Thursday, October 29, 2020

Disparagement doesn't cause TM confusion (and a covid-related claim)

Dupart v. Roussell, 2020 WL 6308339, No. 20-1406 (E.D. La. Oct. 28, 2020)

Plaintiffs (Dupart and Harris) alleged that Roussell’s YouTube videos and Instagram posts discuss their personal lives and Dupart’s cosmetics brand, Kaleidoscope, which competes with Roussell’s Sip Cosmetics. Dupart alleged that she had rights in the Kaleidoscope logo and word marks, and Harris alleged rights in Da Brat/her social-media handle, @sosobrat.

Roussell allegedly posted a YouTube video claiming that plaintiffs are in a same-sex relationship, and later added negative comments that Kaleidoscope products are made with “canola oil,” are “laced with cayenne pepper,” are “Chinese concoctions,” and “brought Corona over [to the United States].”

Plaintiffs sued for trademark infringement and false advertising under the Lanham Act, as well as defamation and coordinate state law claims.

The court ruled that they failed to state a claim for trademark infringement. There were no plausible allegations that Roussell’s use of the marks caused likely confusion. “To the contrary, plaintiffs’ factual allegations suggest just the opposite—defendant uses plaintiffs’ marks in a manner that differentiates his products from plaintiffs’ marks, mostly by making negative comments about Kaleidoscope or Dupart and Harris personally.”

Harris didn’t state a false advertising/false designation of geographic origin claim, but Dupart did. The complaint didn’t allege that Harris provided any goods or services at all, or engaged in commercial activity (despite owning trademarks). [Assume she offers entertainment services and properly alleges this. Should the result differ?]

But Dupart had Lexmark standing because of the disparagement of Kaleidoscope products. Indeed, Dupart alleged that Roussell said: “So [Dupart is] basically saying that I used her to sell response to that is, she’s one-hundred percent right. Let’s just get that off the table. I used her to sell products. I used her to sell products.”

Was Roussell engaged in commercial advertising or promotion? The court joins the overwhelming weight of authority that Lexmark modified the classic Gordon & Breach test, which has been adopted by the Fifth Circuit but not yet readdressed by that circuit post-Lexmark. Lexmark reasoned that “nothing in the statute’s text required a competitive relationship between plaintiffs and defendants,” and the statute doesn’t even use the word “competition” in 15 U.S.C. § 1125(a)(1)(B). And “it would be inconsistent with Lexmark’s holding to say that a class of plaintiffs—those who are not in competition with defendants—may bring suit for false advertising, yet those same plaintiffs could never prevail on their claims.”

The only circuit to hold otherwise merely pointed to the fact that Lexmark said it wasn’t expressing a view on the meaning of “commercial advertising or promotion.” Strauss v. Angie’s List, Inc., 951 F.3d 1263 (10th Cir. 2020). But [setting aside that the question of whether the threat letters in that case constituted advertising/promotion is very different than that addressed here], the reasoning of the case logically bears on the meaning of “commercial advertising or promotion.” McCarthy agrees that “[t]he Tenth Circuit misreads the Lexmark precedent....[T]he Supreme Court’s conclusion [in Lexmark was] that the Lanham Act provides a remedy to anyone, competitor or noncompetitor, with a commercial injury due to false advertising or false disparagement” J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 27:94 (5th ed. 2020).

Thus, the test asks whether Roussell’s conduct amounts to (1) commercial speech, (2) made for the purpose of influencing consumers to buy his goods or services, (3) disseminated sufficiently to the relevant purchasing public to constitute “advertising” or “promotion” within that industry. Each part was sufficiently alleged.

Commercial speech: Roussell allegedly admitted that the purpose of his negative comments was to sell his own Sip Cosmetic products. In an Instagram post attached to the complaint, Roussell states: “All in all today was successful! While there is a definite method to my madness and purpose to my petty it is paying off. Sip Cosmetics got 854 orders for $10,000 in sales since launch,” which allegedly related to his content about Dupart. Thus, his speech was plausibly economically motivated and plausibly part of “advertisement[s]”— “widespread communication through print or broadcast media,” here involving 81,500 followers on Instagram and 40,700 subscribers on YouTube, with over 716,089 views for the videos in which he mentions Dupart or the Kaleidoscope brand. Roussell allegedly encourages his viewers to purchase his own Sip Cosmetic products in the same videos. And he referred to specific products or services.

For the same reasons, the other elements of the test were met.

As for falsity: the complaint plausibly alleged literal falsity as to both “characteristics” and “geographic origin.” And in the Fifth Circuit, literally false statements are presumed both deceptive and material.

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