Wednesday, July 22, 2020

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.”

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