even if it's not a security, a stablecoin can trigger false advertising claims

Donovan v. GMO-Z.com Trust Company, Inc., --- F.Supp.3d ----, 2025 WL 522503, No. 23 Civ. 8431 (AT) (S.D.N.Y. Feb. 17, 2025)

Plaintiffs sued GMO Trust, alleging that it violated federal securities laws and NY state consumer protection laws in connection with the “offer” of a digital asset known as “GYEN,” sold as a “stablecoin.” The court found that GYEN wasn’t a security, but allowed the NY and California claims to proceed.  (Claims against Coinbase have been sent to arbitration.)

GMO Trust touted GYEN as a fiat-collateralized stablecoin—that is, one unit of the stablecoin is backed by one unit of fiat currency, here the Japanese yen. GMO Trust retains for itself any interest generated by the bank accounts where it deposits customer collateral, and it may receive monetary benefits from third-party exchanges as consideration for agreeing to list GYEN on their platforms.

Its Whitepaper on its website touted GYEN as “a global currency solution” that can “virtually eliminate [the] volatility” associated with traditional digital assets such as Bitcoin “while still benefitting from the advantages of digital assets, such as high transaction speeds matched with low costs.” GMO Trust advertised and linked to various “partner” exchanges, including Binance and Coinbase. It allegedly consistently maintained in its promotional materials that purchasers could “always redeem 1 GYEN for 1 JPY ... directly with GMO Trust” and on any third-party exchanges that listed the digital asset.

GYEN launched in March 2021, and there was a lot of price movement. Plaintiffs bought at elevated prices and lost 90% or even 99% of their purchase prices as the price of GYEN returned to its yen peg. For example, “GYEN purchasers whose orders on Binance took time to fill, or who mistakenly bought GYEN when the price on Binance was untethered from the value of JPY, lost as much as 99 percent of their purchase value within hours.” Some of this occurred when exchanges were restricting the ability of customers to trade GYEN in order to deal with rapid fluctuations.

Whether GYEN was a “security” is outside my wheelhouse, so I’ll just report the court’s top-line conclusion: no (specific to the stablecoin context).

However, it was reasonably likely that there would still be CAFA jurisdiction over the state law claims, to which the court turned:

Plaintiffs allege that GMO Trust targeted consumers with statements and advertisements representing that GYEN would always remain pegged to the value of a historically stable fiat currency; omitted the risk that the asset’s value could become untethered from JPY on certain of GMO Trust’s “partner” platforms; and continued to make such representations and omissions even after the price of GYEN on Binance temporarily untethered from the value of JPY in May 2021. Indeed, Plaintiffs allege that GMO Trust not only omitted the risk that the price of GYEN could become untethered on third-party platforms, but it affirmatively stated that consumers would “always” be able to purchase GYEN at a one-to-one value with JPY on GMO Trust’s “partner” exchanges.

They also sufficiently alleged that these statements were objectively misleading, deceptive, and false because the value of GYEN in fact could—and allegedly did—become untethered from the value of JPY on third-party exchanges, and fluctuated over 200% against the dollar in one period. “Given that GMO Trust held GYEN out to consumers as a ‘stable’ counterweight to the extreme volatility of the digital asset market, and held itself out as a regulated and licensed entity offering a product backed by fiat currency held in FDIC-insured U.S. bank accounts and monitored by independent auditors, a reasonable consumer, acting reasonably in the circumstances, could have been misled or deceived by GMO Trust’s statements, acts, practices, omissions, and advertisements.”

As to California law, the court declined to require plaintiffs to meet Rule 9(b)’s heightened pleading standard, because the UCL’s “fraud” prong is not the same as common law fraud—it has lower standards. Unfairness claims also survived.

California's Made in the USA safe harbors aren't preempted by federal law

McCoy v. McCormick & Co., 2025 WL 1918546, No. 1:25-cv-00231-JLT-SAB (E.D. Cal. Jul. 11, 2025) (R&R)

McCoy alleged that French’s mustard bottles were falsely advertised with the claim “Crafted and Bottled in Springfield, MO, USA,” appearing at times with “American flavor in a bottle,” because the product contains foreign-made components. The magistrate recommended granting the motion with leave to amend. Interesting dive into the “Made in the USA” waters.

Specifically, McCoy alleged that the primary substantive ingredient is mustard seed, which is sourced primarily, if not exclusively, from Canada. Some varieties, including French’s Yellow Mustard, allegedly contain turmeric, another imported ingredient.

McCormick argued that California’s statutory safe harbors for “Made in the U.S.A.” protected it against McCoy’s California claims (including state law claims). McCoy argued that California’s safe harbor provisions are preempted by federal law—a conclusion rejected by the court. But he also argued that he alleged that a substantial portion of McCormick’s products exceeded California’s safe harbor levels.

The FTCA provides:

To the extent any person introduces, delivers for introduction, sells, advertises, or offers for sale in commerce a product with a ‘Made in the U.S.A.’ or ‘Made in America’ label, or the equivalent thereof, in order to represent that such product was in whole or substantial part of domestic origin, such label shall be consistent with decisions and orders of the Federal Trade Commission issued pursuant to section 45 of this title.

The FTC’s resulting Rule states:

[I]t is an unfair or deceptive act or practice...to label any product as Made in the United States6 unless the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.

16 C.F.R. § 323.2 (emphasis added).

California law also makes it unlawful to sell products as “Made in U.S.A.,” or other similar words, if the product or “any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” However, under California law, a product may be lawfully labeled as “Made in the U.S.A.” if no more than five percent of the final wholesale value of the manufactured product is obtained from outside the United States, or if no more than ten percent of the of the final wholesale value of the manufactured product is obtained from outside the United States and the manufacturer shows that it can neither produce the foreign article, unit, or part within the United States nor obtain the foreign article, unit, or part of the merchandise from a domestic source.

The FTC’s Rule provides that “this part shall not be construed as superseding, altering, or affecting any other State statute...relating to country-of-origin labeling requirements, except to the extent that such statute...is inconsistent with the provisions of this part, and then only to the extent of the inconsistency.” There is clearly not field preemption, and the judge was not persuaded that California’s safe harbor provisions were inconsistent with the FTC’s “all or virtually all” standard. The disjunctive standard of “all or virtually all” “necessarily means the FTC contemplates that a small amount of foreign content may be present to lawfully label a product as Made in the U.S.A.” The FTC has expressly declined to adopt a definition of “all or virtually all” because “adding further specificity also increases the risk the rule would chill certain non-deceptive claims.” Instead, it says that its rule requires a “de minimis, or negligible, amount of foreign content.” There was certainly no rule that a product containing foreign materials that make up less than 90-95% of a product’s wholesale value qualifies as more than a “de minimis, or negligible, amount of foreign content.” The legislative notes for the state safe harbor specifically referenced the FTC’s Rule, and the FTC, while it declined to adopt percentage thresholds because the “ ‘all or virtually all’ standard is better tailored to prevent unqualified U.S.-origin claims that will mislead consumers in making purchasing decisions,” it didn’t suggest that California’s safe harbors were, in every instance, inconsistent with the “all or virtually all” standard. Nor was it inherently inconsistent with the FTC Rule to rely on “final wholesale value,” since the FTC considered that one of the often-relevant factors in determining whether foreign content was de minimis.

Thus, there was neither express nor conflict preemption. And McCoy failed to plead facts showing that his claims weren’t barred by the safe harbor provisions, but the magistrate judge recommended that he should get a chance to fix that. It wasn’t enough that mustard seed was the third ingredient by weight, since that didn’t show final wholesale value in a product with six or more ingredients.

 

New book chapter on advertising, TM, and antitrust

Misleading advertising as a matter of unfair competition law 

Graeme B Dinwoodie and Ansgar Ohly (eds), Research Handbook on Unfair Competition and Passing Off (Edward Elgar, forthcoming 2026)

Abstract

The prohibition of false and misleading advertising should be the prototypical example of unfair competition law. False and misleading advertising, after all, is generally held to be unequivocally bad, even if punishing every instance would be more costly than it’s worth. But most of modern unfair competition law, at least in the United States, is focused on different things—more in the realm of trademark law (and sometimes antitrust), and I think to its detriment. As trademark’s scope has ballooned, and as the law has tolerated more and more monopoly power, it has also tolerated more and more false advertising. A rebalancing towards false advertising could strengthen the field of unfair competition as a whole.

P&G's brand extension ZzzQuil must face lawsuit alleging falsity of its "Non-Habit Forming" claim

Sneed v. Procter & Gamble Company, --- F.Supp.3d ----, 2025 WL 1017933, No. 23-cv-05443-JST (N.D. Cal. Apr. 4, 2025)

This case is about a product I recently noticed, “Nighttime Sleep Aid” products containing diphenhydramine hydrochloride as ZzzQuil. Sneed alleged that the “Non-Habit Forming” claim on the product was misleading, as diphenhydramine is in fact habit-forming/not different from other sleep aids.

