New false advertising suit against probiotic yogurt claims

The New York Times reports here.

As I settle into the new semester, I hope to resume posting more analysis. In the meantime, I offer you a link to a blog about the reality show The Hills, which has the absolute best analysis of Hillary Clinton's "breakdown" (scare quotes not because I thought she was feigning, but because to call that a breakdown is a misuse of the term) I've seen.

Fair use video contest

University Film and Video Association Fair Use & Free Speech Contest

UFVA is hosting a contest for the best short documentaries employing fair use, made by higher education students and faculty.

May 1, 2008 Deadline

* First Place Student: $500 & 1 year membership to UFVA

* Second Place Student: $250 & 1 year membership to UFVA

* Best Faculty Video: $250 & 1 year membership to UFVA

Entrants must employ fair use in quoting material in their documentaries, using the Documentary Filmmakers’ Statement of Best Practices in Fair Use as a guide to their decision-making.

Download Submission Form here.

Download a Flyer here.

Recent reading: against performance rights

Shourin Sen, The Denial Of A General Performance Right In Sound Recordings: A Policy That Facilitates Our Democratic Civil Society?, 21 Harvard Journal of Law & Technology 233 (2007)

Excerpts:

By influencing the creative practices of role model performers such as Charlie Parker, Buddy Holly, and The Beatles, the entitlements created by copyright law can affect the behavior of nonprofessional and recreational musicians, who represent a more diverse cross-section of the musical community. Copyright has defined the broader structure of the music industry by changing the practices of a smaller subset of influential fringe performers. …

The Copyright Act’s denial of a full performance right led to a steady increase in the number of songwriters. As a result, composing is no longer the exclusive dominion of a select group of professional New York writers. It has become commonplace. …

A performer’s personal attachment to material he wrote also encourages compositions that are socially and artistically progressive. …

The second reason why music composed by a performer/songwriter is substantively different from music composed by professional composers is that performer-songwriter compositions are marketed to a different audience. The professional songwriter’s primary audience, at least initially, is the industry executive, who is often searching for material that is representative of what is currently successful. This top-down process of repertoire selection encourages conservatism. …

More on the Organization for Transformative Works

Julie Hilden at FindLaw has a column up on the Organization for Transformative Works. As she notes, I'm a board member. (These are of course my personal views, not those of the organization.)

Unfortunately, the piece suffers from serious misinterpretations, beginning with the idea that OTW is proposing “changes to copyright law.” OTW’s position is not a proposal. Noncommercial fanworks are fair use, which is one reason there are already millions of them freely available online. As she says, authors have the “option” to sue. In general, one always has the “option” to sue. The crucial question is always: can you win?

Hilden’s piece doesn’t suggest that she’s done any research on fan fiction other than checking out OTW’s website (which is just getting started!). If she had looked at the hundreds of thousands of Harry Potter, CSI, X-Files, Stargate Atlantis, and other stories out there, she might have seen just how much fandom has to offer. Indeed, an article in this weekend’s New York Times suggests that success in the modern media environment requires an active, voluntary fan community, including fan fiction.

And this is a part of what it is to be fannish: not to replace an author’s ability to authorize commercial sequels, but to share alternative, noncanonical visions. Hilden fears destroying incentives to create, but over four decades of active, organized fan productions have shown that fan communities are an economic boon, not a detriment. The incentive argument, in other words, is empirically invalid – which is why the factual background missing from Hilden’s piece is so important.

The copyright owner’s response to that is generally: okay, you’re not costing me money, but I could be making more money from you. Thus, Hilden suggests blanket licensing as an alternative, but there are a couple of problems with that. First, as Julie Cohen has explored, creativity is often spontaneous and unpredictable. If people have to pay $100 before writing 500 words about Harry Potter, they will make other plans. This is especially true for younger writers, who are learning valuable writing and editing skills in a community that encourages them – a community that would be much harder to find without fannish enthusiasm supporting it. Anyway, once we’ve got incentives covered, the author’s willingness to be paid for allowing book reviews, critical commentary, or other transformative works isn’t a reason to give her a right to payment.

Second, the blanket has holes: the various official fan communities that exist routinely retain the option to censor. They want fans to “celebrate the story the way it is,” not explore ways in which it might be different. But it’s that very freedom that makes fanworks so vibrant, innovative, and – yes – potentially critical of the originals, whether of their views on race (The Wind Done Gone), sexuality (as with the popular subgenre of slash), politics (consider David Brin’s critique of the politics of Star Wars – a theme that could readily be explored in fiction or in, say, Troops – for more on using fiction to respond to fiction, see here).

Hilden engages in the standard copyright/trademark merger, asserting that even if there’s no incentive interest involved, authors should be able to control the designation of successors as “legitimate heirs.” But I’ve never seen a fan author claim to be a legitimate heir, and whenever authors may claim trademark rights in commercial exploitation of their names, fanworks don’t and won’t affect that. Tom Clancy can license his name as much as he wants; the OTW supports the idea that Anne McCaffrey can pick her son Todd to write all the official sequels to her books.

