Parody and magical thinking

I've seen enough about ThinkGeek's Unicorn Meat/the other white meat dispute with the pork folks that I didn't feel much need to talk about it, but this post from the Consumer Advertising Law Blog reminded me just how badly we tend to think about parodies:

However, parody is not a defense to infringement per se, but rather an argument that there is no likelihood of confusion—a necessary element of infringement—because consumers will know that the parody is a joke. A parody, though, must make fun of or criticize the trademark or its owner; using a trademark to make fun of something else is not a parody. Thus, to be a parody, Canned Unicorn Meat must be meant as commentary on THE OTHER WHITE MEAT or the NPB. If Canned Unicorn Meat does not qualify as a parody, ThinkGeek may face liability for infringement or possible dilution of the NPB’s famous mark.

The authors state the formal rule (and one that works well as a first cut, no pun intended, before we start to take the First Amendment into account), then immediately ignore that they have done so. That is, infringement liability depends on confusion. No confusion, no infringement liability. Parody is just one reason there might be no confusion. So is satire. So is the nonexistence of unicorns.

Forget the literary theory terminology. (Or pay more attention to it! Contrary to legal caricatures, literary theory has multiple perspectives on parody, almost none of which rigidly distinguish parody-as-commentary-on-a-single-work from parody-as-commentary-on-culture, which makes a fair amount of sense given that (a) different people see different types of commentary in the same thing and (b) works that inspire parody happen to be part of a broader culture. I adore Justice Souter, but that parody/satire divide in Campbell was not sufficiently qualified, even though he did try, in a footnote.) Like too many people considering parody and satire post-Campbell, the authors of this post have made the logical error of denying the antecedent: a successful parody isn't confusing, therefore something that isn't a successful parody is confusing.

And yes, I know that the post doesn't say this outright, since it only concludes that ThinkGeek "may" be liable. I consider that statement, in context, misleading. Suppose there's no commentary on pork. Do you think that the pork folks have partnered with ThinkGeek to sell you unicorn meat? Okay, then!

Salinger applies to trademark cases, district court rules

People’s United Bank v. PeoplesBank, 2010 WL 2521069 (D. Conn.)

Defendant PeoplesBank sought a preliminary injunction against People’s United Bank (a Connecticut-based bank) from use of “People’s United Bank,” or any variant of the name containing the word “peoples,” alone or as part of a logo, on exterior signs and billboards and in advertising and marketing in four Western Massachusetts counties. (People’s United Bank had sought a declaratory judgment of noninfringement, triggering the expected counterclaims; PeoplesBank unsuccessfully sought to have the case heard in Massachusetts.)

In January 2008, People’s United Bank, a federally chartered bank, acquired two Massachusetts banks, the Bank of Western Massachusetts and Flagship Bank and Trust Company. It wanted to use the name “People’s United Bank” in conjunction with them. PeoplesBank is a state-chartered Massachusetts bank with 16 branches and 35 ATM locations in Hampden and Hampshire counties, and it has used the PeoplesBank name and service mark since 2001.

In January 2009, People’s United consolidated the charters of all its acquisitions and, as required by federal regulation, has been operating in Massachusetts under the names, “The Bank of Western Massachusetts, a division of People’s United Bank” and “Flagship Bank, a division of People’s United Bank.” It wants to get rid of the other names entirely. This dispute resulted.

Initially, the district court noted the old standard that, in a trademark case, irreparable harm is inherent in a showing of likely success on the merits, but held that Salinger v. Colting changed the result. “Although Salinger does not specifically apply this change to trademark law, this Court does not see how Salinger’s reasoning can be distinguished in the trademark context. The Second Circuit’s admonition that a court ‘must not adopt a “categorical” or “general” rule or presume that the plaintiff will suffer irreparable harm,’ is as applicable to trademark as copyright. It would be illogical if trademark was the only intellectual property regime holding harm inherent in a prima facie case of infringement.” As a result, PeoplesBank would be required to prove irreparable harm.

The mark had secondary meaning but was not very strong; many banks use “people” in their names. Similarity was “not particularly helpful in the analysis,” but the court found that the “sight” of the marks was distinctive because of the parties’ differing logos, which “undoubtably help customers to distinguish between the entities”; thus, similarity weighed only slightly in favor of PeoplesBank.

What really caught my eye was the discussion of actual confusion. Several PeoplesBank employees testified to instances of confusion: a potential customer called and asked if PeoplesBank was affiliated with the Bank of Western Massachusetts; PeoplesBank received a wire transfer from the town of Southbridge, intended for deposit in the town’s People’s United account; PeoplesBank received a check from another bank addressed to People’s United, which meant that PeoplesBank lost a few days while the check was reissued; four People’s United customers attempted to make deposits at one branch, and similar things happened at other branches; a woman sought assistance after her People’s United ATM card locked following three wrong entries of her pin at the PeoplesBank ATM, but only the issuing bank can unlock an ATM card; several customers attempted to cash checks drawn on People’s United at PeoplesBank; a woman with a People’s United ATM card was surprised that using a PeoplesBank ATM would incur a fee; PeoplesBank customers tried to make withdrawals from People’s United accounts, and vice versa; a PeoplesBank customer inquired about a security breach at People’s United; and a People’s United customer drove by a PeoplesBank branch and entered, mistaking it for People’s United, though she also testified that she wasn’t paying attention and “felt like an idiot.” Two of these incidents occurred before People’s United began using its name in Massachusetts.

The court found that very little of the testimony proved actual confusion, because PeoplesBank was unable to show consumers’ state of mind. The only consumer to testify stated that she wasn’t paying attention, not that she was confused. Affiliation/identity wasn’t the only reason for these events. Consumers might have belived that they could unlock an ATM card where it locks or cash a check at any bank. The only events the court was persuaded showed actual confusion were the attempted deposits or withdrawals at the other party’s branch as well as the PeoplesBank customer’s concern over the People’s United security breach.

But, in order to obtain a PI, PeoplesBank needed to show that the proposed use of the mark would cause or increase confusion over the existing marketplace baseline. Witnesses testified, however, that consumers often request services from banks where they are not customers and get ‘confused’ between banks in the same area with obviously different names, from Bank of America to Florence Savings Bank. Likewise, many of the events occurred before People’s United started using its name in Massachusetts; PeoplesBank didn’t show that confusion increased after that. This was crucial to the request for an injunction, which is supposed to maintain the status quo; PeoplesBank couldn’t show that People’s Union’s planned rebranding will cause confusion above the current rate.

Essentially, the court applies the same standard to testimony about actual confusion that courts now do with consumer surveys: subtract the baseline/control level of confusion to get the amount caused by the similarity between two marks. I’ve just never seen it done with actual confusion before!

The court also thought that the parties’ long history of close proximity, with ads for both banks crossing the Massachusetts-Connecticut border, showed that over time people could distinguish them.

PeoplesBank also had a survey, but it backfired. Respondents were shown PeoplesBank’s mark followed by three other banks’ marks, then asked if any of the three later banks were “the same as” or “affiliated with” PeoplesBank. 32% of respondents thought the parties were the same or affliliated, but the court thought the survey was suggestive, creating a “demand effect” where consumers knew the surveyor was looking for affiliation. (Why didn’t the control take care of this? The court is silent.) The real problem was that respondents exhibited more confusion between PeoplesBank and “Bank of Western Massachusetts, division of People’s United Bank” than between PeoplesBank and “People’s United Bank.” So the proposed injunction was against a use that would be less confusing than the status quo. (And that actually makes sense—the “division of” language could easily combine with a poor memory of a People mark to cause consumers to think affiliation, whereas when there’s just a primary mark they may work harder to distinguish different People mark.)

In addition, PeoplesBank didn’t show commercial injury—no lost sales, accounts, business opportunities or even damage to goodwill and reputation. “None of the events presented to the Court evidenced confusion by consumers choosing where to bank or among providers of banking services. Defendant did not proffer confusion which might alter consumers’ behavior. Defendant simply did not make the necessary connection between confusion and possible negative commercial impact.”

