Tuesday, February 19, 2019

Competitor can't stop allegedly false promotion of unapproved substances bearing CYA "not for human use" warnings

Nutrition Distribution LLC v. Pep Research, LLC, 2019 WL 652391, No. 16cv2328-WQH-BLM (S.D. Cal. Feb. 15, 2019)

Nutrition Distribution sued Pep for false advertising under the Lanham Act, alleging that its competitor, a supplement company, falsely advertised certain prescription-only drugs and synthetic peptides as “research peptides and chemicals” that are “not for human consumption” and “intended for laboratory research only” while also marketing the products for personal use and consumption by bodybuilders, which is misleading because Pep fails to disclose that the [roducts are banned from sporting events and pose health and safety risks. Pep’s website states, for example, that one product has “undergone several recent studies ... reveal[ing] rises in lean body mass and decreases in body fat,” and “a considerable rise in strength, well being, along with healing possibilities”; another product “enhance[s] bone toughness as well as stop[s] weakening of bones”; and another product “decreases the risk and severity of atherosclerosis.”

A page also states:

All customers represent and warrant that through their own review and study that they are fully aware and knowledgeable about the following:
The[] government regulations regarding the importation, purchase, possession and use of research products and other peptides.
The health and safety hazards associated with the handling of our products in a research setting.
That our products are NOT intended to be used as a food additive, drug, vitamin, supplement, cosmetic or any other inappropriate application. Such a sale would be otherwise denied.

Other allegedly disingenuous pages state: “Safety Information: For Research Use Only. Not Intended for Diagnostic or Human Use. Information is for educational purposes and product is not intended to treat, cure, or diagnose any condition or disease” and “All products are intended for laboratory and research use only, unless otherwise explicitly stated. They are not intended for human ingestion, use, or for use in products that may be ingested.”

Somehow, however, ads for the products turned up on worldclassbodybuilding.com and peakmuscle.com.  Moreover, the products are allegedly intended for human consumption given that they’re “sold in liquid form in dropper vials, for easy oral use, along with the amount of liquid to take for an active oral dose.” Pep allegedly targets “bodybuilders, athletes, and fitness enthusiasts,” using social media and terminology specific to that audience. For example, an affiliate offered a free give away via social media post, and one customer tagged an amateur bodybuilding competitor in the post.

The court granted summary judgment to Pep for failure to show literal falsity.  The problem here seems to be a contradiction: the clear warnings against human consumption are combined with marketing to human consumers, in a wink-wink-nudge-nudge fashion.  Pep argued that failure to disclose safety risks wasn’t false advertising (which is not the case, though it’s often harder to show falsity by omission than to show affirmative falsity) and that use of a particular advertising forum couldn’t constitute falsity (which I think is also wrong as a blanket statement: use of a forum itself can make a representation that the products advertised are appropriate for the target market).

The court seems to have answered a slightly different question, framing the issue as whether the claims “for research purposes only” and “not for human consumption” were literally false, and it then concluded that there was no evidence that these statements were false.  The fact that the products pose health risks to humans wasn’t inconsistent with those statements. “To demonstrate falsity by necessary implication, there must be evidence showing that a particular unambiguous conclusion ‘necessarily flow[s]’ from the Representations in the context of the Product marketing, and that the conclusion is false. There is no evidence in the record demonstrating an unambiguous message necessarily implied by the Representations in the context of the Product marketing.” There was also no evidence submitted of a false implicit message.  [It seems that one possibility here, other than consumer survey evidence, would be expert evidence about how bodybuilders are induced to try unapproved products.  Interesting question about how to frame the survey: in some sense, you’re looking for bodybuilders/other targets to explain how they’d react to seeing an ad for these products in a bodybuilding context.  I am guessing they’d infer that the products could be used by humans to improve performance, given that the only point of advertising them to bodybuilders instead of to research scientists is to suggest that bodybuilders try them.]

Without more, the record (viewed in the light most favorable to plaintiff) showed only that defendants advertised to bodybuilders online, described the products’ putative benefits, sold consumer-usable formulations, and didn’t provide information about health risks or anti-doping bans.  That wasn’t enough to show falsity as a logically necessary conclusion.  [I suspect a government agency could get a different result on whether this combination encourages unlawful use, if the use is in fact unlawful (those do sound like disease/drug claims).]

ICANN and the New Top-Level Domains: Feb. 25 conference at AU-WCL

ICANN and the New Top-Level Domains

American University Washington College of Law, Room NT01

Monday, February 25, 2019
We are in the midst of an historic expansion of internet domain names with more than 1200 new generic top-level domains (“gTLDs”) now competing with <.com>. This 5000% increase in gTLDs is the biggest change to the internet's domain naming system in thirty years (and more are coming soon!). Accompanying these new gTLDs, are new and innovative--but little known--IP rights protection mechanisms. These developments could have a profound impact on the rights of IP owners, domain name registrants, and the public, and on the architecture of the internet.
1:30 Welcome, Christine Haight Farley, American University Washington College of Law

1:40 Trademark Protections in the New gTLDs
Brian Beckham, WIPO (invited)
Michael Karanicolas, University of Toronto
Brian King, MarkMonitor (invited)
Rebecca Tushnet, Harvard Law School
Brian Winterfeldt, Winterfeldt IP Group (invited)
Mary Wong, ICANN (invited)

3:00 Break

3:15 “Walled Gardens:” Should gTLDs Become Private Platforms?
Becky Burr, ICANN Board & Neustar
Sarah Deutsch, ICANN Board
Kathy Kleiman, Center for Information Technology, Princeton University
Jeff Neuman, Com Laude/Valideus
Mitch Stoltz, EFF

4:30 Closing, Patricia Aufderheide, American University, School of Communication

4:35-5:30 Reception

Sponsored by American University Washington College of Law, American University School of Communications, Program on Information Justice and Intellectual Property, and Internet Governance Lab

Friday, February 15, 2019

No Lanham Act liability for failure to correct another's misstatement

GeoMetWatch Corp. v. Hall, No. 1:14-cv-60, 2019 WL 578917 (D. Utah Feb. 12, 2019)

Business dispute; of interest here, GeoMet asserted false advertising against defendant AWSF because of two statements about Tempus, with which it was working.  However, both statements about Tempus were made by Tempus, and thus couldn’t be the basis of Lanham Act liability for AWSF.  GeoMet argued that “AWSF assisted Hall in making misleading statements about Tempus[,]” and that “AWSF did not correct, and continued to promote, the Hall Defendants’ misleading representations that they were replacing GeoMetWatch.” The statements were made in emails sent by Tempus employees that AWSF representatives received (and thus knew of).  The court stated that it had seen “no authority for the novel proposition that the Lanham Act imposes liability on an entity that has in some way assisted another in making false or misleading statements of fact.”  Stated this way, it’s too broad: secondary liability is definitely a thing in Lanham Act false advertising cases.  But it seems reasonable to doubt the idea that the Lanham Act “imposes a duty on third parties to correct another’s false or misleading representation of fact,” at least outside of cases in which the third party itself makes some contribution to the misleadingness.  So, merely receiving the emails couldn’t trigger Lanham Act liability.

Eyelash wars: court tosses counterfeiting claim, allows (c) claim to continue

Boost Beauty, LLC v. Woo Signatures, LLC, 2019 WL 560277, No. 2:18-cv-02960-CAS(Ex) (C.D. Cal. Feb. 11, 2019)

Mark Lemley says that many businesses think the term “unfair competition” is redundant; many trademark plaintiffs likewise think that “infringement” means “counterfeiting.” Here, though the court allows other claims to continue, it shoots down that idea where the alleged counterfeiting is AdWords purchases.

Boost sued Woo for copyright infringement, trademark infringement, and related claims. “In brief, plaintiff alleges that defendants engaged in a scheme to gain access to plaintiff’s confidential information and thereby replicate the beauty product that plaintiff produces, markets, and sells. Specifically, plaintiff alleges that defendants copied its signature eyelash enhancement product by using plaintiff’s manufacturer, by unlawfully copying plaintiff’s copyrighted online advertisement, and by unlawfully using variations of the term ‘BoostLash,’ plaintiff’s trademarked product name, as a search engine adword.” [Hey, it’s a generic use of “adword.”]

Plaintiff’s copyright registration application is pending.  Here’s the “work” at issue:

Boost alleged that defendants “word for word” “copied [ ] plaintiff’s advertisement (but ran the advertisement only outside of California in the hopes plaintiff would not become aware of it)” and that the ads “were intentionally unlabeled and source-ambiguous in that an ordinary consumer of the [p]roduct would not be able to tell, unless investigating closely, that the advertisement did not belong to plaintiff.”  [I can’t tell from the original ad that the ad is from the plaintiff; this seems to be a self-generated problem.]

