Lawsuit receives reviving jolt: energy shot claims dismissed too soon

Innovation Ventures, LLC v. Bhelliom Enterprises Corp., --- Fed. Appx. ----, 2013 WL 3306330 (6^th Cir.)

Innovation/LE claimed that Bhelliom infringed LE’s 5-hour ENERGY mark by selling 8-HR ENERGY products and falsely advertised their capabilities. The court of appeals reversed a grant of summary judgment in Bhelliom’s favor on the trademark claims based on the similar result in Innovation Ventures, LLC v. N.V.E.,  Inc., 694 F.3d 723 (6th Cir. 2012), and also partially reversed on the false advertising aspect.

LE sued NVE for selling 6 Hour POWER:

Bhelliom also entered the market with an energy pill, Mr. Energy® 8–HR Maximum Strength ENERGY, and later expanded the 8–HR ENERGY product line to include energy shots:

The same judge presided over LE’s suits against NVE and Bhelliom, granting summary judgment to both.  Finding that LE’s mark was suggestive and that several infringement factors favored each side, the court of appeals determined that summary judgment was inappropriate because the products and sales channels were the same (though the analysis would differ for the energy pills) and consumers wouldn’t be making sophisticated decisions.  With “evenly balanced factors”—the strength of LE’s mark, the similarity of the marks, the lack of evidence of actual confusion, and the defendant’s intent didn’t favor a finding of confusion—summary judgment should’ve been denied; the court said that the absence of actual confusion and bad intent generally neither favors nor weighs against a confusion finding.  (In other words, on those factors: Heads I win, tails you lose.)

Comment: So, each piece of this is certainly prefigured in existing case law.  But to me it suggests the deep rot that has taken hold of the multifactor confusion test.  Read literally, the court is saying that, even with a weak mark and dissimilarity of marks, a competitor in a mass market should get to go to a jury because, after all, competition means that the similarity of goods and marketing channels favor a finding of infringement, and those two factors have to be balanced against the mark strength and similarity of marks factors.  This is the worst kind of mindless counting, and worsened here because the court finds that, because trial was required against a different competitor making a different product, it follows that summary judgment was also inappropriate against Bhelliom.  It is worth nothing that, except for putting a picture of the defendant’s product in the opinion (which is definitely a good thing!), the court of appeals offered no analysis at all of the similarity of these marks: “Considering the similarity of the products, the record evidence, and the district court's rationale, one would expect that our judgment in NVE should control here.” 

LE overreached in seeking a grant of summary judgment on appeal, though.  It failed to distinguish the energy shots from the pills, and its arguments on mark strength and similarity of marks didn’t take the case out of the realm of close calls that could go either way.  “Though we typically resolve trademark claims as a matter of law, we recognize that certain cases present factual disputes or such evenly balanced factors that the matter is properly resolved by the finder of fact.”

LE’s false advertising claim was based on Bhelliom’s claims (1) that the products use a time-released formula, consistent with a Harvard University study that revealed higher sustained energy levels from the consumption of low doses of energy-boosting substances throughout the day; and (2) that the products provide eight hours of energy.

The district court granted summary judgment to Bhelliom because LE failed to show harm.  LE argued that willful misrepresentations warranted a presumption of damages, and that injunctive relief doesn’t require damages.  The court agreed with the second point and remanded.

It’s true that Lanham Act damages are presumed in cases of willfully deceptive comparative advertising where the plaintiff’s product is specifically targeted.  On willfulness, LE offered the testimony of an employee at the company that manufactured Bhelliom’s products that Bhelliom knew that the products lacked a time-released formula, which was “colorable evidence” of knowing misstatements.  It didn’t offer evidence of willfulness on another ad depicting the comparative effectiveness of Bhelliom's products vis-à-vis other energy shots, so the court only analyzed the time-release ads.

Willfulness alone doesn’t warrant a presumption of damages, absent targeting of the plaintiff. The Lanham Act requires damages as compensation and not as a penalty.  As McCarthy writes, it may be appropriate to grant an injunction “even where the likelihood of provable impact on the plaintiff may be subtle and slight,” because that protects both competitors and the public, but not to grant damages that would be a windfall to the plaintiff. 

Here, there wasn’t targeting: at best, one of the time-released formula statements acknowledged LE’s 5-hour ENERGY as a competitor, but it didn’t misrepresent their formulas or effectiveness.  “Rather, the press-release states that the competitors proclaim energy boosts that match their products' respective five- and six-hour names and calls the competitors ‘successful.’ Indeed, the press release offers only one direct point of comparison between ‘8–HR ENERGY’ and the competition: whereas ‘the taste of the drink and the inconvenience of the packaging make [energy shots] a less than ideal choice for many individuals,’ Bhelliom's ‘easy-to-swallow capsule avoids the harsh taste of energy drinks.’”  Those generic statements were mere puffery.  “Thus, at bottom, LE objects to the fact that Bhelliom oversold its own product, not that Bhelliom misrepresented or caused confusion regarding LE's product.” Presumed damages were therefore inappropriate.

Claims for injunctive relief, however, need not meet such a high standard.  “[D]istinct evidence of harm” isn’t a prerequisite.  If statements have a tendency to deceive consumers, injunctive relief is appropriate.  LE argued that the time-release claims were literally false, creating a tendency to deceive as a matter of law; Bhelliom conceded the falsity of the claims, but they only concerned the pills.  Though Bhelliom argued that the ads had been discontinued, the court of appeals remanded for appropriate injunctive relief.  However, the court couldn’t presume deception with regard to the 8-hour-energy claims, whose falsity was in genuine dispute and for which LE didn’t present evidence of actual consumer deception.  This was also remanded.