Friday, December 07, 2012

Consumer surveys don't matter when the court is unconvinced

Scotts Co., LLC v. Pennington Seed, Inc., 2012 WL 6004140 (E.D. Va.)

The parties, who compete in the market for grass seed and plant food, each sought preliminary injunctive relief against the other’s ads, which were both denied.  Nationwide retailers typically sell both parties’ products side by side in garden departments.  The peak sales season for grass seed is brief, about 12 weeks in the spring.

Scotts began by alleging that Pennington’s ads that Pennington’s Smart Seed contained “twice the seed” of Scotts’ Turf Builder.  The court granted Pennington’s motion to dismiss because the claim at issue was covered under the terms of a confidential settlement agreement and the parties were subject to mandatory ADR before they could sue.  Pennington then sought a preliminary injunction against Scotts ads describing Pennington's 1 Step Complete combination grass seed products as “a bunch of ground-up paper” and making superiority claims for Scotts’ EZ Seed over Pennington's 1 Step Complete products.  After the required ADR, Scotts came back to court on the “twice the seed” claims, expanding that to cover Scotts’ EZ Seed and Pennington’s 1 Step Complete combination grass seed products.

On Scotts’ motion, the court gave the following facts: Pennington launched a “twice the seed” campaign on its bags, ads, and display trays, and said on its website that “more seed means more plants ... And more plants means a thicker, more beautiful lawn.”  Pennington’s Smart Seeds compete with Scotts’ coated Turf builder products; uncoated Turf Builder varieties are targeted towards different purchasers.  Scotts’ coating accounts for half the seed’s weight, so Pennington claimed “NO FILLER! TWICE THE SEED! COMPARED TO COATED SEED PRODUCTS” on the packaging and made other comparative claims directly naming Scotts, including a TV ad: “… we're proud to tell you the truth about our Pennington 1 Step. We put in twice as much seed compared to their EZ SEED, we use a better mulch, and, well, look at the difference. I guess we believe in getting to the root of the problem. Don't you? Pennington 1 Step. Honest Green.” 

The court found literal falsity “debatable.”  Pennington’s products don’t have twice the number of seeds as Scotts’ products.  But “twice the seed” was literally true on a weight basis, which Pennington argued was the industry standard.  Scotts, however, introduced a consumer survey showing that consumers thought the claim referred to number, not weight.  Without detailing the parties’ arguments about the survey, the court concluded that Scotts showed that it was slightly likely to prevail on the merits of this part of its claim.

But laches also factored in.  Scotts waited until Pennington’s promotional materials had been public for over a year, triggering a laches defense.  (I’m not sure how the court is counting.  Scotts was aware of the campaign since October 2011, but it sued (albeit too soon, given the ADR requirement) in early 2012.  Perhaps 2011 is a typo?  Also, usually courts use a presumption against laches when a claim is within the coordinate state limitations period, which this seems to be no matter what you think the coordinate state claim is. However, delay—not laches—can be a reason to deny preliminary relief even though it’s not a reason to deny permanent relief, so that may be really what the court is thinking of, though then it’s analyzing the issue at the wrong part of the inquiry/double-counting, as shown by what it says next.)  At a full trial, either party could easily prevail, so the likely success factor didn’t tip in Scotts’ favor.

Scotts also failed to show irreparable harm.  Scotts waited for more than 18 months before taking action, which showed a self-diagnosed lack of irreparable harm.  Plus, given the growing season, the need for urgency is gone; a full trial can be had before the claims could again become crucial.

Balancing the equities, the court also noted that the parties engaged in “tit-for-tat” litigation in which each one’s hands were “slightly soiled.” Though the public interest is against consumer confusion, Scotts’ showing wasn’t strong enough to tilt in its favor.

Pennington fared no better.  It complained about a TV ad (and similar radio spot) comparing Scotts’ EZ Seed to Pennington’s 1 Step Complete.  The ad called 1 Step Complete “a bunch of ground-up paper,” and said that “Scotts' EZ Seed uses the finest seed, fertilizer, and natural mulch that absorbs and holds water better than paper can.” An actor ‘changes his mind’ and uses EZ Seed instead.  A website ad, “You Be the Judge,” also made superiority claims, such as that EZ Seed retained more than four times as much water as 1 Step Complete and outperformed 1 Step Complete in a “torture test” comparing growth after certain periods.  Scotts allegedly used an outdated version of the Pennington product for its comparisons.  Scotts also ran in-store ads, “REVOLUTIONARY GROWING MATERIAL OUTPERFORMS PAPER MULCH,” repeating other claims from the internet ads.

The court found that Pennington failed to show likely success on the merits.  Though 1 Step Complete undisputedly consisted of a combination of mulch, grass seed, and fertilizer, it also was undisputed that the mulch included paper.  Scotts provided evidence of visible newsprint in both old and new formulations.  Pennington argued that Scotts’ ads unambiguously conveyed the message that 1 Step Complete was entirely paper, but no reasonable consumer seeking to purchase a grass seed product would understand it that way.  Pennington’s survey was no help in showing that consumers received the message that it was all paper.

As for the superiority claims, Scotts relied on testing by its research specialist, which Pennington attempted to discredit.  The court found that the testing reasonably supported its establishment claims and that Pennington hadn’t shown that the tests weren’t sufficiently reliable.  Though Pennington claimed to have abandoned the old formula, the court wasn’t persuaded that the old formula was no longer readily available to consumers or that the tests were unreliable with respect to the new formula.

With no likely success on the merits, the other factors didn’t favor Pennington either.

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