Defendants allegedly “purchased the Google AdWords ‘boost’ and ‘lash’ together in that order as a search engine advertisement to drive traffic to their website,” constituting infringement, false advertising, and counterfeiting.  [This nonsense is why courts have ended up pretty aggressively protecting comparative keyword advertising; even assuming that BoostLash crosses the threshold of protectability, boost and lash should still be available to anyone to tout a product that improves the appearance of eyelashes.]

Copyright: Boost sufficiently alleged that the copying was “word for word.” Given how long it took Boost to provide the accused ad, the court declined to address whether there was sufficient objective similarity under the extrinsic test, reserving this for a motion for summary judgment.  Frankly, I hope the defendants get fees on this one.  Word for word?

Counterfeiting: Although the infringement claim survived a motion to dismiss (which is sort of depressing in itself), the counterfeiting claim didn’t.  Defendants pointed out that the entire point of the claim is that defendants are selling their differently named product, WooLash, using the accused ads.  Although a plaintiff may not need to allege direct affixation to a product for counterfeiting, alleging AdWords use was insufficient. “At the heart of counterfeiting … is a good that has been copied and which has been sold, offered for sale, or distributed with a counterfeit mark.” Here, there was no allegation that the BoostLash mark was displayed alongside defendants’ product to trick consumers into believing they were getting BoostLash instead of Woo’s product. Use of a mark as an internet search term isn’t counterfeiting, as a matter of law.  It is a use in commerce, but to extend counterfeiting this far would risk turning all infringement claims into counterfeiting claims, with their harsher penalties.

TM Reading list: Legal Realism: Unfinished Business by Ramsi A. Woodcock

Short and punchy:

For the realist, legal reasoning lacks the determinacy of mathematics because, looked at from the right angle, anything can be analogized to anything else. Trademarks are like easements in that they are both contingent on ownership of something else, but they are also like turtles in that they both start with the letter “T.” The only way to really win an argument through legal reasoning is therefore to assume your conclusion. Mossoff cannot argue that trademark is property because trademark rights happen to have a structure (existence contingent on ownership of a piece of property) that resembles the structure of some other rights that the law treats as genuine property rights. If the law does not actually say that trademark is property — and it cannot because Mossoff’s purpose is to fill that silence with his legal reasoning — then the fact that trademarks merely resemble rights that have been designated as property rights tells nothing about whether trademark rights should be treated as genuine property rights. The resemblance just poses the question whether there should be a rule saying that everything that resembles a property right is a property right. If the argument is that yes, there should be such a rule, then an argument must be made for why that rule should be adopted, returning the argument more or less to where it started, which was to find a way to argue from existing law to the need for recognition of a new rule of law that resolves the question whether trademark should be treated as property.

Wednesday, February 13, 2019

Influencer's laundry list complaint against PopSugar survives motion to dismiss

Batra v. Popsugar, Inc., 2019 WL 482492, No. 18-cv-03752-HSG (N.D. Cal. Feb. 7, 2018)

Batra sued Popsugar for removing the CMI of her photograph, infringing her copyright, violating her right of publicity, intentionally interfering with her contracts, engaging in false advertising, and violating California's UCL. She alleged claims on behalf of a putative class of “persons with large numbers of followers on social media,” also known as “influencers.” [That ought to be a fun class definition.]  The complaint alleged that Popsugar “copied thousands of influencers’ Instagram images, removed the links in the original pages that allowed the influencers to monetize their following, and reposted the images on its own website without authorization with links that allowed POPSUGAR to profit when users clicked through and purchased items.”

DMCA 1202(b): Popsugar alleged that Batra failed to plead that Popsugar had the requisite mental state and that she failed to identify the removed CMI. The court rejected both arguments. The 9th Circuit has held that “the ‘induce, enable, facilitate or conceal’ requirement is intended to limit liability in some fashion—specifically, to instances in which the defendant knows or has a reasonable basis to know that the removal or alteration of CMI or the distribution of works with CMI removed will aid infringement.” Here, Batra alleged that Instagram posts show a photo on the left and sidebar text on the right, with identifying information for the author of the photo, including “his or her name and/or link(s) to personal website(s) or other social media sites, such as a personal YouTube channel.” When Popsugar copied the images, it omitted the sidebar, allegedly constituting the removal or alteration of that CMI. This was sufficient, raising the plausible inference that Popsugar knew that removing the CMI would help conceal the alleged infringement. 

Lanham Act false endorsement/false advertising claim: Popsugar argued that the only relevant goods or services were products bought by users clicking on Popsugar links, and those weren’t falsely described/attributed in any way. But Batra alleged that there was confusion over Popsugar’s own service of posting “shoppable” images of influencers and products, which was sufficient to state a claim.

Copyright Act preemption: Popsugar argued that copyright law preempted the right of publicity, interference with contract, and UCL claims.  For the right of publicity, this argument failed because it was the use of the plaintiffs’ names, other identifying information, and likenesses that was at issue, not the use of the photos as such.  Contract:  The complaint alleges that, pursuant to a contract between Batra and LIKEtoKNOW.it, Batra was “entitled to a portion of the revenue that LIKEtoKNOW.it received from sales resulting from social media users’ use of the app” in connection with her posts. The intentional removal of these links allegedly interfered with her contract.  The court found that the allegation of unauthorized removal of monetized links was an extra element that avoided preemption.  This strikes me as a mistaken extension of the law; it is playing with the definition of “removal” to mean “not copying,” which means that what is alleged is really the unauthorized copying + use of Popsugar’s own links.  But the use of Popsugar’s own links is the kind of economic benefit that doesn’t constitute an extra element of the tort, which is what’s required to avoid preemption. UCL: Not preempted for the same reasons.

Interference with contract: Batra alleged that Popsugar knew of the contract between class members and LIKEtoKNOW.it and general knowledge of the common industry practice of affiliate marketing, and that its removal of links was intentional “in that Defendant intended to disrupt the performance of the parties’ contract and/or knew that disruption of performance was certain or substantially certain to occur.”  This was enough to state a claim for intentional interference.  

The copyright infringement claim was also plausibly pled, despite Popsugar’s argument that Batra didn’t identify the specific infringed works or allege that she’d submitted a complete application for registration before suing.  Batra didn’t plead herself out of court; she alleged dates of infringement and that she had registrations/applications (but not the dates thereof). To survive summary judgment on statutory damages/attorneys’ fees, she’d need the appropriate registration dates, but not yet.

False advertising claim based on patent threats fails to overcome high hurdles for such a claim

Globe Cotyarn Pvt. Ltd. v. Next Creations Holdings LLC, 2019 WL 498303, No. 18 Civ. 04208 (ER) (S.D.N.Y. Feb. 8, 2019)

Globe, a fabric manufacturer, sued a fabric patent holder, AAVN, and its subsidiary, Next Creations, for falsely claiming that Globe had sold infringing products. The court dismissed the complaint without prejudice. 

AAVN owns patents for the manufacture of high thread count cotton-polyester blend fabric. In 2015, AAVN filed an ITC complaint alleging that certain imported textiles violated a portion of one of its patents; it settled with one respondent.  Another company, AQT, filed a 2017 petition with the PTO to review two patents, later adding another after the PTAB found that a trial was justified on the first two. The parties settled.  

Defendants allegedly contacted a number of Globe’s customers and falsely accused Globe of selling infringing materials. Globe alleged that this was done in bad faith: defendants allegedly never inspected Globe’s product or its production facilities and thus could not have known whether their patents were infringed.

Lanham Act claims: there wasn’t a sufficient allegation of commercial advertising or promotion.
Globe didn’t identify the size of the relevant purchasing public, but alleged only two messages to one customer and a third to another customer, with even vaguer allegations about messages to other, unnamed, unnumbered customers. “[T]hree messages sent to two customers in a marketplace of an unidentified size are not sufficiently disseminated to the relevant purchasing public to fall within the Lanham Act’s coverage.”

Separately, under Federal Circuit law, “[t]o prevail on an unfair-competition claim under section 43(a) of the Lanham Act stemming from a patentee’s marketplace activity in support of his patent, the claimant must first establish that the activity was undertaken in bad faith.” This requires a showing that the claims were “objectively baseless, meaning no reasonable litigant could realistically expect to prevail in a dispute over infringement of the patent” and that the claims were also subjectively made in bad faith. 

The court didn’t think that alleging that defendants claimed infringement without having any idea how the allegedly infringing product was made could satisfy that standard; doing so might show subjective bad faith, but not objective baselessness. [I dunno; it seems to me that “having no reason to think that the products were infringing” is kind of the definition of “baseless,” not just for subjectivity but for an objective analysis.]  Globe also argued that the defendants asserted a patent they knew was invalid. This too couldn’t show bad faith. The validity of the patents was never finally determined; as far as we know, they’re still valid.