Hilden then worries that “many unauthorized follow-up works might simply take characters and the story in a different direction, one that might be antithetical to the original.” This is why Hilden doesn’t actually want blanket licensing, despite her initial suggestion. Interestingly, Hilden’s nightmare scenario in which a fan-altered Harry Potter renounces magic, embraces Christianity, and denounces homosexuality was already written years ago – and, though I disagree strongly with that author’s views, that’s not the test for whether criticism of the original is fair. Rather, reworkings that attack the original are, as Hilden recognizes earlier in her column, quite clearly protected by fair use because they operate as a critique of the original. One point to take from this is that the nightmare scenario hasn’t hurt Rowling even though that website has been up for several years. And the fact that Hilden can’t tell we’re already in the nightmare world suggests something about how scary we ought to find it.

Side note: Hilden makes the too-common mistake of saying that there’s a fair use exception for parody. The Supreme Court treated the issue less than transparently in Campbell v. Acuff-Rose, but subsequent cases have made clear that parody in the literary sense isn’t the requirement. Rather, parody is a type of transformative use, and transformation is about adding some new perspective to the original. It doesn’t require humor, or hate.

Recent reading

Richard J. Leighton, Literal Falsity by Necessary Implication: Presuming Deception Without Evidence in Lanham Act False Advertising Cases, 97 Trademark Reporter 1286 (2007). A useful summary of falsity by necessary implication doctrine in the circuits that have endorsed it, along with some discussion of the rationale for the doctrine and its relationship to its mirror image, puffery. Puffery is used to preclude evidence of actual deception; falsity by necessary implication to obviate the need for that evidence. Both are ways of avoiding the surveyor’s black arts.

Briefly noted: Mark H. Anania, Note, The Plight of Small Business Trademark Holders, 59 Rutgers L. Rev. 565 (2007). Argues that fairness to small businesses requires expanding dilution protection to everyone under state law. I couldn’t disagree more, of course, but I think it’s a logical consequence of modern dilution rationales.

Upcoming trademark event at Georgetown

Georgetown is hosting an event in honor of the publication of Jeff Handelman's Guide to TTAB Practice on Tuesday, January 22, 2008 from 4:00 pm to 6:00 pm on the 5^th floor of the Georgetown Law Library. Judge Pauline Newman of the Federal Circuit will be speaking. Anyone interested is welcome to attend.

Deficient pleading leads to disappointment

Wellness Publishing v. Barefoot, 2008 WL 108889 (D.N.J.)

Plaintiff Holt is a doctor and, he alleged, an authority on nutritional supplements with a long academic resume. He has a consulting business which owns Wellness Publishing; the plaintiffs all participate in the supplement industry and in health care publishing. Defendants are Kevin Trudeau and related direct marketers.

The allegations of the complaint are these: In early 2000, former defendant Barefoot (with whom plaintiffs settled) solicited Holt to make a nutritional supplement in a joint venture. Barefoot proposed various formulations, and Holt advised him that a number of them were medically unsafe because of excessive doses of vitamin D and toxic metals. Barefoot told Holt he wanted to market a coral calcium supplement, but Holt, concerned with Barefoot’s ethics, demurred. Barefoot promised Holt he’d behave. The parties agreed that Barefoot would make his best efforts to show a product manufactured by Holt Consulting, to be known as Barefoot’s Coral Calcium Plus, and Wellness would own rights in a book, Barefoot on Coral Calcium. The parties’ agreement included a noncompete clause relating to coral calcium. Despite this, however, Barefoot found a better deal and sabotaged the sales of Coral Calcium Plus, including by promoting a competing book and associated items in at least two infomercials created by Barefoot, Trudeau, and the other defendants. On his website, Barefoot also made claims about coral calcium that Holt felt were unlawful.

Plaintiffs alleged copyright infringement. Defendants challenged standing, because in their settlement with Barefoot, plaintiffs transferred their copyright interests back to Barefoot and thus are no longer legal or beneficial owners of the copyright. The settlement agreement does purport to preserve plaintiffs’ rights in accrued legal claims against defendants. The court agreed that a copyright owner can assign its copyright interests but still bring claims that accrued when it owned the copyright. In fact, under Second Circuit precedent, accrued copyright claims don’t transfer with an overall assignment of copyright unless they’re expressly assigned. The transferor remains free to sue as long as it owned the copyright at the time of the infringement.

Defendants’ second argument, about plaintiffs’ failure to allege registration, worked better. Registration is jurisdictional. The complaint, however, failed to allege registration, and Barefoot on Coral Calcium wasn’t registered when the complaint was filed. It was registered Dec. 20, 2002, four months after the initial complaint, yet the second amended complaint did not so allege. Plaintiffs requested leave from the court to file a third amended complaint to correct the deficiency.

The court ruled that it initially lacked subject matter jurisdiction. The question, it thought, was whether plaintiffs could confer such jurisdiction on the court after the limitations period expired by amending the complaint. Some prior cases hold that a registration defect may be cured by amending or supplementing the complaint once registration has occurred. But in none of those cases had the statute of limitations run prior to a plaintiff’s attempt to cure the defect. “[T]he proper course for a plaintiff who has filed a jurisdictionally deficient copyright infringement claim, upon satisfying the jurisdictional prerequisite of registration, is to file a new action.” Some cases, for efficiency purposes, allow amendment instead, but the expiration of the limitations period removes that justification. An amendment cannot relate back to an initial complaint when there was no subject matter jurisdiction over that complaint.

