Friday, July 31, 2020

IPSC, Trademark

IPSC – Trademark Law I

Moderator: Mark McKenna 

Trademark Depletion in a Global, Multilingual Economy: Evidence from the European Union (abstract)

Jeanne Fromer and Barton Beebe, NYU School of Law 

Notes on the EU system: runs in parallel with national systems. Must be protectable in all EU nations (in theory); if generic in one nation, unregistrable via EU. Also, EU does not review applications for relative grounds for refusal (confusion). They generally remove diacritical marks for purposes of generating similarity reports. Translational similarity matters: same meaning in different language could bar registration. Not use-based as US is. 5 year grace period. Germany is biggest user of EU system, followed by US. Over 60% of applications contain English words—it’s the dominant language commercially. 

Datasets: EUIPO applications, registrations; gathered opposition data. Compared to corpora in English, French, German, Italian, and Spanish, and translated words into those languages as well as looking for positive/negative meanings. 

Results: nearly all good terms carrying positive affect are already registered. 1000 most frequently used words are 65% registered as single-word marks, covering 69.4% of all word usage, and of the most 20,000 frequently used words, 77.3% of all word usage is a word registered as a single-word marks. Of the unclaimed marks, they’re not great: worst, problem, than, thank, their, said, problems, worse, worry, etc. Some classes like apparel are very crowded; if you look at similarity (small edit distance) then it gets close to 90% coverage. Character, word, and number of word lengths are increasing in applications, suggesting increasing resort to longer/less “shorthandy” marks that may function less well as marks. Trends got really bad about 10 years ago. In other languages: About 95% of French usage is currently claimed. Very high proportions of multi-language words are registered: of the top 1000 English words, 55 are highly intelligible in the other languages, and 54 are registered (not REPUBLICAN). 

Opposition rates are declining, not increasing! 2017: 1 in 10. But those who bother to oppose increasingly win. 70% based on confusing similarity resulted in a refusal either in whole or in part in 2017. 

EUIPO system is very different from US: allowing enormous TM crowding, where lots of similar marks are registered at the same time. Registration rate initially declines w/# of entities opposing the application. Where no opposition, 92% registration. When # of opposers increases to 8 or more, though, the rate increases again: the EUIPO just says: everyone gets a registration; the field is already so crowded that there’s no problem. 

Compare to US: “all or nothing” rule may make it harder to find marks. Is it a good system to have third parties doing the opposing/have no examination on relative grounds? Businesses are arguably in the best position to know what is detrimental. But also businesses might need a sense of what’s potentially confusing, and EUIPO may not give it. Search reports of EUIPO to ping third party businesses are really thin. CREMOLAIT triggered nothing—they appear to identically match whole words in the registration. 

Jeremy Sheff: Disclaimer practice? Does that happen at all where common word is disclaimed?  

Fromer: in the US, disclaimers are everything: if you disclaim, you get your registration. Not clear what’s going on in EUIPO.

Irene Calboli: Applicants (except for largest) are usually just looking at 2-3 countries. With enforcement still country by country, similar rights in other nations aren’t much of a problem. Difficult to factor that in looking just at EUIPO. Licensing/coexistence agreements may also be in place. 

Lisa Ramsey: if European companies aren’t worrying about crowding, should we? Maybe rights should just be very narrow. Companies may think that they can distinguish themselves with packaging etc. 

Beebe: tests our basic assumptions about TM law. Crowding may not cause much consumer confusion; we will probably argue that European example shows that narrow rights are generally fine; businesses aren’t very worried about that when they have to express their preferences by paying. 

Fromer: want to be sure we’re covering large businesses v. small businesses with less sophistication that may not know what’s actually available. Multinationals in the US seem worried about TM depletion as a problem, but not in the EU; legal differences or differences on the ground may matter. 

Endorsing After Death, Andrew Gilden, Willamette University College of Law

Exclusive rights to control post-death endorsements given to families/heirs. While “it’s hard to argue wit h a straight face that a dead person is endorsing a product,” we see Elvis face coverings, Marilyn Monroe perfume, Muhammad Ali quotes selling Gatorade. Ordinarily an individual endorsement involves voluntary association/approval; post-death endorsements don’t fit that model, but TM increasingly supports the idea of posthumous endorsement. Project identifies this trend and identifies serious problems. Proposes narrower framework to better represent interests of decedents, fans, and survivors. 

False endorsement claims: estate/heirs claim that something will cause confusion about whether the decedent or the estate endorsed the product. Registered “selfmarks.” Lanham Act 2(a): false association: ability to block other registrations, gives estate leg up in establishing priority. Verified accounts on Instagram: can get a check mark as authentic presence of a global brand represented by a public figure. Allows estates to post and speak as if they are the decedent. Project brackets the right of publicity, which raises different concerns. 

First major concern: continuity problems. Fails to meaningfully distinguish b/t decedent and successor in interest: courts require plaintiffs to demonstrate confusion over endorsement from decedent or estate. But estate can be practically anyone: estate of Marilyn Monroe is an entity Authentic Brands Group that bought the rights to the Monroe IP from the wife of her acting coach. Endorsement by Monroe means something v. different from endorsement by ABG but courts have refused to distinguish those things. 

Second: autonomy/agency of the deceased. Endorsement signals some desired connection b/t endorser and endorsed. Conscripting the deceased into activities they may not have supported. Marilyn Monroe, Elvis, and Muhammad Ali all “participated” in #blackoutuesday, but did that reflect their views? 

Third: discursive problems: controlling cultural meanings of the celebrity. Official account frames her as “Paris Hilton” of her day, downplaying other issues around addiction and femininity; so too w/Whitney Houston. Pernicious b/c posthumous endorsement gives “official voice” to the estate. 

Might still want to recognize some rights b/c they are material to consumers. Purchasing endorsed products can be a way of mourning/processing a celebrity’s death; may also want to support surviving family members/causes the celebrity cared about. Posthumous endorsements can also push back against exploitation—merchandise sold w/names & images of George Floyd and other victims of police violence. Misrepresentations of official endorsement can be bad. This can also happen politically—Reagan Foundation sent a C&D to the Trump campaign for selling Reagan/Trump merchandise. 

What to do? Proposal: recognize endorsement rights not just on the chain of title (as courts currently do) but require privity and power: a meaningful connection b/t rightsholder & decedent. Should be empowered to make legal decisions on behalf of the decedent—personal representative, trustee—w/corresponding duty to their interests. Consistent with HIPAA, Stored Communications Act, attorney-client privilege. 

Finally, where there’s no entity w/legal authority to act on behalf of the decedent but a risk of deception, false advertising law can pick up the slack. 

Ramsey: Monroe used a different perfume than the one proposed to endorse—should that matter? Literature on compelled speech. 

RT: different perfume example suggests that privity/power is quite complex: (1) naked licensing/assignment in gross issue: what would it even mean for “Monroe” to endorse a perfume; (2) conflating materiality of decedent’s endorsement while alive w/estate’s endorsement—courts make it way too easy by allowing conflation; (3) compelled speech arguments in this context make me nervous b/c they are usually deployed against people who have speech interests of their own. 

A: family endorsements can sometimes be material but in a different way—need analysis. [And of course “family” is not the same thing as “estate.”] Would like law to disaggregate these situations. 

Mark McKenna: really stuck on the label “endorsement” for a dead person. Consumers can’t possibly think that’s happened if they know the person is dead. Many of these examples are more about association or dilution than confusion—this person stood for X and is being used for Y. Where the heir is standing in for the person, there’s an extreme level of circularity—only if heirs have the right to license do consumers think it’s the heirs doing the endorsing. 