Unfair competition, tortious interference, and deceptive acts: under Federal Circuit precedent, “federal patent law preempts state-law tort liability for a patentholder’s good faith conduct in communications asserting infringement of its patent and warning about potential litigation.” Even applying NY law alone, the court would reject the claims.  NY’s unfair competition law “closely resembles” §43(a)(1)(B), so the absence of commercial advertising or promotion doomed that claim too, as well as NY’s requirement of bad faith.  Disparagement: Globe failed to plead special damages; the one named customer didn’t ever agree to purchase its product anyway. Tortious interference: Again, Globe failed to do more than make conclusory assertions about specific customers, and it also didn’t sufficiently allege wrongful means.

Deceptive acts under N.Y. Gen. Bus. Law § 349: This wasn’t consumer-directed harm, just a private dispute.

FTC standards for "made in the USA" support competitor's literal falsity claim

BenShot, LLC v. Lucky Shot USA LLC, 2019 WL 527829, No. 18-C-1716 (E.D. Wis. Feb. 11, 2019)

“In 2015, BenShot began selling drinking glasses with bullets embedded in the side via an insertion in the glass.”  In 2016, Lucky Shot followed suit; both parties added more types of glasses over time. Lucky Shot’s logo contains the terms “U.S.A.” and “HANDCRAFTED.”  [There are detailed allegations, but suffice it to say that “Made in the USA” is allegedly a big part of the pitch on defendants’ own websites and Instagram, on Amazon, in point-of-purchase displays, in Google ads, etc.]

On Alibaba.com, one defendant’s company profile states, “Our products are designed and developed in the USA and contract manufactured in China.” Lucky Shot’s manager allegedly admitted that the glass portions of at least Lucky Shot USA’s shot and whiskey glasses were made in China. The bottom of they whiskey glass packaging states, “Glass and packaging made in China.”

BenShot alleged federal and Wisconsin common law false advertising claims. Lucky Shot argued that  BenShot failed to plead fraud with particularity under Rule 9(b), because BenShot acknowledged that the packaging says that the glass was made in China. The court disagreed.  The fact that one type of package says that the glass and packaging is made in China doesn’t mean that the other representations—including, crucially, the representations made in advertising for the glasses—were sufficiently qualified.

BenShot also sufficiently alleged economic/reputational damages by alleging direct competition + false advertising + BenShot’s own substantial investment in making glasses in the US, which is important to customers + resulting injury.

Defendants then argued that falsity wasn’t sufficiently alleged, because they complied with FTC policy on “Made in USA” claims. See B. Sanfield, Inc. v. Finlay Fine Jewelry Corp., 168 F.3d 967, 973 (7th Cir. 1999) (“[T]he [FTC’s] assessment of what constitutes deceptive advertising commands deference from the judiciary.”). The package claims “assembled in the USA,” and the FTC says, “[t]o begin with, in order for a product to be considered ‘all or virtually all’ made in the United States, the final assembly or processing of the product must take place in the United States.”

That was a misreading of the FTC standard, which says, “when a marketer makes an unqualified claim that a product is ‘Made in USA,’ it should, at the time the representation is made, possess and rely upon a reasonable basis that the product is in fact all or virtually all made in the United States.” An unqualified “Made in USA” claim means that a product should “contain only a de minimis, or negligible, amount of foreign content.” Final assembly/processing in the US is necessary but not sufficient under the plain language of the FTC statement.  In light of the FTC standard, BenShot plausibly alleged literal falsity given that it alleged that the defendants make the unqualified “Made in the USA” claim despite admitting that this is not so. “While discovery is needed to better understand the defendants’ manufacturing process and costs, the allegations in the complaint do not suggest that this is a case ‘[w]here the percentage of foreign content is very low,’ or where ‘[f]oreign content ... is incorporated further back in the manufacturing process’ such that the foreign content does not constitute ‘a direct input into the finished product’” (citing FTC standard).

Defendants argued that BenShot failed to allege misleadingness, but literal falsity/misleadingness didn’t need to be sorted out at this stage of the case.  Defendants also argued that all of their statements had to be considered in the full context of their offerings, including their qualified statement on the bottom of their whiskey glass packaging.  The argument that one disclosure cured all other falsehoods was, the court noted, “unconvincing.”

The common law claim for unfair competition also survived.

Tuesday, February 12, 2019

Amicus brief in Mongols TM forfeiture case

Stacey Dogan, Mark Lemley, Jessica Litman, Mark McKenna, Jennifer Rothman, Jessica Silbey, and I filed an amicus in the Mongols trademark forfeiture case.  We argue that, while trademark forfeiture is generally possible, any successful transfer would have to include goodwill. Even if the forfeited marks weren't abandoned by nonuse or by transfer in gross, the current Mongols would retain substantial freedom to continue to identify themselves as Mongols.

Speaking only for myself, packing this all into 15 pages was a challenge, and sparked some questions about collective membership marks generally.  I think the strongest argument against the forfeiture is that it is inherently impossible to include the goodwill of a collective membership mark in a forced transfer, because the goodwill is tied to the membership itself.  I think a rational system could rule one way or another on this--in other areas, courts have been very forgiving about what counts as a transfer of goodwill.  A First Amendment claim to self-identification perhaps strengthens the argument against forced transfer, but then to me raises the question whether the government has any business registering/enforcing collective membership marks for social associations in the first place.  I am in full agreement with the underlying premise--Mongols shouldn't be stopped from calling themselves Mongols just because they committed crimes--but I don't actually see how the right to self-identify distinguishes these Mongols from a hypothetical breakaway group that thinks of itself as the true Mongols.  In the past few decades, courts have used trademark rights to suppress the self-identification of breakaway groups, both political and religious--but is trademark law really sufficiently tailored for this job?

Booking.com isn't generic, but might find it hard to prove infringement

Booking.com B.V. v. U.S. Patent & Trademark Office, No. 17-2458 (4th Cir. Feb. 4, 2019)

In some ways, the biggest change in trademark law since the Lanham Act was adopted was the shift of the courts from accepting prophylactic rules to protect competition—limiting the registration/protection of trade dress, territoriality, and numerous other rules—to prioritizing the idea that all interests other than the protection against likely confusion should be considered only in individualized circumstances.  Let putative owners claim a mark, the reasoning goes, and any anticompetitive or speech-suppressing consequences can be dealt with as defenses for individual defendants.  Wal-Mart is the biggest counterforce, and it is about requiring a showing of secondary meaning rather than a prophylactic exclusion from protection. This case about genericity of top-level domains takes the same tack: the biggest reason not to register BOOKING.COM is the power it gives the registrant to credibly threaten competitors like hotelbooking.com even though its rights shouldn’t extend that far.  The majority thinks that case-by-case ajudication will protect potential competitors; the dissent thinks forcing them to litigate is too dangerous.  (It should also be noted that the disappearance of unfair competition as a protection for unregistrable marks plays a role here—while the Fourth Circuit previously recognized that unfair competition can fill in the gaps for marks unregistrable due to lack of US use, the majority seems to think that Booking.com’s only defense against truly deceptive imitation is the protectability of BOOKING.COM as a mark, which is historically untrue.)

Booking.com lets customers book travel and hotel accommodations. It applied for four registrations for the use of BOOKING.COM as a word mark and for stylized versions of the mark with the USPTO. At issue here are Class 43 services, which include online hotel reservation services.  The TTAB affirmed the resulting refusals of registration, concluding that BOOKING.COM was generic for the services because “booking” generically refers to “a reservation or arrangement to buy a travel ticket or stay in a hotel room” or “the act of reserving such travel or accommodation”; “.com” indicates a commercial website; and “consumers would understand the resulting composite BOOKING.COM to primarily refer to an online reservation service for travel, tours, and lodging, which are the services proposed in Booking.com’s applications.” In the alternative, the terms were descriptive and lacked secondary meaning.

Booking.com appealed to the E.D. Va., which reversed and ordered the registration of the marks, but also, following circuit precedent, ordered Booking.com to pay the PTO’s expenses of over $74,000, including a portion of lawyers’ salaries.  (At the end of this opinion, the court expressed some doubt whether this precedent was still good given a conflict with the Federal Circuit interpreting the same language for patents and subsequent Supreme Court precedent on the necessity of explicit statutory language to create departures from the American rule, but it stuck with precedent.  If Booking.com wants to roll the dice on en banc review or even Supreme Court review, it might do well given that signal.)