The copyright claims were dismissed.

Plaintiffs also alleged that defendants made false statements about coral calcium and about their rights to sell coral calcium using the Barefoot name, in violation of the Lanham Act’s false advertising provisions. (The court noted in a footnote that the latter claim might not be actionable under §43(a)(1)(B), since claims about a trademark do not relate to “the nature, characteristics, qualities, or geographic origin” of the coral calcium product (citing Monsanto Co. v. Syngenta Seeds, Inc., 443 F.Supp.2d 648, 652 (D.Del. 2006)).

Defendants challenged plaintiffs’ standing. Constitutionally, what is required is an injury in fact, fairly traceable to the defendant’s acts, that will likely be redressed by a favorable decision. Despite an inartfully drafted complaint and minimally argued brief, the court found that these elements were satisfied. Plaintiffs alleged that defendants’ false advertising in their infomercials harmed plaintiffs’ market for coral calcium.

Prudentially, the Third Circuit has developed a multifactor test for assessing standing in Lanham Act false advertising cases when the parties are not direct competitors. Here, plaintiffs make nutritional supplements and publish health care information. Kevin Trudeau appeared in infomercials promoting coral calcium, and the other defendants produced those infomercials. The complaint was unclear about the existence of direct competition. Because the false statements allegedly made in the infomercials directly concerned plaintiffs’ products and could bear on their ability to compete in the marketplace, the court declined to rule against plaintiffs on standing grounds.

The next question was whether Rule 9(b), requiring fraud to be pled with particularity, required dismissal. Plaintiffs, oddly, didn’t dispute that Rule 9(b) applied, but the court noted that there is a division of opinion in the courts on this topic. Some district courts in the Third Circuit have even made up an “intermediate” standard for false advertising claims, furthering the policy of Rule 9(b), and this court followed that lead, though I think this is a mistake. The complaint’s recitation of the words of the Lanham Act, the court ruled, failed that standard. And the mere allegation of “false and misleading statements” in defendants’ books and videos was insufficient, because it didn’t give enough detail about the false statements and didn’t even clearly relate to goods, services, or commercial activities.

Plaintiffs identified some allegedly false claims about coral calcium, including that coral calcium supplements “will cure cancer.” But the court found these insuffient, because the false statements alleged in the Lanham Act count purportedly referred to a specific brand of coral calcium, not coral calcium generally. A competitor who did not sell coral calcium, but sold some other supplement or anti-cancer product, could easily base a Lanham Act false advertising claim on these statements, but it’s harder to see why these plaintiffs should have a claim, even though defendants’ false advertising about coral calcium generally could definitely have a negative effect on the overall market for coral calcium if consumers decided that the claims were all snake oil.

Plaintiffs’ fraud claims also failed. Plaintiffs alleged that defendants’ false claims about coral calcium deceived vulnerable members of the public. But they failed to plead with sufficient particularity, and they also didn’t allege harm to themselves from the fraud, as opposed to harm to the direct victims of the fraud who relied on the false claims.

Plaintiffs’ tortious interference claims were also dismissed, because plaintiffs failed to allege wrongful/malicious conduct on the defendants’ part that induced Barefoot to breach his noncompete agreement. (The court did, however, reject defendants’ mistaken argument that this claim was preempted by the Copyright Act.)

Plaintiffs’ New Jersey common law unfair competition law claims were no more successful. Though the New Jersey tort is amorphous, a basic requirement is some kind of misappropriation of property, plus bad faith or malicious conduct. Here, there was no misappropriation, despite the allegedly misleading statements.

Obviously false ads

... otherwise known as humorous ads. The Trunk Monkey series from Suburban Auto Group qualifies; no reasonable consumer would think the Trunk Monkey was actually included with purchase, despite the fast-talking announcer's claim that he's "pending Department of Transportation approval."

Thanks to Christine Haight Farley for the heads-up.

Claim substantiation research not privileged

Procter & Gamble Co. v. Ultreo, Inc., 2008 WL 110245 (S.D.N.Y)

P&G sued Ultreo for false advertising. Both parties make toothbrushes; P&G disputes Ultreo’s claim “that its power toothbrush cleans beyond the reach of the toothbrush’s bristles by virtue of its high-speed sonic bristle action and ultrasound wave technology.” In particular, P&G considers this misleading because it’s based exclusively on lab studies rather than clinical tests in humans. P&G sought discovery of five scientific studies by Ultreo and its affiliates, but Ultreo argued they were privileged attorney work product. The court disagreed and ordered production.

Ultreo argued that the studies were privileged because its attorney advised it to conduct the studies given the likelihood of suit by P&G, and that the privilege should extend to investigators seeking factual information, such as clinical study results, when they work on behalf of an attorney. P&G responded that the studies were part of Ultreo’s ordinary business and no different from other studies that had been produced.

FRCP 26(b)(3) protects materials “prepared in anticipation of litigation or for trial or for another party or by or for that other party’s representative” unless the party seeking discovery has substantial need of those materials and can’t obtain their substantial equivalent by other means. The burden of establishing the privilege is on the party invoking it, but the privilege does cover facts as well as attorney opinions and strategies. As a result, the privilege can apply to non-lawyer party representatives, including investigators seeking factual information.

