Tuesday, July 21, 2020

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,” TrafficSchool.com, 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.

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