The district court accepted Booking.com’s new evidence, a Teflon survey indicating that 74.8% of consumers recognized BOOKING.COM as a brand rather than a generic service. It further found that Booking.com established secondary meaning, a ruling that the PTO did not challenge on appeal. 

The court of appeals found that the PTO had the burden of proving genericness, given the harsh consequences of unregistrability. (And a generic term can’t become non-generic, even with subsequent secondary meaning.)  [Note that this creates a real opportunity for arbitrage: if you attempt to register your borderline term, the PTO has to show genericness so if the evidence is in equipoise you get your registration, and then there’s a presumption of validity you can deploy against subsequent genericness challenges, as there wouldn’t be if you didn’t register.  One might think this risk is minimal because the burden of proof so rarely matters—but I think this case might be evidence to the contrary.]

The key question is what booking.com primarily refers to, which depends on public understanding, which can be determined by reference to different sources, including “purchaser testimony, consumer surveys, listings and dictionaries, trade journals, newspapers, and other publications.” The term is considered as a whole, even when it’s a phrase: “the relevant inquiry is the public’s understanding of the entire mark, not its understanding of the mark’s separate components independently.”

Although the district court made several errors of law, it ultimately didn’t err in finding that the PTO failed to meet its burden of showing genericness.  (One such error: the district court wrongly found trademark significance in the fact that a domain name necessarily [in the current configuration of the internet] refers only to a single source.) The key pieces of evidence were the absence of evidence showing public use of “booking.com” as generic—the generic term is “booking site”—and the Teflon survey. The court of appeals also rejected the PTO’s argument that adding the TLD identifier .com to a generic term can never create a non-generic term.

The PTO identified domain names containing booking.com, such as “hotelbooking.com” and “ebooking.com,” as evidence of public understanding of booking.com as a reference to online hotel booking services, but that wasn’t good enough.  Although the inclusion of the proposed mark in longer domain names was evidence, even strong evidence, of genericness, consumer surveys also matter. Anyway, you can book a lot of things, including theater and music tickets, so booking.com might not mean hotel reservation services.  [This is trademark nonsense; hotel booking is a subset of booking services, so it’s totally irrelevant that there might be other things for which booking is also generic.]

“[T]he ultimate inquiry in determining whether a term is generic is what the public understands the proposed mark to mean.” But the survey was better evidence of that than the usage evidence. It’s true that surveys aren’t relevant where a term was “commonly used prior to its association with the products at issue,” in which case the survey can only demonstrate legally useless de facto secondary meaning. But there’s no evidence here that the term was commonly used, making survey evidence relevant.

The PTO argued that, like adding “company,” adding .com can never convert a generic term to nongeneric. Goodyear’s Rubber Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888), held that the addition of commercial indicators such as “Company” to terms that merely describe classes of goods could not be trademarked.  But Goodyear predated the Lanham Act by more than half a century and didn’t apply the current primary significance test; the court here declined to adopt a bright line rule. Nor was the mark nothing more than the sum of its generic parts.  The district court erred in finding that .com would itself usually bring source-identifying significance (or at least descriptiveness) to a generic term.  “Such a rule would effectively make any domain name distinctive, which oversteps the focus of our trademark jurisprudence on a mark’s primary significance to the public.” But that primary significance wasn’t necessarily derived by taking the separate dictionary definitions for the component parts and adding them together. Where, as here, the composite term was not previously commonly used, additional evidence like consumer surveys was relevant.  Although other cases have found generic.com terms to be generic (e.g., hotels.com), they’ve considered consumer survey evidence in so doing and declined to create a bright line rule.

The PTO argued that granting registration could prevent other legitimate uses of marks incorporating BOOKING.  But trademark protection wouldn’t “necessarily preclude another company from using, for example, carbooking.com or flightbooking.com.”  [Emphasis added. It just makes such use risky, facilitating the plausible assertion of rights to deter potential competitors or even noncompetitors.]  And “the purported overbreadth of the mark can be addressed in proceedings regarding the scope of the trademark’s protection,” since likely confusion must be shown—“often,” indeed, plaintiffs must show actual confusion.  [News to me!]  And here’s something that might be quoted in many other contexts: “Given that domain names are unique by nature and that the public may understand a domain name as indicating a single site, it may be more difficult for domain name plaintiffs to demonstrate a likelihood of confusion.”  

[Should we be granting lots of registrations that are hard to infringe?  Is there a role for unfair competition instead?]

Judge Wynn’s partial dissent (he concurred on the attorneys’ fees part and much of the legal structure of the analysis) described this as “a problem that Booking.com chose to bring upon itself.”  It chose to operate under a generic domain that described the nature of its services, in order to “attract the wealth of customers who simply search the web for that service.” But it should have had to accept the tradeoff of foregoing “the ability to exclude competitors from using close variants of its domain name.” The majority “allows Booking.com to have its cake and eat it too.”  To Booking.com, such a result was warranted to prevent “unscrupulous competitors [from] prey[ing] on its millions of loyal consumers.” But if competitors were using the terms “booking” and “.com” in ways that might confuse Booking.com’s customers, “this is the peril of attempting to build a brand around a generic term.”

The dissent also wouldn’t have adopted a per se rule against protecting generic.com. But such protections should be rare.  The dissent thought the district court’s legal errors (finding that a TLD like .com “generally” has source significance) infected its weighing of the evidence, leading it to adopt a mistaken presumption of descriptiveness and to require less of Booking.com than the law demanded.  The ultimate result “conflicts with the determination that every other court has reached in cases, like the instant case, involving the registration or enforcement of a proposed mark composed of a generic Secondary Level Domain and a Top Level Domain.”  [So if the PTO wants to try its own luck with cert, there’s that.  I’m not sure it gets a different result at the Supreme Court, though there’s an outside chance of a remand to the district court to do the analysis under the correct legal standard.]

Until now, courts rejected the argument that “generic.com” isn’t generic because consumers don’t explicitly call the relevant class of websites “generic.com” websites.  Until now, courts have indicated that the “rare” circumstances in which a generic TLD will allow a generic term to become protectable involve things like double entendres, e.g., tennis.net.  Rom.com for romantic comedies might also work, but both those are “readily distinguishable from the instant case.”  A correct legal analysis would have focused on whether Booking.com was one of the rare outliers.  Instead, the district court’s faulty analysis “upsets the careful balance the law has struck between assisting consumers to identify the source of goods and preserving the linguistic commons.”

The real interest here is in preserving freedom against the monopolization of language, even if a would-be monopolist briefly convinces consumers that there’s secondary meaning in a generic term. “[N]o matter how much money and effort the user of a generic term has poured into promoting the sale of its merchandise and what success it has achieved in securing public identification, it cannot deprive competing manufacturers of the product of the right to call an article by its name.” Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976).

The PTO correctly pointed out that no grocery business called The Grocery Store could ever receive trademark protection because the name is generic, regardless of secondary meaning. The majority, however, left in place the idea that if consumers recognized an online grocery business called “grocerystore.com,” that business would be entitled to trademark protection. “There is no basis in law or policy for drawing such a distinction.” Online sellers need freedom to use generic terms just as brick and mortar stores do.

The district court concluded that .com was different from Company because only one entity can occupy a .com. But courts have long held that “[t]he commercial impression created by ‘.com’ is similar to the impression created by ‘Corp.’ and ‘Co.’, that is, the association of a commercial entity with the mark.” Any difference came from functionality, and functional features aren’t protectable even with secondary meaning.

Not correcting the district court’s legal errors “will provide Booking.com with a weapon to freeze out potential competitors,” forcing them to bear “the risk of a costly, protracted, and uncertain infringement lawsuit.”  Descriptive fair use wasn’t good enough for competitors using “booking” in their own domain names, given the power to threaten provided by a registration.  [Courts are very likely to accept the argument that use in a domain name is “trademark use,” disqualifying the defendant from descriptive use as a defense.]  Even if the defense remains available, it’s a defense, not an immunity from suit, so not much help.  And the idea that car and flight booking sites would be ok was “optimis[tic],” but even if true, not helpful to competitors who want to use names like hotelbooking.com or ehotelbooking.com, “which likewise describe such competitors’ services ‘as what they are.’” No class of services should be subjected to this monopoly. 

As for the majority’s statement that infringement will be hard to prove, maybe, but protecting booking.com would still chill competition based on the expense and risk of defending a lawsuit.

better bank battle: false use of (R) can't support false advertising claim

San Diego County Credit Union v. Citizens Equity First Credit Union, No. 18cv967-GPC(RBB), 2019 WL 446475 (S.D. Cal. Feb. 5, 2019)

SDCCU sued CEFCU, its competitor in the credit union market, seeking a declaratory judgment of non-infringement and invalidity of the federally registered mark CEFCU. NOT A BANK. BETTER. (issued 2011) and the asserted common-law mark NOT A BANK. BETTER, as well as for false registration and unfair competition.  SDCCU itself has a 2014 federal registration for IT’S NOT BIG BANK BANKING. IT’S BETTER. Several third-party credit unions use similar trademarks such as “NOT A BANK – BETTER!”, “BETTER THAN A BANK”, and “IT’S NOT A BANK.” [We are running out of trademarks.]