Nonetheless, the privilege requires such facts to be created “by or for counsel in anticipation of litigation or for trial.” Even if documents are in an attorney’s possession, they aren’t protected if they were created in the ordinary course of business and would have been created in substantially similar form irrespective of the anticipation of a lawsuit.

The court found that Ultreo’s lawyer’s statement that the studies were conducted at his behest was insufficient to establish the privilege. The record clearly showed that Ultreo “has long sought to obtain clinical proof of the effectiveness of the ultrasound component of its toothbrush.” It even applied for (and won) a grant from the National Institute of Health to conduct clinical studies, and planned additional such studies. Ultreo has also planned to use the studies for which privilege was claimed to sell its toothbrushes and has talked about the studies with retailers. The court’s in camera review confirmed that the studies were part of Ultreo’s routine business efforts to substantiate its ad claims. Thus, Ultreo failed to meet its burden.

“Ultreo’s business plan was built around developing a new and innovative toothbrush, and conducting scientific investigations to demonstrate that the toothbrush worked. The fact that these investigations were undertaken in consultation with outside counsel, under the looming specter of litigation, does not, by itself, clothe them with protection. Such a holding would effectively shield every clinical investigation and scientific inquiry, so long as the party was savvy enough to include outside counsel in the decision-making process.” (citations omitted).

Comment: the research here was designed to substantiate a factual claim, not to assess consumer understandings of an ad. Getting discovery of the latter type of research, which is important in implicit falsity cases, could be a harder task, depending on whether the advertiser routinely surveys for consumer reactions and whether the prelitigation survey resembles ordinary market research. Advertisers should also remember that heavy attorney involvement in shaping a survey may make judges less likely to credit it when the advertiser introduces the survey into evidence.

Whitman on producerism and consumerism

James Q. Whitman, Consumerism Versus Producerism: A Study in Comparative Law, 117 Yale L.J. 340 (2007). I saw Whitman present a version of this tailored to dilution, and it was very useful to read the larger article. Whitman points out that there are many versions of producer- or consumer-focused regulation; I too have tried to make the point that what he’d call consumer-protection regulation is about protecting specific consumers, sometimes at the cost of more nuanced information or lower prices that would help different consumers.

Here’s the abstract: The spread of American-style “consumerism” is a burning global issue today. The most visible symbols of American consumerism, large enterprises like Wal-Mart and McDonald’s, attract vitriolic attacks in many parts of the world. Political conflict in Europe (and elsewhere) turns largely on the question of whether legal systems everywhere must inevitably follow the American model. Despite the global importance of the consumerism debates, though, comparative lawyers have found little to say. In an effort to develop an analytic comparative law approach to the problem of global consumerism, this Article proposes to revive an analytic distinction that was common in the 1930s: the distinction between “consumerism” and “producerism.” A producerist legal order tends to revolve around rights and interests on the supply side of the market: it focuses on the interest of some class of producers or distributors (such as workers, small shopkeepers, or the competitors in a given industry). A consumerist legal order, by contrast, tends to focus on rights and interests on the demand side of the market—in particular, on the consumer economic interest, understood primarily as an interest in competitive prices. Producerist legal orders can take forms quite different from consumerist ones, both when it comes to economic regulation in the law of antitrust and retail and when it comes to fundamental conceptions of the nature of rights. The distinction between consumerism and producerism involves some real complexities, and it must be used with care. Nevertheless, this Article argues, it is of fundamental importance for classifying and analyzing legal systems, and in particular for understanding basic and persistent differences between continental Europe and the United States.

carbon neutrality claims and consumers

I spoke at the FTC’s workshop on carbon offsets and renewable energy certificates. Useful background: Randal Shaheen, Amy Ralph Mudge, and Matthew Shultz, Carbon Neutral:The New Green—Substantiation Issues for the Next Generation of Environmental Claims. Webcast here. NYT report here. An interesting example of a case in which an industry wants government regulation in order to support the development of a market, including consumer confidence.

Deborah Platt Majoras (FTC Chair): Eight in ten Americans say environmental policies should matter in their purchasing decisions. The FTC wants to help people buy green and not get fooled, and has accelerated review of the Green Guides (1992, rev. 1998). New terms are at issue: carbon-neutral, sustainable, cradle-to-cradle, etc. The claims are credence-based and hard to verify – e.g., does the seller really plant trees? Does planting trees decrease greenhouse effects? There is thus a heightened potential for deception.

Majoras reminded advertisers that both express and implied claims require substantiation, and that good faith isn’t enough; even good faith purchasers could buy offsets that have been sold more than once. The FTC seeks to give guidance to marketers and consumers without developing environmental performance standards. What, if any, additional guidance is warranted?

Lesley Fair, Division of Consumer & Business Education: Reminded advertisers that website materials are ads and thus subject to the FTC Act. General environmental claims may need careful qualification. Specific environmental/scientific claims require competent and reliable scientific evidence, which is methodologically sound research using accepted procedures with statistically significant results – not anecdotal evidence, and not sales materials from the supplier who sold you the underlying materials/ingredients.