The court rejected P&G’s preemption arguments, some of which were already rejected in an earlier opinion. Briefly, that opinion looked at a FDA tentative final monograph finding “little to no pharmacologic potential for abuse of the ingredients in OTC nighttime sleep-aids,” and that “antihistamines like diphenhydramine ‘have generally been regarded as having low abuse potential and no ability to create dependency.’” But the same monograph specifically concluded that “[t]he term ‘non-habit-forming’ is misleading, undesirable and probably false because it is very hard to prove that any product with psychotropic activity can be non-habit forming; but more importantly, there is an insinuation that other OTC sleep-aid products obviously are habit-forming.” Thus there was no preemption.

Here P&G also pointed to two FDA approval letters where the FDA approved for marketing two cough syrups containing diphenhydramine and their corresponding labels describing the products as “non-habit forming.” But those were cough medicines for temporary use, with less diphenhydramine present per dose, and a sleep aid would foreseeably be used more regularly than cough medicine. That label wasn’t “materially identical” to the one at bar. Nor did the FDA approval for “non-habit forming” cough-medicine labels showed that it must have “reversed its tentative view [on diphenhydramine being potentially habit forming] as it evaluated additional studies.” Fundamentally, the court wasn’t convinced that the claim here would challenge an approved label. There’s no federally approved label for ZzzQuil as to the challenged statements, and “circumstantial evidence surrounding the approval of a different drug with a different dosage—even if containing the same main ingredient—does not pose the risk of conflicting factual determinations about whether ZzzQuil specifically is habit forming.”

The court had previously found that Sneed failed to sufficiently allege that the product actually could be habit-forming; the amended complaint remedied that deficiency by adding citations to “a variety of scientific studies and articles,” including (1) a declaration that discussed clinical case reports; (2) a 2008 study where the researchers detected “a cocaine-like pattern of stimulation of [dopamine] transmission” in rats after the rats were provided with intravenous doses of diphenhydramine;1 (3) a 2002 study finding that individuals rapidly developed tolerance to the sedative effects of diphenhydramine when administered a 50 mg dose twice a day; and (4) a 2021 study reporting a 63% increase in intentional diphenhydramine exposures from 2005 to 2016, including a 230% rise in misuse among adults aged 55 and older.

P&G said that the sources (1) do not focus on diphenhydramine specifically, (2) are based on anecdotes, (3) involve the significant abuse of diphenhydramine rather than the use of the drug as directed, or (4) involve studies that expose test subjects to diphenhydramine at levels exceeding 50 mg per day. But none of that was enough to make the claim implausible given the evidence alleged. As another court wrote: “[t]he cited studies reference at least [the diphenhydramine] identified in the complaint and purport to document their [tendency for misuse and potential habit formation]. Discovery may expose that those studies contain vital flaws, but it is enough for now that the studies do not plainly refute the allegations in the complaint.”

GIs can be indications of quality for purposes of applying failure-to-conform exclusion to advertising injury insurance policy

Allied World Nat’l Assur. Co. v. NHC, Inc., 2025 WL 1852789, No. 22-00469 MWJS-WRP (D. Haw. Jul. 3, 2025)

Nice to see good old-fashioned legal reasoning in these times.

In the underlying lawsuit, class plaintiffs alleged that MNS falsely advertised coffee products labeled as “Kona” that contained little to nothing of the real thing, thus capturing a price premium. MNS ultimately settled the lawsuit for $12 million and sought indemnification from its umbrella insurers. Interpreting the relevant policy’s advertising injury coverage, the court found that an exclusion barred coverage and granted summary judgment for the insurers.

The underlying lawsuit asserted Lanham Act violations. MNS and other named retailers sought the dismissal of the Lanham Act false advertising claim against them to the extent they had acted purely in their role as retailers. The court granted that motion, reasoning that a false advertising claim requires “a false statement of fact by the defendant in a commercial advertisement about its own or another’s product.” Although the court recognized that “[t]here is limited case law on this subject” and that “the Ninth Circuit has not weighed in on this issue,” it concluded that retailers are not liable for false advertising under the Lanham Act “because they do not make a false statement simply b[y] displaying or selling a product that was falsely labeled by another.” However, it cautioned that “[i]f, for example, a retailer controls or participates in the creation of the offending label or creates additional marketing materials for a product that amplify the manufacturer’s misrepresentations, imposition of liability for false advertising may be appropriate.”

As the case headed for trial, other defendants settled and MNS’s supplier filed for bankruptcy. Plaintiffs alleged that MNS was an active partner with that supplier: “MNS regularly collaborated with Mulvadi in developing marketing materials for Mulvadi coffee ... Mulvadi advertising commonly featured MNS’s logo and slogan ... [And] MNS’s 30(b)(6) deponent agreed that the company’s internal emails ‘demonstrat[ed] MNS’s involvement with Mulvadi and Mulvadi promotion.’ ” Then they settled.

The settled claims were defined as “any and all actions, claims, demands, rights, suits, or causes of action, whether asserted or not asserted, that arise from or relate to the allegations made or conduct described in” the last operative underlying complaint, “including but not limited to allegations related to the labeling, packaging, advertising, promotion, branding, marketing, manufacturing, design, formulation, distribution or sale of coffee labeled as ‘Kona,’ regardless of the statute, regulation, common law legal theory, or other legal basis on which the allegations may be asserted.”

Ultimately, Allied World alleged that it had no defense or indemnity coverage obligation under its policies because the settlement liability did not arise out of the “use of another’s advertising idea in [MNS’s] Advertisement” or “infringement upon another’s copyright, trade dress or slogan in [MNS’s] Advertisement.” In addition, it invoked the exclusion for advertising injury arising “out of the failure of goods, products or services to conform with any statement of quality or performance made in [MNS’s] Advertisement.”

The insured bears the burden of establishing that the coverage provisions apply, while the insurer bears the burden of establishing that an exclusion applies. Hawai‘i state law governed. Insurance policies “must be construed liberally in favor of the insured and [any] ambiguities [must be] resolved against the insurer.”

The settlement constituted a legal obligation, and it plainly covered the Lanham Act false advertising claims. Indemnification does not require a finding of liability or a finding that there would have been liability. “If insurance coverage in the settlement context were to turn on a prediction about whether a defendant would have been held liable if a case had gone to trial, the very uncertainty of that prediction—which is presumably one of the factors that would otherwise induce parties to settle—would encourage them instead to trudge on with the litigation.” True, the Hawai‘i Supreme Court’s has stated that an insurer’s indemnity obligation “depends upon the true state of facts surrounding the loss or injury.” But that case did not involve a settlement. “And in cases that do not involve settlements, it makes logical sense to say that an insurance company must defend the insured if there is a possibility of covered liability, but that it need only indemnify the insured if there actually is covered liability.” Settlements are different— “it is no longer a question of possible or potential liability.” Thus, to determine whether the legal liability created by settlement “flows from a covered claim, a court must inquire not into what has been or would have been resolved on the merits, but what claims the settlement has legitimately and reasonably been designed to cover.”

That doesn’t mean that insureds can insert frivolous or legally barred claims into a settlement just to get coverage; the court predicted that state law would agree that “an insurance company has the right to present evidence that some or all of a total settlement amount should be allocated to the settlement value of non-covered claims.” But there was no such argument here.

Allied World did argue that there was no possible liability for ad-related Lanham Act claims as a matter of law. But it didn’t show that the advertising-related Lanham Act claims were frivolous or meritless. The underlying plaintiffs made clear in their motion for summary judgment that their view of the evidence was that MNS did not merely act as a retailer, but also participated actively in its supplier’s advertising and marketing efforts. Moreover, the retailer-only liability claims were still appealable at the time of settlement, and the court acknowledged that there was no binding circuit precedent on the issue. Finally, joint and several liability for advertising conduct was still on the table at the time of settlement.

The court turned to the relevant part of the “Advertising Injury” provision, which defined it as an “injury arising out of your business ... arising out of one or more of the following offenses”: (i) “the use of another’s advertising idea in your Advertisement,” or (ii) “infringement upon another’s copyright, trade dress or slogan in your Advertisement.” The policies further define “Advertisement” as “a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters,” including any “material placed on the internet or on similar electronic means of communication.” But “only that part of a web-site that is about your goods, products or services for the purposes of attracting customers or supporters is considered an Advertisement.”

The court rejected Allied World’s claim that the phrase “another’s advertising idea” should be understood narrowly as a “process or invention used to market one’s goods.” “[N]o reasonable layperson would anticipate such a stingy construction of the phrase. Instead, an “advertising idea” is better understood as, and construed in favor of the insured as being, “any idea or concept related to the promotion of a product to the public.” This is similar to the California interpretation of the term as covering the “manner or means” of advertising goods and services.

Allied World also argued that the word “another’s” in the phrase “another’s advertising idea” means that the injury must arise from the use of an “advertising idea” that another person owns or in which they hold a proprietary interest of some sort. But the Kona farmers, it argued, did not hold any legal property right in that term.

But nothing in the language of Allied World’s policies requires that the Kona farmers have the exclusive legal right to use an advertising idea. Indeed, nothing in the language of the policies requires them to have any legal right or property ownership at all in the advertising idea. The possessive term in the phrase “another’s advertising idea” is readily understood to refer to the factual question of whether another person uses something, rather than the legal question of whether they own it. …That broader meaning accords with how language is ordinarily used. For example, when trying to find a place to sit in a coffee shop, one might ask “is this your seat?” When doing so, one is not literally asking if that other person owns the seat. … In a similar vein, one would naturally say that Kona farmers—who advertise their coffee as “Kona” precisely to signal the high quality and special characteristics of their product—have hit on “Kona” as their advertising idea. They use it, and it is theirs in that significant sense. And it is theirs even though they have no property right in it.

