Wednesday, April 06, 2016

Something smells: new product makes competitor's claims instantly literally false

Playtex Prods., LLC v. Munchkin, Inc., 2016 WL 1276450, No. 14-cv-1308 (S.D.N.Y. Mar. 29, 2016)
Playtex makes a diaper pail, the Diaper Genie, with three current varieties: Diaper Genie Elite, Diaper Genie Essentials, and Diaper Genie Mini. Soiled diapers are contained in a large expandable film bag, refills for which are needed many times in the life of the pail. Playtex sells refills for the Diaper Genie, and so does Munchkin.  Munchkin’s packaging said that its refills “fit [ ]” certain models of the Diaper Genie and that its refills “compare to” Playtex’s refills, and its website made similar “fit[ ]” or “work [ ] with” claims. Munchkin also told retailers the same thing.
Munchkin refill with "compare/fits" claims
Munchkin’s website prominently displayed a chart comparing the thickness of the two brands and stated that its refills contained “7-layer film on bags,” while the Playtex refills had only a “5-layer film on bags” Munchkin also claimed that its refills had a “thicker, seven-layer film to keep everything contained.”   
Comparison chart

Before launching redesigned Diaper Genies, Playtex notified Munchkin that its refills would not fit the redesigned products. Around March 2014, Playtex began selling the redesigned versions.  Munchkin told Playtex that, beginning on March 17, 2014, it would place on its Nursery Fresh Refills packaging an orange sticker that stated:
FIT GUARANTEED: Guaranteed to fit all Diaper Genie® II and Diaper Genie® II Elite pails, and guaranteed to fill all Diaper Genie® Essentials and Diaper Genie® Elite pails purchased prior to March 1, 2014. New and improved Nursery Fresh™ refills will be coming out soon to fit the new Diaper Genie® Essentials and Elite pails.
Stickered version
Munchkin said that it would ask retailers to place the same sticker on the packaging of products currently in inventory; revised its website to make the same limited guarantee; and directed retailers to revise their online product descriptions to contain the same language. Then, in December, Munchkin began selling redesigned Nursery Fresh refills that indisputably fit all Diaper Genies, and claimed to do so.
New version
The court found that, between March 1 and March 17, 2014, Munchkin’s fit claims were literally false because they failed to disclose that the refills wouldn’t fit the newly released redesigned Diaper Genies.  The fit claims were also material and caused harm to Playtex, so Playtex won summary judgment as to Munchkin’s liability for this period.  Query: what, if anything, could Munchkin have done to avoid this result on liability?  Pulled the product entirely?  Pre-stickered with an open-ended date, which might be more confusing?  Limited its guarantee to pails sold before 2014, even though it could indeed guarantee fit for pails sold in the first three months of 2014?  I understand the result on literal falsity--after all, the Lanham Act is strict liability--but it's hard to see why equitable considerations shouldn't strongly influence the remedy here.  Just in terms of damages calculations: even assuming that many people buy a set of refills when they buy their first Diaper Genie, and assuming that the Diaper Genie is in use for only two years, it's hard to imagine that many of the Munchkin refill sales during that 17 day period would be attributable to the new Diaper Genies.
Munchkin won summary judgment for the period starting in December when its redesigned refills came on the market. 
Thus, the contested period was in the middle, when the “fit disclaimer” was in use.  First, the court found that the disclaimer made the packaging not literally false, but at worst ambiguous.  Though it would not be unreasonable for the consumer to read the disclaimer as not acknowledging the lack of fit between the refills and the new Diaper Genies, a more plausible reading of the disclaimer is that the refills wouldn’t fit the new Diaper Genies.  That inference flowed naturally from the time-limited fit claim, especially when contrasted with the very next statement that “[n]ew and improved Nursery Fresh™ refills will be coming out soon to fit all the new Diaper Genie® Essentials and Elite Pails.”  Even Playtex’s survey expert recognized the ambiguity there.
On implicit falsity, the court refused to presume deception because the evidence didn’t support Playtex’s argument that Munchkin “intentionally set out to deceive the public” through “deliberate” and “egregious” conduct. Instead, Munchkin took several steps to clarify the allegedly false fit claims (not to mention that, with a repeat-purchase product like this, Munchkin had limited incentive to fool people into buying a nonfitting product once and giving up on the brand in disgust forever).  No rational jury could conclude that Munchkin acted intentionally, much less “egregiously,” to deceive the public, so no presumption of consumer deception applied.  