The Commission has, to her knowledge, never lost a case where the defense was “we disclosed relevant information in a footnote/superscript!”

Katherine Hamilton, Ecosystem Marketplace: The carbon offset marketplace is mostly chaotic, a sort of Wild West/buyer beware area, but there is significant consumer demand. Customers care about (1) additionality – a project that wouldn’t have happened without the offset; (2) additional environmental benefits – “charismatic carbon”; and (3) certification – which may be related to exposes about products in the marketplace – and perhaps even registries where you can watch transactions happening.

Alan Levy, FDA (notably clear and concise – I would invite him to talk about consumer perceptions anywhere!): He doesn’t know much about carbon offsets, but does know about how consumers understand information disclosures and product labels. The claims we are discussing here are strange – they’re not about individual use attributes like taste (experience claims). Carbon footprints can’t be verified by consumers, or even by a group of consumers – these are extreme forms of credence claims. Biodegradability is verifiable, but carbon neutrality can’t be verified by product testing, nor can other claims about producer behavior outside the production cycle.

Also, most people have only a vague notion of what a carbon footprint is, and even less about what an emissions market is. And consumers know they don’t know. This produces difficult practical challenges: trust and knowledge. Buying a carbon neutral product is an act of symbolism and faith.

From the consumer point of view, labeling is a convenient shortcut for search. Effective marketing has to seem useful to consumers.

Knowledge from the FDA: (1) Labels are usually seen by consumers to be about specific products, not categories or issues. Ads can portray themselves as more generally useful. But consumers generally don’t assume ads or labels are educational. They don’t learn scoring mechanisms from those sources or think of food labels as places to learn about nutrition. (2) Consumers are looking for new and relevant information, especially product-specific information. (3) Consumers don’t necessarily assume ads are reliable. They are wary of being misled. They don’t carefully assess every claim – the whole point is to save time on search – but they’re sensitive to whether claims sync with what they already know. They run a reflexive legitimacy test on new info. This is the value of a positive brand identity: it allows claims to pass that test without triggering too much thinking.

All marketing claims are implied because they depend on what consumers already know (about value, at a minimum).

Identifying current consumer knowledge is the key to an effective approach in this area. In the dietary supplement market, producers specialize in providing information to consumers to raise knowledge and facilitate customer acceptance. They use Prevention and other news sources to do so, because news is more credible. Fortunately (for marketers) the news is often filled with what’s going on in marketing. News promotion is marketers’ best bet.

Consumers’ rules of thumb: (1) Ubiquitous claims generate confidence that the claims have been vetted and are trustworthy. (2) Marketing that uses the same format to convey information shows the existence of a consensus or maybe even a regulatory entity that can rein in excesses. This is why the nutrition panel on food has been a huge success. And it explains why industry would want a Green Guide. Consumers don’t care whether the standard is voluntary or mandatory. (3) Inconsistency signals ulterior motives and heightens skepticism.

A couple of notes from the last panel, a roundtable about what the FTC could do to help consumers as it reviews the Green Guides:

Wiley Barbour, Environmental Resources Trust (an impressive speaker): The public needs something simple: indirect reductions are difficult to explain. Also, there is no consensus in the community about what counts as a reduction when you’re buying offsets instead of reducing emissions directly. The FTC could help define terms, but those will be policy choices and we should confront that head-on. In fact, this is about price: we do have some reductions that everyone could agree on, but the fact is that they’re too expensive, so we’re looking for cheaper alternatives.

Moreover, we simply can’t expect consumers to understand the distinctions we’re talking about in terms of varying certification standards. Additionality – the extent to which a renewable energy credit or other transferable device represents environmental benefit that would not otherwise have occurred – is a key term here, but very hard to define. We need to make some policy decisions about standardizing, which is especially important if we are, as seems likely, moving towards a mandatory emissions control regime.

Court of appeals gives a little bitter and a little sweet to Splenda

Via several alert readers:

McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, --- F.3d ----, 2007 WL 4478981 (3d Cir.)

District court ruling allowing copying of Splenda’s yellow trade dress for use in sucralose house brands discussed here. The court of appeals affirmed in part and reversed in part, finding that as a matter of law the likelihood of confusion factors weighed in favor of McNeil as to certain versions of the private-label packages, so that on remand the district court would have to consider whether injunctive relief was appropriate as to those versions.

The opinion began by noting that, in 2005, private label products accounted for 20% of all US supermarket, drugstore, and mass merchandiser sales, or $50 billion. At that time, more than 90% of consumers were familiar with store brands, and almost as many bought them regularly. Such brands are typically found next to the coordinate national brands, and their packaging often invites comparison with a national brand, whether by similarity in dress or by “compare to” statements. Shelf tags also explicitly invite comparisons. The court accepted as fact that consumers are generally aware that private label products are sold next to national brands, and that prominent price displays allow consumers to see the cost differences between them.

Splenda is sold in a primarily yellow package, with blue italicized lettering on a white cloud, pictures of food in need of sweetening, and the controversial slogan “Made from Sugar, Tastes Like Sugar.” Defendants make private label boxes of individual sucralose packets and bags of granular sucralose for Giant, Stop & Shop, Tops, Food Lion, Safeway, Albertson’s, and Wal-Mart. They use yellow backgrounds and blue or white lettering, and pictures of food in need of sweetening.