While “some concepts are simply too common or too widely used to be considered anyone’s advertising idea,” this was not one of them.

Allied World also argued that the injury from the use of another’s advertising idea must come from that idea’s use in “your”—the insured’s—“Advertisement,” and that the underlying lawsuit plaintiffs did not challenge any of MNS’s own advertisements. But the underlying plaintiffs argued that the ads at issue were legally attributable to MNS.

The court did agree that “Kona” was not a “slogan,” as relevant to the separate definition of “Advertising Injury” as also covering injury from infringement on a copyright, trade dress, or slogan. The court agrees that “Kona” is not a “slogan,” that is, a “distinctive cry, phrase, or motto of any party, group, manufacturer, or person; catchword or catch phrase.” “Whether labeling products as ‘Kona’ might qualify as trade dress is a more difficult question.” But it didn’t matter because initial coverage was already established.

What about the exclusions? There, MNS faltered. The failure-to-conform exclusion provided that Allied World’s policy “does not provide coverage” for any “Advertising Injury ... arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your Advertisement.” Although “exclusionary clauses are interpreted narrowly against the insurer,” Allied World would meet even a heightened standard for applying the exclusion.

When MNS settled claims that alleged MNS was making statements about the quality of their coffee products when they labeled those products as “Kona,” those claims amounted to a statement of quality for purposes of the policy. The underlying lawsuit plainly alleged that Kona coffee has a “distinctive flavor and aroma” resulting from its cultivation in the “volcanic soil, the elevation, and the humidity” of the Kona District of Hawai‘i island; that “Kona coffee is one of the rarest and most prized coffees in the world” and that a vendor of same is “tell[ing] consumers that the coffee has a distinctive flavor profile, and that the beans are of the highest quality.” By selling commodity coffee that did not contain much, if any, genuine Kona coffee, MNS allegedly sold a product that failed to conform with that statement of quality. The underlying complaint alleged that defendants damaged the goodwill and reputation of Kona coffee precisely because a “consumer who tries that inferior product, thinking it is Kona coffee, will conclude that Kona coffee is not worth a premium price” and “will be unwilling to pay a premium price for Kona in the future.” The alleged injury to the Kona coffee farmers “flowed directly and unambiguously from the alleged failure of MNS’s coffee products to conform with the quality expected of Kona coffee.”

MNS argued that “Kona” was merely a statement about the origin or source of the product, rather than a statement of quality. But the cited out-of-circuit district court decisions simply found, “in their own unique circumstances, that statements of source were predominantly about the provenance of products, rather than their quality.” (Citing cases about Native American origin claims and reasoning that “similar logic could be said to apply whenever a product is labeled as ‘Buy American’ or ‘Buy Local.’”) Although previously the court followed the logic of GIs, now it says: “When vendors label a wine as ‘Burgundy,’ they are not seeking to avail themselves of the peculiar interest of customers in supporting a region in central France; they mean to say to the customer that the wine will possess the features of a high-quality, and therefore more expensive, strain of the product.” [I often talk in class about casual empiricism in judicial reasoning; this is a good example.]

The underlying lawsuit didn’t just allege sales diversion, or that customers had a peculiar interest in paying premium prices to support Kona farmers. “Its allegations were that ‘Kona’ bespoke high quality, and by selling a product that failed to meet that standard of quality, MNS … undermined the premium market for Kona coffee by unfairly leading consumers to conclude that genuine Kona coffee did not meet the quality standard. Allegations of this nature are not predominantly about the source of a product; they are about the statement of quality that a vendor makes when it calls its coffee ‘Kona.’” [They are both?]

Nor need a statement use “express” representations about quality or performance to be excluded. “While the court recognizes that exclusions must be construed narrowly, it cannot adopt a construction at war with the language of the exclusion. And nothing in the language of the failure-to-conform exclusion would support an artificial ‘magic words’ approach.”

MNS argued that the underlying plaintiffs’ alleged injuries would exist regardless of the coffee’s quality; at least some of that is true because of the alleged driving down of prices for Kona-labeled coffee, but the court concluded otherwise. “If MNS … had sold coffee that conformed to the quality standards of Kona coffee—which, according to the allegations in the [underlying] lawsuit, they could only have done by selling the real thing—there would have been no injury at all.” Even if, at trial, the underlying plaintiffs wouldn’t have been able to prove the higher quality of Kona coffee, MNS did not identify anything in the record of the underlying lawsuit indicating that the plaintiffs there had abandoned or lacked the ability to prove their allegations about the superior quality of Kona coffee. Indeed, two expert reports in the underlying lawsuit “affirm[ed] that the use of the term ‘Kona’ reflected a statement of quality.” One specifically opined “on how the geographical location of production of a product ... is intended to signal quality,” and further noted that the Kona coffee “has historically carried a reputation for high quality.”

breast pump rules: Think Green's trade dress claims against Medela proceed to trial

Think Green Ltd. v. Medela AG, 2025 WL 1826137, No. 21 CV 5445 (N.D. Ill. Jul. 2, 2025)

Think Green sued Medela for infringing its trade dress in its breast pump, as well as false advertising claims that were quickly dismissed on summary judgment because TG and Medela aren’t the only players in the market and the advertising didn’t disparage TG, meaning that TG couldn’t show harm. The trade dress claims, though they seem extremely weak to me (both in whether there would be confusion and whether the trade dress is nonfunctional), survive for a jury.

Think Green and Medela both sell manual, one-piece silicone breast pumps. Think Green’s pump is on the left and Medela’s pump is on the right within each image: 

Think Green claims trade dress rights in the “three-part shield-collector-base configuration, wherein the collector is bulbous yet fits underneath the outer diameter of the shield and contains an ornamental rib in its top part, while the base flares out from the bottom of the collector bulb to meet the surface upon which the whole unit rests.” Medela previously won summary judgment on Think Green’s design patent claim.

Much of the opinion focuses on the expert reports around secondary meaning and confusion. Think Green’s expert witness Harper opined that (1) among the relevant universe of consumers, there is a likelihood of confusion that Medela’s pump is sponsored or approved by Think Green due to the allegedly infringing trade dress; and (2) the relevant universe of consumers would likely ascribe secondary meaning to Think Green’s trade dress. Her surveys were not among the “rare” ones where fundamental flaws render them “completely unhelpful to the trier of fact and therefore inadmissible.”

Harper’s secondary meaning online survey presented half of the respondents with photos of Think Green’s trade dress, pictured immediately below, and asked those respondents whether they associated the pump with one particular company or brand, and if so, which brand and why. 

The control group saw a different pump and received the same questions. 

Harper’s point-of-sale confusion survey showed the test group an image of Medela’s pump, captured from the website buybuybaby.com, which included the “MEDELA” brand name; the product’s name, the Medela® Silicone Breast Milk Collector; its price; and an image of the pump that included a lanyard and yellow stopper. 

The control group was presented with a similar image of a different, “wearable” breast pump: 

The survey ultimately asked respondents whether or not “the manufacturer or brand of the breast milk pump/collector [they] just reviewed … is sponsored or approved by another manufacturer or brand.” If a respondent answered yes, they were asked who and why.

Medela’s criticism of the control was that it was wildly different from the trade dresses at issue. But, first, a secondary meaning survey might not even need a control. As for the confusion survey, it contained additional probes (why?), which the court thought helped (though the psychological literature suggests that people are really bad at answering that question), and anyway a bad control isn’t necessarily enough to kick out a survey. Choosing a control is really hard, so a bad control should bear on weight rather than admissibility.

Medela objected that the survey also didn’t reflect real-world conditions of online purchase, including images of the pump’s packaging, additional images of Medela’s “signature butter yellow,” a bullet point list of the pump’s features, and the ability to click on the pump’s image to expand it. Again, that went to weight; these were not core components of the shopping experience.

There was also a post-sale confusion survey. [Here one real issue is that unlike point of sale confusion, post-sale confusion’s theory requires that the post-sale confusion negatively affect subsequent consumers—either by causing them to think poorly about the plaintiff or by making the plaintiff’s product seem too easily available to the hoi polloi. There’s no evidence of this in the survey, and if you leave out that part of the theory you remove one of its few constraints.] Harper’s survey first screened for respondents who purchased a pump in the last year or who would consider purchasing one in the next year then showed them four images of Medela’s pump, collected from Medela’s online retail product pages, less Medela’s name, design elements, and measurements. The control group saw the same control pump. 

control images

test images

The survey asked respondents what company, companies, or brand(s) they believed put out the pictured pump, assuming they had an opinion in that regard; why they had that belief; and whether they believed the pump was affiliated with, or sponsored or approved by, any other company or brand. Although there were more similar noninfringing pumps out there, the control pump was also made of silicone, clear/white, and curved; whether the control was good was for cross-examination and the jury.

