Monday, September 20, 2021

competitor's copying of photos doesn't inherently inflict competitive harm

McCleese v. Natorp’s, Inc., 2021 WL 2270511, No. 1:20-cv-118 (S.D. Ohio Jun. 3, 2021)

The parties compete in the market for custom landscape design services. “[I]n February 2010, Natorp’s began using approximately 24 of McCleese’s photos on its commercial website.” The parties disagree about how and whether they were authorized to do so. Each webpage that contained one of McCleese’s photos also contained Natorp’s own trademark and copyright symbols at the top and bottom. Natorp’s removed all of his photos from its website shortly after he complained, but the photos allegedly remained “online at various social media outlets including Natorp’s private website, Facebook, and Pinterest.” McCleese registered copyrights for his photos in 2019.

Along with copyright claims, McCleese asserted Lanham Act false advertising claims. But he failed to plead any injury to a commercial or sales interest. He did allege sadness, distress, and “profound grief” from Natorp’s copying of images of a particular landscape job, but the Lanham Act doesn’t cover psychological, emotional harm. The complaint didn’t allege how his position in the marketplace was harmed in any way; he even alleged that he “does not license his photos for any commercial purpose, does not sell copies of his photos, and his photos are unpublished.” Although the complaint alleged that defendants were unjustly enriched, “[a] plaintiff’s standing under the Lanham Act hinges on a commercial injury to the plaintiff, not merely a benefit to the defendant.” (Now do trademark standing.)

The same analysis applied to claims under Ohio’s statutory and common law of unfair competition.

DMCA §1202: McCleese didn’t plead facts sufficient to allege the existence of false CMI. It was not enough to allege that Natorp displayed its trademark and copyright symbols on the same webpage as McCleese’s photos. False CMI, according to the case law, must appear in the “body” or “area around” the infringed work.

natural decay of nicotine complicates evaluation of literal falsity of nicotine content claims

Bidi Vapor, LLC v. Vaperz LLC, 2021 WL 2433642, No. 21 C 1430 (N.D. Ill. Jun. 15, 2021)

“The novel question of how the electronic cigarette industry should approach labeling nicotine content in the face of nicotine degradation is both significant and unsettled.” Thus, the plaintiff was not going to get a preliminary injunction against its competitor for falsely advertising 6% nicotine content.

All nicotine degrades with time, so all e-cigarette products contain different amounts of nicotine than reported. This undermined Bidi’s literal falsity theory.

Bidi’s lab reports found that Vaperz’s stick, which advertises 6% nicotine, had an average nicotine level between 3.06% to 3.43%. It’s cheaper than Bidi’s stick, and this allegedly caused Bidi to lose business. It brought state and federal false advertising claims.

In context of inevitable degradation, 6% was not shown to be literally false. “Even though Bidi’s reply argues that a +/- 10% degradation is the industry norm, the mere existence of some norm acknowledges the fact that some degradation is inevitable and even expected.” A case that must inevitably be about what is acceptable variation within the industry cannot be about literal falsity. The court pointed out that the package never made any claims about when the stick had 6% nicotine. “[A] linguistically competent person could, when considering nicotine degradation, reach at least two conclusions about what 6% means in this context. This inherent ambiguity means that Vaperz’s statement is not indisputably or undeniably false.”

Comment: One annoying thing about Seventh Circuit precedents is that they are often sloppily phrased even when they intuitively have the result right. The court of appeals did not mean “linguistically” competent despite what it said, and the court here isn’t applying linguistic analysis. It is considering cultural competence. Indeed, immediately following this statement, the court concludes: “Rather, this case presents a genuine dispute about market norms in the e-cigarette industry and whether Vaperz has defied those norms.”

Bidi tried to argue that the statement was literally false because defendant’s stick contained less nicotine than the industry-accepted +/- 10%. But there was little evidence that such a standard existed. [The court probably goes overboard saying that a literal falsity theory could prevail if all sides agree that 6% doesn’t mean 6%--if there really were an industry standard that defendant violated, or if there were 0% nicotine from the start, that seems literally false.]

Likewise, Bidi didn’t have a clearly enough defined or well enough evidenced theory of misleadingness. Also, there was at least one lab report finding that defendant’s stick had 5.38% nicotine, which was within the 10% tolerance proposed by Bidi.