Jeremy Sheff: unpleasant flashbacks to NY ROP debate. Once you start dealing w/postmortem rights, you get into complex issues of trust & estates & tax law, which your privity requirement brings to the front. The idea of this being an asset passed from one generation to the next is something those bodies of law have things to say about—taxing on its distribution depends on its worth, which depends on its use before death, which might be different from use after death. Or you could do an objective valuation which would be potentially inconsistent w/decedent’s own desires and/or desires of family. How will you engage w/ those bodies of law—Eva Subotnik has been doing related work in © context. 

A: definitely a goal is to bring TM into dialogue with T&E. Even weirder than ROP and © b/c it’s unclear what needs to be assigned to bring endorsement rights. Nebraska courts say ROP is inalienable so there’s no transferable endorsement right; NY courts said that even though there was no post-ROP there’s still an endorsement right. 

Calboli: compare theories on moral rights postmortem. 

Trademarking “Covid,” “Covid-19” and “Coronavirus”: An Empirical Review and Considerations of a Larger Pandemic, Irene Calboli, Texas A&M University School of Law

Also looking at “social distancing” and “six feet apart”—using these as a measure/example of certain issues in the system. More than 600 applications for these in less than 3 months. Looking at a sample: Medical-related (124), unrelated existing businesses like baby clothes (64), merchandising products/promotional goods (135), slurs (also merchandising, 7).  A considerable number disclaim “COVID” etc. and are combination or design marks. Some could in theory be inherently distinctive given the unrelatedness of the goods. Although she’s ok with the merchandising right for established businesses like Mercedes cars, here there are a bunch of clear examples of failure to function. 

Is there a problem? What are the costs for the PTO given that vast majority will be rejected? Time invested by examiners, including possible office actions/appeals. Costs minus fees generated: hard to determine. 

Cost to possible legitimate business from being cut off from using descriptive terms? Costs from possible litigation—C&Ds?  There’s a backlog in the system—too many applications? A lot of waste to sift through. 

RT: Carol Rose talks about how a property system is in some ways a commons of its own; overuse can impose unexpected costs/externalize harms. Here, one possible immediate result is elevating failure to function as a free floating reason to reject registrations (or even recognition as marks). As with slurs, even when the result might be inherently distinctive according to our usual tools for identifying what is functioning as a mark, the non TM meaning overwhelms the usual signals of what constitutes a mark such as placement on the product. (This breakdown in old standards for what counts as a TM is also happening on the other end of the Abercrombie spectrum with telling us that consumer perception is all.) I don’t think that Corona Legal Services is going to work as a mark! The corrosive effect of overclaiming on our usual tools for identifying trademark function is itself a problem, and it also raises the question of what comes next to identify TM function. Crystals & Mud in Property Law offers some ways of thinking about how property systems might react to overuse. 

Ramsey: do other national systems have a similar problem?

Beebe: costs on the system are a real question. PTO examiners might like these b/c they’re so easy to reject—helps their numbers! Saw it as a revenue making thing, but there aren’t that many of these; still, on balance assumed that PTO was making money off of these. Finally, people can waste their money if they want to apply for registrations that won’t succeed—not sure what we could do to stem the flow of these (given right to petition!). 

Alexandra Roberts: consider whether these are deceptive marks too—grabbing attention at a desperate time is not good. Consumer health & safety are also relevant. 

Headaches and Handbags: A Fragility Theory of Trademark Functionality, Matthew Sipe, University of Baltimore School of Law 

Placebo effect is powerful & often mediated by TM. Subjects who took marked Nurofen experienced much more relief than unmarked; subjects who took Nurofen-branded sugar pills even did better than people who took unbranded actual Nurofen. Pink is associated with soothing/care in Western cultures, so pink Pepto-Bismol will work better than red or green. Traffix says that a product feature is functional if it’s essential to use/purpose or if it effects the cost/quality. If so, no need to proceed further. TM names of drugs clearly affect quality, as do the color of drugs. We do have cases finding color functional on these grounds, but not the names. 

Traffix language can’t mean what it says, b/c any TM affects costs by reducing search costs and any TM affects quality by increasing the incentives to preserve quality. So lower courts have added de jure/de facto, aesthetic/utilitarian distinctions. But TM has fumbled towards a consensus on functionality. 

Three themes: (1) preference for bright line heuristics; (2) intentional focus on welfare maximization; (3) conceptual unity b/t marks and dress. 

But Nike golf clubs improve consumer performance versus unbranded or irrelevant branded clubs; 3M branded earplugs improve performance on a math test in a noisy space; Red Bull improves performance on cognitive tests v. Sprite. 

There is also social functionality: conspicuous consumption, conspicuous giving. Organizational functionality: a certification mark allows product manufacturers to avoid costs in warranties, demos, etc. Credibly certifying place of origin allows producers to compel buy in for advertising, research, etc. that would be dissipated by free riding.  And design functionality: granting protection to one shape allows producer to introduce variation w/o losing recognizability and brand prominence: Zippo lighter shape and Funko pop general configuration. Also allows them to avoid tags or other marks. Interlocking functionality: makes other products from the same producers higher quality b/c of match/fit: Lego shapes, or Tiffany blue earrings as only match for Tiffany necklace, or John Deere green accessories being only match for John Deere tractor. 

All these functions are fragile: the use/purpose would be destroyed through unchecked copying. Only nonfragile functionality truly prevents TM eligibility in practice. Pepto pink still soothes even if other producers use pink. But the word mark Pepto-Bismol only works if exclusive and would eventually dissipate if freely used. His proposal: any use, purpose or effect dependent on TM exclusivity itself doesn’t count. But any time there’s a mix of exclusivity-dependent and non-dependent functionality, secondary meaning (fragile functionality) won’t save the matter from ineligibility.  Allows us to dispense with aesthetic functionality b/c test no longer needs it. 

Application: overlapping TM & © protection. Fragility model: overlapping protection shouldn’t be allowed in vast majority of cases. Traffix tells us patented subject matter is only nonfunctional when it’s an arbitrary embellishment. If it’s being used for its innovation, that affects cost/quality. So too w/©. Unless © subject matter is being used for reasons unrelated to creative expression, will affect product in impermissible ways. Of course a Batman backpack is being used for its creativity. Dastar thus follows. 

By contrast, dilution and post-sale confusion: to prevent unwinding of signal, have to protect exclusivity. 

Protecting fragility is welfare-enhancing. Benefits that can be shared are, benefits that can’t be shared aren’t. Leaves space/incentives for branding. But there are distributionally regressive outcomes: healthcare, athletic/academic performance. Inferior products to those who can’t afford them. Potentially anticompetitive. 

Barton Beebe: Metaphysically convoluted. Is SCt approach as expressed in reputation-related functionality v. non reputation related functionality already what you’re getting at? Samara Bros. does seem to get at the distinction you’re making. How is fragility different? 

Different dichotomy: exclusivity related functionality versus non exclusivity related functionality? Not just the high fashion brands that advertise into our heads; all consumer goods participate in economy of exclusivity to some extent, including K-Mart. TM law just talks about the high end brands as a matter of class. Other things to consider: (1) Easterbrook’s approach to functionality: a design that produces a benefit other than source identification is functional. Bright line! (2) Consider definition of useful article in © and recent struggles with that. Similar vibe. 

A: For “non-reputation-related”: two problems. (1) They tell us we don’t ever hit that test if you trigger Inwood first. You can dance around this a little w/a gloss on whether this is a two-step test. (2) It doesn’t deal with all these functionalities. The word “significant” is precisely what starts to look like an antitrust rule of reason. 

Fromer: lots of literature about functionality, including Lunney, Litman, McKenna; grapple explicitly how what you say differs from or works with what they say. 