Ultimately, actual confusion favored People’s United. The number of incidents was rare by comparison to the number of bank transactions engaged in each day. But crucially, PeoplesBank couldn’t show that People’s United’s use of its name and logo in Western Massachusetts would increase the existing, longstanding low-level confusion due to geographic proximity.

Also, after detailed evidence—People’s United’s expert testified that, before investing, 25% of consumers perform almost no research, and 20% perform almost none before borrowing—the court was convinced that, for most consumers, banking isn’t an impulse purchase, making confusion less likely. (What about that substantial minority? I guess they’re just out of luck.)

Even if PeoplesBank had done better, People’s United showed that the balance of hardships favored it. It was trying to become a single brand running one bank, and the ability to present a consistent brand was a significant draw for customers. People’s United had hired a tech company to design and run a single, uniform operating system for an estimated cost of $40 million. The new system can only generate documents like deposit statements with the People’s United name and logo. An injunction would interfere with this transition and might even halt it outside Western Massachusetts.

Not gray anymore: Blue Sky class certified

Chavez v. Blue Sky Natural Beverage Co., 2010 WL 2528525 (N.D. Cal.)

Prior court of appeals ruling. Plaintiff Chris Chavez now sought and received class certification for claims arising from allegedly false/deceptive labeling of Blue Sky’s beverages as being from Santa Fe, New Mexico. This deceptiveness allegedly included statements on the can, the Southwestern look and feel of the cans including images of the Sangre de Cristo mountains bordering Santa Fe, and statements on the official website indicating that the company was based in Santa Fe. However, since 2000 there hasn’t been any company named “Blue Sky Natural Beverage Co.” in Santa Fe, and Blue Sky beverages aren’t made or bottled in Santa Fe or anywhere in New Mexico. Chavez alleged that he bought Blue Sky beverages from 1999 to 2003 because he relied on defendants’ misrepresentations about their geographic origin. His claims were for false advertising, unfair trade practices, violations of the CLRA, and common law fraud, deceit, and/or misrepresentation.

Chavez moved for summary judgment on defendants’ preemption defense, and received it. The NLEA preempts labeling requirements that are not identical to federal law. FDA regulations provide that food is misbranded if its label expresses or implies a geographical origin of the food or any ingredient unless the representation is (1) a truthful representation of geographic origin, (2) a trademark/trade name that is not deceptively misdescriptive as applied to the article in question (which can occur either because of secondary meaning or because the term is arbitrary or fanciful and thus not generally understood by consumers to suggest geographic origin), (3) a part of the name required by federal law or regulation, or (4) a name whose market significance is generally understood by the consumer to connote a particular class, kind, type, or style of food rather than to indicate geographical origin. Federal regulations also detail how the manufacturer’s name and place of business are to be disclosed. The label can use the principal place of business in lieu of the actual place where the food was manufactured or packed or is to be distributed, unless that would be misleading.

Chavez argued that he was not pleading violations of the FDCA, nor would he need to prove such violations to establish his claim. He also argued that the state laws he was trying to enforce did not impose any requirements different from federal law. The court concluded that there was no clear evidence that FDA regulations prohibited defendants from changing the Blue Sky labels to comport with state law. Under recent Supreme Court precedent, courts should recognize that state rights of action provide useful additional relief for injured consumers, even though there’s no private right of action under the FDCA. Congress didn’t intend for FDA oversight to be the exclusive way to regulate statements of geographic origin.

Likewise, the court rejected defendant’s primary jurisdiction argument. Chavez’s state law claims don’t require an FDA ruling on whether the FDCA has been violated, nor would ajudication require the FDA’s particular expertise or uniformity in administering labeling requirements.

Then Chavez won class certification. Certification requires: (1) a class so numerous that joinder of all members is impracticable; (2) questions of law or fact common to the class; (3) claims or defenses of the representative parties that are typical of the claims or defenses of the class; and (4) fair and adequate protection for the interests of the class. In addition to meeting these requirements, parties seeking certification must meet at least one requirement of FRCP 23(b).

Initially, defendants argued that Chavez hadn’t demonstrated that any purported class member other than himself suffered injury in fact. Though this isn’t binding as a matter of federal law, the California Supreme Court has held that unnamed class members in an action under the UCL aren’t required to establish standing. Defendants also challenged the proposed class as unascertainable and hopelessly broad. It must be administratively feasible to determine whether a particular person is a class member; defendants argued that membership could not be contingent on state of mind, and that here membership would require an in-depth analysis of each class member’s purchase motivation.

The court disagreed. Chavez’s claims didn’t require an individualized showing of reliance, because according to the California Supreme Court UCL relief is available without individualized proof of deception, reliance, and injury. On the CLRA claim, reliance on the alleged misrepresentations can be inferred for the entire class if the named plaintiff can show material misrepresentations. And the California Supreme Court also applied the same reasonableness standard for materiality and reliance for a fraud claim. A presumption or inference of reliance arises whenever there’s a showing that a misrepresentation was material—that a reasonable man [sic] would attach importance to its existence or nonexistence.

Chavez’s proposed class of all persons who (1) purchased any beverage bearing the Blue Sky mark or brand (2) in the United States (3) between May 16, 2002 and June 30, 2006 was sufficiently objective and practicable. It was easy to satisfy the numerosity requirement, given that Blue Sky sold over $20 million of product, or over 500,000 cases per year.

Defendants argued that individual issues of motivation and damages defeated commonality. This went more to whether common issues predominate under Rule 23(b)(3); the class members shared common issues of fact and law on deceptiveness/misleadingness. Defendants then contested typicality, given that Chavez didn’t buy each product in the Blue Sky line. But representative claims are typical if they’re reasonably co-extensive with those of absent class members. Because Chavez alleged that all the Blue Sky beverages bore substantially the same misrepresentation, he satisfied this standard.

In view of Chavez’s rigorous prosecution of the class claims in this court and on appeal and the absence of conflicts of interest with other class members, the adequacy requirement was satisfied.

That left Rule 23(b)(3), which allows class certification if “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” The court considered (1) the class members’ interests in individually controlling the prosecution or defense of separate actions; (2) the extent and nature of any litigation concerning the controversy already begun by or against class members; (3) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (4) the likely difficulties in managing a class action.

Chavez satisfied these requirements, mainly because state law means that individual class members wouldn’t have to prove reliance on the alleged misrepresentations. The focus of the law is on the defendant’s conduct. Damages may be individual, but that doesn’t defeat certification as long as there is a likely method for determining class damages. At this stage, that was satisfied by offering as an objective measure the price difference between Blue Sky beverages, which sold at a premium, and defendant’s lower-priced mainstream beverages.

Defendants also argued that the law applicable to the proposed nationwide class isn’t uniform because California’s laws don’t apply to nonresident plaintiffs. However, defendants are headquartered in California and their misconduct allegedly originated there. Thus, defendants can be subjected to California law in its entirety.

Chris Chavez was appointed as class representative and counsel, Gutride Safier LLP, was appointed as class counsel.

Phone home: no Lanham Act claim by alleged customer

Transcom Enhanced Services, Inc. v. Qwest Corp., 2010 WL 2505606 (N.D. Tex.)

Transcom, a VoIP provider, alleged that Qwest falsely accused it of masking toll calls as local calls to avoid paying Qwest access charges. When a customer uses Transcom’s services to place a call, Transcom changes the form and content of the call and sends it for transmission to a competitive local exchange carrier, which sends it on either to the recipient or to an incumbent local exchange carrier for the recipient. Transcom alleges that it is properly deemed an “end user” customer and thus required to pay only end user charges to connect to the public switched network, whereas providers of telecommunications services, including providers of toll services, must pay access charges.

Qwest is a local exchange carrier, as is Electric Lightwave, another relevant party. Transcom must maintain relationships with local exchange carriers because, as a noncarrier, it can’t directly deliver a call on the public switched network. In 2005, Transcom and Electric Lightwave entered into an agreement by which Transcom would deliver calls for termination in Electric Lightwave’s coverage area. Electric Lightwave, in turn, had a relationship with Qwest for delivering calls.

