Thursday, June 01, 2006

First Amendment prohibits regulation of misleading geographical indication

Piazza’s Seafood World, LLC v. Odom, -- F.3d – (5th Cir. May 4, 2006)

This case involved constitutional challenges to two Louisiana statutes, one regulating the labeling of catfish and the other the use of the word “Cajun” on food products. The former, which distinguished between foreign and domestic fish, was struck down as a violation of the dormant Commerce Clause. The latter, challenged on First Amendment grounds, is where my interest lies.

Plaintiff sells food, including Chinese-farmed Ictaluridae (catfish) under the trade names “Cajun Boy” and “Cajun Delight.” Though it originally sold mostly Louisiana seafood, 99% of its current products are imported from overseas. It sells mainly but not exclusively to large institutional buyers who resell to wholesalers and restaurants. Louisiana’s “Cajun Statute,” La. Rev. Stat. Ann. § 3:4617(D), provides that “No person shall advertise, sell, offer or expose for sale, or distribute food or food products as ‘Cajun’, ‘Louisiana Creole’, or any derivative thereof unless the food or food product [was] produced, processed, or manufactured in Louisiana ….” There was originally a grandfather clause for the use of trademarks or trade names legally registered with Louisiana as of May 15, 2003, but the legislature repealed the grandfather clause, thus putting all plaintiff’s products in violation of the law. (Plaintiff asserted a takings claim which the court did not reach; an interesting question in itself, which deserves a separate analysis I haven’t undertaken in this post.)

The court of appeals agreed with the district court that Piazza’s use of the “Cajun Boy” and “Cajun Delight” trade names was only potentially misleading, not actually or inherently misleading, because Piazza largely sells its products to wholesalers and it labels its products with their country of origin. Though the state’s interest in preventing deception was substantial, the statute goes further than necessary to serve that interest because there was no actual deception in this case. As a result, the law, as applied to plaintiff, flunks the test set forth in Central Hudson Gas v. Public Service Commission , 447 U.S. 557 (1980), for regulations of commercial speech.

“Potentially misleading”? “Inherently misleading”? If you’re wondering where the Lanham Act or other trademark or consumer protection laws make this distinction – well, you’re not the only one. (Note also that Central Hudson doesn’t make much room for dilution laws – if Louisiana decided that the “Cajun” label was an important property interest of in-state producers, like “Olympic” is an important asset of the USOC, since that’s not an interest in avoiding deception the regulation would be subjected to stringent First Amendment scrutiny.)

The name "Cajun" is misleading, full stop, when applied to non-Louisiana food; contextual information on the package and buyer sophistication may prevent many purchasers from relying on this misleading name, but it seems unlikely that this is a federally registrable trademark. (There's an apparently unrelated live registration for CAJUN BOY for processed meats by a Louisiana corporation.) Applying a potentially/inherently misleading distinction to federal trademark and false advertising law would, to put it mildly, disrupt many settled doctrines and presumptions.

Relatedly, I take issue with the court’s facile assumption that labeling with country of origin is enough to eliminate the deceptive nature of the name. Do buyers – even institutional buyers – inspect the packaging? (“Chinese” was stamped on each case of catfish, but I’m unclear whether buyers saw the cases before placing orders.) The usual rule – with support in the empirical literature – is that a smaller disclosure can’t correct a false claim in the main part of an ad, though it can sometimes clarify an ambiguous claim. “Cajun” doesn’t seem that ambiguous to me.

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