The court stated that initial interest confusion could apply to private-label packages sold next to national brands, if it is likely to confuse consumers “‘at the point when [they] first reach[] for the product on the shelf.’” Initial interest confusion, like point of sale confusion, should be assessed using the standard multifactor test.

McNeil argued that the district court misapplied the first factor – the degree of similarity between the marks – with respect to products for which it weighed the similarity factor in favor of defendant Heartland. Similarity is the “‘single most important factor’” in determining likely confusion, and it is not usually assessed by side-by-side comparison unless, as here, the products are typically seen by consumers that way. The district court weighed similarity in defendants’ favor for the Food Lion box, Food Lion bag, and Safeway boxes.

McNeil claimed that similarities should have been weighed more heavily than differences. The court of appeals found that this was not the rule; rather, “forceful and distinctive design features” should be weighed more heavily because they are most likely to affect the overall impression of the trade dress, regardless of whether they’re similarities or differences.

The court of appeals found no clear error in the district court’s ruling on the overall impressions created by the trade dresses. The most important difference was the absence of the mark SPLENDA and the presence instead of a store name and logo. Quoting McCarthy, the court stated that the absence of SPLENDA was not in itself sufficient to cure an otherwise infringing trade dress, but the presence of a house mark can be sufficient. The presence of a house mark should be considered as part of the overall similarity analysis, not as an independent defense. Here, Food Lion and Safeway are themselves well-known to the relevant consumers, who are after all shopping there. And the marks are prominent on the packages. If, as cases from other circuits have found, it’s clear error to weigh similarity against a defendant when the defendant’s own house mark is prominently displayed, it can’t be clear error to weigh similarity in the defendant’s favor.

McNeil also argued that the history of color coding in the sweetener industry increases the likelihood of confusion – white stands for sugar, pink for saccharin, blue for aspartame, and yellow for Splenda. (One of these things is not like the others; this is an argument that goes back to Nabisco and Inwood v. Ives, among other cases – having a unique product in the market does not necessarily lead to enforceable trademark rights.) McNeil argued that yellow was shorthand for Splenda, whereas the market leaders in saccharin and aspartame waited too long to challenge imitators.

The court of appeals was unpersuaded. First, the district court fully accounted for the similarity in color in its overall similarity analysis. Second, the pink and blue experiences cut the other way: consumers understand that not all pink is Sweet ‘N Low and not all blue is Equal. Nor is all yellow Splenda – even sugar packages use yellow.

On consumer care – the weakest part of the district court’s analysis, in my opinion – McNeil argued that the district court erred by requiring a heightened level of care by consumers of no-calorie sweeteners, who are presumably health-conscious. The products are inexpensive – between $4 and $5 – and less sophisticated consumers are not buying sucralose for health reasons. But the district court relied on affidavits about the health-related motivations and extra care of ordinary consumers of no-calorie sweeteners. Moreover, prior Third Circuit language about looking at the least sophisticated consumers in a class only applies when the buyer class consists of both professional buyers and consumers. For a class consisting solely of ordinary consumers, most of whom are health-conscious, the district court didn’t need to focus on the least sophisticated of them.

McNeil also argued (persuasively) that health-conscious doesn’t mean brand conscious. Consumers may look at the active ingredient, but still be confused by the trade dress, and the district court therefore was wrong to hold them to a higher standard with respect to choosing among sucralose products. The court of appeals rejected this argument because it hadn’t been raised before the district court, and because grocery stores put sugar right next to sucralose; because sugar packages are often yellow, a reasonably prudent consumer “might be” careful not to pick up sugar by accident. In sum, there was no clear error on consumer care.

On evidence of actual confusion, McNeil argued that the district court erred in failing to count the evidence of one actually confused consumer in McNeil’s favor. But the district court carefully considered her testimony and held that she was just unusual. In fact, she usually didn’t pay attention to brands, and – this is based on a quote from McCarthy rather than record evidence – such consumers are “few” and unrepresentative. As a matter of law, brand indifferent consumers don’t count in the likelihood of confusion inquiry. (A secret pocket of materiality in trademark law! If only defendants surveyed for brand indifference, we might find out more about those “few” consumers!)

With respect to the Giant, Stop & Shop and Tops boxes and bags (collectively Ahold, since they’re all owned by Ahold), the district court weighed similarity in McNeil’s favor because there weren’t any prominently displayed distinguishing design features on those products, but still found in favor of defendants overall. McNeil argued that this was error.

The court of appeals considered this claim in the context of the overall balancing. It concluded that the district court clearly erred in not finding likely confusion for those packages. Because a number of factors weighed in McNeil’s favor and others in favor of neither party, “there is no way” the court could have balanced them against McNeil. The district court clearly erred because the single most important factor in determining likely confusion is similarity, especially when goods directly compete.