Playtex also submitted a consumer survey in support of its claims.  The survey involved 406 women who currently owned a Diaper Genie or planned to purchase one in the next six months. The test group was shown Nursery Fresh Refills packaging with the fit claims and fit disclaimer. In the control group, the phrase “FIT GUARANTEED” on the disclaimer was replaced with the phrase “Only Fits Diaper Genie Pails Purchased Before March 1, 2014,” and the word “Fits” in the fits claim was replaced with the phrase “Only fits Diaper Genie pails purchased before March 1, 2014.”
Respondents were asked, among other things, whether the packaging conveyed anything about whether the refills would or would not fit in the Diaper Genie purchased before or after a particular date. Excluding respondents who answered “don’t know” or “no opinion,” 41.4% of the test group said that the packaging does not communicate anything about whether the refills would or would not fit Diaper Genies purchased before or after a specific date, while only 20.1% of the control group gave the same answer. Including respondents who stated “don’t know” or “no opinion,” only 36.7% of the test group answered yes to whether the packaging communicated whether the refills would or would not fit into the Diaper Genie purchased before or after a particular date, while 57.7% of the control group answered yes to this question.
The court agreed with Munchkin that the survey asked the wrong questions.  Playtex contended that consumers were misled into thinking that the Munchkin refills would fit Diaper Genies sold after March 1, 2014.  But the survey didn’t ask whether consumers received this message.  By phrasing its questions in terms of “a specific date,” “the survey only evaluated the percentage of respondents who took away the message that there is a date restriction on the fit of the Nursery Fresh Refills without providing any information about consumers who might take away the false message that the Nursery Fresh Refills would fit pails purchased after March 1, 2014, which is the relevant issue in this case.”  At most, the survey showed that the control group’s disclaimer was better than the fit disclaimer, but the point of the survey wasn’t to propose a better disclaimer but to figure out whether the message conveyed was false.  The Playtex survey simply didn’t show whether test group respondents received the false message that the Munchkin refills would fit Diaper Genies bought after March 1, 2014.  Thus, without any other evidence, Munchkin won summary judgment for the period after March 17, 2014.
Playtex fared better on the thickness claims. These claims were material: Munchkin chose to highlight the number of layers, “obviously in the hope that the advertisements would encourage consumers to purchase the Nursery Fresh Refills instead of the Playtex ones.”
Playtex argued that Munchkin’s claims that its refills were “thicker” than Playtex refills were literally false, based on (i) an analytical test, performed in the fall of 2013, which determined that the average thickness of the Munchkin refills was 0.89 thousandths of an inch, while the average thickness of the Playtex refills was 1.15 thousandths of an inch, and (ii) a June 24, 2014 test, which determined that the Munchkin refills were thinner than the Playtex refills.  Munchkin’s only counterevidence was the statement of a third-party witness that he “would be cautious in outright stating that one [refill] is thicker than another,” but this was conclusory and Munchkin offered no evidence to explain the basis for this witness’s caution. The witness even admitted that “from the data, if I just look strictly ... at the data, then ... there is one that appears to be thicker than the others.” Thus, there was no factual dispute on the falsity of the “thicker” claim.
Munchkin argued that Playtex hadn’t shown any damages, but injury could be presumed given the literal falsity of the “thicker” claim.
As for the comparison chart, Playtex argued that, starting in the fall of 2013, the Playtex refills had more than five layers. But the record revealed genuine disputes of material fact over whether, and when, Playtex transitioned to seven-layer film. Playtex’s own witness testified that “[t]he actual change as to when we stopped using five layers can only be known by the manufacturers of the film. They didn’t even tell us when they stopped .... When we transitioned to seven, I don’t know.” Even as late as July 2015, Playtex still had advertisements stating that its refills had only five layers.
Playtex also argued that the comparison chart falsely conveyed a “thicker” claim by necessary implication. The court found that the chart was ambiguous in its reference to layers, rather than thickness directly.  Though some consumers might receive a thicker message, they might also conclude that the additional layers made the Playtex refills stronger or better at containing odors, and there was no evidence that such claims would be false. Playtex pointed to testing that shows that Playtex refills allowed less oxygen or water through the film, which “is believed” to correlate with odor retention, “Playtex’s own witnesses were unable to explain this correlation.”

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