RT: From the paper: “All trademarks affect cost and quality. Full stop. Trademarks reduce search costs for consumers by providing a “consistent signal,”

--assumes the existence of secondary meaning; b/c search costs aren’t reduced w/o that, this description assumes a de facto functionality that may not exist in mere TM function

--framing elides one of the hardest Qs in functionality: it is good to have a mark, or to have a shape, but does that mean that every mark or every shape is functional? No! That’s just de facto functionality.  (Can see that most clearly in the possible response to my first point: even having an unknown TM signals that “this isn’t the TM you know,” thus reducing search costs in some sense, but of course the actual content of the TM is completely irrelevant to that message. The relevant information is that the product/service is “not-known.”) Some of the paper reads like semantic games: you’ve labeled the credence benefits of trademarks as functional, but I think it doesn’t work without a better account of the level of generality at which you are analyzing functionality. 

I wish I thought this reformulation worked, but because of the level of generality issue I don’t think it does any better than current doctrine. Consider the Apple logo or the design of a Rolex watch: they are beautiful designs; certainly under your view of what constitutes an effect on quality they at least marginally increase the quality of the products simply because of their beauty: even on first exposure with no secondary meaning, they are nice designs. I don’t see how your test helps us with the issue that has confounded every attempt to reformulate functionality doctrine: When does that marginal effect, which rests on generalized features of human perception like our preference for curves, override the effect of the specific trademark meaning?  This is why some courts ask for a substantial non reputation related benefit in the aesthetic functionality test. 

Defense of dilution lacks engagement w/empirical literature where that doesn’t actually seem to happen: maybe the things you say are fragile aren’t actually fragile. 

[[Things I didn’t have time to say: Your argument depends in part on the placebo effect being fragile. [Similar to what McKenna is about to say.] Why not hypothesize that the effect an effect of familiarity and allowing the brand name to become generic would continue that familiarity, as with Pepto pink? My take: Especially likely to persist w/pharmaceuticals b/c those are credence goods; I understand why spitting out the generic Diet Coke in disgust would make me distrust labels on experience goods, but the placebo effect works best on credence goods. Might even work for Nike clubs! 

You try to deal with the placebo effect by looking at the research on counterfeits labeled as counterfeits. But telling the consumer they’re using a counterfeit is different than just putting the label Nurofen on it and saying no more—among other things, the effect of telling someone they’re using counterfeits might well be related to a generalized surprise or distrust—see Sprigman et al on dilution: you might also find that performance using a Bic pen also goes down after experience with a labeled-counterfeit Parker pen b/c consumers are just more suspicious generally. Also, as far as I recall the research isn’t conducted on the set of consumers who prefer to buy (fashion) counterfeits—hard to test, but someone who chose counterfeits because they’re cheaper might have a different reaction. 

Similar Q: if we could empirically show, say by looking at China, that widespread counterfeiting and copying does not diminish the perceived value of brands in certain categories, which is to say that exclusivity remained somehow perhaps through subtler quality signals, would your argument have to change? 

[Again echoing what McKenna says] The charitable signalling & certification mark bits seem to be about false advertising: if the law enforced a rule that everyone using the Toms mark donated a pair of shoes to people in need, the relevant signal would continue; it would just be converted to a certification mark, which is related to the reason that certification marks theoretically need nondiscrimination provisions.]]

Jeremy Sheff: does fragility differ from the economic concepts of congestion or rivalrousness, and if so how? 

Jessica Litman: why fragility and what are the other possible terms? The term is an uncomfortable fit for the phenomenon you’re describing. 

Mike Risch: Doesn’t read cost/quality the same way the paper does. Thinks it’s mostly about cost of manufacture, quality of physical product outside of placebo: if made in the way it’s supposed to be made, how does it work. There is definitely uncertainty, but cost/quality isn’t anything that might affect how good consumers think it is or how much they’re willing to pay for it, or you swallow all TM. 

McKenna: you have to assume quality differences for Nurofen to stop working if freed for all to use. We could make sure that everything labeled Nurofen had the same pharmacological characteristics. It’s really the quality differences that derive dissipation, not mere reproduction [at least for those things that aren’t dependent on excluding the proles].  Separately, it’s at least implicit that it has to affect cost/quality in a way unrelated to reputation. The function has to be distinct from reputation, but can exist along with reputation. Courts just struggle when people want the product for non-source reasons but also want it for source reasons. 

Overlapping and Sequential IP Rights, Lolita Darden, Suffolk University Law School

Patent/TM and ©/TM interface: functionality takes us a long way toward weeding out those designs that might create perpetual monopoly. Trying to expand functionality to be more comprehensive to protect those other systems. Distinguish types of protection available for trademark/trade dress. Using a piece of music whose © has expired as a TM. There may be a narrow opportunity for these things to serve as TMs. Right to copy v. need to copy can be distinguished; functionality test proposed is built on concept of need. 

RT: Paper coming at the end made me think that something unites all these presentations: an increased interest in bright line rules and formalism: most of the presentations seem to be coming if not from classic formalism then from rule utilitarianism—the case by case analysis we have been doing in a lot of these situations has become so costly as to lead us to seek alternatives. For this project: what is the product or service at issue? For the airline example, does it include the advertising (theme music for the airline)? If we confidently say no, then drawing the distinction between protectable and unprotectable uses of music becomes easier—but why then is the Batman backpack not a member of the class of backpacks and Batman just part of its marketing? 

A: paper does discuss Wonder Woman merchandise—may be a hard call. 

Calboli: overlaps of protection also raise issues of overlaps of fair use/defenses. One possibility: redesign the system from scratch and create a “brand right” that would just tell you what you could do.

Sheff: we’ve all gone crosseyed over this problem at one point—previous framing was often one of boundaries. Problem in functionality is that sometimes consumers want things for both reputation and non-reputation related reasons. Ultimately we have to make a choice about what we value more, not necessarily as a matter of grand theory but could be tied to particular cases like the Wonder Woman lunchbox, its markets, and its consumers.

Wednesday, July 29, 2020

The McCarthy Series: U.S.P.T.O. v. What the Recent SCOTUS Ruling Means for Trademark Law

My notes are messed up because I had technical difficulties! But the McCarthy Institute will apparently publish video on its YouTube channel.

David Bernstein, Debevoise & Plimpton: intro to case/overview. 

Hal Poret: Used a Teflon survey to educate consumers about difference between brand & common name, including .com terms to show they could be either ( = brand name; = generic term). Also used to account for bias towards considering .coms to be brand names.  Pattern of responses for and clear that & produced essentially opposite results—heavily in favor of brand, and heavily in favor of common name respectively.’s results not just from bias in favor of considering a .com to be a brand. Dissent/PTO misunderstands significance of control: substantial noise doesn’t reflect a problem w/a survey but w/a real world bias that the survey needed to grapple with.  Even if you remove the people who misclassified, those who didn’t thought classified it as a brand by a 2:1 margin. 

So this is perhaps reflecting [de facto] secondary meaning and not lack of genericness. What are possibilities for accounting for this? Could do additional education in the survey training. Could include a .com in the mini-test respondents must pass. Could make the entire survey about .com terms, so all the educational section and examples would be about .com. Another possibility: change answer choices to instead of asking about brand/common, could focus on distinguishing b/t descriptiveness and genericness, which can be done. Could also look for secondary meaning to look for respondents who are responding to previous knowledge of the website versus those who weren’t previously familiar of the term—to weed out influence of actual secondary meaning. Could also ask those who were aware of the site questions to distinguish between whether they thought it was descriptive or generic: is the primary meaning a description of the products/services or is the primary meaning a type of product/service. 