Transcom learned in 2006 that Qwest was “spreading allegations in the telecom industry” that it was masking toll calls and otherwise avoiding paying access charges through fraudulent conduct. Qwest accused Transcom of attempting to avoid over $1.4 million in access charges. Transcom responded by providing “copies of rulings from a court of competent jurisdiction” determining that it was a service provider exempt from paying access charges. Shortly thereafter, Electric Lightwave informed Transcom that it was in default and intended to disconnect its service, as Electric Lightwave had learned from Qwest that Transcom was avoiding payment of access charges. Electric Lightwave had received bills from Qwest for unpaid access charges of $3 million, 70% of which was attributable to Transcom. Electric Lightwave then decided to exit the business and Transcom was then rebuffed in efforts to establish a customer relationship with its successor in interest because of the previous accusations. Qwest also sued a number of defendants, including Transcom, in the Western District of Washington, accusing them of fraud to mask toll calls; Transcom was eventually dismissed for lack of personal jurisdiction.

Transcom then sued for libel, slander, tortious interference, violations of the Communications Act, and false advertising under the Lanham Act. Here, Qwest won dismissal of the Lanham Act claims on the grounds that the statements to Electric Lightwave at issue were not advertising or promotion. Specifically they weren’t for the purpose of influencing consumers to buy Qwest’s goods or services. They were for the purpose of enforcing Qwest’s legal rights, rather than a marketing or sales pitch. Nor could Transcom logically allege a sales pitch, since the complaint alleges that Transcom was Electric Lightwave’s customer, not the other way around.

Transcom responded with arguments about why and how Qwest was attempting to eliminate it as a competitor in the VoIP market. The problem was that the complaint contained none of these factual allegations. Nor do they show how any of Qwest’s communications were made to persuade any consumer to purchase Qwest’s goods and services. (Though I would think offering a consumer a good reason to avoid a competitor would also be a marketing/sales pitch, since the necessary implication is that one ought to choose a different source.)

Today's fake exam question

At the Smithsonian Folklife Festival, I bought earrings made by Kathy Whitman from recycled soda cans. On her site, you can choose which brand of can you want for your order; I just bought ones made from Coke Zero off the shelf. Given the Ninth Circuit's recent ruling that confusion trumps first sale, and given that Coca-Cola itself licenses recycled Coke can jewelry, what happens to Whitman? Bonus: the earrings I bought were made from Olympic sponsorship cans, and have a substantial portion of the five rings on them. How should S.F. Arts & Athletics, or whatever rule you believe is the law today, apply to this use?

PLI: puffery, parody and surveys

Puffery & Parody

David H. Bernstein (moderator)

Richard J. Leighton, Keller and Heckman LLP

Materiality and puffing are opposites. In one sense materiality is an element of falsity. Judge-made law: judges add their own twists, making the Lanham Act a movable target compared to the more predictable NAD. Materiality explains why some literal falsity (as many puffs are literally false) can be nonactionable. Materiality is often based on proof that the intended audience would be motivated to purchase the product or service. They can also be motivated not to buy by a comparison even if they don’t buy the advertised product. Keep negative materiality in mind.

An omission of material fact can also be deceptive. Example: KFC ad claiming that eating KFC could be “eating better” and saying that KFC has less fat than the BK Whopper. Was this a claim that eating KFC was healthier than eating a BK Whopper?

Recent trend in puffery: courts say something is an obviously false or unprovable assertion that the audience should not have relied on even if the plaintiff has evidence that consumers actually believe and rely on it. Reasonable consumer’s wouldn’t rely, therefore your evidence is irrelevant. Courts just want to get rid of a complicated case/avoid the battle of the experts/avoid a jury factfinding. Real question: is there extrinsic evidence that consumers/influencers think this claim is relevant to them?

If the advertiser decided to put the claim in the ad and the competitor was willing to sue over it, why did both parties think the claim was worth making/fighting?

Bad case: American Italian Pasta v. New World Pasta Co. (8^th Cir. 2004): “America’s Favorite Pasta” held to be puffery because of a 1943 dictionary definition of “favorite” found to be unprovable. P&G v. Kimberly-Clark Huggies Natural Fit case: said that the competitor’s diaper fits a brick, not a baby. Huggies did tests to substantiate its better fit claim but after the fact argued puffery. The judge agreed: tests done with parents don’t count because the only person who can tell if it fits is a baby, and babies aren’t talking. Leighton suggested that parents were well aware when poor fit led to leaks.

Annie M. Ugurlayan, Senior Staff Attorney, National Advertising Division: Factors NAD considers in puffery determinations—are these general matters that can’t be proven or disproved? Are they about specific characteristics?

Copart Inc. salvage vehicle auctions: “the best way to sell low to mid-value trade-ins,” “the best place to find cars,” and “the most efficient bidding process possible.” Copart sold millions of vehicles each year. NAD determined that the best place/best way to sell claims were puffery because not linked to specific performance attributes. Most efficient bidding process was different: it was a broad superiority claim but there was no evidence in the record that the process was more efficient. NAD recommended ending the comparison and disclosing the basis for the efficiency claim.

Kimberly Clark (softness of tissue): “softness done right” and “new pattern for even more softness” were puffery.

Kohler Co. toilets (April 2009): “global leader in performance toilets” standing alone could be puffery, but not in context, because it was linked to specific attributes. The tagline was shown just above statements about flushing power, water conservation and noise reduction, which are objectively provable.

Vital Pharm. (Redline Princess): “world’s most effective energy drink” on website front page. No performance claims on that page, thus, without more, likely puffery. But would be problematic if linked to other elements like mood enhancement or fat loss.

Alcoa, Inc. (Reynolds Handi-Vac): claim was that leading freezer bags trap air so that freezer burn sets in the minute you close the bag, while the advertiser’s bags virtually eliminate freezer burn. This is not puffery.

Chemistry.com challenged by eHarmony: “get you out dating in the real world faster.” Not puffery: faster is a superiority claim and the core of the service’s goals is to get you dating in the real world. T

Takeaway: puffery is general; more specific claims are less likely to be puffery. NAD typically doesn’t use surveys for puffery but can find them useful. In the Gorilla Glue case, where “toughest glue on Earth” was on the package, a survey supported the challenger’s contention that the slogan wasn’t puffery. Respondents perceived a comparative strength claim. NAD noted inherent difficulties in designing a puffery survey.

Advertisers should be mindful of imagery that could contribute an attribute in non-puffing ways. Context can be key.

Rebecca L. Tushnet, Georgetown

Puffery and humor get to some fundamental truths about ads. We ask “why did you make the claim if you didn’t want consumers to believe it?” Often the answer is: because we wanted to be funny/likeable. But unpack that. We wanted the ad to be funny/likeable so that consumers would feel warm & fuzzy towards our brand which we think will cash out into purchase decisions even though that’s not really about product features. The law has agreed to pretend that consumers are rational, except when it doesn’t pretend that.

Puffery is a way to reconcile falsity doctrine with the intuition that things are a little more complicated than true/false. Puffery is the flip side of falsity by necessary implication, which operates by recognizing the contextual competence of the modern American consumer: when it is obvious that the ad makes claim X to get us to infer claim Y, we treat claim Y as if made. This is why there are routinely problems in new fields—new technologies or drugs—where consumers aren’t quite sure how seriously or metaphorically to take particular claims. I think this was an issue in the DirecTV case—the range of things that consumers might reasonably think could be true of a new type of TV is large.

Courts use puffery because they distrust juries and are confident that the way they see the world (as reasonable consumers) is the way the world is likely to be seen. Ziploc case, involving portrayal of Ziploc bag leaking while Glad bag stayed closed: the court determined that the print ad was false because it misrepresented the rate of leakage—but a single static picture can’t misrepresent a rate; the court read all that in even though Glad had substantiation that its bags leaked less.

This judicial confidence is tied into other developments—Iqbal and Twombly—making explaining how a particular business works even more important early on in a false advertising case.