SDCCU’s customers are primarily located in Southern California while CEFCU’s customers are primarily located in Peoria, Illinois and Northern California. [CEFCU bought a credit union in Northern California in 2008, but didn’t start advertising its mark outside Illinois until 2011.]  In early 2016, a CEFCU employee saw the SDCCU mark on a billboard in San Diego, and in May 2017, CEFCU filed a petition to cancel the SDCCU registration based on its registered and claimed common-law marks.

The complaint alleged that the CEFCU mark was more similar to the third party marks than to the SDCCU mark, and that if CEFCU asserted rights broad enough to encompass the SDCCU Mark, it therefore materially misrepresented to the USPTO that the CEFCU Mark was not confusingly similar to any of the third-party marks.  In the alternative, its confusion claim was unjustified.  Also, CEFCU allegedly uses ® on its common-law variant.

Under the Lanham Act, “Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence thereof.” 15 U.S.C. § 1120. The alleged falsities were (1) lack of use in interstate commerce, given that it wasn’t using the mark outside Illinois when it declared the mark was being used in commerce and (2) lack of confusion with preexisting marks such as the “IT’S NOT A BANK” mark of Warren Federal Credit Union, “BETTER THAN A BANK” mark of ABNB Federal Credit Union and “NOT A BANK-BETTER!” mark of United 1st Federal Credit Union.

This was sufficiently pled on a motion to dismiss—whether there was actually use in commerce outside Illinois at the relevant time, or whether use in Illinois by a federally regulated credit union was sufficient for “use in commerce,” was not for the court to resolve on a motion to dismiss. Likewise, though SDCCU can’t assert others’ rights, it sufficiently alleged that the existence of those rights meant that CEFCU made a false statement in its registration application.

SDCCU also alleged damages in the form of company resources expended to fight the claim. The harm must be proximately caused by the fraudulent registration; CEFCU argued that its rights were not dependent on the date of the registration and that this dispute would be happening anyway, thus there was no proximate causation.  That again was a factual dispute not appropriate for a motion to dismiss.

The court also dismissed claims based on false use of ®.  As to the actually (but allegedly fraudulently) registered mark, use of ® was literally true; SDCCU’s remedy was to be found in §1120, not in a false advertising claim.  As to the unregistered mark, the use might be literally false, but a ® symbol didn’t relate to the “nature, characteristics, qualities or geographic origin” of CEFCU’s services, as required.

Allegedly rigged "review" site was commercial speech, but falsity still not pled

GOLO, LLC v. Higher Health Network, LLC, No. 18-cv-2434-GPC-MSB, 2019 WL 446251 (S.D. Cal. Feb. 5, 2019)

GOLO sells a weight loss program and a proprietary supplement to help promote weight loss. HHN defendants published a review of this supplement, allegedly with inaccuracies, misleading statements, and blatant falsehoods, which led to this lawsuit. HHN moved to dismiss and moved to strike the state law trade libel claim under California’s anti-SLAPP law. The court granted the motion to dismiss but denied the special motion to strike because HHN make a prima facie showing that GOLO’s claim arose from an act in furtherance of HHN’s right of petition or free speech in connection with a public issue.

HHN (and its founder Shanks) allegedly compete with GOLO in the diet and weight-loss industry. Shanks specializes in SEO, and he and HHN allegedly bought and created dozens of information websites that generate revenue exclusively through advertising sales. One such website, SupplementPolice.com, claims to be a “product review website” aiming to introduce “honesty and transparency to the world of online reviews” through “detailed reviews of popular products.” Supplement Police states that it “doesn’t currently accept affiliate income from any company in exchange for favorable reviews – instead, it makes it money exclusively from [Google] AdSense revenue.”

GOLO alleged that the reviews were “predominantly bogus,” not based on any testing or analysis conducted by Supplement Police, biased, and designed solely to benefit HHN rather than the public. Supplement Police allegedly promotes and links to products the defendants are affiliated with, manufacture, and/or sell. Specifically, Supplement Police positively reviewed SilaLive Silica, giving it “an overall score of 4.6 out of 5” and said that it is “clearly a product that works for a lot of people.”  SP provided multiple links to the SilaLive website, which offers the product for sale, but doesn’t disclose that Shanks and HHN are affiliated with, and manufacture, distribute, and/or sell SilaLive, and own and/or operate the SilaLive website. Further, the review allegedly contains false statements, including that SilaLive is “formulated with the greatest quartz crystals” and that its main ingredient will help fight common health problems “from the inside,” giving a healthier more permanent solution that artificial cures cannot promise.

SP’s GOLO review allegedly inaccurately describes how GOLO was created, as well as what GOLO “promises,” and allegedly falsely states that the supplement should be taken “30 minutes before a meal” in order to “enjoy health benefits while also purportedly normalizing your insulin levels.” It further says: “Out of all of the ingredients listed [in the Release Supplement], only Salacia bark has been linked to reduced diabetes symptoms...Meanwhile, none of the other ingredients in Release have been linked to weight loss or normalized insulin levels.” And its bolded headlines allegedly “pose misleading questions which would cause readers to doubt GOLO’s effectiveness and/or decide not to purchase GOLO.”

Lanham Act claims: The specific falsities alleged were as above—non-obviously, GOLO alleged that it was false to say GOLO made any “promises” to consumers.  The court found that Rule 9(b) applied and that GOLO failed to plead why these statements were false and misleading. GOLO didn’t explain how GOLO was actually created or why it was false to say they made “promises,” nor about why it was false to make the statements about recommended intake time or about the ingredients.  As for the bolded headlines, “GOLO – Insulin Resistance for Weight Loss?” and “How Does GOLO Claim to Work?” the court found it unlikely that a question could be an actionable “statement,” but even if it could be, the complaint didn’t plead how those specific questions would mislead or confuse consumers, rather than simply framing the review.

As for the SilaLive review, GOLO likewise didn’t adequately allege the falsity of  “formulated with the greatest quartz crystals” or “will help you fight [common health] problems from the inside and thus give you a healthier, more permanent solution that artificial cures cannot promise you.”

Standing: Under Lexmark, “a plaintiff must allege an injury to a commercial interest in reputation or sales” proximately caused by violations of the Lanham Act. HHN argued that this claim failed because SilaLive is not a weight-loss product and does not compete with GOLO; nor does the GOLO review mention SilaLive. But Lexmark makes direct competition unnecessary. The complaint alleged competition between the parties in the diet & weight loss industry generally, and alleged that SilaLive was promoted as a supplement that could “help detox or kickstart[ ] a diet.” It also sufficiently alleged “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising” including foregone sales. Although the GOLO review, in fact, called the GOLO diet a “cost-effective” program, the court nonetheless accepted GOLO’s allegations of lost sales as factual for purposes of the motion to dismiss—which is a take on plausibility that not every judge would have.

Was the GOLO review commercial speech?  HHN argued that the review didn’t mention SilaLive or direct readers to the page hosting the SilaLive review.  So was it a consumer review or an ad? GOLO alleged that the review was “surrounded by advertisements and links to products and websites unrelated to but, in many cases, in direct competition with GOLO,” and that Supplement Police was affiliated with and/or received compensation from sales of “some or all” of the linked products.  Moreover, the positive review of SilaLive also allegedly generated sales/diverted sales from GOLO.  Thus, GOLO successfully alleged that defendants’ speech was an ad for competing products, and that the review was meant to discourage use of GOLO products and use products defendants promoted instead.

GOLO, LLC v. HighYa, LLC, 310 F. Supp. 3d 499 (E.D. Pa. 2018), dismissed a claim that GOLO reviews were commercial speech, but the court here found HighYa distinguishable. First, in that case, when the plaintiff objected to the review, the defendants amended the review and advised its readers that changes to the review were made based on additional information provided by GOLO. Under those circumstances, the facts didn’t plausibly support an inference that the review was meant to create an economic advantage for competing products.  Here, however, defendants removed the GOLO review after receiving a C&D, without attempting to correct the alleged misrepresentations. [Ugh. Talk about creating seriously bad incentives. Plus, I just don’t see how this connects to commerciality. Why isn’t “wanted to avoid the hassle of litigation”/ “had its speech chilled” at least as plausible as “wanted not to say anything nice about the competition,” especially given that the review doesn’t seem to have been particularly harsh in the first place?]