The district court relied on consumer awareness of store-brand products sold in direct competition with national brands in similar packaging, often touted by signs inviting comparison. But these factors, the court of appeals held, are insufficient on the current record to overcome the likelihood of confusion. “The danger in the District Court’s result is that producers of store-brand products will be held to a lower standard of infringing behavior, that is, they effectively would acquire per se immunity as long as the store brand’s name or logo appears somewhere on the allegedly infringing package, even when the name or logo is tiny. The Lanham Act does not support such a per se rule.” The practices the district court identified are important, but not sufficient here where the store name and logo aren’t prominently displayed on the packaging.

In other words, the generic maker is going to have to repackage the products for every store it sells – what the court of appeals called a “store-specific signature” -- in order to be better protected against suit; using a third-party name isn’t going to be good enough.

As this collage of Head & Shoulders-style house brands shows (click for larger image), there are a number of house or third-party brands that don’t track the store name. Even Wal-Mart’s Equate doesn’t use the Wal-Mart name prominently, though the comprehensiveness of Wal-Mart’s Equate brand may bring it within the Third Circuit’s holding that “the more a store’s name and/or logo are present around that store’s shoppers, the more likely those shoppers will know well that name and/or logo, which in turn may serve to differentiate materially a store-brand packaging that displays them prominently.”

Essentially, the court of appeals thought that the district court had created a near-absolute “house brand” defense independent of the confusion factors, which was inappropriate. The court of appeals recognized that a prominent house brand might allow store brands to “‘get away’ with” a little more similarity than other defendants’ comparable products. But a tiny differentiating label won’t suffice in any event.

Thus, for the Ahold boxes and bags, the court of appeals remanded for consideration of the other preliminary injunction factors, since McNeil established a likelihood of success on the merits.

The decision is an important trade dress case, further highlighting the importance of a strong house brand: to those who have much, much will be given.

Strikeout: baseball player's claim against cards fails

Brooks v. Topps Company, Inc., 2007 WL 4547585 (S.D.N.Y.)

Brooks sued over the publicity rights of her late father, baseball player James "Cool Papa" Bell. Bell was involved in the Negro Leagues from 1922 to 1950; "his friend Satchel Paige is said to have remarked that Bell was so fast he could switch off the light and be in bed before the room was dark." After being inducted into the Baseball Hall of Fame in 1974, Bell granted the National Baseball Hall of Fame permission to use his name and likeness on various products. He also made other deals to sell autographed cards. Brooks, the executor of his estate, also granted licenses to use his name and images on baseball cards, clothing, prints, throw blankets, and Wheaties.

In 2001 and 2004, without authorization, Topps released seven baseball cards showing Bell; one of the 2004 cards also had images of Bell's signature. The 2001 cards stated: "Cool Papa, who once stole more than 175 bases in a 200- game season, earned his nickname after falling asleep right before a game." This description came from Players of Cooperstown: Baseball's Hall of Fame, written by baseball experts, but Brooks asserted that this description was both false and derogatory.

Topps promotional materials for the 2004 cards stated, in mouseprint, that "[a]lthough these players have agreed to provide these cards for Topps, we cannot guarantee that all autographs ... will be received in time for inclusion in this product" and, in text, that the cards "feature an authentic autograph from 1 of 186 Hall of Fame members," though Bell's name and signature did not appear on the promotional materials.

In early 2005, Brooks first heard that Topps might have sold a Bell card (something Topps didn't disclose to her in 2004 when discussing possible licensing agreements, which she ultimately rejected). She found out about the 2004 cards and asked for Topps to stop selling Bell materials and for compensation for past use. She then found out about the 2001 cards. She rejected a $35,000 settlement agreement and sued for violation of the Missouri common law right of publicity, the Lanham Act, and New York unfair competition law.

The parties agreed that Missouri law governed the right of publicity claim, because Bell was a Missouri resident at the time of his death. But the statute of limitations is provided by New York law, which has a shorter limitations period – one year. Under the single publication rule, the limitations period runs from the date of publication, and further dissemination of the same item doesn't create a new cause of action or extend the period. As she sued in 2006, her right of publicity claims were time-barred; the court refused to apply the discovery rule even though the cards were distributed in sealed packages that didn't identify their particular contents.

The court also rejected the argument that Topps' concealment of the existence of certain cards estopped Topps from asserting a limitations defense. Such an estoppel must be established by clear and convincing proof of intentional misrepresentation. The statute of limitations had already run on the 2001 cards when Topps first interacted with Brooks. As for the 2004 cards, there was no evidence of affirmative misrepresentations, only failure to disclose – the first time a Topps representative told Brooks that he was providing her a list of all Bell cards was in 2006, after the statute of limitations had run.

Brooks also argued that Bell's name and likeness were unregistered marks, and that the promotional material for the 2004 card was likely to confuse consumers into believing that she or Bell endorsed the card. She further argued that the false endorsement and the nickname story were false and damaging to Bell's image.

To succeed on a false endorsement claim, Brooks needed to show ownership of a distinctive mark plus a likelihood of confusion. She failed, however, to show sufficient evidence that she owned a distinctive mark, because she did not show evidence of secondary meaning. Scattered instances of commercial licensing of Bell's name and one license of the image at issue here were insufficient to meet her burden on summary judgment. Thus, the court didn't need to reach the issue of the likelihood of confusion. (Comment: the court implicitly required Brooks to show a mark in specific images of Bell, or Bell's name, rather than a mark that would be coextensive with Bell's persona – see also the Rock & Roll Hall of Fame and ETW v. Jireh cases, in which difficult questions about likely confusion based on mere portrayal of a cultural artifact/celebrity were avoided by requiring very specific definitions of the marks at issue.)