Plus, Medela objected that most people won’t encounter other people’s pumps in the wild, just like they mostly won’t encounter other people’s underwear, making post-sale confusion unlikely. The court was offended on behalf of those who pump in public, wash out/pour bottles in public, etc.

The survey also sufficiently isolated the claimed trade dress, even though it included the “distinctive ridge around the breast shield” visible in the test stimulus, which Think Green disclaimed as its trade dress. Again, this went to weight rather than admissibility.  

Think Green’s objections to Medela’s expert Cohen were equally unavailing. There’s a first time for every expert, so the fact that this was her first trade dress survey didn’t require exclusion. Medela’s survey showed Medela’s pump “as it had been displayed on the Amazon platform.” With the stimulus picture still on the screen, respondents were asked open-ended questions such as, “if you have an opinion, what company or organization makes or puts out this breast milk collector” and whether the respondent “believe[d] that this breast milk collector is affiliated with or sponsored by any other company.” The court didn’t buy that keeping the stimulus on screen created untoward demand effects. The court agreed that, because “[a] consumer would be staring directly at the product, together with its packaging and description, at the moment he/she made the decision to purchase (e.g., clicked ‘Add to Cart’),” the methodology underlying Cohen’s survey sufficiently mimicked marketplace conditions.

With that out of the way, there was enough evidence of secondary meaning to avoid summary judgment on that ground. Along with the survey, there was at least a minimal showing of Think Green’s volume and history of sales, even with no contextualization of those sales or of its advertising expenditures. As for intentional copying, “[c]opying is only evidence of secondary meaning if the defendant’s intent in copying is to confuse consumers and pass off his product as the plaintiff’s,” and whether that happened was for the jury.

And for confusion, “[i]t is a rare trade dress case where the ‘evidence is so one-sided that there can be no doubt about how the question [of whether likelihood of confusion exists] should be answered.’” [This is either trivial (a contested case generally means that both parties believe that they have a shot) or wrong (TM cases aren’t actually all that special in terms of evidence, much as we like to think TM is especially complicated). This claim contributes to making TM doctrine worse in practice by making courts reluctant to grant summary judgment—usually for the defendant—which has systematic effects on who gets to do what.]

Emails among Medela employees were not convincing evidence of passing off. “In at least some of the quoted emails, the employees discuss their desire to avoid copying Think Green’s pump and—crucially—never evince a desire to pass their pump off as Think Green’s,” the court concluded, citing phrases like “I do not believe this is a winning strategy,” “[W]e need to be more innovative,” and discussions of potential advantages of Medela’s pump over Think Green’s. “Although other email excerpts appear to support Think Green’s narrative, in asking the Court to interpret this entire body of emails as unequivocal proof of Medela’s intent to pass off Think Green’s trade dress as its own, Think Green is asking the Court to ‘choose between competing inferences.’”

On functionality, once again a lower court relies on the existence of alternative designs to deny summary judgment. The reason this is supposedly consistent with Traffix is that, if utility is shown by other means (in practice the only possibilities are patent claims, advertising that touts utilitarian advantages, or maybe effects on quality/cost), then alternative designs need not be considered, even though that’s not what Traffix says. Thus, the court says “[a] design does not need to be the only, or the best, way to do things to be considered functional: It only needs to represent one of many solutions to a problem,” then immediately proceeds to disregard that statement.

The court found that an international patent application involving the pump was not dispositive. Although the Federal Circuit held that “an applied-for utility patent that never issued has evidentiary significance for the statements and claims made in the patent application concerning the utilitarian advantages, just as an issued patent has evidentiary significance,” the court didn’t think that rules for the TTAB were relevant to “a court’s Lanham Act analysis.” [??? They are interpreting the same statutory language? Why would you ever want the PTO and judicial analyses of functionality to differ?] “A never-approved patent application … could include any number of useless features that would never have passed muster with the Patent and Trademark Office”; only approved or expired utility patents show functionality. [This seems wrong, including as a matter of applicant estoppel; it would also make evaluating the effect of foreign patents into a mini-trial on the relationship between foreign and US patent law.]

Anyway, even considering the application, it wouldn’t persuade the court that functionality was present. The court thought that there was no evidence that the “central advance” application matched the “essential feature” of the claimed trade dress. “And although the absence of a utility patent does not preclude the functionality of a design, the lack of a presumption of functionality does make it considerably less likely that functionality can be determined on summary judgment.”

Medela’s expert Faltum opines that the shape of Think Green’s design was ideally suited for the human hand, while other shapes are “awkward to hold, difficult to manipulate, inferior in performance,” and less effective at creating a vacuum seal: 

The court was skeptical; 3D pumps shouldn’t be likened to 2D shapes, and this analysis disregarded “the prominent breast shield topping the pumps.” Likewise, a jury should evaluate the claim that the bulb design was more effective, based on a study Faltum conducted that tested how much water various pumps could draw through a hose from a beaker when the bulb was compressed and released. The court agreed with Think Green’s argument that the study merely “demonstrate[d] that there is a statistically significant difference in the efficiency with which liquid is collected by one-piece silicone breast milk collectors as a consequence of their shape.” But it didn’t evaluate other potential utilitarian features of a pump (such as adherence or comfort), “whether this alleged difference in water-drawing efficiency translates into a more effective vacuum ‘essential for these collectors’ remains a factual question.” [I really don’t get this logic—something doesn’t have to be comprehensively better to be functional; tradeoffs are a thing, and each solution within the solution space should not be monopolizable. If you’d told me “this pump will be more efficient but be less comfortable,” I probably would have gone for speed. Perhaps there’s more to the story, but the explanation doesn’t persuade me.]

And Think Green sufficiently countered Medela’s claim that the suction base is ideal for stability “by pointing to several other similar pumps that use different types of non-suction bases to provide stability.” [Alternative designs, in one of the factors that’s supposed to determine whether alternative designs even need to be considered!]

Advertising didn’t unequivocally claim advantages to the design, only of the breast shield and suction base. (E.g., “Available in two larger capacities of 100ml and 150ml, and with a new suction base that sticks to flat surfaces to prevent accidental spills, it is the easiest and most simple way to express breast milk.”) That just meant that having a suction base is good, nothing about its size or shape or overall design. [This seems particularly anti-Traffix -- that suction base looks like the size and shape of a suction base you'd make if you wanted a suction base; a circle uses less material than anything else of the same size, and surely they shouldn't be forced to use a different shape or cover up the suction base.] “In short, none of these advertisements urge consumers to purchase the pump on the strength of any particular utilitarian quality of the suction base’s design.” [It would be interesting to see what consumers actually thought was being claimed.]

different breast sizes

suction base claim

suction base claim

The court pointed to Think Green’s evidence of “numerous successful, highly rated alternative silicone one-piece breast pumps that are designed differently than, but function the same as, Think Green’s pump.” “Where Think Green has presented evidence that other non-infringing designs are available, a triable issue of fact exists on functionality.” [So much for Traffix.]

ambiguity in consumer class actions v. the Lanham Act: convergence or divergence?

Slaten v. Christian Dior Perfumes, LLC, 2025 WL 1840026, No. 23-cv-00409-JSC (N.D. Cal. Jul. 3, 2025)

The concept of ambiguity is now on a path to become as entrenched in consumer protection cases as in Lanham Act cases. My thinking on this is still evolving, but right now I’m inclined to say that an “ambiguous” claim for purposes of Lanham Act claims means what an “ambiguous” claim for purposes of consumer protection litigation does, even though the assessment process is formally different. That is, a statement challenged under the Lanham Act is ambiguous if there are multiple plausible interpretations, some of which are not false. As the Ninth Circuit has clarified, a statement challenged under consumer protection law can be found plausibly deceptive if reasonable consumers could think it has a false factual meaning, even if other reasonable consumers would think it was ambiguous and required more information to interpret/had a different non-false meaning. That latter group can be expected to consult the back of the label for clarification, if present. But the first group of reasonable consumers has no reason to inquire further and therefore can be deceived; they are functionally equivalent to the deceived group in a Lanham Act false implication case.

The Lanham Act cases use the modifier “substantial” to describe the relevant subset (reasonable consumers who are deceived), but accepts much less than half as a sufficient percentage. Consumer protection cases are right now generally stricter, requiring bigger percentages where there are surveys (as there often are these days), so there may still be doctrinal divergence. I think that divergence, to the extent it exists, is likely unjustified—it is hard to see why competitors should have an easier path to remedies than the directly deceived consumers—but it is early days for both the “ambiguity” concept and the new prominence of surveys in such cases. 

I suspect that courts are thinking that “half or more” is better for class action treatment, but formally it really isn’t. That is, the common question in a consumer protection class action in the key states is “is this ad deceptive?” and the answer to that should be “yes” if it is likely to deceive a substantial number of reasonable consumers. Then, NY and California (etc.) presumptions about deception kick in to allow the class to proceed. An ad that deceives 49% of consumers—or 30%—about a material fact is actually pretty bad! [Caveat: our concept of deception should incorporate a “compared to what?” inquiry. If it’s impossible to provide the information in a non-deceptive way, but the information is also truthful and useful to some people, then we have to balance those considerations; if it’s not useful/the ambiguous meaning is just puffery, then we don’t have to worry so much.]