Also, “defendants disclosed a commercial relationship with another fitness product negating any indication that it was engaged in covert competition.”  But covertness has never been an element of the commercial speech test.  A clear ad should not deceive about whether it is an ad, and that’s important (and indeed where the only alleged falsity is the appearance of lack of financial interest, disclosure may be all that’s needed to avoid liability), but we still need to know whether it is an ad.  Anyway, the court also found it important that Supplement Police allegedly doesn’t disclose the identity of its owners and actively hides its association with SilaLive. HighYa said that “liability can arise under the Lanham Act if websites purporting to offer reviews are in reality stealth operations intended to disparage a competitor’s product while posing as a neutral third party.” This was sufficiently alleged.

The trade libel claim failed for want of sufficient allegations of special damages, which usually requires identification of specific lost sales/customers or (in Pennsylvania, whose law GOLO sought to use) really clear evidence of a sales decline traceable only to the disparagement, including allegations about sales for a substantial period before the challenged publication and sales after. The same falsity problems as with the Lanham Act claim also justified dismissal of this claim as well.

The anti-SLAPP laws of California differ from those of Pennsylvania (transferring district) and Delaware (another potentially interested state).  California’s law is broader, and California has a strong interest in protecting its speakers. “ ‘California would appear to object strongly to the absence of a robust anti-SLAPP regime.’ On the other hand, Pennsylvania’s or Delaware’s interests would be less harmed by the use of California law.” So the court applied California’s law, but it still didn’t help HHN.

An “act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue” triggering anti-SLAPP protection includes “any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest.” HHN argued that the reviews were a matter of public interest because GOLO itself described its product as a “leading weight loss and wellness program,” “the top-searched diet on Google in 2016,” and “endorsed, and even used by, multiple doctors.” In Wong v. Jing, 189 Cal. App. 4th 1354 (2010), the court reasoned that a negative review of a dentist’s services on the rating website Yelp.com constituted an issue of public interest because “consumer information that goes beyond a particular interaction between the parties and implicates matters of public concern that can affect many people is generally deemed to involve an issue of public interest for purposes of the anti-SLAPP statute.”

The court distinguished Wong because “it dealt with the more general issue of the effects of dentists’ use of certain products, not just a highly critical opinion of a particular dentist.” It implicitly dealt with the more general issues of whether it was ok to use nitrous oxide and mercury in dental treatments for children, and wasn’t just about one dentist.  Also, “[i]t is well established that commercial speech that does nothing but promote a commercial product or service is not speech protected under the anti-SLAPP statute.” Consumer Justice Ctr. v. Trimedica Int’l, Inc., 107 Cal. App. 4th 595 (2003) concluded that “speech about a specific product was not a matter of public interest because the speech was not about herbal dietary supplements in general, but about the specific properties and efficacy of a particular product.” So too here. Even if GOLO was popular, it’s not true that “simply because a lawsuit affects a large number of consumers and involves a life-threatening illness, it will satisfy the public interest requirement of the statute.” Scott v. Metabolife Int’l, Inc., 115 Cal. App. 4th 404 (2004). HHN thus failed to make a prima facie case that the GOLO’s suit arose from an act in furtherance of its rights of petition or free speech.

Monday, February 11, 2019

Neighboring farmers have Lanham Act standing where false ads allegedly prompted pesticide use

In re Dicamba Herbicides Litig., MDL No. 2820, 2019 WL 460500 (E.D. Mo. Feb. 6, 2019)

Plaintiffs, twenty-one soybean farmers from eight states (Arkansas, Illinois, Kansas, Mississippi, Missouri, Nebraska, South Dakota, and Tennessee), alleged that their soybean crops were damaged by the herbicide dicamba when neighboring farmers planted genetically modified dicamba-resistant seeds and sprayed that crop with dicamba. USDA permitted the sale of the dicamba-resistant seeds in January 2015, but the plaintiffs argue that commercial sale was wrongful because the EPA hadn’t yet approved a dicamba herbicide for use over the top of crops grown from those seeds. (The seeds could allegedly tolerate other herbicides, like Monsanto’s Roundup.)  Allegedly, the amount of dispersal of an herbicide varies and there are other herbicides that wouldn’t have drifted in the same way; dicamba had previously been a problem because of its volatility and propensity to drift, sometimes taking other herbicides with it. In 2017, the EPA approved new low-volality dicamba herbicides for over-the-top crop use during the growing season, XtendiMax and Engenia.

However, the plaintiffs alleged that the new herbicides are “unsuitable for in-crop use because they too, like the earlier versions of dicamba, are volatile and prone to move off-target and damage nearby, sensitive crops.” This is allegedly a further win for defendants insofar as it induces farmers to defensively purchase dicamba-resistant seed to avoid damages.

I’m here for the Lanham Act claim, though the other claims are also interesting. On causation, Monsanto argued that it wasn’t the source of the old, pre-2017 herbicide, but the causation theory was that “Monsanto marketed and sold its dicamba-resistant seed to third-party farmers knowing that they would spray dicamba that may harm nearby, non-resistant crops.” The only reason to buy and plant the seeds, the plaintiffs alleged, was to use it with dicamba herbicides, whether new or old.  The manufacturer of the herbicide wasn’t the key to causation.

Defendants challenged plaintiffs’ Lanham Act standing. The alleged false advertising was that the Xtend seeds could be safely employed utilizing over-the-top application of dicamba herbicides and that the dicamba would not drift.  Lexmark requires a plaintiff to plead: (1) an injury within the “zone-of-interest,” that is, “to a commercial interest in sales or business reputation,” (2) that was “proximately caused by the defendant’s misrepresentations.” Plaintiffs need not be defendants’ competitors to state a claim. The plaintiff must be a commercial actor suffering commercial injuries instead of being a “consumer who is hoodwinked into purchasing a disappointing product.” That was sufficiently pled here: the plaintiffs were commercial actors, not consumers of defendants’ products, and thus they fell within the Lanham Act’s zone of interest.

Monsanto argued that there was no standing for 2016 claims because it was illegal for third party farmers to use dicamba herbicides with its Xtend seeds in 2016, so the intervening criminal conduct severed the causal chain connecting Monsanto’s misrepresentations to any wrongdoing. That is not an automatic Article III rule; standing was sufficiently alleged.

Proximate cause: Monsanto argued that the plaintiffs were at best indirect victims of the allegedly false advertising. But consumer deception is always an intervening step before the harm materializes in a false advertising case (and in a Lanham Act case it materializes to a third party, usually the competitor who’s lost a sale as a result, even if it also materializes as harm to the consumer). Monsanto argued that there had to be harm to a consumer for there to be proximate cause, but the court recognized that this made no sense.  (The Lanham Act should be triggered where there is false advertising that changes consumer behavior—if the plaintiff’s product was exactly the same as the defendant’s and exactly the same price and there was nothing better on the market, a misrepresentation of superiority that diverted purchasers to the defendant wouldn’t necessarily harm those purchasers in a tangible way, setting aside the moral disrespect of fraud, but it distorts the competitive environment and harms other market actors, who are the targets of the Lanham Act’s solicitude per Lexmark.)  Even if the direct victims of Monsanto’s fraud ended up with crops that were fine, plaintiffs still alleged commercial injury because Monsanto’s misrepresentations caused third parties to use dicamba that destroyed plaintiffs’ crop, so plaintiffs had no soybeans to sell.

Interestingly, the fact that plaintiffs successfully pled a Lanham Act claim seemed to comfort the court in concluding that they couldn’t bring tort claims based on ultrahazardous activity—that concept usually involves only the actual use of the product in question, not promotion of its use.  “Ultimately, plaintiffs’ claim is that “lying” about the safety of an ultrahazardous activity—the spraying of dicamba—is itself an ultrahazardous activity. That claim is certainly actionable, but not under the ultrahazardous activity doctrine.” 

So too with trespass and nuisance—Monsanto’s extensive seed licensing agreement with farmers did not allow it to terminate the agreement for misuse of dicamba, so they didn’t control whether the dicamba particles migrated to plaintiffs’ land. There was no “ongoing” promotion, aiding, abetting, assisting, or contributing to the trespass/nuisance, and no need to hybridize a cause of action using trespass/nuisance plus misrepresentation theories. 

Failure to warn claims/consumer fraud act claims under the laws of Illinois and Nebraska: Monsanto argued that FIFRA preempted these claims.  Plaintiffs argued that FIFRA preempts labeling-based claims, but that their claims were based in part on non-labeling material, such as in-person discussion and websites (Facebook, Twitter, Instagram, YouTube, Snapchat, Pinterest, and Linked In).  (Today I learned that Monsanto or its agents allegedly use Snapchat.)  Though a few cases hold otherwise, the court approved a more literal reading of the preemption statute, limiting its reach to labeling and packaging.