Even if it showed falsity, Bidi didn’t show materiality. It presented little evidence that rates of nicotine degradation are “actually salient to consumers”— “especially when nicotine degradation appears to be an industry-wide issue.” “Instead, it is distinctly possible that customers base their purchasing decisions on factors like taste, convenience, or price.”

Finally, Bidi didn’t make a strong showing on causation, just a bare assertion of a tradeoff in sales, and Bidi’s sales had also been increasing, which weighed against showing likely success.

Because of all this, Bidi wasn’t entitled to the statutory presumption of irreparable harm (of which the court did not seem very fond, citing Winter despite its obsolescence in the Lanham Act context). And Vaperz largely rebutted any presumption, by which the court seems to mean “made arguments that Bidi didn’t do a good job providing evidence.” Lost profits aren’t generally irreparable injury and a sales tradeoff would be “purely financial, easily measured, and readily compensated.” Claims about “customer relationships, goodwill, and reputation” were mere bare assertions. Market dynamics—specifically the existence of other 6% products on the market, as well as the inevitability of nicotine degradation for all participants—made irreparability of harm hard to assess.

And the balance of harms didn’t favor Bidi, since a preliminary injunction would essentially be a mandatory recall. The court was also influenced “by the very strong likelihood that the Bidi Stick also does not contain exactly 6% nicotine. … The available record evidence suggests that the Bidi Stick could have as low as 5.47% nicotine.” This could constitute unclean hands.

The court was also concerned that any injunction would incentivize e-cigarette manufacturers to add more nicotine in the manufacturing process, but the FDA usually worries more about products with too much nicotine than too little. It’s much worse for a user to consume too much nicotine than too little, and the current situation errs on the side of too little. Plus, the FDA is actively regulating this market, and the court didn’t want to interfere.

The court did caution that discovery might reveal a very different picture; this was just how it looked now.

ordinary recalls aren't commercial advertising or promotion

Pictsweet Co. v. R.D. Offutt Farms Co., 2021 WL 4034222, No. 3:19-cv-00722 (M.D. Tenn. Sept. 3, 2021)

Defendant RDO has a subsidiary, CRF, which was in the business of “producing, preparing, processing and selling frozen vegetables to frozen vegetable producers, processers, repackers, distributors and wholesale and retail re-sellers, including Pictsweet, for human consumption.” Pictsweet packages frozen vegetables for various wholesale and resale customers, including Kroger.

CRF assumed responsibility for Pictsweet’s previous supplier’s facility and obligations, which Pictsweet allegedly consented to in reliance on representations that CRF would fully perform those obligations and that Pictsweet—through CRF— “effectively would be doing business with RDO Farms, which was well known in the industry.”

However, shortly after CRF took over, defendants allegedly became aware that products processed at CRF’s facility had tested positive for Listeria or “exceeded an IEH2 Process Control Test (‘PCT’) value of 9,” meaning that they knew the products were “adulterated,” and they affirmatively chose not to notify Pictsweet of the Listeria-positive test results, despite purchase orders containing express warranties by CRF regarding the products’ wholesomeness and fitness for human consumption, language regarding the seller’s obligation to notify Pictsweet of any “significant issues” relating to the products, and indemnification provisions requiring CRF to indemnify Pictsweet for any claims against it relating to injury caused by the products.

In 2016, the CDC and the FDA began investigating reported instances of illnesses related to Listeria and soon determined that the strains were “closely related to strains” of Listeria detected in vegetables processed at CRF’s facility. CRF thereafter issued two voluntary nationwide recalls of its frozen vegetable products. The second recall “impacted 432 products and included Pictsweet products.” However, Pictsweet alleged, the “second recall,” for undisclosed reasons, also included products that were not contaminated. “Because of CRF’s recall, Pictsweet, as required by law, issued its own recall of products that either contained or could contain CRF green beans and green peas. Pictsweet’s customers, including Kroger, were then required to issue their own recalls.”

As a result of a consumer class action against Kroger, Pictsweet allegedly obtained an FDA inspection report for CRF’s facility, from which it learned for the first time that CRF had concealed positive Listeria test results and PCT scores above 9 and that it had engaged in a protocol pursuant to which it redirected and shipped product that it knew was contaminated to Pictsweet and other customers that did not require finished-product pathogen testing. Pictsweet allegedly also learned through discovery that “CRF’s representations about [Listeria] contaminated products was [sic] inaccurate, and that a large portion of the frozen green peas and beans CRF had supplied to Pictsweet were not contaminated by [Listeria].”