RT: Brief note: the Poret report relied on the 74.8% total “brand name” response for as the relevant number rather than treating the net 44.8% as the key when the 30% who responded “brand name” for are taken into account as a control. This matters if (but only if) one holds the opinion that a threshold over 50% in the relevant consumer group is the correct threshold for showing that the primary meaning of a term is as a trademark. But realistically, measuring brand awareness is going to be hard in a Teflon survey, which is primarily directed at a different question. 

Given that the majority explicitly says that it’s not reaching the survey criticisms because of the PTO’s concessions, I think Mr. Poret’s suggestions for future surveys are useful. A few specific comments: asking if people have heard of suggests looking for secondary meaning; the interpretive question will be what to make of people who say, as 1/3 seem to have done with, “I’ve never heard of this particular but forced to choose between generic/brand/not sure, I’ll go with brand.” If domain names are not inherently distinctive by virtue of being domain names, it may be necessary to offer a fourth option to make a Teflon survey work, something like “neither a brand name nor a generic word.” Really interesting to see if people could be trained on the Abercrombie spectrum!

Caveat: classifications are legal matters and surveying on them may be a bad idea. Very few trademark lawyers can predict the suggestive/distinctive line in a given dispute by looking at prior cases. If we can’t get useful answers from five minutes of training an ordinary consumer, we will have to look elsewhere. 

Another possibility: use Likert scales where people give answers and then rate their degree of certainty—using Likert scales can reveal a lot about where respondents are basically guessing. Some empirical work by Sprigman et al on this forthcoming.

The larger problem is the still uncertain issue of de facto secondary meaning: if the SCt opinion means that there is no remaining doctrine of de facto secondary meaning, then the survey as conducted in Booking is fine. If there is still such a doctrine, then the survey shows that it may not be possible to ask consumers questions they can reasonably be expected to answer. Respondents were (a) trained on the brand/generic distinction, (b) classified screening examples correctly in order to have their responses counted, and (c) uniformly got “supermarket” correct and 398 out of 400 got “sporting goods” correct—if 30% of those people, who clearly understood the task, still considered to be a brand name, when everyone agrees that it lacks trademark function, then this type of survey may simply not work for the relevant question. 

To put it another way, post-decision, a Teflon survey will likely always produce the result “not generic” for a But “not generic” is not necessarily the same thing as “a trademark,” and especially given the PTO’s increased and welcome attention to trademark function, we may see much more attention to whether that has been shown. Bold applicants may even argue that the Court majority at least implicitly endorsed the district court’s reasoning that domain names are usually inherently distinctive b/c everyone understands that they are exclusive—but trademark function is a requirement even for matter that could in theory be inherently distinctive, so we might see more attention to that point.  

Bernstein: footnote 6 says other evidence might be better than surveys. Voice of the consumer evidence.

Peter Golder, Prof. Marketing, Dartmouth: Hearing the Voice of Consumer through Archival Evidence. Archival evidence can avoid certain biases. Consumer perceptions can change over time: Howard Johnson’s was once the most well known fast food chain, and quotes you think are about McDonald’s were about it. Here: look at consumer perceptions from tweets, referring to as one among several members of a class like Travelocity.  Can also look at prevalence of consumer serach. Can look at historical “name of class”—what did competitor call itself? Example: Portable electronic camera was one early name; took a while to converge on “digital camera.” Carefully designed studies can be scientifically valid and persuasive in litigation. 

RT: Relevant, but normative issues remain about interpreting things like usage versus comprehension and whether de facto secondary meaning is a thing. Test suite: determine what would this methodology have done for some of the key cases already decided, “hog” for motorcycles, shredded wheat, etc. I don’t think that if there’s a divergence b/t the results and the case law it’s fatal, because it might be that the courts were wrong, but I do think it’s important to see what kind of results you’d have gotten in such cases to see what the match is. More overarchingly: still have the normative issue: is there such a thing as de facto secondary meaning? If not—if de facto secondary meaning is de jure secondary meaning—then this methodology is perfectly good in itself to answer the relevant questions. 

Q: competition issues?

Issues still to come: if might be inherently distinctive, what about Is that confusingly similar and how will we know? Consistent with past Supreme Court decisions, questions about the scope of the mark have all been deferred to the infringement inquiry: Freecycle example of how this can allow overclaiming against people who are using only the generic portion. The majority says that this risk attends any descriptive mark, but not all descriptive terms are comprised of generic components: while one need not use “soft” to sell one’s mattresses, one generally must use mattress to do so. Open question: will courts use plausibility to put an early end to such cases? 

Related issue: prosecution history estoppel, well known in patent but unknown in TM until recently: Booking will likely increase both the PTO and the courts’ interest in the concept. Two important examples pre-Booking: First, Bottega Veneta’s application to register a specific width and angle of basket weave for shoes and bags, which the PTO granted but with an explicit statement that the registered rights did not extend past the width and angle of straps specifieds in the registration; second, the Lettuce Turnip the Beet case in which a court said that where the PTO found that a phrase failed to function as a mark when used to decorate a T shirt but did function as a mark on a tag, the court would not find liability for the defendant’s decorative use. 

If other registrants say something like what booking did—that it wasn’t going to assert its rights against variations—courts and the PTO may see a competitive need to enforce those concessions. 

Golder: use of hasn’t been key component of competitive advantage—market leaders don’t have the generic term in their names in key industries. [As Christine Farley pointed out in comments, that was against a different background legal regime. Given the installed base, the real question is what happens in new industries or new forms of advertising. It's not surprising that freecycle, a newly invented generic, is one place that problems have developed.]

Bernstein: is looking to prevent confusing uses. a brick & mortar dealer used a sign and was unaffiliated. Similarly w/UDRP rights. But there will be recognized limits on the breadth b/c the TM is still composed of highly descriptive if not generic components. Booking is a generic term for booking things and .com is a generic tld. So the ability to prevent other uses will depend on the totality of the facts: there’s a lot of mechanisms to prevent against overenforcement: likely confusion; descriptive fair use. 

Q: can this opinion can be cabined as holding only that a domain name isn’t necessarily generic? 

RT: yes; the opinion doesn’t preclude the idea that .coms are inherently distinctive because unique, but nor does it embrace it. Depends on the cases that people bring whether the doctrine develops in a way that protects users of generic terms from having to go through full trials/at least develop a full summary judgment record for. Descriptive fair use won’t be any help b/c using a term in the domain name will at least create a fact issue on “use as a mark.” 

Bernstein: if you have a registration, UDRP panelists will usually defer to it and find confusing similarity. If you don’t have a registration, you really need to show acquired distinctiveness. UDRP doesn’t have access to discovery tools—would probably have to be pretty overwhelming to persuade a panelist that the domain name is serving as a mark. was already registered in many countries around the world; brings US into conformity; key takeaway goes beyond domain names, to hashtags, addresses, combinations of marks, etc. Issue is not whether the term is composed of terms that are generic but what is the perception of the term as a whole.

Q: had so much secondary meaning—isn’t it difficult for a survey to separate out that from what people think of the term in the abstract? Wouldn’t the survey have had to be done years before to separate that out? 

Poret: it’s a recurring problem that often shows up. You can’t go back in time and measure it back then. May be able to help people to distinguish between describing characteristics and identifying a class. 

Golder: archival analysis can be a complement to these methods. Can estimate the life of a brand even before it dies. Can find how terms were being used in archived materials. Federal Circuit in Converse case raised issue of historical secondary meaning being a challenge, but archive can serve as a time machine.