Second, plaintiffs argued that they weren’t seeking requirements that are “in addition to or different from” FIFRA, as required for preemption. FIFRA bars “misbranding,” which occurs if a label contains a “false or misleading” statement or if it “does not contain adequate instructions for use, or if its label omits necessary warnings or cautionary statements.” Although FIFRA doesn’t provide a private cause of action for misbranding, states are allowed to do so.  The state law requirement need only be substantively identical; it need not be phrased in the identical language.  To the extent that plaintiffs alleged that the labels failed to contain instructions that would, if followed “prevent harm to the environment,” that did go beyond FIFRA, which only requires instructions that will, if followed, prevent “unreasonable harm,” so their claim was preempted to a tiny extent, but there was still room for their failure to warn claims.

The court reached a similar result on Nebraska Consumer Protection Act and Illinois Consumer Fraud Act claims. However, the court dismissed the Nebraska statutory claim because of its regulatory state harbor. Both states’ laws have safe harbors; Illinois says: “Nothing in this Act shall apply to any of the following: (1) Actions or transactions specifically authorized by laws administered by any regulatory body or officer acting under statutory authority of this State or the United States.”  Although Monsanto’s advertising claims were submitted to the EPA as part of EPA registration procedures, “exemption is not available for statements that manage to be in technical compliance with federal regulations, but which are so misleading or deceptive in context that federal law itself might not regard them as adequate.”

However, Nebraska’s exemption was broader: “the Consumer Protection Act shall not apply to actions or transactions otherwise permitted, prohibited, or regulated under laws administered by the Director of Insurance, the Public Service Commission, the Federal Energy Regulatory Commission, or any other regulatory body or officer acting under statutory authority of this state or the United States.”  Being “regulated” is enough, rather than being “specifically authorized.” Thus plaintiffs’ statutory claim failed. I think this reading doesn’t make much sense, insofar as the FTCA and other federal statutes regulate pretty much any commerce you can think of; in this interpretation, the only commercial transactions covered by Nebraska’s consumer protection law would be those that did not arise “in commerce” for purposes of allowing the federal government to exercise its Commerce Clause authority—what is likely a null set even after the ACA case.  I have my doubts that Nebraska could have meant to negate its law entirely in this way.  But since EPA regulates pesticide ads under FIFRA, Monsanto’s conduct was within the safe harbor.  [What about seed ads? I thought those were the real problem.]

The Illinois Consumer Fraud Act protects “any person who suffers actual damages as a result of a violation of the Act.” Non-consumers “may sue under the ICFA if they allege (and ultimately prove) the nexus between the objectionable conduct and the consumer injury or harm.” A non-consumer has standing to sue under the ICFA where the “conduct involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns.” The allegedly unfair and deceptive conduct—the publishing of false information to cause farmers to defensively buy dicamba-resistant seed—sufficiently implicated consumer protection concerns.  The complaint also satisfied Rule 9(b), whether or not that was required for all ICFA claims.

Breach of warranty claims met varying fates depending on the state. In Kansas, a non-purchasing, non-using third party can only recover for breach if they’re (1) “expected to use, consume or be affected by the goods,” and (2) “injured in person by breach of the warranty.” That didn’t happen here.  Arkansas, South Dakota, and Tennessee gave effect to defendants’ prominent disclaimers of implied warranties of fitness and merchantability, even though plaintiffs, as nonpurchasers, couldn’t have read those disclaimers. “[T]o give the non-purchasing plaintiffs more rights than purchasers themselves would have is an untenable result.”

The Magnuson-Moss Warranty Act prohibits disclaimers of implied warranties when an express warranty is provided, but only applies to consumer products, not agricultural products.

Also, Missouri has a law protecting crops, who knew?  It is unlawful for anyone intentionally to cause the loss of any crop. Further, “any person or entity who knowingly damages or destroys any field crop product that is grown for personal or commercial purposes…shall be liable for double damages.” A claim under this law was properly alleged, as was a design defect claim.

Alkaline water false advertising claim is unappetizing, court rules

Weiss v. Trader Joe’s Co., No. 8:18-cv-01130-JLS-GJS, 2018 WL 6340758 (C.D. Cal. Nov. 20, 2018)

Trader Joe’s sells Alkaline Water, whose label includes:

• “pH 9.5 +”
• “Our Alkaline Water + Electrolytes is ionized to pH 9.5+.”
• “pH is the measure of acidity and alkalinity. The higher the pH, the greater the alkalinity.”
• “ionized to achieve the perfect balance”
• “refresh & hydrate”
• “hundreds of plus symbols” on the label

Trader Joe’s flyer touting Alkaline Water said:
• “Whether you’ve just eaten an abundance of corn or cranberries (foods high in acid); or you’ve been sweating profusely; and/or you’ve been reading this Flyer (because obviously that would make you thirsty) our Alkaline Water + Electrolytes is a drink that can satisfy.”
• “The mineralized water is purified through reverse osmosis, then run through electric currents (electrolysis), which changes the structure of the water and raises the pH to 9.5+ (neutral pH of water is 7).”
• “Trader Joe’s Alkaline Water + Electrolytes is water and then some.”

Weiss alleged that the label misled her to believe that the Water was a “superior source of hydration” and could help “balance pH internally.” She further alleged that the Alkaline Water does not actually have a 9.5 pH balance and that “the actual pH at the time of purchase and consumption was far less on the pH scale.” She brought the usual California claims.

The court found that this was all puffery except the “not 9.5 pH” part, and that wasn’t sufficiently pled, a holding I find dubious.

Initially, some of the complaint alleged lack of substantiation of the purported health benefits, which isn’t actionable by private parties under California law. The label and marketing also didn’t make the health claims she identified, because it was mostly mere puffery. E.g., “refresh” was “a vague, generalized assertion incapable of being proved false or of being reasonably interpreted as a statement of objective fact,” as were the plus symbols. Nor did the label claim to be a superior source of hydration, just a source. The “ionized to achieve the perfect balance” claim didn’t claim that consumers would become perfectly balanced or tout any health benefits from the perfect balance.

As for the flyer touting the water as good “[w]hether you’ve just eaten an abundance of corn or cranberries (foods high in acid); or you’ve been sweating profusely,” there was still no health benefit claim.  I think this ignores the effects of implicature. Why would it be relevant to whether you should choose this water that you’ve been eating foods high in acid?  There’s no reason to mention that other than to imply that the water you drink should “balance” your acidity (an impossible task in my case, I fear). But because the flyer finished by claiming to “satisfy,” it was mere puffery. As for “water and then some,” it followed the description of the water as containing 0.1% “minerals (electrolytes), harvested from the lake region of Utah.”

The 9.5 pH claim was factual and falsifiable. However, Weiss failed to plead with particularity “how she came to believe that the representation is false.” That’s a diversion, mostly corrected in the court’s ultimate analysis. We really don’t care how she came to believe that it’s false, or even if she did come to believe that—her belief in falsity is not an element of her claim. We care whether the statement was false. 

And as with so many Twiqbal issues this is all about the court’s common sense: pleading that the pH was not 9.5 is a factual allegation. Is that plausible? Sure, why couldn’t water not have pH 9.5?  Apparently much water doesn’t, according to TJ’s itself. However, the court wants a “basis” for the assertion of falsity. “Even assuming that viewing videos on the internet or personally testing the pH balance of the Water is enough to support her claim,” that wasn’t in the complaint, and the complaint needed to specify when the pH wasn’t 9.5—at bottling, at purchase, or at consumption.  In a footnote, the court warned: “The Court seriously questions Plaintiff’s decision to bring this suit if the only support she has for this claim is what she has seen on the internet, or her own rudimentary testing. Further, the Court reminds Plaintiff’s counsel that attorneys are subject to sanctions under Rule 11 when they present ‘factual contentions [that] have [no] evidentiary support or ... will [not] likely have evidentiary support after a reasonable opportunity for further investigation or discovery[.]’”

WIPIP 2019, Plenary (designs)

Whole Designs, Sarah Burstein
What is a “design for a useful article”?  TLDR: it’s a whole article.  Egyptian Goddess said the infringement test has to be sameness of appearance. Must appear substantially the same to the ordinary observer.

Worst design patent claim ever: Caffeinate Labs v. Vante: multitool shaped like a monkey; the accused design is not shaped like a monkey. (Withdrawn when D correctly filed a motion for sanctions.)  Richardson v. Stanley works: claimed & accused designs were hammer tools w/things in the same places but didn’t look the same.  We don’t have fragmented literal similarity as in ©; you have to look at the design as a whole.