The false advertising claim also failed. The story of Bell's nickname was not commercial speech – it wasn't made for the purpose of influencing consumers to buy the goods.

The statement that players had agreed to provide signatures was actually false with respect to Bell; consumer deception could be presumed. However, the court ruled that, as a matter of law, the statement was not material in context. Brooks didn't provide sufficient evidence that the statement would encourage consumers to buy Topps cards. (This is a problem with false endorsement claims generally: there's rarely evidence that endorsement matters to consumers, but plaintiffs usually deal with this by suing under 43(a)(1)(A), as to which courts have – perhaps mistakenly – neglected to impose a materiality requirement.) Here, the statement didn't include Bell's name, and in fact it was a disclaimer – Topps didn't guarantee that all the autographs would be included. Plus it was in "miniscule" font.

The autograph statement – that Bell's autograph would be on the card – wasn't literally false. There was no extrinsic evidence of consumer confusion, so the court also granted summary judgment as to this statement.

New York common law unfair competition provided no further coverage than the Lanham Act, and thus this claim also failed.

Final comment: One way to look at plaintiff's difficulties here is as further evidence of the disproportionate difficulties African-Americans have had in getting the benefits of IP protection.

The Cadillac of laudatory uses

Ian Ayres has written a book, Super Crunchers, lauding the power of large databases. In it, he says that medical search software Isabel touts itself as the "Google of medical diagnosis." I have to say that though I'm generally skeptical of trademark owners' attempts to control expressive and referential uses, I find this a little problematic, if only because Google is the Google of medical diagnosis. Google, however, thinks that this claim only appears in one article, albeit quoting the CEO and co-founder.

In general, because I don't believe in dilution, I think it can only be a good thing to be such a category killer that other people use your mark to mean "the epitome of." This one, though, even Google can probably live without.

ETA: Take a look at MEDgle, which came up as a result for "Google of medical." Is anyone happy with the disclaimer at the bottom?

Misleading us to the movies

Ray Cha pointed me to this column by David Pogue, discussing the extreme divergence between the trailer for National Treasure 2 and the reality:

Rearranging scenes in the trailer is one thing. But what about this business of putting stuff in the trailer -- a *lot* of stuff -- that isn’t in the movie at all? If they can get away with “National Treasure”-style misrepresentation, what’s to stop other moviemakers from putting special effects, witty lines, exotic locales and hot-looking actors into *their* trailers, just to get us to go to a movie that doesn’t have any of those things?

The answer is, I think, that materially misleading descriptions of content -- here, scenes that are funnier and more exciting than the footage actually contained in the movie -- are false advertising, even though the product is an expressive one. It's more usual to see trademark/right of publicity claims against ads for expressive works, but we can use a variant of the Rogers v. Grimaldi test to ask whether the ad explicitly misleads about the content of the work. (Rogers also asks whether the challenged content is artistically relevant to the work being advertised; arguably, missing footage isn't artistically relevant because it isn't present, but let's give the filmmakers a pass on that part.)

Does padding a trailer with scenes that aren't in the movie count as explicitly misleading? I think the necessary implication of a trailer, absent special circumstances (like the Sweeney Todd ads that are "making-of" trailers showing interviews and recording studios), is that the scenes shown are actually in the movie, and thus the trailer Pogue describes was, in Lanham Act terms, explicitly false.

I imagine that the filmmakers did not intend to make a trailer for a different, and apparently better, movie, but that something happened in the editing room -- some of the missing scenes might have been edited out to keep the film suited to short attention spans, while it sounds as if some other elements might have been reshot. But the Lanham Act, of course, is strict liability -- the fact that a product changes between the time it's advertised and the time it's purchased is little consolation to the deceived purchaser or to competitors. (And even without strict liability, if the filmmakers leave the deceptive ad running after the editing occurs, they might still have guilty knowledge.)

A court might be persuaded to require some scienter where expressive products like movies are concerned -- but it's interesting that in the trademark/publicity context, the tests developed to cabin the Lanham Act do not look at scienter, even though that's a traditional way of putting First Amendment constraints on torts. Perhaps that's because a producer will rarely, if ever, have reason to know that using a trademark or a famous person's name misleads about affiliation. A scienter requirement would therefore put serious pressure on one of modern trademark doctrine's weak points, which is the extent to which we -- courts, marketers, consumers -- should presume that other people think that referring to a trademark or a famous person requires permission. What counts as reckless indifference or negligence about likely confusion? Given that most cases involve only circumstantial evidence of likely confusion, it's hard to figure that out.

Anyway, the filmmakers might have better luck against a consumer lawsuit, if only because there's more doctrinal room in many state laws to add in a scienter requirement for expressive products. But if Pogue wanted his money back, I think he ought to get it.

Too much information

A new report from a British business group argues that too much information harms consumers, and makes recommendations for regulatory reform. HT Consumer Law & Policy blog.