Most of the decision is about alter ego liability, but the court spends some time on the various business tort claims. Some fraudulent concealment claims weren’t challenged in the motion to dismiss, but libel claims failed because the complaint didn’t allege that CRF made any statements about Pictsweet’s product. CRF allegedly knew that, “once it issued its recall, Pictsweet would be obligated to issue its own recall, which would communicate to Pictsweet’s customers that the product Pictsweet had delivered was contaminated and not merchantable.” But that meant that “it was Pictsweet’s own recall that communicated to its consumers false and disparaging information about Pictsweet’s products, not CRF’s recall. CRF’s recall, necessary or not, was only about its own product.”

Lanham Act claim: The recall was not “commercial advertising or promotion.”  Innovation Ventures, LLC v. N.V.E., Inc., 694 F.3d 723 (6th Cir. 2012), was not to the contrary. That case involved a recall order based on a trademark/trade dress claim. The plaintiff had sued two different manufacturers of competing energy shots and gotten a preliminary injunction based on trade dress, but not trademark. It then sent a “recall notice” to 110,000 convenience stores and truck stops, without specifying which “6 Hour Shot” was covered or mentioning that there were multiple such products on the market. There was no dispute in that case about whether the notice was commercial advertising or promotion.

Here, the plaintiff didn’t sufficiently allege what in the recall notice was false or misleading. But more important, the recall here “clearly did not constitute commercial advertising or promotion of CRF’s product but instead recalled it. Even if the court assumes that the recall was ‘misleading,’ insofar as it allegedly extended to products of its own that CRF actually knew were not contaminated, this is simply “not the kind of misrepresentation prohibited by the [Lanham] Act.’”

Tennessee Consumer Protection Act claims based on the same conduct also failed, though there was other stuff going on (alleged misrepresentation of the CRF/RDO relationship, and allegedly knowing provision of contaminated/adulterated products to Pictsweet while representing their wholesomeness/fitness for human consumption). The economic loss doctrine didn’t bar recovery under the TCPA.


Does the Lanham Act cover a campaign to get a particular job?

Healthcare Integrity, LLC v. Rehoboth McKinley Christian Health Care Servs., Inc., 2021 WL 4129248, Civ. No. 20-750 KG/LF (D.N.M. Sept. 9, 2021)

Plaintiffs, a healthcare management company and its individual owner  alleged that a group of medical providers at RMCHCS secured their ouster as management company/Chief Executive Officer of RMCHCS through a campaign of false and misleading information. Defendant CMO Wangler was allegedly motivated by a desire to replace the individual plaintiff, Conejo, as CEO and secure a lucrative management agreement for her own company.

Plaintiffs sought to amend the complaint to add, inter alia, a Lanham Act false advertising claim, which the court held was not futile.

Footnote: Commercial advertising or promotion isn’t necessarily straightforward. The court didn’t undertake any analysis of this element at this stage.

The proposed amended complaint would allege that Wangler “in connection with a professional service (i.e., managing a hospital system) made false or misleading statements of fact regarding the hospital management services Plaintiffs provided that, in fact, caused damage to Plaintiffs.” She allegedly “embarked on a campaign to disparage the value and quality of the management services Mr. Conejo and HCI were providing to RMCHCS” because she “knew that Mr. Conejo was well-liked and respected” and that she would “need to create a negative impression of Mr. Conejo ... if she were to be successful in ousting Mr. Conejo” and HCI so that she could “secure the CEO position for herself under a management contract with her LLC[.]” She allegedly “complain[ed] publicly about how Mr. Conejo had cancelled contracts with agency nurses and proposed employee pay cuts and insist[ed] that his mismanagement and desire to turn a profit was endangering patient lives and safety”; made statements to the media suggesting that the entire RMCHCS medical staff had voted “no confidence” in Conejo where, in fact, the majority of physicians and nurses had not signed the No Confidence Declaration; accused Conejo of creating patient safety risks and engaging in retaliatory suspensions; and made the foregoing statements despite knowing that they were false or misleading.