Separately, the puffery/materiality question highlights two different questions we might ask of consumers: what message do they perceive the ad is really sending, and what message do they believe? A consumer might receive a message that a product lasts all night long, as with Mylanta Night Time Strength, but not believe it because she doesn’t believe any ads. Should we care about reception or deception? I’d argue for reception, because we shouldn’t make the problem of distrust worse. We shouldn’t require consumers to distrust/discount even specific factual claims.

A related problem is that consumers exist on a spectrum. Some get the right/intended message from an ad, some get the wrong/misleading message, some get none. This is part of why humor is a focal point of many challenges. Example: “Where’s the Beef?” ad. Some consumers probably receive the true message of slight superiority in size for Wendy’s burgers. Some probably receive a false message of substantial superiority. Some think it’s just a joke. Question: can you communicate the truth without deceiving a substantial number? What are the alternatives to get the truth out? This isn’t asked often enough.

Penultimately, we are seeing courts distinguish between “misleading” and “misunderstood.” At first I found this distinction puzzling—it sounds like it’s about speaker intent versus audience reception. But considering intent to be key to liability contradicts decades of precedent (and is a bad idea). It would be better to see this as about materiality: I can misunderstand something irrelevant; misunderstanding is static. To be “led,” however, is to be induced to move—a misleading statement is one likely to make consumers change their positions.

Last point: we should keep in mind the interaction of puffery/parody/materiality with trademark law. Advertising law in the US favors comparative advertising; if you can make specific factual claims about a competitor as long as they’re true, we should also be careful to preserve the ability to make general emotional claims without liability for tarnishment, as we’ve seen some trademark owners allege (and even, sadly, win in the Deere case).

Bernstein: some judges don’t like these cases—think of parties as kids fighting on the playground, and use puffery to kick the dispute out. NAD takes it more seriously.

Q: The knowledge base of consumers is important, but so is potential sensitivity. The audience for Ziploc bags may be less sensitive than the audience for weight loss or dating.

Me: It’s about risk: a consumer who sees possible benefit for her baby may be more willing to believe/hope in a claim and pay extra for it. The law needs to guard against consumers’ lowered scrutiny.

Leighton: an intended audience inquiry can help with this.

Ugurlayan: we see cases where that has been a consideration, e.g., new mothers.

Bernstein: puffery as a matter of law is troubling because one way to determine materiality is to ask consumers. How should plaintiffs go about proving materiality?

Leighton: certain presumptions exist in the law—frequently courts presume materiality from a direct express comparative ad. Price claims too go to the essence of the marketing process. Health claims. Intent to deceive can justify a presumption. He always tacks on materiality questions when surveying for evidence that a representative sample considered the claim material (would pay more for a feature v. a product that did not have that feature). Discovery: often internal admissions by advertiser. They thought it would motivate sales. This is persuasive to a judge or jury. If 15-25% of the intended audience considers it material, that matters: make clear early on that this is a material fact dispute, not one that is a matter of law.

Internet Surveys

David H. Bernstein (moderator)

Sandra Edelman, Dorsey & Whitney LLP

Ask yourself: is this the right case for an internet survey?

Dr. Eugene P. Ericksen, Special Consultant, NERA Economic Consulting

Note that internet access is not universal. High usage among college graduates (94% used in the past 30 days) v. 52% of adults who didn’t attend college; similar results for households with incomes above $75,000 and those below and with people 18-54 (81%) versus people 55 and over (50%).

Whatever the universe, how well does your sample represent it? Most internet panels are nonprobability samples. We do those in mall surveys all the time, though. It’s possible to do a probability sample on the internet by sampling people with phones, including providing people with computers if they didn’t have them. Compared probability to nonprobability samples: clear differences in quality.

Often you want to compare test to control, and the research hasn’t been done on whether a nonprobability sample biases test v. control, but we do know that people in non-probability samples tend to be more interested in the subject matter. Being more interested might skew the comparison between test and control.

Edelman: Issues around approximating market conditions: stimulus can’t be picked up in a web survey. Will the method of online presentation be realistic? How long should the respondent be exposed to the stimulus? Should the respondent be able to view the stimulus while answering questions?

Ericksen: even testing a website can be an issue—people like to poke around websites; if you only have one page, you may have problems. We usually do ok with 5-10 pages.

Bernstein: internet survey can be useful for informal discussions towards settlement—can draft questionnaire themselves and get results in a couple of days. Doesn’t replicate market conditions, people can’t pick up the bottle or look on the label, and if it goes forward you may need a full mall intercept survey.

Edelman: if you have a low incidence product, a mall intercept survey could be very difficult. You might be able to reach your niche market on the web.

Bernstein: we’ve done surveys on vets online that would be impossible in a mall.

Ericksen: most internet survey cos. interview people they recruit, so if you want to study recent car purchasers, they can line them right up—really cuts down on incidence cost. Surveys of 400-600 typically cost less than $10,000 in data collection; small fraction of overall—costs of designing a questionnaire, analyzing data, and writing an expert report are the same. He always used to say that his minimum amount of time for a survey, mall or telephone, would be 3 weeks. Now you can collect your data in a week.

Bernstein: state of art on controls: Ex-Lax was reformulated with senna—“new natural senna formula.” Were people deceived into thinking that the whole product or its active ingredient was natural? Schering-Plough sued for false advertising because lots of it was not natural. Their survey asked them what “natural” meant. But it had no control. 50% said it was 100% natural and 50% said it was not. For cross-examination, asked expert if they couldn’t have covered up the word “natural” and asked the same set of questions and found out the effects of preexisting beliefs/question bias.

“Lotrimin Ultra treats most athlete’s foot in just 1 week’s use. Lamisil Defense takes 4 long weeks. Why live with the itching and the burning?” Lamisil was concerned that the message was that the itching and burning would last 4 weeks, whereas you just have to keep using it. If you took out that last line, 19% fewer people thought that symptoms would persist longer with Lamisil. NAD was impressed with this. Change only the part you think is causing falsity.

Edelman: if the perfect control is an altered package that would look unrealistic in the real world, that might be good for an internet survey. It’s timeconsuming and really expensive to create a real-looking control for a mall intercept.

Bernstein: Hybrid—phone survey where you ask someone to go to the internet while on a phone.

Ericksen: We know that shopping mall demographics are similar to US demographics, except for people over 65 who tend to go to shopping malls less. Lately we’ve taken the computers to the shopping malls. He’s done a patent infringement survey that way where he looked at whether a particular software feature affected consumer satisfaction with the product, and that worked just fine.

Edelman: screener issues: should the sampling plan target specific groups based on information the firm previously collected? The internet panel companies want to make their money, and if they promised you 500 people from a particular geographic area they want it done fast, and they have an incentive to allow people to take these surveys, while people want to take the surveys; this leads to data quality issues. One example: their own data said 15% of the population used the product, but 60% of those who took the screener qualified. Seemed unlikely.

Ericksen: buyer beware with internet panel companies. Also they are often just now learning how to deal with litigation and discovery; he wouldn’t be surprised to see some withdraw from the field rather than reveal trade secrets. Big problem: people interested in rewards wind up taking lots of surveys. So he asks for people who have taken less than 12 surveys in a year; creates conflict by taking longer. Can also stratify: only 25% of the panel can have taken a lot of surveys; those people are probably much more unrepresentative and more likely to notice things.

Validation: you can ask questions on your survey to compare with panel data collected at time of recruitment.

Edelman: title of survey can be an issue. How the internet panel is describing subject matter to invitees can actually suggest their involvement. Even more care is required than in mall intercept era about everything part of the invitation process.

Ericksen: respondents are not robots. Where the question is vague and nonspecific, respondents look to the wording of the questions, even the preceding questions, to create a framework for answering.

Bernstein: in-room example: Ask people first whether they’re generally happy and next whether they’re happy with their relationship with spouse/significant other. Then reverse the order with a different group. There are differences! In actual research, asking people about general happiness first makes them more likely to say they are very happy compared to respondents asked about marital happiness first. And people asked about general happiness first were more likely then to say they were very happy in their marriage, though the difference was a bit smaller. Thinking about marriage helps you define general happiness.

