Wednesday, May 16, 2018

But in that sleep what dreams of liability may come?

When you sue a competitor for false advertising, be prepared to get sued back.  In this pair of opinions, most of the parties’ claims against each other survived, paving the way for a messy trial.

GhostBed, Inc. v. Casper Sleep, Inc., 2018 WL 2213002, No. 15-cv-62571-WPD (S.D. Fla. May 3, 2018)

GhostBed and Nature’s Sleep (hereinafter GhostBed), owned by the same family, sued Casper, a competitor in the online mattress business, for various causes of action.  Nature’s Sleep alleged that it was among the first in the mattress business to deliver a “bed in a box” concept direct to consumers: a mattress vacuum-sealed in a box, which inflates when the packaging is open, though Casper did well after its launch in 2014.  In 2015, Nature’s Sleep launched a competing DTC company, GhostBed.

Casper argued that GhostBed copied many of its product features, website design, and marketing techniques, down to the name, GhostBed, “designed for customers to associate the ‘ghost’ name with Casper based on the popular cartoon character ‘Casper the Friendly Ghost.’” Casper thus sued for trademark infringement and false advertising under the Lanham Act, along with related state law claims.

GhostBed accused Casper of intentionally infringing Nature’s Sleep’s “BETTER SLEEP FOR BRIGHTER DAYS” and false advertising; in this opinion, the court granted Casper partial summary judgment on the false advertising claims.

GhostBed registered (with two ‘s’s). ICS, apparently a known cybersquatter, registered (one s). In 2015, Casper allegedly arranged for users who visited the one-s site to be redirected to Casper’s website. GhostBed argued that this constituted direct or contributory infringement and violated ACPA.  Casper argued that it didn’t register or use the domain name.  AdMarketplace, “a company hired as part of an advertising campaign by Casper, had some role in the redirection” to Casper’s site.  The ACPA claim only imposes liability for using a domain name if a person “is the domain name registrant or that registrant’s authorized licensee.” Multiple factual issues, also including damages, precluded summary judgment on these claims.

Likewise, alleged infringement of Nature’s Sleep’s unregistered mark, BETTER SLEEP FOR BRIGHTER DAYS, couldn’t be decided on summary judgment.  Whether Casper’s use of BETTER SLEEP in commerce preceded Nature’s Sleep’s use was disputed.

GhostBed also alleged that Casper engaged in false advertising by: (1) posting false and misleading comments about GhostBed on the internet; (2) coercing mattress reviewers into posting fake, favorable reviews of Casper mattresses on the internet; (3) utilizing search engine optimization techniques to increase visibility of favorable Casper content on the internet; and (4) entering into settlement agreement with three mattress reviewers that resulted in elimination of negative reviews of Casper content.

These claims failed because, first, GhostBed didn’t provide evidence that Casper posted false/misleading comments about GhostBed. GhostBed argued that Casper’s use of affiliate relationships with online reviewers was “part of a concerted effort to reward reviewers to post favorable reviews and ‘strong-arm’ reviewers into posting fake positive reviews of Casper’s mattresses.” However, GhostBed didn’t prove that this conduct involved false or misleading statements that deceived consumers.  Casper also purchased the Google Ad Word “Ghostbed” and directed that an ad saying “Why Buy a Copycat?” and “Surely you Meant Casper” would appear as a sponsored link in search results when users googled “GhostBed.” “Here, the Lanham Act claim fails because these are not false or misleading statements of fact. Instead, these are advertisements suggesting Casper’s opinion that GhostBed is a copycat and that the consumer should also investigate Casper’s mattress.”

GhostBed argued that Casper manipulated search results with negative SEO techniques that caused favorable Casper mattress reviews to appear higher in search results and unfavorable Casper reviews to appear lower.  But this “common marketing strategy” wasn’t an actionable false or misleading “statement.”  So too with entering into settlement agreements with online mattress reviewers to remove negative reviews of Casper mattresses.

Ghostbed, Inc. v. Casper Sleep, Inc., 2018 WL 2213008, No. 15-cv-62571-WPD (S.D. Fla. May 3, 2018)

Here, the court denies GhostBed’s motion for summary judgment on Casper’s claims for trademark infringement/false advertising.

Casper alleged that GhostBed used Casper’s name in social media posts, creating a likelihood of customer confusion and that a Google AdWords campaign stating “GhostBed vs. The Competition—Pick your Ghost Carefully” contributed to consumer confusion by associating Casper with “Casper the Friendly Ghost.” Use of the trademark “GhostBed” also allegedly caused consumer confusion with the trademark “Casper.” Given Casper’s numerous allegations of consumer confusion. GhostBed’s argument that the confusion is de minimis was a question for trial.

Whether GhostBed’s use of the phrase “SuperNATURAL Comfort” misled consumers into believing that Ghostbed mattresses are made from all-natural fibers, or just suggested a connection with the “ghost” in “GhostBed,” was a question of fact for the factfinder at trial.  So too with whether GhostBed’s claim of being in business for 15 years was true because it could legitimately attach its length in business to that of its related company, Nature’s Sleep. There were also factual issues about whether GhostBed falsely represented reviews as “Verified Purchaser[s]” on when GhostBed practically gave the product to the reviewer for free (at a 99% discount) in violation of the terms of use defining a “Verified Purchaser.”

In a slightly different scenario, GhostBed’s “GhostBed vs. Casper Mattress Review” stated that Casper didn’t offer a matching mattress foundation. This statement was initially true when made, in April 2016, and was updated at some point after GhostBed became aware that the statement was no longer true, but it was unclear whether GhostBed timely corrected the statement once it became false. “While Plaintiffs do not have an obligation to monitor a competitor’s offerings minute-to-minute to correct a comparison that may later become untrue, Plaintiffs do have an obligation not to make misleading statements in advertising. A fact finder could find that a substantial delay, if there was one, in correcting a statement that became untrue, was misleading.”  This is actually more defendant-favorable than other rulings on the subject, which do find falsity the moment the claim becomes false (although of course the amount of damages from a short-term falsity may be limited).

Finally, an image GhostBed’s website depicted the Google logo and falsely reported that GhostBed had a 4.99 rating (a non-existent rating). The creator stated that it was designed to poke fun at Casper’s purported 4.9 rating—“they have a 4.9 rating. I put ours at 4.99.” Misleadingness and damages were factual issues.

Other claims were only raised as state law (FDUTPA) claims. Casper targeted an article written by non-party Ryan Monahan of Honest Reviews, LLC, a purported affiliate of GhostBed: “Casper’s Newest Product Might Be at the Expense of Animal Cruelty.” The article could suggest that Casper sources its down feathers from suppliers who “live pluck” birds, but again this was a factual issue, as was whether GhostBed “used social media to harass Casper’s customers who posted comments about Casper’s mattresses online” in a way that was unfair or deceptive under FDUTPA.

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