A related question is the role of the jury, at least in a Lanham Act case: If courts applied similar analysis in such cases, they'd ask whether a reasonable jury could find that a claim was literally false with respect to a substantial number of reasonable consumers, such that those consumers would feel no need to inquire further. That's not how Lanham Act courts tend to treat the issue; it would probably counsel against determining "ambiguity" as a matter of law. 

Anyway, this case involves a remand on claims over alleged deceptive labeling/advertising of SPF in cosmetics as lasting for 24 hours. The court initially interpreted McGinity v. Procter & Gamble Co., 69 F.4th 1093 (9th Cir. 2023), to mean that if a front label is ambiguous in that it “could mean any number of things,” some of which would not be deceptive, a court must look to the product’s back label to determine whether a reasonable consumer would be deceived. Upon review of the back label, the court dismissed plaintiff’s claims.

The court of appeals eventually remanded based on Whiteside v. Kinberly Clark Corp., 108 F.4th 771 (9th Cir. 2024). Whiteside held that “[a] front label is not ambiguous in a California false-advertising case merely because it is susceptible to more than one reasonable interpretation.” On a 12(b)(6) motion, a label “may have two possible meanings, so long as the plaintiff has plausibly alleged that a reasonable consumer would view the label as having one unambiguous (and deceptive) meaning.” That is:

a front label is not ambiguous simply because it is susceptible to two possible meanings; a front label is ambiguous when reasonable consumers would necessarily require more information before reasonably concluding that the label is making a particular representation. Only in these circumstances can the back label be considered at the dismissal stage.

Whiteside specifically rejected this court’s earlier “more than one possible meaning” standard for ambiguity. Bryan v. Del Monte Foods, Inc., 2024 WL 4866952 (9th Cir. Nov. 22, 2024), did not change matters. Bryan considered whether a front label describing a fruit cup using the phrase “fruit natural” falsely led consumers to believe all ingredients in the cups were natural. The court explained the word “naturals” was “a noun, not a descriptive adjective,” and so the label suggested “the phrase is just the name of the product.” Further, the front label context indicated “although the fruit itself is natural, the syrup may not be,” and customer surveys were insufficient because they “asked people what they thought ‘natural’ should mean on the label of a product, not what they thought it actually did mean as used on these labels.”

But here, reasonable consumers could conclude from the front label alone that defendant was advertising 24 hours of sunscreen protection.

Southern discomfort: class certified over malt beverage dressed like Southern Comfort whiskey

Andrews v. Sazerac Co., 2025 WL 1808797, No. 23-cv-1060 (AS) (S.D.N.Y. Jul. 1, 2025)

Plaintiffs alleged that Sazerac deceived consumers by selling a malt beverage that looks like Southern Comfort whiskey but in fact contains only “whiskey flavor.” The court certified a class of “[a]ll persons who purchased the Southern Comfort Malt Products in the State of New York at any time during the period February 8, 2020, to the date of judgment” with one named plaintiff.

The malt beverage comes in three sizes: 50ml, 100ml, and 355ml. The 50ml bottle is cylindrical, while the two larger sizes are relatively flat. But each has “colors, themes, fonts, symbols[,] and spacing” identical to Southern Comfort whiskey bottles. Each bottle has a statement of composition, which until April 2023 described the drink as a “malt beverage with natural whiskey flavors, caramel color and oak extract.” Inclusion of the “whiskey flavors” and “oak extract” language allegedly contributed to this misleading impression.

Addressing only the parts that interest me:  

Sazerac argued that there was no classwide proof that the bottles’ labeling was materially misleading. Although plaintiff’s survey found that 62.9% of consumers believed that the malt-beverage mini bottles contained whiskey, Sazerac argued that it was fatally flawed, and anyway only applied to the 50ml bottles.  The 50ml bottle is cylindrical, while the larger bottles have “relatively flat front[s],” and the statement of composition, which says that the drink contains “malt beverage,” appears in larger font on the bigger bottles. But the court didn’t find these differences to be material:

That the larger bottles are flat, instead of round, might be material if their shape would tend to indicate to reasonable consumers that the bottles contain malt beverage, not whiskey. But Sazerac doesn’t say that its whiskey is only sold in round bottles, so it’s not clear why the bottle shape makes a difference here. Sazerac’s observation that the statement of composition appears in larger font on the larger bottles seems similarly irrelevant. On the one hand, “malt beverage” is in larger font. But so too were the allegedly misleading “whiskey flavor” and “oak extract” phrases, at least until April 2023. Regardless, the Court sees no reason why the impression created by a specific combination of elements on a small bottle would vary “significantly” from the impression created by those same elements on a larger bottle.

Anyway, misleadingness was a merits question.

Plaintiffs offered a choice-based conjoint survey to measure their claimed damages, which estimated a 8.8% price premium from false beliefs that there was non-malt liquor in the beverage. Sazerac argued that this study failed to (1) show that the price premium is attributable to the beverage’s misleading packaging, as opposed to flavor and convenience, or (2) consider supply-side factors. The court disagreed. Plaintiffs’ theory was that the overall packaging contributed perceived value, and the survey tested that theory. Even if the study asked respondents to assume that the products were all available in the same store (and thus didn’t control for convenience), that was a matter of ultimate persuasiveness, not a matter of whether it tested the plaintiffs’ theory. “If [the] model missed the mark, then it did so in one fell swoop for the entire class.” Likewise, an alleged failure to measure supply-side factors can be accounted for “when (1) the prices used in the surveys underlying the analyses reflect the actual market prices that prevailed during the class period; and (2) the quantities used (or assumed) in the statistical calculations reflect the actual quantities of products sold during the class period,” as the survey here did. After all, “[a] conjoint survey that asks respondents whether they would rather pay x for a product labeled ‘100% Fruit Juice’ or y for a similar product labeled ‘50% Fruit Juice’ ... would account for supply-side factors if both x and y reflect the prices for which juice companies actually sell similarly labeled products in the marketplace.” Sazerac argued that it would refuse to sell its malt beverage at the lower price of a generic competitor. But again, that was not relevant to whether the survey was good enough for class certification. “Moreover, it would be improper to give Sazerac the benefit of the doubt—and to take its CEO’s self-interested statements as controlling—at this stage.”

 

5th Circuit agrees that joint TM owners can't sue each other under any Lanham Act theory

Reed v. Marshall, --- F.4th ----, 2025 WL 1822673, No. 24-20198 (5^th Cir. Jul. 2, 2025)

Jade, an R&B, hip hop, and soul vocal group, rose to prominence in the 1990s. Jade disbanded in 1995, when the members began pursuing their respective individual careers. “Appellant Di Reed contends that her fellow Jade members, Joi Marshall and Tonya Harris, violated the Lanham Act by performing under their co-owned JADE mark with another singer, Myracle Holloway.” She lost because “the Lanham Act does not authorize claims between co-owners of a trademark.”

In 2018, the three original members agreed to a reunion tour, and collectively applied for joint ownership of the “JADE” service mark; it was registered in 2019 for “[e]ntertainment services in the nature of live musical performances.” The registrants were listed as Reed, Marshall, and Harris, all in their individual capacities. But the reunion fell through, and in June 2021, Marshall and Harris entered into a six-month work-for-hire contract with a different singer, Myracle Holloway. That trio performed as Jade at multiple “90’s Kickback Concert[s].” Promoters created social media ads that, Reed claims, inappropriately used her name, image, and likeness, along with the JADE mark.

Reed sued the other individuals, along with two other defendants (now settled out), alleging infringement, dilution, and unfair competition through false designation of origin and false advertising; as well as violations of Texas statutory and common law. After disposing of the federal claims because co-owners and licensees thereof can’t be sued, the district court found that it lacked supplemental jurisdiction over the state claims. This appeal followed.

The court of appeals framed the issue as one of statutory standing. (Scalia was never going to win this terminological issue.)

Reed, Marshall, and Harris “entered into joint ownership of the JADE mark—that is, each individual owns a complete interest in the mark.” This is disfavored—“a mark is fundamentally intended to ‘identify and distinguish a single commercial source,’ not three distinct owners,” but it is allowed (why, though, since it can’t actually perform that core function if the owners part ways and more than one keeps using the mark? This is an example of the US TM system not fully committing to the principles it says it uses; you could probably get a highly similar result by saying that the mark stops signifying the joint owners when they fragment and can be reappropriated by the first successful user thereof). Because “[a]ny discord between co-owners could result in ‘multiple, fragmented use’ that may result in ‘consumer confusion and deception,’” parties should contract to clarify “outcomes should owner interests become unaligned.” But they didn’t.

Too bad! The Lanham Act, “which is aimed at protecting consumers and mark owners from fraud and deceptive acts,” does not provide a cause of action “to remedy disputes between the co-owners of a trademark.” An owner definitionally can’t be an infringer. “Co-owners of a mark, who generally have the right to use their marks as they please,” are owners, not infringers. “[T]he question is not whether joint ownership of a trademark could cause confusion if co-owners went their separate ways, but whether the Lanham Act affords a statutory right for those co-owners to sue each other.” And Holloway was not an appropriate target either, because “Marshall and Harris, as persons with complete ownership interests in the mark, have an unencumbered right to use the mark as they please,” including by licensing. [Note that this is not correct—there are uses of the mark that will lead to loss of rights, not to mention potential conflicts with, say, JADE for other things if they try to expand.]

