Sunday, April 25, 2010

ABA Antitrust Section Spring Meeting part 5

False Advertising Litigation: The Lanham Act Preliminary Injunction Hearing

Presented by the Private Advertising Litigation and Trial Practice Committees

The fastest way to stop false advertising by a competitor is to obtain a temporary restraining order or preliminary injunction in federal court. What does it take? In a mock hearing, two leading practitioners will examine an expert on consumer perception and then argue for and against an injunction before a Federal District Court Judge. The session concludes with a critique of strategy and tactics.

Session Chair: Richard A. Kurnit, Frankfurt Kurnit Selz & Klein PC, New York, NY

Moderator: Amy Ralph Mudge, Arnold & Porter LLP, Washington, DC

Thomas C. Morrison, Manatt Phelps & Phillips LLP, New York, NY

Hypothetical argument over “Where’s the Beef?”: argument for liability is that, even with the humor, a clear comparative advantage message is communicated: Wendy’s offers more burger than competitors. Ads with humor have been found false: ad with a woman whose 16-hour appetite suppressant “wore off” and who then consumed the entire contents of her refrigerator won a lot of awards for cleverness but was enjoined for conveying a false message.

Hypothetical survey: 75% of people thought that the comparative claim in the ad was not a joke. Net 14% perceived a message that Wendy’s was at least 10% bigger, and they went up to 2x as big. 14% is well within the range for finding deceptiveness. The actual difference is said to be 3%.

Michael Rappeport, RL Associates, Princeton, NJ: mock expert witness testimony. Emphasized importance of preconceptions from prior experience, thus needing a control to test what they already believed about Wendy’s burgers. Defended more specific questions since general meaning questions get unhelpful answers. Most people would accept that the ad is a joke, but the question is whether it is just a joke: people tell jokes to communicate something serious all the time (thanks, Jon Stewart!).

Questioning brought out that, with a national campaign like this, 14% is 33 million people—perhaps a more useful number.

Ronald Rothstein, Winston & Strawn LLP, Chicago, IL: For the defense. This ad is an obvious exaggeration; we don’t need a survey to tell us it’s not. The survey examines things not at issue in the ad, and is entirely based on closed-ended questions that fed answers to respondents.

Rappeport said that there were two kinds of leading questions: one implies an answer; one implies that there is an answer. The first kind is avoidable; the second kind is unavoidable by mere fact of asking a question in a survey.

Discussion of demographics: no sorting for race or economics, just random malls. Rappeport argued that national ads are aimed at everyone, even if Wendy’s actual customers are a different group skewed by race/ethnicity/economics. Also discussion of whether not interviewing people under 16 would skew the results: Rappeport maintained there was no reason to think that the reactions of people under 16 would be different. Etc.

Materiality: Rappeport argued that Wendy’s clearly thought the claim was material, or it wouldn’t have made it. Rothstein argued, through his questioning, that there was no evidence of materiality; the survey hadn’t checked that.

C. Lee Peeler III, National Advertising Review Council, New York, NY

Served as judge; pressed Morrison hard on materiality and whether there’s a difference between 3% and “at least 10%” from a consumer’s perspective.

Rothstein returned to the questions of demographics: diversity of society is such that you can’t rely on general population when different subgroups may exist. If 33 million were misled, then 270 million were not misled.

Peeler: why doesn’t the control take care of the leading questions?

Rothstein: the control was equally flawed. Makes the whole survey invalid. Invalid question can’t be fixed by a control. Planting in the question issues like “how much bigger do you think the patty is?”—forcing people to give a response that includes percentages, even though people never thought about it and just guessed based on preconceptions or on something else not in the ad.

Peeler: why run the ad if not to convince people that Wendy’s has more meat?

Rothstein: that’s true. (Then why are you fighting so hard on the joke part? The answer probably has something to do with materiality. And indeed:) There’s no proof that anyone cares about the difference between 3% and 10%.

Audience poll: based on the evidence/testimony, about half would grant the preliminary injunction.

Kurnit’s closing commentary: you have very little time in practice to get the facts, do a survey, argue it in court. The client will tell you what the precooked weight difference is and then the judge will ask you what the weight difference is after cooking. Candidly, judges pick the survey that goes with their judgments about what the result should be.

Rappeport: he thinks anything under 10% is evidence of no confusion, anything over 20% is confusion, and in the middle is the gray area that will depend on intent and other factors. He chose 14% to be in the middle of the gray area. Leading questions: he suggest a closed-ended question is leading in a troubling way when it doesn’t give all the reasonable answers (you don’t have to ask whether the ad says the Yankees will win the pennant). It’s hard to give all the reasonable categories in a closed-ended question, but if you don’t, you can be in trouble.

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