Friday, March 15, 2019

sales show format and timing are functional, court finds

VBS Distribution, Inc. v. Nutrivita Laboratories, Inc., No. SACV 16-01553-CJC(DFM), 2018 WL 5274172 (C.D. Cal. Sept. 10, 2018)

The parties compete in the market for nutritional supplements and television programs. VBS sued for Lanham Act and California state unfair competition law violations, as well as other claims including trade secret misappropriation.  None worked.

VBS alleged two unlawful schemes, the first involving false advertising of a dietary supplement. The supplement defendants made and sold “Arthro-7,” a dietary supplement for joint relief, with 60% of the market (perhaps among elderly people/people of Vietnamese descent). VBS sold a competing dietary supplement called JN-7 Best, with 10% of the market.  Defendants allegedly falsely advertised that Arthro-7 is “100% natural herbal,” that over 8 million bottles have been sold, and that Arthro-7 has been “clinically tested” and is “Doctor Recommended.”

“100% natural herbal” was allegedly false because the product contains animal products. The challenged ad contains the following phrase in Vietnamese: “100% tu duoc thao thien nhien.” VBS argued that this phrase translates to “100% natural herbal,” whereas defendants argued that the correct translation of “duoc thao” was “dietary supplement,” not “herbal.” There was a disputed issue of fact on the translation, but defendants still got summary judgment for lack of evidence of harm from this one ad. Instead, the only relevant evidence was that VBS suffered no lost profits between 2013 and 2014, when the advertisement ran in the newspaper, because its sales of JN-7 Best actually increased in that time period.

“Over 8 Million Bottles Sold!”  Defendants provided evidence that they had sold this many bottles from 1998-2017, so it wasn’t false.

The Arthro-7 package states that Arthro-7 is “clinically tested” and “Doctor Recommended,” and that “Positive results utilizing Arthro-7 have been supported by a UCLA researcher.” [See xkcd on “clinically tested.”] The packaging also has a picture of a man in a doctor’s coat, identified as “Dr. John E. Hahn, Board certified foot surgeon.” Plaintiffs argued that this was misleading because Dr. Hahn is a Doctor of Podiatric Medicine, and not a medical doctor.  But defendants submitted an article on the results of a 12-week clinical study in China; four of ten authors were from the Department of Pathology and Laboratory Medicine at UCLA’s medical school. This wasn’t misleading just because the studies took place in China; nothing on the package indicated otherwise. Nor was the use of a podiatrist whose license had expired as a “doctor” false—“Plaintiffs provide no admissible evidence showing that ‘doctor’ necessarily means one who is currently licensed or one who has a medical degree.”

The second general scheme involved the parties’ respective television shows. VBS Television is “primarily aimed at the Vietnamese community and is broadcast primarily in the Vietnamese language.” It produces a show named “DAU GIA TREN TRUYEN HINH” (“Fight Price on Television”), a live auction program which primarily auctions diamonds. In 2012, Defendant Tram Ho became a host of the show.  In 2016, VBS discovered that Ho was appearing on a rival television show called “Diamond at a Surprise Low Price.” The two shows allegedly have the same hostess, some of the same vendors, the same technician, the same time slot of 5:00 p.m. to 7:00 p.m., “the least to most expensive format,” “the same auctioning of approximately 30 items each show,” and the same product price range from $300 to $3,000.

Plaintiffs alleged trade dress infringement based on a trade dress comprised of:

a) the unique style and format of the show, b) its time slot and date selection, each week on alternate weekdays, from 5 to 7 p.m., on Tuesdays and Thursdays, c) the price range for its auctioned items, ranging from about $300 to $3000, d) its “least to most expensive” format in which the least expensive items are sold first, ascending to the most expensive items at the end of the show, e) the length of the show, 2 hours, f) its focus on live TV auctions of jewelry, particularly diamonds, g) its carefully selected vendors, who appear on the show with the show’s host, h) unique and proprietary camera angle and special lighting techniques developed by Plaintiffs using an Apple ipad tablet, i) the number and selection of items sold, usually about 30 items.

VBS failed to show that the claimed trade dress had nonfunctional features or a nonfunctional arrangement of those features. VBS’s own CEO and Chairman explained in his deposition that the lighting techniques and camera angles function to make the diamonds on the television show “sparkle” and appear brighter and that the lighting techniques are common in jewelry stores, “which demonstrates that the techniques are intrinsic to the sale of jewelry.” He testified that the show times and dates were chosen as times that would maximize viewership and auction purchases; that the show sells thirty products per episode because it is the optimal amount to sell during a two-hour long show; and that the products are priced between $300 to $3000 because the range is what the average target consumer can afford. Finally, he testified that the products are shown in the order of lowest to highest price to maximize sales, because more viewers tune in towards the end of the show. That’s all functional.

(Some other claims failed because Ho didn’t quit or breach her contract because of any outside interference—she left because the CEO/Chairman “grabbed [her] boobs, put his hands on [her] butt and then put his hands into [her] groin area.”)

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