Wangler also allegedly (1) disseminated the allegedly false or misleading statements to the relevant purchaser of the services: the RMCHCS Board, which had the authority to engage—and/or terminate—the services of a hospital administrator of its choosing; (2) utilized multiple methods of communication, including interviews with news media, email, Zoom videoconferencing, and letters, to disseminate false or misleading statements about the services Plaintiffs were providing; and (3) “made an express sales pitch for the CEO contract” in a letter she submitted to the Board in May 2020. Taking all this as true, the court couldn’t say that amending the complaint would be futile.

Comment: The key move prefigured here is whether a specific potential employer is the relevant audience for an individual’s services. Is this an organized campaign to penetrate the relevant market? We can only know once we understand the relevant market, and the answer might be different for an ordinary company that could in theory provide services to many different hospitals versus a very specific employment situation—or it could simply be that soliciting a particular employer, no matter how desireable to that would-be CEO, is not enough to be commercial advertising or promotion, since the relevant skills are likely transferable in ways that, say, supplies for Ford engines are not. That is, previous cases recognizing solicitations to a single buyer as “commercial advertising or promotion” for Lanham Act purposes have all, as far as I know, been about customized products that can only realistically be sold to the specific buyer, like Ford or Coca-Cola. However, it’s notable that the producers in those cases chose to customize their products—there was a broader market out there; they just wanted to participate in a very specific market. So at what point in time do we assess the relevant market, and can the specificity of human factors be part of that?

Friday, September 17, 2021

"recyclable" could be deceptive where local recycling isn't widespread

Downing v. Keurig Green Mountain, Inc., 2021 WL 2403811, No. 1:20-cv-11673-IT (D. Mass. Jun. 11, 2021)

Keurig allegedly deceptively advertised its plastic single-serving pods as recyclable when those pods were not recyclable according to federal regulations. Keurig allegedly released pods that were manufactured from #5 plastic (which is recyclable) instead of #7 plastic (which is not) in order to address backlash to the use of nonrecyclable plastic. The new pods featured a three-arrow recycling symbol and the catch phrase “Peel, Empty, Recycle,” although the word “Recycle” was followed by an asterisk that advised buyers to “Check Locally.” The box also informed customers that they could “Have your cup and recycle it, too,” although again it stated that customers should “Check locally to recycle empty cup.”

During the period from the release to the present, however, many recycling centers could not accept the Pods as a recyclable product. In a pre-release investigation, Keurig allegedly discovered that even at recycling centers which will accept the Pods only 30% of the Pods were successfully recycled, because of their size, their tendency to become crushed by the recycling machines, and residue from the foil tops, filters or other contaminants.

Keurig argued that Downing lacked Article III standing because he didn’t include the specific ad he saw that induced him to buy the pods, didn’t say whether he was a prior pod purchaser before the change, didn’t allege whether the pods he bought were recyclable in his community, and didn’t allege what the difference in value between a recyclable and a non-recyclable pod would be. That’s not required (and very little of that is about standing). He attached photos of the ads and stated that the ads had been substantially and materially the same since the “recyclable” pods were released, which was sufficient. He further alleged that he relied on the ads and paid more than he would have paid for the truth.

Keurig then argued that any harm was traceable to the recycling centers, not to Keurig. Also no. “Keurig’s advertisement may be understood as making representations regarding the recycling process,” and causation exists “where the deceptive act or practice ‘could reasonably be found to have caused a person to act differently from the way he [or she] otherwise would have acted.’ ”

He also had standing to seek injunctive relief so that he could rely on future statements from the company. It was plausible that he’d buy pods from Keurig again if he had confidence that they were recyclable, so his alleged present inability to rely on the product’s labeling satisfies the requirement of an “actual and imminent, not conjectural or hypothetical” threat of future harm sufficient to establish his “ ‘personal stake in the outcome of the controversy’ as to warrant his invocation of federal-court jurisdiction.”

Massachusetts Chapter 93A: Massachusetts law is “guided by the interpretations given by the Federal Trade Commission.” The FTC has provided such guidance: “When recycling facilities are available to less than a substantial majority of consumers or communities where the item is sold, marketers should qualify all recyclable claims.” The guidance also states: “If any component significantly limits the ability to recycle the item, any recyclable claim would be deceptive. An item that is made from recyclable material, but, because of its shape, size, or some other attribute, is not accepted in recycling programs, should not be marketed as recyclable.”