Wednesday, July 22, 2020

"graham cracker" is dead metaphor, implying nothing about graham flour content

Kennedy v. Mondel─ôz Global LLC, 2020 WL 4006197, No. 19-CV-302-ENV-SJB (E.D.N.Y. Jul. 10, 2020) 

(R&R by someone I remember from my debate days, Sanket Bulsara) 

Plaintiffs alleged that the terms “grahams” and “graham crackers,” along with other statements and images, in Nabisco and Honey Maid’s graham cracker products, violated NY consumer protection law by falsely implying that the products contained predominantly graham flour—as opposed to white flour—and more honey than sugar. The magistrate recommends dismissal. 

The Nabisco Grahams box contains the words “Nabisco Grahams,” “Original,” and “made with 8g of whole grain per 31g serving,” and pictures of a tan, khaki-colored, darkened-color, or “noticeably dark-tan hue” cracker and a swaying, unrefined stalk of wheat. On the side: “No High Fructose Corn Syrup,” “More than a century of great graham know-how,” “A sensible snack with a satisfying hint of sweetness,” and “NABISCO Grahams - a tradition of wholesome nutrition.” 

The Honey Maid label includes a similar picture of a tan, khaki-colored cracker, as well as pictures of a bee and a honey dipper, with the words “Honey Maid,” “Made with Real Honey, “No High Fructose Corn Syrup,” and “8g of Whole Grain per 31g serving.” 

The dictionary definition of “graham crackers” is “a slightly sweet cracker made of whole wheat flour” or “a semisweet cracker, usually rectangular in shape, made chiefly of whole-wheat flour.” Graham flour is a whole grain wheat flour (and calling the product “grahams” allegedly represents that it’s all graham flour, since grahams is allegedly the common or usual name for the flour). Plaintiffs alleged that reasonable consumers would expect graham flour to predominate, but it doesn’t. Truthful suggested names: “crackers made with graham flour,” “graham-flavored crackers,” or “crackers with X% graham flour.” Plaintiffs also alleged that predominately graham flour crackers are available, including as institutional versions of these very products made for schools (since the ones sold in stores don’t meet nutritional standards/the USDA’s grain crediting standards). 

Similarly, consumers allegedly expect that honey and molasses are to be the predominant, but not necessarily the exclusive, sweeteners for graham crackers as opposed to refined, white sugar. 

The recommendation: No. First, the word “graham” in “grahams” or “graham crackers” “does not connote graham flour.” The predominant meaning is “a slightly sweet, darker-colored, rectangular, and perforated cracker … a type of cracker that is used in desserts like s’mores.” Reasonable consumers wouldn’t think that graham means “graham flour,” and as a result assume that graham flour is either the predominant ingredient in the product or that graham flour predominates over other types of flour. As with the name Coca-Cola, the descriptiveness has been lost. 

Plaintiffs pointed to dictionary definitions that said that a graham cracker was “a slightly sweet cracker made of whole wheat flour,” or “a semisweet cracker, usually rectangular in shape, made chiefly of whole-wheat flour,” but the products indisputably contain graham flour. And the definitions didn’t agree that graham flour had to predominate. [That strikes me as overreading. “Made of” at least implies something like predominance, especially compared to “made with,” and “chiefly” is pretty clearly about predominance.] “Such a variation between ostensibly reasonable definitions suggests that Mondelez’s use is necessarily not misleading or deceptive.” [No, it suggests that it’s not literally false, which is not the same thing.] 

The fact that other graham crackers, including other products with the same name sold to institutions, have more graham flour didn’t matter. Putting the word “graham” before “cracker” still wouldn’t lead a reasonable consumer to assume predominance. 

The result would be different if the label said “Crackers Made with Graham Flour.” [Compare treatment of the dictionary definitions above ….] In Mantikas v. Kellogg Co., 910 F.3d 633 (2d Cir. 2018), the court found that it was plausible that labelling of Cheez-It crackers as “whole grain” and “made with whole grain” caused reasonable consumers to believe the grain in the product was predominantly whole grain. [This distinction only makes sense if you really believe—and I see why you might—that “graham cracker” has just become detached from any relationship to graham flour in the same way that Coca-Cola has become detached from a relationship to kola nuts.] Calling something a “graham cracker” doesn’t say anything about the quantum of graham flour in the product. [Presumably it could therefore have zero graham flour and still be a “graham cracker”—otherwise the distinction from Mantikas really breaks down.] 

Anyway, the statement that there are “8g of whole grain per 31g serving” “remedies any ambiguity about how much whole grain is in the product per serving.” 

Distinguishing the honey-related claims from Mantikas was a heavier lift, but here we go: The crackers are in fact “made with real honey.” And the products don’t state anywhere that honey is the only sweetener. “Sweetening grahams with honey does not foreclose the use of other sweeteners or make the representation deceptive.” Mantikas was no help because that case distinguished claims to be misled “about the quantity of an ingredient that obviously was not the products’ primary ingredient.” So while “reasonable consumers are likely to understand that crackers are typically made predominantly of grain, ... [t]hat same consumer, confronted with the claim that a cracker is ‘made with real vegetables,’ ” for example, “likely would not likely conclude that the cracker was made predominantly of vegetables.” Here, reasonable consumers wouldn’t think that “made with honey” means the grahams contain more honey than sugar. Thus, “similar representations about non-dominant ingredients are non-deceiving.” [Doesn’t exactly get at the precise question, where an ingredient plays a particular function but isn’t actually the predominant ingredient playing that function. The closest analogy is probably the juice cases: if you say “made with real pomegranates” and show only a pomegranate on the label, and in fact the juice is 95% grape and 5% pomegranate, is that deceptive?]


confusion over confusion: court holds that disparagement can be infringing

Nutreance LLC v. Primark, LLC, 2020 WL 3892995, No. 4:18-cv-00098-SRC (E.D. Mo. Jul. 10, 2020)

“This is a trademark infringement/false advertising case involving competitors in the nutritional-supplements market.” The court holds that the alleged bad conduct is actionable, but unfortunately considers some of it (disparaging the plaintiffs at a webpage reached using keywords) as possibly trademark-infringing without actually setting out how consumers could be confused about the link between the plaintiffs and the criticism or about the relationship of the two explicit competitors. 

Plaintiffs alleged that defendants “orchestrate a scheme to publish sham reviews of Plaintiffs’ products online, on websites purporting to be independent and unbiased, but actually controlled by Defendants.” The sites rank products, invariably ranking plaintiffs’ products as superior and defendants’ competing products as the top choice. They allegedly buy keyword ads using plaintiffs’ trademarks to steer potential customers to the fake review sites. 

Some of the defendants (Admark) contracted with non-party review site hosts to conduct “affiliate marketing.” Admark agreed to pay the hosts a 20% commission on all sales of Admark products referred by the review websites, which agreed to place banner ads for Admark products on their sites. The review hosts disclose that they may receive a commission for product sales, but an “Advertising Disclosure” states: “We are independently owned and the opinions expressed herein are our own. All editorial content is written without prejudice or bias, regardless of sponsor or affiliate associations.” This was allegedly untrue: the review sites were actually controlled by various defendants. The hosts allegedly 

paid third-party copywriters to prepare the reviews with an appearance of objectivity, but always concluding that the competitors’ products were inferior. Potential customers who entered the name of competitors’ products into search engines would see results near the top of the list using phrases like “shocking facts,” “exposed,” “scam,” or “warning,” and urging customers to first review the Review Hosts’ purportedly-unbiased reviews before purchasing the competitor’s product. Prospective customers who clicked on these links would see the Review Hosts’ sham review, including false and disparaging information about the competitor’s product. 