Dilution: Same result. Of note: “The plain text of 15 U.S.C. § 1125(c)(1) signals that at least two distinct marks need to be in play for dilution to occur: ‘the famous mark’ possessed by an owner, and an imposter ‘mark or trade name’ that causes dilution of the original mark.” Here, that mattered because an owner can’t be an imposter, but it has broader implications (if use as a mark is still a thing).

False advertising: Reed alleged that the “[d]efendants’ unauthorized use of [her] JADE Mark ... in conjunction with the promotion and provision of live entertainment services constitutes unfair competition and false advertising.” More specifically, defendants allegedly falsely advertised that “Holloway is a member of the group Jade” and “that the performances promoted and provided by Defendants are those of the group Jade.” But this hinged on the mistaken premise that defendants were using the JADE mark in an unauthorized manner. Also, there was no evidence that defendants’ use of the JADE “mark in commerce proximately caused Plaintiff to suffer injuries to commercial interests in business reputation or sales.”

Reed’s best allegation is that in marketing materials for the 2024 “R&B Block Party” concert, the event’s promoters created social media posts that included a Jade song that featured Reed’s voice. But with respect to the Lanham Act, Reed concedes that “[a] person’s name, image, or likeness cannot function as a trademark such that it affords a plaintiff a cause of action for trademark infringement,” and in any event, the promoters who made the advertisements in question are not parties to this suit.

Reed argued that she suffered “lost opportunities such as the creation of new compositions under JADE name and subsequent profits from new compositions”; “business reputation in the form of deliberate exclusion from promotional appearances under JADE name”; and lost “performances under the JADE name.” But, even had there been evidence in the record, “the defendants’ co-ownership of the JADE mark does not exclude Reed from using the mark as she pleases. In other words, the defendants’ use of the JADE mark has not caused Reed to ‘los[e] opportunities’ associated with the mark; she, as a co-owner, has the right to pursue those opportunities consistent with the (lack of) conditions linked to her ownership interests.” [Among the implications: she benefits from defendants’ use to preserve her own rights, since their use in commerce redounds to her benefit. Could a state law proceeding force partition by sale? What about partition in kind?]

False designation of origin: Here it seems like Belmora would at least allow for some sort of labeling remedy under appropriate circumstances, but Reed’s theory was not conducive to that. She argued that the defendants’ “unauthorized use” of the JADE “mark” and her “voice and likeness in commerce” was “likely to deceive consumers as to the origin, source, sponsorship, or affiliation of Defendants’ services.” Specifically, she argued that consumers would think that the Holloway-Marshall-Harris performances were “affiliated with or sponsored by” her. [My theory: people who knew the group but didn’t know the performers’ names would think that she was performing—this seems much more plausible. But the remedy might be much more limited.]

The court of appeals found that, even if she did fall within the statute’s zone of interests, her injuries were not proximately caused by a violation of the Lanham Act. [I don’t think this is a conflict with Belmora, but rejecting my theory might be—she doesn’t need to own a TM to bring a Belmora claim.] Her allegations were all premised on unauthorized use of the JADE mark. But that use wasn’t unlawful, and Lexmark bars “suits for alleged harm that is ‘too remote’ from the defendant’s unlawful conduct.”

 

claim of failure to warn of kratom's addiction potential not preempted; a "disease claim" involves helping, not causing, disease

J.J. v. Ashlynn Marketing Gp., 2025 WL 1811854, No. 24-cv-00311-GPC-MSB (S.D. Cal. Jul. 1, 2025)

Plaintiffs sued on behalf of putative nationwide, California, and NY classes, alleging that Ashlynn failed to warn consumers of the potentially addictive nature of its products, which contain dried leaves from a plant called kratom. As alleged, “the active alkaloids in kratom ... work on the exact same opioid receptors in the human brain as morphine and its analogs” and it “has the same risks of addiction, dependency, and painful withdrawal symptoms, among various other negative side effects.” As a result, plaintiffs allege that kratom “has sunk its hooks into tens of thousands of unsuspecting customers and caused them serious physical, psychological, and financial harm.”

The symptoms of kratom withdrawal include: “irritability, anxiety, difficulty concentrating, depression, sleep disturbance including restless legs, tearing up, runny nose, muscle and bone pain, muscle spasms, diarrhea, decreased appetite, chills, inability to control temperature, and extreme dysphoria and malaise.” However, because it “does not produce a debilitating ‘high’ like cocaine or heroin, it is very easy for users to take the drug every day without feeling as though they are developing a drug addiction or harming themselves.”

Plaintiffs alleged that defendant had superior knowledge compared to reasonable consumers, and that it had received numerous user reports about the addictive potential of kratom in the United States. They also alleged that defendant interacted with growers and distributors in Southeast Asia who have disclosed the addictive nature of kratom to it. Nonetheless, its product only had “a bog-standard disclaimer stating that the Products are not regulated or evaluated by the FDA.”

product front ("all natural")

product back with disclaimer of FDA approval

Defendant argued that the FDCA preempted the claim because a warning about addiction would be a prohibited “disease” claim. A disease claim explicitly or implicitly claims “to diagnose, mitigate, treat, cure, or prevent a specific disease or class of diseases.” As the court easily concluded, a disclosure that a supplement has addictive qualities is not a “claim to diagnose, mitigate, treat, cure, or prevent” disease. “Instead, such a disclosure informs the consumer that, rather than improving one’s health, kratom has exactly the opposite effect.” The defendant “can easily comply with state laws and the FDCA by avoiding false, misleading, or deceptive statements or omissions regarding kratom’s alleged addictiveness.”

The court did, however, dismiss nationwide class allegations because of differences in the consumer protection laws of the various states on reliance, burdens of proof, statutes of limitations, and damages.

Plaintiffs could bring claims for “unpurchased products” (forms in which they didn’t buy kratom) because the products were all substantially similar for purposes of their claims.

NY statutory and common law fraudulent omission claims: A plaintiff bringing a fraudulent omission claim must show either that (1) “the business alone possessed the relevant information,” or (2) “a consumer could not reasonably obtain the information.” This was sufficiently alleged; although defendant didn’t have exclusive knowledge of the risks, “an omission can still be actionable where it is shown that a consumer could not reasonably obtain the omitted information.”

At the pleading stage, it was enough to allege that “selective online materials or niche federally funded studies” are not “reasonably accessible or comprehensible to consumers”; that kratom is marketed as providing benefits without disclosure of its addictive potential, and, “most importantly,” “that consumers are not aware of the risks of kratom consumption before making their purchases because the available information is either difficult to access or, as with the medical literature, incomprehensible to the average person.” Misinformation about kratom is allegedly rampant.

California: A fraudulent omission must either (1) “be contrary to a representation actually made by the defendant,” or (2) “an omission of a fact the defendant was obliged to disclose.” A defendant “has a duty to disclose when either (1) the defect at issue relates to an unreasonable safety hazard or (2) the defect is material, ‘central to the product’s function,’ and the plaintiff alleges … (1) the defendant is in a fiduciary relationship with the plaintiff; (2) the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) the defendant actively conceals a material fact from the plaintiff; or (4) the defendant makes partial representations but also suppresses some material facts.” This too was done.

Although there was a lot of public information about kratom, it was conflicting, and many documents referenced “complex studies” or were “difficult-to-access reports and letters.” It was plausible that the manufacturer had superior knowledge compared to the average consumer. Defendant argued that its labels directed users to consult with a doctor before use, who in turn would have informed a user of kratom’s addictiveness. But “Defendant cannot simply place the onus of warning consumers of the potential adverse effects of its kratom products on consumers’ doctors by adding boilerplate language to its labels.”

Claims for equitable relief also survived because plaintiffs adequately alleged that public injunctive relief would be appropriate. California class members and members of the public are still at risk of harm—public safety harms can’t be redressed through money damages.

plaintiffs don't have to use full FDA methods for testing nutrients to avoid FDA preemption

Scheibe v. ProSupps USA, LLC, --- F.4th ----, 2025 WL 1730272, No. 23-3300 (9th Cir. Jun. 24, 2025)

The FDA specifies testing methods for determining the amount of carbohydrates and calories in a food, as well as a sampling process for those tests requiring “a composite of 12 subsamples (consumer packages) or 10 percent of the number of packages in the same inspection lot, whichever is smaller, randomly selected to be representative of the lot.” A dietary supplement, is “misbranded” in violation of the FDCA if its label differs by a specified margin from the results of these tests. Foods containing up to 0.5 grams of carbohydrates can be labeled as zero-carbohydrate, and foods containing up to 5 calories can be labeled as zero-calorie. State law claims that aren’t identical to FDCA violations are preempted.

This is the background for the claims here, over a dietary supplement: Hydro BCAA. The supplement’s FDA-mandated label states that each 13.8-gram serving contains 10 grams of amino acids but zero grams of carbohydrates and zero calories. Scheibe bought the supplement to help him lose weight and gain muscle mass; his preliminary testing of one sample, using a FDA-specified method, found that the supplement contained 5.68 grams of carbohydrates and 51 calories per serving, “far exceeding the FDA’s allowable margins for zero-carbohydrate and zero-calorie labeling.” He sued under California consumer protection law.

