfect Golf’s ‘combine’ feature,” which “enables golfers to identify strengths and weaknesses in their game.” Defendants also allegedly developed an online platform to host tournament play by GSPro users that copied Perfect Golf’s API data structures for simulating golf competitions. And they allegedly copied golf courses created on Perfect Golf’s course design platform.

In addition, defendants allegedly claimed that course selection included “iconic, branded courses like St. Andrews in Scotland and various PGA Tour Tournament Players Club courses throughout the United States” without having the licenses “required” to offer those courses, while plaintiff had “diligently sought and obtained permission[ ], including trademark licenses, from the owners of branded golf courses,” including St. Andrews and various PGA Tour courses. “Eventually, in 2023, the trademark owners of the St. Andrews and PGA Tour courses sent cease-and-desist letters to defendants, after which defendants ‘removed, disabled access to, or renamed the St. Andrews and PGA Tour courses,’” but plaintiffs argued that the damage had been done.

The court refused to hold on a motion to dismiss that the API data structures at the center of the dispute (which sound like they’re needed for interoperability) were not copyrightable, relying on the Federal Circuit’s decision in Google v. Oracle. The structures at issue include “shared naming conventions that allows a simulated golf tournament site … both to communicate with [client] software … and to process data, like how many shots it takes for a player to complete a hole in the golf simulation.”

The court found that plaintiff sufficiently pled the “modest” requirements of originality by alleging that it spent “years” developing the program, which provides, among other things, “an immersive experience centered on high-resolution visuals” and “hyper-realistic gameplay.” (Why does this make the API protectable?) It also alleged that it “built” an API. (That very verb signals the issue.) But: “Such allegations, at this stage, are more than sufficient to demonstrate that Perfect Parallel both independently developed the subject API structures and made numerous creative decisions in doing so.” Anyway, questions of originality are generally inappropriate for determination on a motion to dismiss. Likewise, whether plaintiff’s API structures were a protectable process or method of operation couldn’t be determined on a motion to dismiss.

Estoppel/license defenses were also premature, and the complaint satisfied the discovery rule on its face for statute of limitations purposes.

However, the court dismissed the breach of contract claim, finding the EULA’s anti-reverse engineering provisions preempted by copyright law. “Put simply, plaintiff claims that defendants breached the [reverse engineering] Provision by ‘studying and analyzing’ plaintiff’s software as part of its efforts to develop its own competing golf simulator software that would be compatible with Course Forge courses and third-party hardware.”

The disputed work was clearly within the scope of copyright—software/literary work. For express preemption to apply, “the state law claim must involve acts of reproduction, adaptation, performance, distribution, or display.” That was true here. But a claim isn’t preempted if it has an extra element that makes it qualitatively different. Unlike other circuits, the Second Circuit has instructed that the “extra element” inquiry is not “mechanical” but instead “requires a holistic evaluation of the nature of the rights sought to be enforced, and a determination whether the state law action is qualitatively different from a copyright infringement claim.”

While some courts have held that the promise element of a contract claim suffices, categorically exempting contract claims from preemption, the Second Circuit hasn’t. (And in an age of unavoidable contracts of adhesion, saying that as a matter of law there’s an actual “promise” and then that the promise avoids preemption seems wrong.) In the Second Circuit, “a breach of contract claim is preempted if it is merely based on allegations that the defendant did something that the copyright laws reserve exclusively to the plaintiff (such as unauthorized reproduction, performance, distribution, or display).”

Plaintiff argued that its contract claim was distinguishable because it is specifically (and carefully) “directed to the non-copying acts of studying and analyzing copyrighted works.” But, evaluating the nature of the rights sought to be enforced “holistically” showed that the contract claim was centrally about copying (or studying) in order to create competing works. Defendants’ “studying and analyzing” were “part and parcel of their broader infringing conduct that is at the heart of plaintiff’s copyright claims (i.e., unlawfully developing, producing, and distributing plaintiff’s software).”

Then, in a footnote revealing a fundamental misunderstanding, the court noted the strategic reasons for a breach of a contract claim, if the API structures turn out not to be copyrightable—in that case plaintiff would be “wholly or partly without a remedy.” Thus, the court dismissed the contract claim without prejudice if there are “substantial changes in the law.” This is a flat-out mistake about 301’s scope, which doesn’t just apply when there are valid © claims. It applies when the subject matter is the same as ©’s subject matter, whether or not the material at issue is protectable. That’s why you can’t use state law to protect works whose copyright has expired, or the facts in a work. If it’s a claim whose gravamen is copying a fixed work, then the unprotectability of the copied material doesn’t matter.

And then the court upheld a false advertising claim that seems quite problematic to me. Plaintiff alleged that defendants “sought to commercially advertise and promote the availability of iconic branded golf courses for simulator play on the SGT platform,” which misleadingly suggested that they were “authorized to offer genuine, trademarked courses,” when, in reality, defendants “lacked the rights to offer these branded courses.” The court agreed that plaintiff didn’t allege literal falsity, but found that implied falsity was plausible.

The claims weren’t literally false because “iconic, branded golf courses” were available for play. But they might have falsely implied licensing/endorsement, and plaintiff didn’t need to provide extrinsic evidence of deception at this stage. Also (ugh), intentional deception might obviate the need for evidence of confusion, and the facts here might allow that theory: Defendants allegedly

(1)  knew that they did not have the requisite authorization to make available the trademarked courses; (2) made a litany of statements on social media and elsewhere suggesting that they had such authorization; and (3) made these statements with the intention of influencing “a significant number of users” to purchase SGT subscriptions and GSPro downloads on the basis that they could play “at some of the most coveted courses around the world.”

Even though (3) was true, that was enough for the court.

What about materiality? It was plausible that consumers would care about whether the courses endorsed defendants, because the courses are official partners of plaintiff, which was plausibly related to plaintiff’s success.

What about Dastar? Some courts have rejected Lanham Act claims premised upon false representations of licensing status.” E.g., Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008), rejected the plaintiff’s argument that “the licensing status of each work is part of the nature, characteristics, or qualities of the karaoke products” because they weren’t characteristics of the goods themselves. But the court found this line of cases to be irrelevant to the false advertising claim here. “Dastar and the like are concerned about impermissibly blurring the lines between trademark and copyright law.” The claims here were “based solely on the SGT Defendants’ misleading statements regarding the licensing of trademarked courses, not the licensing of expressive copyrighted (or copyrightable) material…. [T]he misrepresentations at issue have nothing to do with claims of authorship of an expressive work or creation of an invention.” Plaintiff wasn’t suing over copying the simulated version of the course.

This is a little weird given that the representations of the courses were copyrightable representations—the license was a license to represent the courses, not to play on them or replicate them in the physical world. More to the point, though, the analysis does not fit well with today’s textualism. Dastar says that is about the meaning of “origin” in the Lanham Act, even if that interpretation was motivated in significant part by avoiding a TM/© conflict. Dastar says that “origin” does not include the origin of intangible content—including who “stands behind” that intangible content. It specifically addresses the argument that intangible origin could well matter to consumers for “communicative” goods. You can get there textually by saying that “nature, characteristics or qualities” is broader than “origin,” for sure. But I think these days you have to take that step.

It’s also worth noting that the TM claim here is based on the representation of golf courses in the game, which shouldn’t require permission any more than a book about the golf courses would—there are pretty significant Rogers issues as well, and the trademark claimants aren’t even actually here to make their claims.