Ericksen: Similarly, starting with a low number can change results: ask people how much TV they watch; start with 2½ hours or less per day v. ½ hour or less. In our group, only 5% in the small scale said they watched more than 2½ hours, while substantially more said that they watched more than that in the high-starting-point condition. How do you define what “watching” is? People feel socially conscious about this. In the low category condition in actual study, 84% reported they watched up to 2½ hours/day and 16% watched more. In the high category condition, giving more permission to watch more, 62.5% reported they watched up to 2 ½ hours/day and 37.5% watched more, pure self-reporting.

If people’s experience online doesn’t replicate the real world, it can distort their answers. “What did you think was the main message of the commercial” is a very broad question, and people are going to have to go through a lot of thought to deal with it.

Bernstein: controls are supposed to deal with this, but it’s tricky.

Edelman: technical problems may happen. You may not want people to take the survey on a mobile device where all they can see is a tiny little image; good practice to ask now.

Ericksen: ability to remember stimulus will fade quickly; don’t expect them to be able to answer 60 questions.

Bernstein: may be able to keep image on screen.

Ericksen: human interviewer can keep respondent motivated to answer questions, and bringing respondent back on track. Web surveys create problems with open ended questions. Respondents can get a little lazy. One survey: showed no confusion among respondents who answered with less than 10 words, but substantial confusion among respondents who did the work. Second problem: you can’t do anything when people just write gibberish. Don’t let the survey run long/tire out your respondent.

Bernstein: what can go wrong without an interviewer: advertising for Bausch & Lomb’s MoistureLock ReNu—claim that it lasted for 16 hours. Optifree, the market leader, thought that there was an implied message that the market leader didn’t last 16 hours—tagline “contact lens comfort just took a dramatic turn for the better.” B&L did an internet survey wanting to show that no one got a main message of comparison. But the verbatim responses showed that people missed the video or didn’t remember the name—showed that this study was not an effective way to test people’s reactions. If you followed all the rules, though, he thinks NAD would be a willing audience.

Edelman: practice tips on discovery. One of the first times she served a subpoena, she didn’t get the data file from the expert—the internet panel had all the responses. She had to bring a motion to compel to get Harris Interactive to turn over the data, in particular how many surveys per year their respondents take. Make sure the expert takes responsibility for getting the data from the panel to turn over as part of the expert’s production.

Experts are up on the fact that they aren’t supposed to put excessive stuff in writing/email. Internet panels email back and forth all the time; they don’t necessarily say much but you have to be careful. She encourages experts to keep emails to a minimum, tell the internet people to call to talk; they are often surprised that they have to turn stuff over.

Q from Ugurlayan: what steps are being taken to minimize technical glitches?

Ericksen: we haven’t solved it all yet. Often we say “tell me about the video you just saw,” and if they didn’t see anything we delete that response. Also try to make sure they’re not taking the survey on a cellphone. Many problems come from small screens.

Bernstein: one survey he’s working on now said 25% of responses were thrown out for consistently poor behavior. Survey expert said he didn’t know why; internet panel threw it out for him—that’s an indication of a very big problem.

PLI: other agencies and user-generated content

Beyond the FTC: Regulatory Guidance From Other Government Agencies

Randi W. Singer, moderator

Barbara S. Chong, Team Leader, Division of Drug Marketing, Advertising, and Communications (DDMAC), U.S. Food and Drug Administration

FDA’s hearing on the internet/social media: an overview of what we talked about. Our mission: communication of truthful, balanced, and accurate drug information. Surveillance, enforcement, and education to foster better communication for both healthcare professionals and consumers. Promotion needs to balance efficacy and risk information, consistent with the approved product labeling or package insert, and must be supported by substantial evidence, which generally means two adequate well-controlled clinical trials.

Increase in promotional pieces submitted to the FDA; the trend is true for internet-related promotions too. In terms of enforcement action, 2009 actions 44% of the enforcement letters were internet-related; 1/3^rd of 2010 letters are internet-related. 14 letters issued over sponsored link issues in 2009, making a spike v. other years.

For what online communications are manufacturers etc. accountable? How can they fulfill regulatory requirements like fair balance/risk disclosure in social media, especially when there are space limitations or realtime communications? How do we deal with corrective information websites controlled by third parties? What are appropriate uses of links? What about internet adverse event reporting, which isn’t formally within DDMAC’s ambit? CDER will deal with this last question on a policy level, but we see the issues as related.

Guidance process here is not legally binding. FDA will be working on social media through 2010. Plan is to find long-term applicability rather than focusing on specific tools like Twitter.

Julie Saulnier, Deputy Chief, Consumer Policy Division, Consumer & Governmental Affairs Bureau, Federal Communications Commission

The FCC has authority over common carriers. Past ad regulation was based on a joint statement with the FTC in 2000, directed at advertising of dialaround and other long-distance services, from the days of extensive price competition on rates (which has fallen away with the rise of all-you-can-eat). But what we said there may still be relevant to things like litigation around dish and DirecTV, where the competition is hot.

FCC also covers things like fax advertising, telephone solicitation—tries to have its rules track the FTC’s actions. Commercial messages to wireless devices: FCC rules bar sending, by use of an internet address, of commercial messages t owireless devices without express prior authorization from recipient. Texts/messages sent using phone numbers are covered by telemarketing rules. Tracking FTC rules, there’s a transactional/relationship exemption, though opt-out is always allowed.

Newer things: grant of authority over common carriers as well as ancillary authority over Title I—if we have subject matter jurisdiction over the service and the jurisdiction is reasonably ancillary to the effective performance of the commission’s responsibilities. One big consumer initiative: notice of inquiry on consumer information and disclosure for all stages of the purchasing process: choosing a provider, choosing a service plan, managing use of the service, deciding whether and when to switch to a new provider or plan. Should there be things like the EU requirement of sending messages when you’re close to your monthly cap, at your monthly cap, and over, to avoid “bill shock” when the customer gets a higher than expected bill?

Notice of Proposed Rulemaking scheduled for third quarter of 2010 to determine performance disclosure requirements for broadband. Advertising the “up to” speed is not satisfactory, according to our extensive consumer surveys—consumers have no idea what speed they’re actually getting. Comment is also being sought on measurement of mobile broadband network performance and coverage.

Another NPRM from October proposes transparency on internet network management: must disclose, subject to reasonable network management, information about network management and other practices as reasonably required for users, content, application, and service providers to enjoy protections (sending or receiving lawful content of the user’s choice, running lawful applications and using lawful services, connecting to and using user’s choice of lawful devices, and maintaining competition among network, application, service, and content providers)—internet user’s bill of rights. Enforcement action against Comcast was struck down by the DC Circuit as beyond our ancillary jurisdiction. As a result, we’ve opened a Notice of Inquiry on a framework for broadband internet.

Joy Feigenbaum, Bureau Chief, Bureau of Consumer Frauds & Protection, NY State AG’s Office

We are very interested in post-transaction marketing: well-known retailers, merchands and banks partner with companies that sell “membership programs.” The solicitations are provided to customers during or immediately after the customer’s online transaction with the retailer; also occurs with “live check” solicitations that appear to be rebate checks, but by endorsing the check you are agreeing to join a fee-based membership for which you’ll be charged on your credit card.

First, the solicitation isn’t what it seems. Looks like it comes from the retailer with whom you transacted but it’s not. Second, credit card data is passed from the retailer to the membership companies. Ultimately the consumer is enrolled without their knowledge, charged for unknown benefits. Names on the credit card sound like they could be something you bought; sometimes the size of the charge keeps consumers from noticing for months. We found that the vast majority of consumers didn’t understand that they were signing up for a fee-based program or that their credit cards would be charged. Banner ads at the end of the transaction say things like “click here to get your $10 cash back reward on your next purchase”—looks like it’s from the retailer. Or create an impression that the consumer is being rewarded for taking a survey from the retailer. Fandango offered free movie tickets; audio overlays that encouraged consumers to “just click yes now and claim your free movie tickets,” discouraging consumers from understanding what was going on. She showed numerous slides that were cluttered/confusing/bare of information about what was really happening.