It offers an example:

[a] paperboard package is marketed nationally and labeled either ‘Recyclable where facilities exist’ or ‘Recyclable B Check to see if recycling facilities exist in your area.’ Recycling programs for these packages are available to some consumers, but not available to a substantial majority of consumers nationwide. Both claims are deceptive because they do not adequately disclose the limited availability of recycling programs.

Given the allegations that most recycling centers do not accept Pods and only 30% of Keurig’s Pods were recyclable at the facilities that accepted them, Keurig’s statement to “check locally” might not be sufficient to avoid deceptive marketing under the FTC guidance.

A reasonable consumer could have relied on the claim: “reasonable customers viewing the Keurig’s claims that the Pods were recyclable were not expected to do research to see if the Pods were actually recyclable, either in their own communities or across the United States. The warning ‘check locally’ did not make those customers unreasonable in assuming the Pods were recyclable.”

However, Downing could not represent a putative nationwide class, even if the relevant decisions were made in Massachusetts.


Lost profits aren't restitution for California UCL purposes

Lee v. Luxottica Retail North America, Inc., --- Cal.Rptr.3d ----, 2021 WL 2451109, A157657 (Ct. App. Jun. 16, 2021)

Lee, on behalf of a putative class of California optometrists with independent optometry practices, brought suit against a competing chain of optical retailers, alleging UCL violations. However, compensation for lost market share isn’t authorized by the UCL, because that’s not restitution, “the only form of nonpunitive monetary recovery authorized under the UCL. … Lost profits are damages, not restitution, and are unavailable in a private action under the UCL.” Absent a legally enforceable right to a stream of future income, the plaintiff lacks an ownership interest in it and thus there is nothing to “restore.”

handful of bad Amazon reviews make Energizer's false advertising claims plausible

Energizer, LLC v. MTA Trading, Inc., 2021 WL 2453394, No. 20-CV-1583 (MKB) (E.D.N.Y. Jun. 16, 2021)

Along with breach of contract and tortious interference claims, Energizer alleged that MTA falsely advertised by selling batteries with Energizer’s mark and then by fulfilling orders with products different from those advertised and shipping batteries to consumers that were “used, aged, or tampered-with.” In seven consumer reviews quoted in the complaint, the reviewers report that batteries sold by the relevant account did not work or were not as advertised.

Defendants argued that Energizer failed to state a false advertising claim because it relied on seven pieces of negative feedback without explaining whether they were representative, and didn’t allege details about how the batteries were advertised, such as whether they disclosed repackaging or advertised an expiration date (two subjects that came up in the negative reviews). It argued that there are plausible alternative explanations for the negative reviews, including that Amazon shipped and fulfilled the products (and might well have sent them from another seller, which does seem to be a thing with Amazon sales) or that competitors were leaving fake negative reviews. That’s a fascinating Twiqbal issue, it seems to me: at what point do Amazon’s problems become part of common sense?

The court found the Lanham Act allegations adequate. Energizer alleged that defendants advertised their batteries as “new,” and also advertised the batteries in certain quantities, but instead, the batteries were not new and were inoperable or had insufficient charge, and the shipments sent to consumers were short of the quantities they ordered. That was specific enough.

The additional arguments might work, but not on a motion to dismiss.

independent contractors as agents in creating fake reviews

RingCentral, Inc. v. Nextiva, Inc., 2021 WL 2476879, No. 19-cv-02626-NC (N.D. Cal. Jun. 17, 2021)

The parties are cloud-based communications companies. RingCentral offers voice, virtual private branch exchange, audio and video conferencing, messaging, contact center collaboration, SMS, online meetings, contact center, and fax. Nextiva’s offerings inlcude voice, video, and messaging.

RingCentral sued for tortious interference, defamation, trade libel, unfair competition, and cybersquatting. Nextiva’s independent contractor, Baruch Labunski, “fabricated fictitious online personas of RingCentral personnel, registered domain names using fake contact information, and created fraudulent websites associated with those domains for the purpose of redirecting users away from RingCentral, and toward unrelated business websites.” Nextiva also allegedly posted fake negative reviews of RingCentral and fake positive reviews of Nextiva.

Likewise, RingCentral allegedly created a customer review page selectively aggregating only positive reviews from other review sources.