The district court dismissed the claims because he didn’t use the 12 random sample process. But a plaintiff need not prove a claim in the pleadings, and his allegations made misbranding plausible.

Anyway, because compliance with the FDCA can be determined only by the FDA’s testing methods and sampling processes, “the Act necessarily preempts mislabeling claims proven only through testing methods and sampling processes ‘not validated or accepted by the FDA for use in th[at] context.’” But ProSupps bears the burden of showing preemption, and Scheibe didn’t plead himself out of court. Instead, he pled facts allowing a reasonable inference that the supplement was misbranded. His preliminary testing “allows a court to draw a reasonable inference that testing a composite sample according to FDA regulations would show that the supplement is misbranded under the Act.” It was plausible that additional samples would contain similar amounts, and even if those samples they had far fewer carbohydrates and calories than Scheibe’s original sample, “they still could lead to a result that exceeds the margins for zero-carbohydrate or zero-calorie labels and thereby establish misbranding under the Act.” (It's not clear whether the result would be the same with lower divergences from the label. If every other sample in a 12-sample group was zero and zero, the average would be 0.47 grams of carbs and 4.25 calories per serving, just slightly below the relevant thresholds. Whether such a result is likely is of course well beyond the record and my expertise.) Maybe his test result was weird. “But the Federal Rules of Civil Procedure do not cast judges as skeptics of pleadings.”

Scheibe wasn’t arguing that every serving must have the same amount of nutrients; he was arguing for a reasonable inference about the results of the FDA-mandated twelve-sample process. Indeed, it may be “impracticable” for a plaintiff to test 12 different samples “randomly selected to be representative of the lot” before discovery opens. “[T]he fact that defendants may have exclusive control and possession of critical facts—like their own product inventory—cannot categorically prevent plaintiffs from stating a plausible claim.”

Scotts loses trade dress claim over green & gold for Miracle-Gro

Scotts Co. v. Procter & Gamble Co., 2025 WL 1779167, No. 2:24-cv-4199 (S.D. Ohio Jun. 27, 2025)

A different Scotts trade dress claim than the one I blogged last year. While it’s hard to get rid of trademark claims on a motion to dismiss, a preliminary injunction may be a different matter—as it is here, where the court does a thorough job with an expansive trade dress claim (which frankly should have John Deere’s lawyers taking notice, given its own reliance on green and yellow). This might be a good case to give students, given its accessibility.

Scotts makes the Miracle-Gro line of plant food and lawn and garden products, some of which are depicted below: 

P&G recently introduced a new non-selective herbicide—a weed killer—called “Spruce”:

Scotts is the market leader in the lawn and garden business. What is its Miracle-Go trade dress? It has an incontestable registration that “consists of a rectangular shaped box in the colors green and yellow” for “plant food.” When the appropriate colors are transposed onto the lined image in the registration, the mark looks something like this:

But Scotts claimed more, alleging a trade dress comprising:

(1) A green and yellow color combination;

(2) With each color presented as a separate horizontal band and the top color taking up a smaller ratio than the bottom color;

(3) With the two bands sharing a common border that runs horizontally along the package;

(4) With a straight line dividing the two colored bands; and

(5) A circular horizontally centered graphic element.

The court referred to the “rectangular shaped box” combination as the Registration, to avoid confusion with this broader trade dress claim—broader because it lacked a shape restriction and applied to more than plant food. Nonetheless, Scotts has never used the Miracle-Gro Trade Dress with any herbicide, nor did it plan to. Also, the broader trade dress did have some greater specificity—specifically, the “circular horizontally centered graphic element.” As implemented, this element was the Miracle-Gro logo or wordmark, which consists of “white text overlaid on (and extending beyond the horizontal border of) a black circle with some additional graphic sheen.”

Products using this broader trade dress have been on the market from 15 to 70 years, depending on the product. Plant food was the original, sold for over 70 years, and was most closely associated with the registration.

Since 2014, Scotts has sold around 104 million units of this product for approximately $650 million. During the same period, Scotts sold roughly one billion units of Miracle-Gro, generating approximately $5.6 billion in revenue, although just under one-third came from so-called “specialty products” or “flavors,” “which come in quite different packaging (although sometimes with at least some of the design elements from the Trade Dress).” 

Ninety percent of sales occur at brick-and-mortar stores, including “do-it-yourself ... home centers” like “Lowe’s, Home Depot, Menards”; large chain retailers like Target, Walmart, and Meijer; and hardware, garden, and club stores. The cost ranges from $6 to $20 depending on the product and configuration.

Spruce became available to consumers mid-November 2024. It costs between $12.99 to $39.99 depending on the configuration. Spruce is carried in brick-and-mortar retailers such as Home Depot, Lowe’s, Walmart, Target, Ace, and True Value, as well as online. P&G has invested significantly in television, online/social media, print, and in-store advertising as part of the product rollout:

The bottom of each container consists of a clear or transparent section. The transparent portion is designed to allow consumers to see the liquid product. A spruce green portion predominates most of the product packaging. “The Miracle-Gro green is a brighter green with a glossy finish that resembles a freshly cut lawn on a sunny day, while the green on the Spruce packaging has a matte finish and is darker, more like a pine (or spruce) tree in a shadowy forest.” On most packages, a round, yellow dandelion image (with an even darker green background) traverses the clear and dark green portions, intended to depict a half-living, half-dehydrated-and-dying, dandelion. The Spruce trademark appears in bold white text, with a yellow “violator” containing the text “Visible Results in 1 HOUR.” I learned: “A graphic violator is a visual element used in product design that sellers use to draw the consumer’s attention to certain messaging the seller wants to emphasize.”

Many third-party lawncare products similarly use green and yellow color combinations: 

Although market presence for all of these wasn’t shown, Scotts admitted that Preen Weed Preventer Plus Plant Food product (leftmost) is “widely sold in the lawn-and-garden marketplace” (perhaps outselling the Miracle-Gro weed preventer product) and at times “shelved right next to” that Miracle-Gro product. That is true also of Spectracide (center), which Scotts admitted is “a leading weed killer product.”

Plaintiff’s witness Sass had worked for Scotts for over 20 years. He testified about the 12 distributor declarations and 110 consumer declarations submitted to the PTO for the Registration. The declarants each said something like: “when I see packaging which is green on top and yellow on the bottom in connection with plant food products, I interpret the packaging design as an indication that the goods come from a single source, i.e., the makers of Miracle-Gro.”

Testifying about differences from other products on the market, Sass emphasized the importance of the proportions (“typically one-third green on top, two-thirds yellow on the bottom”) and a dark circle element for the Scott products. The court concluded that the proportions were “perhaps more important” than Scott argued.

Meanwhile, P&G’s witness Croswell testified that P&G settled on Spruce’s dark green because P&G believed it would make Spruce distinctive in the weed-killer market and because it invoked the namesake of the brand (i.e., Spruce trees). “[D]uring development, P&G and one of the third-party marketing companies it used identified concerns about whether a certain version of the Spruce design may have been too similar to a particular competitive product. But at no point during that process did anyone raise a concern that any version of the proposed Spruce design was too similar to the Miracle-Gro line of products.” And P&G has no plans to expand the Spruce brand into other product categories in the lawn and garden space.

Nobody was aware of instances of actual confusion.

Winning my heart, the court began its confusion analysis by cautioning that it would not allow Scotts to extend the benefits of incontestability to the common-law trade dress, and that incontestability and likely confusion are two different questions.

Strength of the mark: Miracle-Gro’s trade dress likely acquired distinctiveness through secondary meaning, even though its PTO declarations were only directed to a rectangular box and it had no survey evidence. Length of time on the market, advertising, sales volume, and market leadership favored secondary meaning nonetheless.

The trade dress was also probably nonfunctional.

Without evidence of actual confusion, “it basically comes down to the Court’s assessment of the objective likelihood of confusion based on the products and packaging, along with the evidentiary value of the competing consumer surveys the parties tendered.”

Given that strength of the plaintiff’s mark and similarity of the marks are the most important, Scotts lost primarily because of dissimilarity.

Miracle-Gro’s trade dress had substantial commercial strength, but its conceptual strength was unclear, especially given the definitional questions (are proportions key to the trade dress, or not?). The court noted that, on all the products it saw, the one-third/two-thirds division was the same, and the green was above the yellow. With that, plus the “circular horizontally centered” black circle at the dividing line between the colors, there was likely some conceptual strength.

“But when you start subtracting individual elements from that combination, the distinctiveness quickly vanishes.” There was nothing particularly distinct about using green and yellow for packaging in the lawn care industry: they “are the colors of sunshine and plants.” Although the burden is on the defendant to show what actually happens in the market, P&G did so, showing that several other strong market performers use green and yellow. It’s not that those others are confusing—it’s that reasonable consumers wouldn’t just rely on seeing green and yellow to attribute source given the market.

The dissimilar Miracle-Gro variants also sapped some of the conceptual strength of the trade dress. “[T]he more consumers come into contact with Miracle-Gro products with a different style of packaging, and in particular different color combinations, the less likely they are to look for the green and yellow combination as identifying their favorite lawn and garden product.” (But the black circle abides.)