Some players in the industry have now ended the “data pass” of information, but only online. Other companies are trying a pre-transaction variant. Offer a choice of a lower or higher price, and if they choose the lower price then they’re enrolled in a fee-based program. High volume of consumer complaints generated.

Live check solicitations: cashing the check enrolls the consumer making them liable for monthly charges on the credit/debit card provided to the retailer/bank with which they’d earlier transacted; the retailer/bank provides the information for a fee to the program operator; the checks are often cobranded with the retailer/bank’s mark, creating the impression of customer loyalty rebate. Live checks have been banned/restricted in at least 6 states as too misleading. She also showed a number of those checks, with confusing/misleading text.

Also deceptively retaining unauthorized revenue from consumers. Train CS reps to respond to complaints by cancelling without a refund or at most providing a refund for one month; trained to withhold information about how long the program has been charging them; provide misleading information suggesting that they can’t get a refund/can only get a refund if their credit card has been lost or stolen. She played a really great, in an awful way, recording of a CSR doing this, which ends when the AG’s name is invoked.

Some settlements/redress funds. The investigations continue. Several enforcement actions/settlements should be announced in the near future. There’s also a New York Senate investigation. Enforcing GBL §349 and §350 and laws against repeated fraud or illegality.

User-Generated Content

Randi W. Singer, Weil, Gotschal & Manges (moderator)

Hypothetical scenario with a promo for “World’s Best Pizza”: New “homestyle” pizza hits stores tomorrow, and want a promo campaign to generate buzz about the house-made crust and point out that other chains use frozen crust. Invite consumers to visit the website and upload a written/video submission in which they describe or reenact their favorite pizza memory or tradition. Directions encourage folks to share what they think the best combinations of toppings are, and World’s Best may create some offer some special pies using those suggestions. Please sign off by the end of the day!

Response: most of the audience said you needed to call marketing and discuss (not email). Showed sample video where the UGC included pop music and mentions of other TMs.

Darren A. Bowie, Legal Director, Nokia Inc.

General guidelines for videos: talk to marketing clients and IT clients about your capabilitities: what size and length and format of files? Disclose those to avoid problems with consumers getting files rejected. Guidelines about obscenity, appropriate content (no harassment/hate speech). Make clear you have discretion to reject videos. Think about advertising/gambling—suppose someone contains a video with links to other sites; call it out explicitly and prohibit it. Make clear to consumers that there’s no right to have their video posted or kept up if posted. Consider some type of disclosure/link for complaints about the video.

Susan M. Shook, Associate General Counsel - Associate Director, The Procter & Gamble Company

Work closely with client to understand what will be done: just a gallery on the site? Broader plans to use in other advertising? Find out what technically can be done for monitoring and filtering. Answers will drive terms and conditions as well as format.

If only a gallery, you may have a few short & sweet provisions: you’re consenting to this; you’ve gotten the consent for everyone who appears; etc. If you’re planning to reuse/repurpose the content, you may need much more robust terms and conditions and more robust format—make sure submitters are residents of the jurisdiction; they’re of the age of majority so it’s not voidable; they’re not employees; make sure they know they need to follow the submission guidelines and don’t include third-party materials; if they use other people/third-party materials, need consent; have them make a representation that it’s original content not submitted to others (what if they submit the same thing to your competitor?); ownership v. license (some third-party social networks may dictate what you can get from the consumer in terms of license v. ownership).

Format is almost as important and often ignored. Consumers must see them. Hyperlinks at the bottom of the page are not transparent enough to the consumer.

Lisa F. Cantos, Vice President & Associate General Counsel, Starwood Hotels & Resorts Worldwide, Inc.

Lots of IP issues—TMed products appearing; music appearing. No matter what you tell users, there will be third-party content in the video—a Polo shirt, a picture of a car in the background. So provide that it’s the user who is obligated to get the consent; also have the ability to review content before it’s posted; also have the ability to take it down—the coolest stuff will often be what you need to pull down. Let the business people know what the videos have to be reviewed for—very few legal departments have enough staff to review and probably shouldn’t be doing it anyway; you can have great terms and conditions but the people doing the review have to know what they mean.

On ownership v. licensing: be aware of why you’re running the contest. If you’re looking for new independent filmmakers, then asking for ownership will cause an outcry.

Shook: remind people that the people on the other end of the transaction are unlikely to have read the contract, and may well be a 13-year-old with $12. If you want to reuse the content, indemnification from the user is unlikely to be any good for you. You’ll need real releases. Also, once you cherry-pick certain videos, all the old rules about ads apply, including substantiation.

Bowie: think of COPPA, which prevents collection of information from kids under 13. Can prescreen videos; can use age gating, which can involve some tricky tech; ask the user to confirm age. If they give an age under 13, don’t let them submit. Still may have issues if people under 13 are disclosing personally identifiable information in a video.

Singer: What do you want to know about your ad agency before you launch a new campaign?

Bowie: talk to your in-house marketing client about how they know/came to work with the agency and speak with the agency yourself, getting a sense of whether they understand the issues.

Shook: remember that not every firm has the same risk profile. And younger people may have a right-click-and-its-mine mentality. Just because someone else has done it does not mean you can do it.

Singer: call v. email?

Cantos: first, consider whether your client is the type to ignore a message. Sometimes you don’t create a written record if you think your client is going to do it anyway. She wouldn’t just do it by phone; she’d send an email saying: we need to talk more about this.

Bowie: We can put privileged/do not forward on the email, but know that this will be ignored. Short message followed by oral discussion is best.

Singer: add in lawyer’s question: how will consumers know to go to the website to submit content? Are we advertising? Response: mass email/text message blast to everyone in our database.

Bowie: this creates huge privacy policy issues—think generally about your privacy policy.

Shook: not every company is situated in the same way with regards to privacy. P&G is an opt-in company—consumers must check a box to allow further email communications. The client wants to use all the lists, but if the consumer didn’t affirmatively opt in, you can’t do a “blast out.” Nonlegally, think about what your consumers thought when they got notice. Did they think they were going to get coupons? May be a customer relations issue.

Bowie: special rules about text messaging. Most would consider the necessary tech to be autodialer technology, which would implicate the TCPA. There is a private right of action under the TCPA, though not under Do Not Call. Courts have adopted the FTC’s position that text message marketing without prior consent is prohibited under the TCPA; pretty significant settlements with companies such as Timberland. Don’t do it without explicit prior opt-in consent; not buried in privacy policy/terms that you reserve the right to send out SMS. Need a tick box.

Cantos: Simon & Schuster promotion for Stephen King’s Cell—“the next call you get may be your last”—received by a young boy. This is a problem.

Singer: one more piece of the issue. We’ll interview consumers trying the homestyle and asking them if it’s better than the frozen dough at the other place. We want camera crews filming. More or less problematic than the website user submission? (The audience was relatively split, with 56% thinking it was more problematic.)

Shook: worried about the way the question was planned to be asked. Figure out what your client wants from the interviews (and online). If the client suddenly changes the promotion to be more comparative, that could get you into trouble—Quiznos v. Subway case. Submission requirements asked for a comparison, and the sample videos were arguably disparaging/suggested laughable amounts of meat in the Subway sandwiches. Court held that it was a fact for the jury whether Quiznos was the publisher or the source of content. So ask about the directions to the consumers—do they ask for comparisons to competitors that might lead to disparaging content? What examples do you provide to consumers? Make sure your sample videos are not infringing IP or encouraging the submission of disparaging content. Another factor: how vigorously are you going to police submissions? If 80% of videos are disparaging, probably have to pull some of that content.

Bowie: also recall the FTC’s new endorsement guidelines: user should certify that claims reflect honest beliefs/experiences; say they can’t make deceptive claims about your product or your competitor’s. Then think about typicality. Separately, think about whether you will lose 230 protection if you make any changes to consumer submissions.

Q: Would take exception to suggestion that you should only seek out ad agencies with big agencies with huge legal firms—smaller agencies can do some of the best work; imaginative marketing comes from people with fewer resources/experience.

Bowie: There’s a need for due diligence/getting a sense of what legal review an agency can do. Small agencies may not be able to do full review. Just something to be factored in when doing risk analysis.