Starting with the counterclaims against RingCentral:  The review page “reflects an overall 4.8-star rating in the marketplace,” but Nextiva argued that, on the sourced websites where the reviews originate, it has “at least hundreds of one- and two-star reviews; rather than the five one- and two-star reviews reflected on RingCentral’s Reviews Page.” RingCentral blamed a third party contractor, though I’m not sure why that should matter; the court found there were genuine issues of material fact, including about whether the third party had discretion to exclude reviews. (Even if it did, I don’t see why RingCentral wouldn’t be liable for them.)

RingCentral then argued that Nextiva failed to prove causation or economic injury. “Here, Nextiva’s experts used regression analyses to show that traffic to RingCentral’s web pages closely coincided with reduced Nextiva sales, and that Nextiva would have to spend significant funds to correct the misimpressions that RingCentral’s pages caused in the market.” Though RingCentral pointed out that the experts relied on claims that were no longer being challenged and didn’t apportion the harm, this was for a jury to resolve.

Nor could RingCentral’s unclean hands argument be resolved on summary judgment.

So too with Nextiva’s motion for summary judgment, except for claims based upon allegedly fake positive reviews of Nextiva. Starting with those, defamation and trade libel don’t cover fake positive reviews of the defendant.

As mentioned above, Labunski, under the supervision of Nextiva’s former CMO, “posted over 10,000 fake positive reviews of Nextiva on downdetector.com and verified-reviews.com,” as well as a smaller number of fake positive reviews on other sites.  Nextiva allegedly published at least 85 fake negative reviews of RingCentral’s services, though RingCentral’s own expert testified that approximately five of those fake negative reviews were “verified” as false by being tied to domains known to be registered by Labunski.

Defamation: Fake positive reviews of Nextiva were not “of and concerning the plaintiff,” and RingCentral didn’t show that third parties reasonably understood the fake positive reviews to be a part of a “defamatory scheme” against RingCentral. In fact, the law doesn’t recognize RingCentral’s theory that the fake positive reviews were part of drawing a contrast between the parties with a “defamatory scheme.” It had to prove that prospective customers reasonably understood the challenged statements to be derogatory against RingCentral under the circumstances. RingCentral did show that that three prospective customers, who ultimately chose Nextiva, made a comparison between the two companies after looking at reviews. “But there is no evidence that those prospective customers interpreted positive reviews about Nextiva to mean something derogatory about RingCentral…. To agree with RingCentral’s ‘defamatory scheme’ argument would be to say that any statements made in the course of market competition, whether falsified or factual, would necessarily result in defamation.”

However, fake negative reviews of RingCentral were definitely “of and concerning” RingCentral, so the defamation and trade libel claims based on them could continue.

Trade libel: Trade libel is the intentional disparagement of another’s property that results in pecuniary damage. A trade libel plaintiff “must also prove that the statement played ‘a material and substantial part in inducing others not to deal with [the plaintiff],’ ” along with special damages in the form of specifically itemized pecuniary harm that was proximately caused by the libelous statements. Nextiva argued that RingCentral couldn’t prove causation and damages. The court agreed that, under governing law, a plaintiff is required to “identify particular customers and transactions of which it was deprived as a result of the libel.” But there was a genuine dispute of material fact on causation and loss: RingCentral identified prospective customers who saw reviews of both companies and chose Nextiva, but it wasn’t clear whether they saw the allegedly fake reviews, and if so, whether those fake reviews played a substantial and material role in their decision to choose Nextiva over RingCentral.

Tortious interference: Same thing.

UCL: Nextiva argued that RingCentral didn’t show it was entitled to an injunction.  But “[t]hat Nextiva has since fired the alleged wrongdoers and discontinued its policy does not mean that a risk of future injury is lacking.” There were disputes of fact about whether the officers and employees still employed by Nextiva were complicit or failed to act on the fake review scheme, and whether changes were implemented company-wide or only by specific teams.

Cybersquatting: Could Nextiva be held liable for the acts of its independent contractor “falsely register[ing] at least one domain name strongly suggestive of the RingCentral brand name.”

Masjedi was the CMO who hired Labunski to work on search engine optimization. He instructed Labunski to impersonate another competitor to post fake negative reviews. Labunski then re-used that idea to impersonate RingCentral; he purchased the domain name “ringcetrnal.com” and used fake identities and funds supplied by Nextiva, he created fake email accounts on the “ringcetrnal.com” domain to impersonate RingCentral’s CEO and the CEO’s daughter, and tried to use those false identities to eliminate positive reviews of RingCentral with the Better Business Bureau and Fit Small Business.