Nonetheless, this factor overall tilted towards Scotts.

Relatedness of the goods: One of the products bearing the Scotts trade dress is a “Weed Preventer.”

That didn’t move the needle much (herbicide is not “weed preventer” but killer, and you’d use the weed preventer on a flowerbed but not the weed killer, and vice versa for weeds sprouting between bricks), but the products were somewhat related insofar as they are all in the lawn and garden category.

Similarity of the marks: a “defendant’s resounding success on this factor makes the plaintiff’s burden of prevailing on the seven other Frisch’s factors effectively insurmountable.” Similarity doesn’t depend on a side-by-side, element-by-element comparison; it is based on the overall impression arising from the combination of elements. Even going element by claimed element, there was substantial dissimilarity.

Color: Very distinct shades of green, and Spruce was matte (and transparent in part) while Miracle-Gro was glossy and entirely opaque.

Separate horizontal bands of color with top smaller: Scotts has the one-third/two-third ratio, and Spruce uses a clear, bottom portion (about one-fifth), then dark green predominates over most of the rest. The yellow portion, it is relatively small and is used to highlight a message—“Visible Results in 1 HOUR.”

True, on both packages, the colors “shar[e] a common border that runs horizontally along the package” in the form of “a straight line dividing the two colored bands.” “But these visual elements are wholly unremarkable and add little to the overall visual impression of each product.”

Likewise, both products contain a “horizontally centered graphic element.” But on one, it’s the Miracle-Gro logo, which is white text on a black circle with some additional features. Spruce, has a circular yellow dandelion (with different graphics on each half) overlaid on a dark green background. Moreover, the circular graphics are “in different places on the package ([top] v. bottom).” “The dissimilarity on this element could not be more stark.”

There were other dissimilarities as well, including in the actual containers—with five Spruce configurations versus the entire Miracle-Gro product line, “none of them even remotely resemble each other in shape.” Scotts didn’t have text in the top portion; P&G did. The graphics were “meaningfully” different: photorealistic images of vegetation versus graphic design-like elements (e.g., an outlined paw print). And the Spruce trademark creates its own distinct visual impression, serving as a house mark.

The trade dresses at issue are “clearly distinguishable and would appear so to all but the most obtuse consumer.”

Scotts tried to change this result with survey evidence. Its expert, Dr. Wind, conducted a Squirt survey—one that presents survey respondents with both of the conflicting marks and “do[ ] not assume that the respondent is familiar with the senior mark.” Potential purchasers of Miracle-Gro and Spruce were broken into three groups, Home Depot, Lowe’s, or Meijer, each with a test and control cell. After telling respondents to imagine they were considering purchasing a lawn and garden product, the survey showed respondents in each group in-store displays from the stores to which they were assigned (except the Lowe’s, which was mistakenly shown Home Depot; the court found this rendered the survey “suspect and deserving of little weight” as to this subgroup). E.g., Home Depot respondents saw these: 

Then test respondents were shown some of the same photos containing Spruce, with red lines surrounding the Spruce products, and asked how they would describe those products to a friend.

Finally, test respondents were shown the in-store display that included Miracle-Gro products along with various other third-party products (the right-most photo in the initial photo array above) and were asked: “Do you believe that any of these products or product lines on this plant food display were made by the same company that manufacturers the products you saw that were circled in red?” Respondents were asked some follow-up questions (e.g., the reason they selected the products).

The survey repeated the process for (1) asking whether respondents thought any of the products or product lines in the display with the Miracle-Gro “ha[d] a business affiliation or connection with the company that manufactures the products you saw that were circled in red” [I note that there was no training on what a “business affiliation” is, and there probably should be]; and (2) asking whether respondents thought any of the products or product lines in the display with the Miracle-Gro “gave permission or approval to the company that manufactures the products you saw that were circled in red.”

Control groups saw the same images and stimuli, except the colors on the Spruce products were black, white, and silver.

If a respondent who answered positively mentioned green and yellow in connection with Spruce, the coders tagged that respondent as “confused.” Dr. Wind calculated net confusion rates, “[d]ue to explicit reference to the green and yellow packaging” of 16.2% for the Lowe’s subgroup, 9.1% for Home Depot, and 17.7% for Meijer.

P&G objected to (1) the Squirt survey format; (2) the design; and (3) what Wind counted as “confusion.”

Squirt: P&G argued that Miracle-Gro and Spruce do not appear side-by-side in the marketplace and that an Eveready survey is the appropriate tool to use where one of the marks at issue (here Miracle-Gro) is a strong mark. The court agreed with this criticism. “The products at issue are typically not displayed side-by-side in a retail setting, nor was there a sufficient showing that the typical consumer sees them sequentially,” and Miracle-Gro is commercially strong. The court quoted McCarthy to the effect that “Squirt methodology is inappropriate unless there are ‘a significant number of real world situations in which both marks are likely to be seen in the marketplace sequentially or side-by-side.’”

Design: P&G argued that Squirt surveys have an inherently leading nature (seems true), which was amplified by stimuli unreflective of true market conditions. This was even more problematic than choosing Squirt in the first place. First, there was the Lowe’s error. Second, in the Home Depot image, nearly half of the “plant food” display shown to respondents was dominated by a pallet of Miracle-Gro potting mix. “[T]he Court finds it unlikely that large pallets of Miracle-Gro potting mix typically sit directly in front of Home Depot’s plant food shelves (or at least, that customers typically would stand behind such a pallet while selecting something on the plant food shelf). Simply put, the Home Depot photo was highly suggestive.”

Identification of confused respondents: Dr. Wind “classified any respondent ‘confused’ for simply describing the products as ‘green and yellow’—even if they mentioned nothing about Scotts or Miracle-Gro.” That is, if a respondent accurately noted that the packaging for Spruce products contained the colors green and yellow, that would be coded as reflecting “confusion.” This the court found most troublesome of all. “P&G identified a significant number of responses that clearly should not have been coded in that manner—namely, respondents who referenced “Spruce” in their answers, and who did not mention “Miracle-Gro” or “Scotts” at all, but who happened to mention that the Spruce bottle was green and yellow (which it is).”

P&G offered its own survey by Dr. Simonson: an “aided Eveready survey.” An Eveready format assumes that survey respondents “are aware of the [senior] mark from their prior experience.” This “format is especially useful when the senior mark is readily recognized by buyers in the relevant universe.” Respondents are shown the allegedly infringing products,, then asked:

• Who do you think makes or puts out this product?

• Does the company that makes this product put out any other products?

• Does the company that makes this product have a business affiliation or connection with any other company? [Again, no definition/training.]

• Did the company that makes this product receive permission or approval from another company?

However, Simonson used the typical Eveready questions, but displayed multiple products from the marketplace (as would occur in a Squirt survey), instead of the single, allegedly infringing product. Each respondent viewed a picture array of products, like so:

They were asked to review all the products “as they would if they were considering purchasing a weed preventer at an online store.” The respondents then saw one of the four images below, with the Spruce product (or a control version of the Spruce product, bottom) blown up on the left-hand side: 

They were then asked variations of the four standard Eveready questions along with follow-up probing questions as necessary. The “control” “had a different trade dress, but still incorporated green and yellow elements as well as the language and small icons used on Spruce.” Simonson found that “only 2.9% of the Test group respondents … mentioned either Miracle-Gro or Scotts.” Although the court didn’t rely on the Simonson survey, it didn’t like the control.

Here, the characteristic being assessed was the color combination. But instead of altering solely Spruce’s color, as Dr. Wind did for his control, Dr. Simonson created an entirely new shape, maintained the colors green and yellow (but making white the most prominent color), and added a circular graphic element to the top portion of the packaging. In many ways, Dr. Simsonson crafted a control that was more similar to the Miracle-Gro’s Trade Dress than Spruce’s current packaging, which may explain why the control group displayed greater confusion than the test group.

(The court  did reject Scotts’ criticism that the answers “Ortho,” “RoundUp,” “fertilizer,” or the like should have been coded as confused. “This case is about Miracle-Gro; not every brand Scotts uses. And Scotts certainly does not have a monopoly on the word ‘fertilizer.’”)

Remaining factors: Marketing channels favored Scotts; degree of purchaser care was not very significant/it was dependent on mark similarity. Intent: (1) P&G considered other packaging designs with other color schemes; (2) some third-party reports prepared for P&G, as part of Spruce’s packaging development process, featured images of Miracle-Gro products; (3) Scotts sent P&G a letter expressing concerns about confusing similarity between the products’ designs in May 2024. This was “attenuated at best” intent evidence. “It seems natural to the Court that a product development team might consider different colors and designs, then test those options before going to market.” Nor was a study’s inclusion of “a few images of Miracle-Gro products (along with many, many other lawn and garden care products)” evidence of intentional copying. “Scotts is the category leader; you would expect some of its products to appear in any report about the market.” Finally, the Scotts letter had no bearing on intent—the packaging design was nearly finalized by then. No weight.

Likely product line expansion: Not likely; no weight.

Dilution: In the Sixth Circuit, “[t]he ‘similarity’ test for dilution claims is more stringent than in the infringement milieu.” Given the high level of dissimilarity here, that was fatal.