But: the whole what?  Three long-recognized types of designs.  A design for the shape of an article of manufacture, like a dryer ball shaped like a hedgehog.  A design for the surface ornamentation of an article.  Or a combination of both (grab bars covered with leopard spots).

Then came Zahn, where the CCPA said that the old rule of claiming the whole was out; the design is whatever the patentee says it is.  Dotted lines disclaim portions of a complete design.  Now you can claim anything, including daisy chaining so you keep an application pending and target what your competitors are doing.  Apple had a bunch of noninfringed whole shape patents that it didn’t assert against Samsung; you can also claim components; you can claim fragments. There’s at least three types: intact fragments, where only the part in solid lines is claimed—never exists separately in real life, such as the rounded edge of one side of a laptop.  Apple has mastered this—there are still pending applications from the original iPhone at the PTO.  There are also fragments that are voids: holes.  Apple claims the hole where you plug in your Lightning connector.  There are also variable fragments (she wanted to call them mutilations) where you can’t see them by looking at the product.  E.g., a pink interior with dotted lines around the round holes in the interior.  Is that claiming an interior with no holes?  With star-shaped holes?  No one knows.

Fragment design conflicts w/ the statutory text, which refers to “an article of manufacture” not multiple articles.  [This would be a good issue to try to get cert on at this particular juncture in time.] Conflicts w/long-standing practice.  It distorts the total profits remedy, making a not great situation worse.  And it provides protection for minor, immaterial, and/or functional parts.  Creates doctrinal incoherence: if everything is a design, then it is difficult to apply the other rules about, e.g., prior art and how to deal with parent/child applications. Anticompetitive.

As a design school graduate, was trained that design is the whole—it’s not just shape but color and all other elements.  Not simply a hodgepodge of discrete elements but a cohesive and integrated whole.  Also there is positive space/negative space in art theory: when you draw on a piece of paper, there is a part that is perceived as ground/empty space.  Even when it’s colored and the figure is not colored, you perceive the background as negative space and the figure as positive space.  This is important because negative space is as important as positive space in creating the design. 

A new theory: a configuration design for an article of manufacture would be a design that dictates the entire shape of that article, including positive and negative spaces; a surface design would dictate the entire surface, including positive and negative spaces; and a combination design would be both.  Thus a single image for fabric would be a different design than that image repeated multiple times in a pattern on fabric. 

If a piece is made and sold separately, that can be a separate design.  So there can be handle design patents.

Lemley: what happens to dotted lines under your proposal? 

A: have served different purposes over time—not the same meaning in the 19th c.  Do we protect designs per se or tether them to a particular product?  It can’t be in the abstract, but the Fed. Cir. might screw it up. The key is that the uncertainty adds more complexity.

Lemley: then we need a standard that is something other than infringement standard that uses dotted lines for something. When you have a swirl for the screw top of a bottle depicted in solid lines and dotted lines to indicate the rest of the shape of the bottle, right now courts say that the accused design has to have some kind of a bottle shape; you wouldn’t be able to win an infringement claim for a similar screw top configuration on a car.

A: under my rule you just don’t use solid lines for that purpose.  [I guess under her rule at least you could try to get the grooves as part of a design for a bottle cap, to the extent that’s a separate article; maybe a bottle cap can go on many different things, but the problem would be diminished and you wouldn’t be worried about dotted lines.]

The Laws of Design, Christopher Buccafusco:
Legal and nonlegal mechanisms that promote or fail to promote disabled access in the environment. Fits into non-IP motivations for innovation. There’s lots of important work on access and innovation, including in access to texts, access to the internet, deafness/blindness.  Will focus on physical environment and opportunities to move around in it.

1920s/30s after WWI, medical innovation lets people w/serious spinal cord injuries survive when they wouldn’t have before. That creates a new population, further affected by polio epidemic which also increases portion of population that survives into adulthood w/a major disability. Medicalized, rehabilitationist model of disability: how to be productive laborers in society, which typically involves lots of things disabled people don’t actually have as goals.  Institutionalization v. preferences for independence. GI Bill then provides a not inconsiderable amount of $ to buy accessible technology; March of Dimes and similar things also increase ability to pay/demand side.  Oldsmobile Valiant: a car driveable with two arms and no use of legs. But veterans’ payments only allowed them to buy a certain set of cars, e.g., a regular Chevy, then sell it and buy the Valiant.  A huge amount of user innovation is going on. Users’ language of inventorship seems to provide ways to claim continuing community membership.

Case study: wheelchair development.  One company dominated the market; it had patents that helped. In addition, as the patents began to expire, they began to engage in anticompetitive practices such as deals w/foreign companies to prevent imports. Same wheelchair cost $400 in US in 1975$, but cost $100 in England. Worked with Medicare/VA to specify which chairs would be insurable, and those just happened to be the Everest & Jennings chair and no others. Disabled people begin to protest the increased prices and depressed innovation. Nader & his raiders took on the company and began to publish findings. Eventually Justice Dep’t began an antitrust case, which was settled in 1979. Almost immediately the market expanded, though not a ton.  OTA in 1984 studied the market and found some innovation but many of the new manufacturers suggested they were anxious about producing new innovation b/c they were worried about products liability law if they did more than tweak the Everest & Jennings chair.  Whether this is true or not, we see a claim about innovation drivers.

VA/Medicare as buyer has other problems: if the buyer is not the user, that skews things. VA/Medicare cared more about initial cost than total operational costs, for example. Ralf Hotchkiss, wheelchair innovator, argued against patents as inhibiting progress/access in the area.

Once wheelchairs spread, people start to notice that the built environment is hostile to them and thus to their users. That changes the site of innovation—from innovation at the individual/product level to innovation at the environment level. Section 504 of the Rehabilitation Act of 1973 produces a civil rights/antidiscrimination approach that has a demand-forcing effect, creating willingness to pay on the part of institutions.

Lessons: innovation regulation is really complicated; when users aren’t purchasers, incentives can be skewed.

Grynberg: cognitive access?

A: deliberately focused so far on physical access.

Q: FDA piece should be a bigger part: there are regulations for wheelchairs and for wheelchair accessories [shades of the phone and the Hush-a-Phone].

Ebrahim: firms w/different strategies?

A: user innovation sometimes gets users to start commercializing; sometimes firms buy out the innovation but sometimes they get shut down.  Federal gov’t encouraged accessible buses when GM wasn’t making accessible buses and had 85% market share.  GM just ran out the clock until Reagan took over and kept its market share.

Q: each of these stories can be its own paper.

A: rather tell them together—focused on a product and wants to tell the story of that product.  [The recent book Temp by Louis Hyman is an interesting example of how to bring together narrative threads in a really productive way, though I’m not sure you could do exactly the same here.]

Privacy When Form Doesn't Follow Function, Roger Ford
Design patent: for stuff that’s seen.  Taco Cabana: designs and shapes are protectable if nonfunctional. Privacy law does something very different: “privacy by design,” which is about process. Building privacy into design specs from the beginning, to get better results. 

For physical design, people learn to infer functionality from particular features, e.g., olive oil bottles are dark because the oil will deteriorate in light otherwise, so dark bottles are likely to contain sensitive liquids.  Things with multiple spikes on them may dig down into dirt.  Security cameras signal surveillance and thus send messages; even one-way mirrors affect the design of space. Because companies know consumers make these inferences, online they use those signals to send messages: e.g., the image of a padlock and a secure website. But this signal is also manipulable b/c the connection b/t form and function is not as tight.  Or phone apps can track your movements without telling you that’s happening.  This will be a bigger problem over time.  Now there are padlocks that look like padlocks but are run by software and not physical keys; consumers can be misled by the form they recognize about how easy it is to open, so one of these broadcast its key unencrypted and anyone with the right software could open it, while another was secure at the software level but had screws that could simply be opened w/a screwdriver.  22 services track you on USA Today’s homepage, but nothing on the browser/URL line shows anything to make you think that there’s anything other than a link b/t you and the USA Today server.  

Williams Sonoma case: zip code as personally identifiable information—that’s a legal rule designed to solve the mismatch b/t perception and reality: the law is designed to deal w/the fact that retailers are asking the info in a context that looks like it’s for security purposes but is really for marketing purposes.  When Apple does the same thing, though, the court said security is more important online so it’s ok, without inquiring whether Apple was actually using the info for security or marketing. Thus he thinks the courts/ regulators should look more at intentional attempts to exploit consumer expectations.

Said: Compliance as a goal might be a different framing than design: external constraints as something you better be designing towards. 

A: Compliance oriented might avoid unexpected problems but doesn’t necessarily avoid expected problems—manipulation of what the consumer would expect based on the design.