Trademark infringement under §32: because plaintiffs conceded they hadn’t shown source confusion, they were only claiming “affiliation, connection, or association” confusion under §43(a), so the §32 claim was dismissed. [Intriguing, given current doctrine that assimilates all confusion to 32, but wait for it.] 

False advertising: survived defendants’ motion for summary judgment (except as to some specific defendants whose involvement wasn’t supported by evidence). Plaintiffs offered evidence that certain defendants “exercised considerable or complete control over the content” on the review sites, and that those sites published false representations of independence and lack of bias. There was also evidence that the reviews of plaintiffs’ products included literally false statements, “including the false representation that no clinical studies were done on any of Plaintiffs’ products.” Even without evidence of consumer reaction, literal falsity allows a court to grant relief.  [Are all the alleged falsities literally false?] 

A jury could also reasonably conclude that “sham reviews, purporting to be unbiased, that consistently ranked Plaintiffs’ products as inferior to Defendants’ competing products” were material. There were affidavits from plaintiffs’ principals about quantifiable losses and expert testimony to quantify those losses. 

§43(a) unfair competition: A jury could reasonably find likelihood of confusion regarding, at least, “the affiliation, connection, or association” of defendants with the Review Hosts [clearly yes] and Plaintiffs’ trademarks. [Clearly no. If the reviews are disparaging and suggest defendants’ products instead, it is hard to see how there could be confusion over either the review sites’ affiliation with plaintiffs or plaintiffs’ affiliation with defendants.] In so holding, the court gave “significant weight” to the evidence that relevant defendants “deliberately concealed—and in fact materially misrepresented—their affiliation” with the review hosts and websites. [That suggests false advertising, not a false suggestion of affiliation with plaintiffs.] Also, defendants used plaintiffs’ marks marks as paid search terms on search engines “to steer customers to the sham review pages hosted by the Review Hosts and, in turn, to Defendants’ competing products.” The parties’ products directly competed, which favored plaintiffs in the multifactor confusion test. A jury could reasonably find likelihood of confusion. [Yes, but about what?] 

Commercial disparagement: “One who publishes a false statement harmful to the interests of another is subject to liability for pecuniary loss resulting to the other if (a) he intends for publication of the statement to result in harm to interest of the other having a pecuniary value, or either recognizes or should recognize that it is likely to do so, and (b) he knows that the statement is false or acts in reckless disregard of its truth or falsity.” A jury could find in plaintiffs’ favor based on the evidence above—even without apparent evidence of specific people from whom sales were lost. So too with defamation claims. [As with the Lanham Act claims, the court is not being super careful about the distinction between defamation and product disparagement; it doesn’t explain why “not clinically tested” would harm the reputation of the seller, as opposed to the seller’s product.] 

On tortious interference, by contrast, there was no evidence that defendants knew that the plaintiffs had an existing relationship with customers that was disrupted. “[A] mere assertion of interference with prospective customers fails to raise a right to relief above the speculative level.”

July 29 Webinar - The McCarthy Series: What the BOOKING.COM Ruling Means for Trademark Law

I'll be part of the panel: 

On Wednesday, July 29th, at 12 noon Eastern Standard Time (9 AM PST), the McCarthy Institute will host a webinar to discuss the ramifications of the Supreme Court's decision in USPTO. v. B.V. Entitled "The McCarthy Series: U.S.P.T.O. v. What the Recent SCOTUS Ruling Means for Trademark Law," the webinar will present "the survey expert whose survey played a prominent role in the briefing, the oral argument, the Court’s decision, and Justice Breyer’s dissent, amici who submitted briefs on both sides of the case, and co-counsel for" Registration (here) is free. 

The panelists will explore what the BOOKING.COM ruling means "for survey and other consumer perception evidence in the future, what is the applicability of the case beyond domain names (and is there anything left to the Supreme Court’s 1888 case finding that a generic term combined with the generic corporate descriptor Company cannot serve as a trademark), and how can brand owners, competitors and consumers navigate the anti-competitive concerns raised by the USPTO and Justice Breyer in the world." 

Prof. David Franklyn, Director of the McCarthy Institute, will serve as moderator. The four panelists are:

David Bernstein, Partner, Debevoise & Plimpton, LLP.

Prof. Rebecca Tushnet, Professor of First Amendment Law, Harvard Law School

Peter Golder, Marketing Professor, Tuck Dartmouth.

Hal Poret, Hal Poret LLC, survey expert.

Tuesday, July 21, 2020

Sue Bee beats suit: "pure" survey not good enough to show deception over trace pesticide amounts

Tran v. Sioux Honey Assoc., 2020 WL 3989444, No. 17-cv-00110-JLS-SS (C.D. Cal. Jul. 13, 2020) 

Tran brought the usual California claims based on Sioux Honey products labeled as “Pure” and “100% Pure,” arguing that the products were mislabeled because they contain glyphosate, a synthetic chemical and herbicide. Tran relied in part on testing carried out by the FDA in 2016 on a Sioux Honey sample which identified the presence of Glyphosate in a concentration of 41 parts per billion. A subsequent 2018 analysis commissioned by Tran’s counsel, on three samples “returned varied results — there was no detectable level of glyphosate in one sample; 30 parts per billion in a second sample, and 40 parts per billion in a third sample.” The parties agreed that glyphosate was not an additive incorporated during the manufacturing process, but rather was a byproduct of the honey’s natural production, when bees encounter the glyphosate herbicide in nature. 

First, Tran could represent class members with claims arising from the purchase of products labeled “100% Pure” even though she only bought “Pure” labelled honey, as those claims were “reasonably co-extensive with those arising” from the purchase of products labeled “Pure.” 

Second, Tran failed to produce evidence that would allow a reasonable factfinder to find that the labels were deceptive to reasonable consumers. Though the court had been unwilling to dismiss the claims at the pleading stage, at this point Tran needed evidence that reasonable consumers believed the word “Pure” on the label means that there will be no trace amounts of pesticide in their honey. 

Tran relied on a survey. The expert (Thomas J. Maronick) surveyed 251 individuals over 18 who (1) lived in California, (2) were their household’s primary food shopper or shared responsibilities for food shopping, and (3) purchased or considered purchasing processed honey in the two months preceding the Survey. After they saw a photo of a representative product, the 159 participants who responded that they saw the phrase “Pure Premium Honey” on the label were asked two follow-up questions about the meaning of that term. 

First, they were asked the open-ended question, “[w]hat does the word ‘Pure’ mean to you when you see it on a label for honey?” Second, they were asked “[b]ased on what you saw on the label, which of the following, if any, reflect your understanding of what ‘Pure’ means when you see it on a label for honey?”: 

□ No additives □ Nothing artificial □ Made from pure bees □ Made with no chemicals □ Nothing but honey □ No chemical residues □ Other (specify) □ Don’t know/not sure 

In responding to the open-ended question, five participants stated something to the effect that the term indicated the product contained no chemicals, 19 stated that it meant the product contained nothing artificial, 52 stated that it meant that the product was “natural” or “just honey,” and 54 stated that it meant that the honey contained no additives or substances added to it. In response to the “closed-end” question as to what “pure” meant, 115 selected “no additives,” 123 selected “nothing artificial,” 108 selected “no chemicals,” 114 selected “nothing but honey,” 100 selected “no chemical residues,” and 77 selected “made from pure bees.” [Are they made from real Girl Scouts?] 

But the theory of the case has always been about trace amounts of glyphosate, and the survey “avoided the relevant question.” At his deposition, Maronick acknowledged that he “wasn’t asked to focus on trace amount[s].”

