Tuesday, December 08, 2020

When is "verified by [platform]" an actionable misrepresentation about authenticity?

Choon’s Design, LLC v. Contextlogic Inc., 2020 WL 6891824, No. 19-cv-05300-HSG (N.D. Cal. Nov. 24, 2020)

Defendant Contextlogic runs Wish, which is allegedly a “bargain hunting retail website and smartphone shopping application,” with 94 percent of its merchants based in China. Contextlogic allegedly imports, ships, and warehouses many of the products in its marketplace and charges the merchants a fifteen percent fee for each sale. It provides a “Verified by Wish” badge on many of the products on its platform. Wish’s website explains that the badge signifies that the products have been “inspected for the best quality,” “inspected and [are] guaranteed to be the best quality,” and “have been inspected and approved by our team, and are guaranteed to the best quality.” Moreover, to receive the badge, the products must be from “Trusted Stores,” requiring “good delivery performance and high product quality” including a “Counterfeit Rate < 0.5%.” Wish allegedly touts a “zero-tolerance policy against intellectual property infringement,” publicly prohibits the “sale of counterfeit branded goods,” and states on its website that “[w]e do not allow product listings which infringe on intellectual property.” However, Contextlogic allegedly only reviews the counterfeit rate periodically, and grants the “Verified by Wish” badge to counterfeit products.

Choon’s alleged violations of both §43(a)(1)(A) and (B), as well as California’s UCL, because the “Verified by Wish” badge “misrepresents the nature, characteristics, [and] qualities” of the third-party products on its website. Choon’s did not allege direct or secondary trademark infringement, but rather that the “Verified by Wish” badge is likely to cause confusion as to the products’ authenticity and “how Plaintiff or a third-party vendor is affiliated, connected, or associated with Wish.”

The statute doesn’t require the “use of a trademark” for an actionable claim. However, it still has to be alleged that whatever the defendant does “is likely to cause confusion or mistake, or to deceive, as to sponsorship, affiliation, or the origin of the person or goods in question.” And Choon’s didn’t adequately allege that part. It alleged only that the “Verified by Wish” badge is likely to cause confusion (1) “as to the affiliation, connection, or association of Plaintiff and the Class Members’ products with” other products or persons and, (2) “as to the origin, sponsorship, or approval of Plaintiff and the Class Members, as to their products, services, or commercial activities.” But §43(a)(1)(A) on its face requires that the badge must cause confusion as to the defendant’s affiliation, connection, or association with another, or as to the origin, sponsorship, or approval of the defendant’s goods, services, or commercial activities by another person.

There were no allegations to support the suggestion that the badge erroneously affiliates Wish with Choon’s or its products, or allegations that Wish was liable for the vendor’s conduct.

False advertising: Choon’s failed to adequately allege falsity. Contextlogic allegedly touts the badge as a representation of product quality, but Choon’s argued that it was a misrepresentation of authenticity.  Although its allegations could suggest that Contextlogic’s verification was inadequate or perhaps even nonexistent, Choon’s didn’t allege this with the specificity required by Rule 9(b), or explain why quality plausibly means authenticity. This also got rid of the UCL claim.

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