PLI hot topics in ads: PIs and endorsements

PLI Hot Topics in Advertising Law 2010

Provisional Remedies: TROs & Preliminary Injunctions in Advertising Cases

David H. Bernstein, Debevoise & Plimpton

Defended the presumption of irreparable harm after a finding of false advertising. Consumer surveys to show harm take time and huge amounts of money while the damage is ongoing. What about eBay? Unlike patents and copyrights, there’s no concern for monopoly with the Lanham Act; the concern is to protect consumers and source-identifying functions of marks and the public interest is on the side of a plaintiff who has shown likelihood of success on the merits.

11^th Circuit has addressed this in the Axiom case—use of TMs in metatags. The real problem was that metatags are useless and have nothing to do with actual search engine practice; nevertheless, relying on old caselaw, the district court enjoined the use. On appeal, the 11^th Circuit said the presumption of irreparable harm was no longer applied under eBay. The Supreme Court was concerned with categorical rules, but a presumption of irreparable harm stemming from likely success on the merits is not a categorical rule. Burden is on the defendant to rebut the presumption and show that monetary relief would be sufficient or some other defense.

DirecTV case as an example: 2d Circuit continued to presume irreparable injury after a showing of success on the merits; a few cases are beginning to question this. Footnote in Salinger suggests that eBay would apply to injunctive relief in all cases, not just TM/false advertising. He disagrees that this is appropriate—eBay was about categorical rules: patent trolls don’t get injunctions (in the district court) and patentees get injunctions (in the Federal Circuit). When there’s likely success on the merits, the defendant should have the burden of rebutting irreparable harm. (Why wouldn’t this also have applied in Salinger?)

Where does this leave us? Be prepared to show evidence of harm, but that’s a two-edged sword. In the Mylanta Night Time Strength case (with which I was involved when I was in practice), he came in with evidence of lost sales, but a court might say that this ensured that the harm was measurable/compensable in money damages. Hard to explain how the loss of goodwill will hurt the brand over time.

Hon. Denise Cote

Litigating preliminary relief: judges like IP cases, especially trademark cases. They’re fast-paced. They’re intellectually engaging. Give judges some insight into the real world—learn about the details of each business/industry. Also important public policy ramifications. And generally it’s a very skilled bar, which is a pleasure.

TRO: be prepared to work night and day because of the timeframe. If you have a strong case on the merits, the main question is laches. The court will want to know why it should issue an injunction, now, before discovery and a fuller hearing. If you’ve just discovered this problem and it’s critical to your business, you have a better case for a TRO compared to if the problem has been out there for a while. Don’t just do it to educate the court; you might be educating the court that you can’t be trusted if you don’t have the full facts. However, you might be able to convince the court, even if it doesn’t grant the TRO, that it’s a close call deserving an expedited schedule.

At the first conference, TRO or not: come knowing about what kind of discovery you want, with the understanding that you’re likely to face an expedited schedule and you can’t overburden the other side; the same will happen to you. Think about cost. Impressive if you can immediately serve your document requests and interrogatories. Shows seriousness on sides of both plaintiff and defendant. Have to make a decision about a survey early on too. If you decide to survey, be aware: (1) the design is the most critical component. (2) Courts are far more sensitive today than 10-20 years ago to scientific principles; control is the key component though there are others. Even if the judge doesn’t have an explicit requirement, try to resolve any disputes with your opponent before going to her.

At the PI: don’t forget to think about admissibility for exhibits—you need a stipulation, witness, or other hook. Witness preparation: some judges use direct testimony by affidavit. Many advantages to that for attorneys and parties. Concise and accurate; allows judge to prepare for the hearing. Make sure it’s the witnesses’ voice the judge listens to, not the lawyers. The advocate has to ensure precision; the witness can be hurt by imprecision or inaccuracy and that can undermine the entire case. Is the witness testifying to direct knowledge? Prepare witnesses for questions they’ll likely get/documents they’ll likely see.

Don’t assume that the judge will stop with the briefs. Cite relevant circuit law; you’ll lose enormous credibility if your citations don’t check out. If there’s a district court opinion that is really factually similar, it’s helpful to discuss that too. Also be familiar with your judge’s jurisprudence in this area and feel free to cite them; address them if they’re against you on certain points. If you’d like the judge to read your document, make it accessible—don’t package a brief with three feet of affidavits—make it portable.

Salinger: Judge Calabrese did suggest that the PI standard has been changed across the board. The four-part test will replace the simple two-part test of likely success and irreparable injury. Before a court, whatever you are arguing, you are probably advantaged by saying that you aren’t afraid of the four-part test and that you win under it without a presumption of irreparable harm. She reads Salinger to suggest that the things we used to talk about as underlying the presumption of irreparable harm are alive and well in talking about the existence of irreparable harm even in the absence of a presumption: a loss to goodwill from false advertising or the existence of market confusion; difficult to measure or replace. First Amendment rights can also be useful to establish irreparable harm. Always helpful to a litigant, whether or not public interest is part of the standard, to be able to make a public interest argument in the context of a request for an injunction, which is after all an equitable remedy asking for judicial intervention.

Reminder on the skill of listening: you may think you know how a witness will answer a question, but that might not happen. Thinking about the next question may lead you to assume that the record is one way when it is missing facts or containing ones that hurt you. Likewise, listening to your adversary’s questions and witnesses: your best insight into their strategy for further witness prep/later argument is to listen to cross-examination. And listen to the court: the court may be confused/may not understand everything that’s been given to it in writing.

If you’re allowed posthearing briefing, ground the court in the record and the relevant law: make it easy for the judge by citing the transcript/exhibits. Acknowledge bad facts and give the court reasons to reject their relevance. The most effective advocates establish their own credibility before the court with preparation and respectful advocacy.

On discovery: judges do consider cost in these disputes. You should only have to do one search in a case, and it should be narrow/targeted in time and with respect to the number of custodians. Consider whether you want electronic discovery at all. Don’t be shy about talking to judges about the cost and burdens of discovery; we’re supposed to think about efficiency and burdens on the parties. If there’s disparity in means, that’s fair to talk about. Best way to do it: “We want to cooperate and these issues are important to us, but we can’t afford what’s proposed; here’s what we think are the core issues. Discovery limited in the way we propose can address the matter while protecting everyone’s interests.” Give suggestions about controlling costs. She doesn’t think counsel are aggressive enough about raising this issue—why do we need all these depositions? Ten, allowed as a presumption by the rules, shouldn’t be your starting point—think of it as an endpoint.

Bernstein: Discussion of failure to send a hold order at the outset of litigation as a problem risking sanctions. In the rush to a PI, litigants can forget two things that come back to haunt you: first, suspend electronic deletions using a litigation hold notice; second, check to see if you have advertising injury insurance coverage. In some districts, this covers TM. Give your client notice right away so that it can inform the insurer right away.

The FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising

Randi W. Singer, Weil, Gotshal & Manges LLP (moderator)

Thomas A. Cohn, Venable LLP: The guides date to 1980; in effect 27 years before the first review even began. They aren’t rules or regulations.

Why do we care about endorsements? Advertisers regularly use them to make a more memorable or effective claim about the product/service. For the guides to apply, the endorser has to be acting on behalf of the advertiser—it must be a sponsored message.

General rules: if the endorsement represents that the endorser uses the product, that has to have been true at the time, and the ad can be run only so long as the endorser uses the product and so long as the advertiser has good reason to believe that the endorser still agrees with the endorsement.

Substantiation: “results may vary” or “results not typical” safe harbor has been eliminated. Ads containing testimonials/endorsements are treated just the same as other ads: based on the net impression consumers take away. Key: how would an endorser’s experience be interpreted? As a measure of results themselves users would likely get? Remember that likely doesn’t mean always. Also, “results may vary” isn’t banned, its effectiveness just depends on what consumers would think.