Tran argued that “a jury can determine whether advertising is likely to mislead simply by comparing the challenged advertising to what was actually delivered.” But in cases like this one, where “the allegedly false word has no fixed meaning,” “even though not required, survey evidence can be particularly helpful in determining whether a reasonable consumer would be misled by accused labeling.” And even if a survey is not required, there must be some evidence to satisfy the reasonable consumer test. [Could the named plaintiff’s own testimony ever do this? If surveys aren’t required, something like that must be allowed instead, I’d think.] Tran’s own personal view was only that pure means “without added ingredients or chemicals,” and she offered “nothing to show that her view of the labels equates to that of the reasonable consumer.” 

“Chemical residues” in the survey wasn’t enough to do the trick. Nothing in the expert report suggested that “chemical residue” satisfies as a stand-in for “trace” amounts, and “residue” and “trace” have different dictionary definitions, with the latter indicating “a minute and often barely detectable amount.” The court thought “[i]t would have been simple to present the Survey participants with a question going to whether the participant viewed a honey product containing trace amounts, or 41 parts per billion, of glyphosate, as less than ‘Pure’ or ‘100% Pure.’”

expert can't substitute for survey evidence (at least w/o experience w/consumer reactions)

Kurin, Inc. v. Magnolia Medical Technol., Inc., 2020 WL 4049977, No. 18-cv-1060-L-LL (S.D. Cal. Jul. 20, 2020) 

A lot going on here in this false advertising case about blood collection devices (one called Steripath); I will omit a lot of the contested claims at issue. The most broadly interesting thing: the court rejects an attempt to use a subject matter expert’s testimony to replace consumer survey evidence of deception, even though the product is specialized/bought by sophisticated entities (a situation where this technique has occasionally worked). 

The proposed expert opinion was about whether the relevant consumers, though generally familiar with FDA regulations, would have understood that “FDA registered and listed” does not mean the same thing as “FDA approved” given the regime applied to medical devices.  The opinion was based on the  proposed expert’s experience as an attorney representing medical device manufacturers before the FDA.

Kurin argued that his opinion was admissible because he “has 25 years of experience regarding FDA compliance.” But the proposed expert had no experience or expertise in market research or marketing and did not review any market surveys to form his opinion; he only infrequently interacted with purchasers of medical devices, and thus his opinion could not reliably be based on his experience. Nor did he review any literature on the topic of “medical device purchasers’ perception of statements about FDA regulatory status.” Instead, he relied on two references to Steripath’s regulatory status in an article and a presentation, although he didn’t know whether their authors would be involved in purchasing such a device.  His opinion was not admissible. 

Other notes: While health-related claims are often held to a high standard, the court here found that certain statements were puffery. In particular, Magnolia advertised that Steripath eliminates or “virtually eliminates” false positive results. The evidence indicated that Magnolia could substantiate a false positive rate below 1%. Under the circumstances, “virtually eliminates” was puffery, as was the claim that “Steripath will ‘...significantly improve specimen integrity and the accuracy, consistency, and predictability of critical laboratory tests.’ ” 

By contrast, the statement that “Steripath is the ‘only vein-to-bottle closed blood culture collection system that is proven to virtually eliminate preventable error of blood culture contamination and false-positive results for sepsis’ ” was not puffery to the extent that Magnolia contested whether Steripath was a “closed system.” (The claim still failed based on proximate cause/harm issues.)

court rejects survey indicating consumers think "white chips" have white chocolate

Cheslow v. Ghirardelli Chocolate Co., No. 19-cv-07467-PJH, --- F.Supp.3d ----, 2020 WL 4039365 (N.D. Cal. Jul. 17, 2020) 

Plaintiffs brought the usual California claims against Ghirardelli’s “Premium Baking Chips Classic White Chips.” They sought to bolster the plausibility of the complaint by including a consumer survey about whether the labeling misleads consumers into believing that the product contains white chocolate. 1,278 respondents were asked about one of four products: Ghirardelli’s Classic White Chips, Nestle Toll House’s Premier White Morsels, Target’s Market Pantry White Baking Morsels, and Walmart’s White Baking Chips, e.g., “Based on your review of this package, do you think that this product contains white chocolate?” 

According to the results, 91.88% of respondents indicated that they believed the product contained white chocolate. In response to “If, after purchasing this Product, you learned that the Product contained no white chocolate or chocolate of any kind, would you be less or more satisfied with you purchase?” 64.69% of respondents answered that they would either be “much less satisfied” or “somewhat less satisfied.” Similar percentages responded that they would be much or somewhat less likely to purchase the product again. 

Each named plaintiff also alleged with greater specificity than in the first complaint the reasons why they were deceived by the packaging and why they relied on the product’s package. “For example, Cheslow desired white chocolate chips to bake holiday cookies, bars, and brownies and found the product in a section of a Target store labeled ‘chocolate chips.’” Plaintiffs also alleged facts about the history of chocolate and the attributes of white chocolate to support the allegation that chocolate is perceived to be a unique, irreplaceable product and that reasonable consumers do not think they are purchasing a “cheap knock-off pretending to be chocolate.” 

None of this worked.

In dismissing the previous version of the complaint, the court held that “white” in “white chips” was a color reference, so “it would not be appropriate to base liability off of a misunderstanding of that word.” [Ah, those silly consumers—not misled, but just misunderstanding.] Likewise, for the images of baking chips and cookies with chips, “it would be unreasonable to draw a specific qualitative message about a product from an image on that product.” Since there was nothing deceptive on the front of the package, plaintiffs couldn’t reasonably ignore the ingredients label, which didn’t include the words chocolate or cocoa. The placement of the product in the grocery aisle wasn’t alleged to be under defendant’s control, and anyway it wasn’t reasonable to draw any conclusion from its placement. 

The court declined to revisit its holding that “white” definitely means a color, no matter what the context (I assume it would be happy to get a “flat white” that was a smooth cup of milk), and so considered the new allegations in isolation. 

Citing Becerra v. Dr. Pepper/Seven Up, Inc., 945 F.3d 1225 (9th Cir. 2019), which dealt with the meaning of “diet,” Ghirardelli argued that the court should reject the survey. The court agreed. Just as, survey notwithstanding, “a reasonable consumer would still understand ‘diet’ in this context to be a relative claim about the calorie or sugar content of the product,” it was still the case that understanding “white” in “white chips” to mean “white chocolate” was unreasonable. So Becerra posed a legally identical question: “whether a consumer survey can shift the prevailing reasonable understanding that white chips does not include chocolate.” [Where does the “prevailing” understanding come from? Prevailing here means winning, not widespread—reasonableness as courts implement it is a normative concept. But being explicit about that is a bit embarrassing for a system that is supposedly dedicated to consumer protection. My own view about the reasonable consumer construct is that it should be more empirical in cases like this one, as “[a] drunken man is as much entitled to a safe street as a sober one, and much more in need of it,” Robinson v. Pioche, Bayerque & Co., 5 Cal. 460 (1855).]  

The court noted that a survey can bolster a plausible claim but can’t make an implausible claim plausible. [No epistemological modesty here, even on a motion to dismiss! I should be clear: this is a readily available reading of Becerra; the court here isn’t going off on a frolic of its own. That’s just a problem with a standard that says that likely deception has to be alleged but then rejects evidence of actual consumer reaction—the magic happens where the court posits, without saying outright, that a substantial--here, nearly unanimous--majority of consumers are unreasonable in what they think words mean, and therefore marketer exploitation of their “misunderstanding” is acceptable.] 