Example: endorser describes her huge weightloss detailing extreme diet and exercise regime. Saying “using diet and exercise, I lost 110 pounds” wouldn’t be enough, but “eating only raw vegetables and going to the gym for six hours a day, I lost 110 pounds” would be enough. If consumers can’t expect to get the depicted result in the depicted circumstances, then the results they can expect must be clearly and conspicuously disclosed: no more pictures with “I lost 50 pounds” without a disclosure that “most women who use the product lose 15 pounds.”

Points to remember: not every ad will convey a typicality claim. Go with more general/diverse results rather than extreme, atypical example. Or you could narrow or specify the population from whom the testimonials were chosen: focus on the depicted circumstances.

New media: disclosure when the connection is one the consumer would not expect and where the connection would materially affect the weight or credibility given to the endorsement.

Singer: Lifestyle Lift—company told employees to go out and put comments on message boards about how good the company was, without disclosing the connection. Those are the things targeted.

Cohn: the disclosure rule applies to new media and old media.

Qs he gets: why are bloggers being treated differently than offline reviewers? FTC says that for traditional media reviews, those subject to assignment/oversight by independent editors aren’t endorsements. The rule is the same if there’s a direct benefit from advertiser to reviewers; we do know that this happens offline, so maybe there are endorsement issues there too. Main point: both blogger and advertiser could be held liable, but what the FTC really expects is monitoring. Advertiser has duty to establish procedures to monitor that the blogger discloses and avoids false/unsubstantiated claims. Advertisers are liable for the actions of the bloggers they support. His fuzzy crystal ball: within a year, we might start seeing the first FTC enforcement action in this area, and it will be slam-dunk/low-hanging fruit situation that goes after an advertiser who is doing no monitoring.

Richard L. Cleland, Assistant Director, Division of Advertising Practices, Federal Trade Commission

We’ve been doing education and not actively looking for law enforcement targets, but don’t ignore those when they come along. Only one case has been dealt with under new guides, Ann Taylor Loft—resulted in a closing letter with no further action. Bloggers invited to attend preview of summer 2010 fashions, and told that if they posted about the event within 24 hours of the event they could win up to $500 in a gift card. Some attempt at the event to tell bloggers to disclose; some bloggers did disclose. FTC’s view: under the circumstances, material connection needed to be disclosed. Closed the investigation because this was a single, not-very-well-thought-out event attended by a small number of bloggers; before FTC notified the company of the investigation, it had already changed the policy for future events requiring that gifts would always ask bloggers to disclose. Two years from now, this might not get a closing letter—we may think there’s been enough of an educational period.

There’s some investigation underway in this area; expect some announcements in the near future. Earlier this week, we posted FAQs on the FTC website. (You can ask more questions of endorsements@ftc.gov.)

Ask two questions: First, is there a sponsored relationship between the company and the blogger/individual? That can be created in any number of ways—direct payment, free merchandise, free trips. Free merchandise is sometimes a little difficult, depends on circumstances to see whether there’s an expectation of future benefit from continuous receipt. If you’re handed a free sample in the grocery store, the purpose is to get you to try the product, not to get you to go blog about it, so there’s no sponsorship relationship. (Do my free LibraryThing review copies count? I don’t necessarily expect future books from any one publisher, but LibraryThing notes that posting a review, good or bad, of a book I’ve received through the program enhances my chances of getting picked for a future free review copy. Of course I always disclose that I got a free review copy!) Is there a de minimis threshold—a benefit so insignificant as to not effect the credibility of the consumer, like a $1 discount? That might work to get the FTC to withhold prosecutorial discretion; depends on the full circumstances.

Second, are consumers confused/misled? May be easier to answer than question one.

Low/zero tolerance: employees promoting products without disclosing. Same with ad agencies promoting for their clients without disclosing.

Celebrities: where celebrities are presenting their own opinions, it’s endorsement v. acting as spokesperson. Where there is endorsement, celebrities need substantiation; if they don’t have it, we believe they are liable for injunctive and monetary relief. Generally, you don’t need to disclose sponsorship in traditional ad formats: people expect celebrities to be paid for that. But going outside that—Twitter, Facebook, late night TV—a disclosure needs to be made in those situations.

What kind of disclosure? We haven’t dictated anything in particular.

Affiliate marketing: hot buzzword. A number of investigations in this area. For legit marketers, questions arise where they have a link on a website where they get commissions for purchases made through the link—does the link need a disclosure? If they’ve disclosed in the endorsement that there’s a connection, then the link to purchase doesn’t need another one, but if there’s no disclosure, then the commission should be disclosed.

We’re most concerned when something doesn’t look like an ad but in fact is. The more it looks like an ad, the less of a need for additional disclosure.

These programs are set up as marketing tools for the advertisers, and as such we think the advertisers are accountable for the risks created. If you use this, you need adequate training for what people can or can’t say; you need a reasonable monitoring system in place, which you probably want to do anyway for trademark and other issues. If you’re selling an important healthcare product, we think that probably requires closer monitoring than if you’re selling handbags. Finally, if there are abuses, have you followed up on them?

On substantiation: the main thing we did was to wipe out the presumptions about typicality disclaimers, and it now depends on the net impression conveyed by the ad.

Rhonda Joy McLean, Deputy General Counsel, Time Inc.

Ann Taylor gives questions to ask your clients. Is it going to be one time only or ongoing? We are dealing with hundreds of thousands of bloggers all over the world; impossible to think we can really control them. But we need a policy for what they should know about what they should say to their readers. Often bloggers want a material connection even when there is none.

Bloggers who blog regularly, but not just about us—what is the nature of the communication that might be questionable? Is this just opinion/rants? What would a reasonable consumer think was happening here?

Only a small number of bloggers participated in the Ann Taylor showing. If you have a 50-city event, you need disclosures in every place plus you need an electronic trail that it was distributed to bloggers, on your website, on your message boards, anywhere you need it.

Regular monitoring. What do you do if you find nondisclosure? Our marketers often have relationships and can let bloggers know—don’t want to be slamming people in public. Her guideline: unavoidable disclosure—it shouldn’t be easy for someone to come to your site, participate in your event, or read your content without knowing what your expectation is for them. Transparency: clarity on the nature of the connection.

Example from Teen People: Proposal to send out a letter from EIC’s 16-year-old’s daughter. Isn’t that a problem? Would have to disclose who she is; the marketer thought this was surprising. Compromise: used the letter, beginning with “my mom is the EIC …” Disclosure doesn’t kill the promotion. Clear, clean, transparent: who does the consumer think is speaking to them?

She’s finding that bloggers are being very aggressive about soliciting business—they want points/sweepstakes for delivering site visitors/subscriptions. Make sure bloggers are making their disclosures visible—no brown text on black (an example she’d seen). Make disclosure easy: if bloggers say “I got this from the company; here’s how you can too!” or something like that.

Q: would it have been better to put the disclosure request in the Ann Taylor invitation?

Cleland: the invitation was problematic—wouldn’t be fixed with a magic sentence. If you suggest they can get a gift for blogging, you need to say they have to disclose. (I think he’s suggesting that you should make it a condition of getting entered into the gift drawing, which was something I was wondering about. Maybe LibraryThing should do the same as a condition of giving me credit for the review, or even hard-code in some signal (since they do track which books I got through the program) so that they wouldn’t have to rely on my disclosure.)

Q: section for blogging by American Idol contestants. An AI contestant blogs about the Ford he got from Ford on a Ford-sponsored website. Disclosure required?

Cleland: Depends on context, but would want disclosure.

Singer: what if the contestant blogs on her personal blog?

Cleland: Disclosure needs to be accomplished in some way! Think about use of individual Twitter feed. It doesn’t matter if most of the people know about the relationship; would a significant number of possible viewers be unaware? (Even if the biggest fans know the relationship, you can’t ignore the casual fans.)

McLean: We have shortened urls so that you can do sponsored tweets with more clarity. We are also thinking about disclaimers/disclosures on the wallpaper of our Twitter accounts, other measures. She worries about inviting people to tweet recipes to one magazine’s account; ordinarily they test recipes or warn people that they’re untested; never occurred to the folks at the magazine that there was any danger in posting unvetted content.

Cleland: we’re not looking to play gotcha, but don’t be the low-hanging fruit.