Anyway, the survey was bad because it only showed respondents the front panel of the packages; consumers aren’t entitled to disregard the ingredient list in the absence of a deceptive front panel.

does unclean hands require actual deception? answers may differ for TM/false advertising

Certified Nutraceuticals, Inc. v. Avicenna Nutraceutical, LLC, No. 18-56631, --- Fed.Appx. ----, 2020 WL 4037411 (9th Cir. Jul. 17, 2020) 

This memorandum opinion comes with a partial dissent calling out the majority’s differential treatment of §43(a)(1)(A) and (B) claims for unclean hands purposes. The district court rejected Certified’s false advertising claim based on misstatements about the patented nature of Avicenna’s products because Certified had made similar false claims about its products. The court of appeals affirmed. Unclean hands “requires balancing the alleged wrongdoing of the plaintiff against that of the defendant,” and the district court did that. Unclean hands also “requires a finding of inequitableness or bad faith,” including “any willful act concerning the cause of action or bad faith relative to the matter.” Although evidence of actual consumer deception is relevant, and although in trademark cases the Ninth Circuit requires a showing that the “plaintiff used the trademark to deceive consumers,” it was enough here to determine that Certified knowingly made false statements about the patented nature of its directly competing product. 

Judge Paez would have reversed on unclean hands. Sufficient inequitable conduct in trademark cases requires proof of actual deception. [Side note: I’m not sure this was a correct description—cases often say things like “show that plaintiff used the trademark to deceive consumers,” but “used to deceive” and “actually deceived” could differ a lot depending on how much one values intent versus effect, and the prior cases don’t seem to have turned on the distinction. However, this case plus the dissent makes it more likely that, going forward, evidence of actual deception will be required in trademark cases instead of just highly probative. Cf. Republic Molding Corp. v. B.W. Photo Utils., 319 F.2d 347 (9th Cir. 1963) (stating that the “extent of actual harm caused by the conduct in question” is “highly relevant” to whether the plaintiff’s conduct was inequitable).] 

Here, the district court made no finding about actual deception. Affirming therefore drew a distinction between trademark and false advertising claims that didn’t exist. Prior false advertising claims rejected unclean hands where “[o]ur review of the record reveal[ed] no evidence of actual deception caused by plaintiffs’ advertising,”, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011), or where the plaintiff showed only the knowing falsity of a claim, Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829 (9th Cir. 2002). Thus, Judge Paez dissented in part.

Monday, July 06, 2020

calling pork "prime" doesn't misleadingly imply USDA grading

Davis v. Fresh Market, Inc., 2020 WL 3489369, No. 19-CV-24245-PCH (S.D. Fla. Jun. 26, 2020) 

Plaintiffs alleged that defendants violated Florida consumer protection law by misrepresenting, via the name, that their Chairman’s Reserve Prime Pork product had been graded prime by the USDA, even though the USDA does not grade pork (and approved the product name). Plaintiffs alleged additional statements, such as a newsletter stating, “Just like prime beef, the new Chairman’s Reserve Prime Pork is the upper-echelon of quality in terms of having superior marbling …. ‘We’re excited to provide our guests with fresh pork that’s the same caliber as our prime beef offerings....”; a quote from Tyson’s President of marketing and premium products reading, “People know of ‘prime.’ They get it right away”; a website displaying images of prime pork next to prime beef; and the like. But defendants never used the term “USDA.” The court found the theory implausible. 

First, USDA approval of the name/labeling wasn’t preemptive. While FDUTPA doesn’t apply to an “act or practice required or specifically permitted by federal or state law,” there was no approval of the promotional materials; the USDA has no authority to regulate ads in conjunction with labels. 

However, plaintiffs’ theory was still unpersuasive because there were no allegations that the defendants did anything to communicate that the USDA even grades pork; they didn’t claim that the product is graded. According to defendants, plaintiffs’ theory assumed that a reasonable consumer would be aware of USDA’s grading scheme for beef but not aware that there was no such scheme for pork. This was implausible: “A reasonable consumer sufficiently familiar with USDA grading would note the absence of the term ‘USDA.’”

flushable wipes injunctive relief class must go, damages class can stay

Kurtz v. Costco Wholesale Corp., --- Fed.Appx. ----, 2020 WL 3480830, Nos. 17-1856-cv, 17-1858-cv (2d Cir. Jun. 26, 2020) 

This is a flushable wipes case. The court of appeals decertifies an injunctive relief class under NY law, but allows a damages class to proceed on a price premium theory. There’s no likelihood of future injury here because the named plaintiff didn’t claim that he intended to purchase additional flushable wipes. [Side note: the doctrine that individual class representatives have to have separate Article III standing for each type of relief sought, even if they plainly have Article III standing to seek some other kind of relief, is a consequence of precedent protecting the police against private litigation seeking to make them stop killing people! Like qualified immunity, it doesn’t strike me as a very good rule.] 

Although defendants offered objections to plaintiffs’ expert’s regression model, that went to probative value and not admissibility; the district court didn’t abuse its discretion in allowing the case to proceed. (Here, the expert arguably failed to consider some significant variables, and the regression allegedly didn’t produce a price premium if the time frame is shifted or if additional products were included in the underlying dataset, but the expert testified that changing the timeframe of his model while making appropriate adjustments to other variables still yielded a price premium, and the district court found that Weir used a sufficiently wide range of sources to render the end-result “statistically reliable.”) 

Comcast Corp. v. Behrend, 569 U.S. 27 (2014), held that “a model purporting to serve as evidence of damages in [a] class action must measure only those damages attributable to that theory.” But plaintiff’s model did that: it purported to measure the price premium attributable to the allegedly false “flushable” label. The class action was a perfectly good way to resolve the common question of whether the model was any good.

NY high court reiterates that "consumer-oriented" is broad, covers statements to thousands of gov't employees

Plavin v. Group Health Inc., 35 N.Y.3d 1 (Mar. 24, 2020) 

The Third Circuit certified to NY’s highest court whether a plaintiff “sufficiently alleged consumer-oriented conduct to assert claims under General Business Law §§ 349 and 350 for damages incurred due to an insurance company’s alleged materially misleading representations made directly to the City of New York’s employees and retirees about the terms of its insurance plan to induce them to select its plan from among the 11 health insurance plans made available to over 600,000 current and former City employees.” Yes, it did. 

The plaintiff alleged that the summary materials he received about the health plan were misleading about various matters, including out-of-network reimbursement rates and coverage. The district court held that, because “the alleged deception [arose] out of a private contract negotiated between” GHI and the City—“two sophisticated institutions,” the conduct wasn’t consumer-oriented because the City had contracted with GHI on behalf of its employees and, therefore, “[t]he contract was aimed to benefit only a circumscribed class of individuals.” 

Previous cases used language such as “[i]n contrast to a private contract dispute as to policy coverage, the practices before us involved an extensive marketing scheme that had ‘a broader impact on consumers at large’ ” and“[d]efendants’ alleged multi-media dissemination of information to the public [was] precisely the sort of consumer-oriented conduct that is targeted by General Business Law §§ 349 and 350 ... even though the subject of the conduct was in vitro fertilization.” But claims are rejected when the plaintiff alleges only “a private contract dispute over policy coverage and the processing of a claim which is unique to the[ ] parties, not conduct which affects the consuming public at large.” 

Here, although the underlying insurance contract was negotiated by sophisticated entities, “neither plaintiff, nor any of the other hundreds of thousands of employees and retirees who participated …, were participants in its negotiation and, critically, that negotiation was followed by an open enrollment period, which exposed City employees and retirees to marketing resembling a traditional consumer sales environment.” That marketing was what was allegedly misleading, not the contract between the City and GHI. Competition between insurers for subscribers during the the open enrollment period “resembles the sort of sales marketplace—characterized by groups of similarly-situated consumers subjected to the competitive tactics of a relatively more powerful business—that GBL claims were intended to address.”