Nextiva argued that there was no evidence that the impersonation caused harm. RingCentral’s 30(b)(6) witness testified that “the reputation of RingCentral was diminished...through the fraudulent emails,” but also lacked knowledge of any changes to RingCentral’s Better Business Bureau membership or of any RingCentral reviews being removed from Fit Small Business. It was for the jury to weigh the credibility of this testimony.

Was Nextiva liable for its independent contractor’s domain name registration? The Restatement (ThirdO of Agency says: “An agency relationship arises “when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.” “An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act.” There was sufficient evidence for a jury to find that Labunski was an agent of Nextiva for purposes of cybersquatting liability by finding that Labunkski’s wrongful conduct was within his authority, or that Labunski was negligently supervised by Nextiva. The fact that Labunski’s consulting agreement disclaimed an agency relationship was insufficient.

Thursday, September 16, 2021

TM infringement and false advertising claims related to putative open source software "fork" succeed

Neo4j, Inc. v. PureThink, LLC, 2021 WL 2483778, No. 5:18-cv-07182-EJD (N.D. Cal. May 18, 2021)

Neo4j specializes in graph database management systems. “Neo4j USA’s platform helps organizations make sense of their data by revealing how people, processes and digital systems are interrelated.” [I still don’t know what that means, but ok.] It has more than 400 commercial customers, including global enterprises such as Walmart, Comcast, Cisco, and eBay, and also does substantial business with government agencies, including US agencies. It has trademark registrations for the word mark “NEO4J.”

Neo4j originally offered a free and open source version of the Neo4j platform known as the Neo4j Community Edition, with limited features and no technical or administrative support. Neo4j Enterprise Edition was originally offered under both a paid-for commercial license and the free GNU Affero General Public License, version 3, but Neo4j then replaced that AGPL with a stricter license (the Sweden license), which prohibited the non-paying public from engaging in commercial resale and certain commercial support services. Eventually, they released Neo4j EE version 3.5 under a commercial license only.

PureThink is a software and information technology consulting company that specializes in supporting agencies within the U.S. Government. The parties previously partnered nonexclusively so that PureThink would sell and support the commercial version of Neo4j; upon termination, PureThink expressly agreed to “cease using any trademarks, service marks and other designations of Plaintiffs.”

Neo4j ultimately considered PureThink’s Neo4j Government Edition to be a problem. PureThink’s principal created a new entity, iGov, which stated:

The principal behind PureThink and the Government Package has created a new corporate entity called iGov Inc, which is not a Neo4j Solution Partner. …

* * *

iGov Inc’s new Government Package for Neo4j can be added to any Neo4j instance making it a “Government Edition”. By default, all Government Packages for Neo4j now comes with Neo4j Enterprise included under its open source license!

Many details omitted, but eventually defendants’ principal helped found an organization that began promoting a software called “ONgDB.” This used Neo4j EE version 3.4 as a base, but replaced the Neo4j Sweden Software License with the AGPL. “Defendants continued to promote ONgDB as ‘free and open source’ by replacing the Neo4j Sweden Software License with the AGPL in certain LICENSE.txt files alongside the source code. Doing so removed certain legal notices identifying Neo4j Sweden as the copyright holder and licensor, and removed the Commons Clause, effectively allowing Defendants to commercially use and support ONgDB.”

On GitHub, the landing page was called “ONgDB – Neo4j Enterprise Fork: Graphs for Everyone,” contained numerous references to Neo4j throughout, and was very similar to that of Neo4j EE. Defendants characterized it as a “drop in replacement” for Neo4j CE and EE. On their sites, various links including the sequence “neo4j” remained active for a couple of years, despite going to OngDB pages; conversely, some hyperlinks on their sites redirected to operations and developer manuals on Neo4j’s website. They also regularly used the Neo4j Mark as a hashtag on Twitter.

After nearly two years, the ONgDB software had been downloaded over 14,000 times, “signaling its widespread success.” At the same time, some consumers who encountered compatibility issues, technical problems or glitches with ONgDB sought assistance from Neo4j. And some have “expressed uncertainty about the propriety of Defendants’ modification to the Neo4j Sweden Software License. This has caused some confusion about whether and when a commercial license from Neo4j USA is necessary to use, modify or redistribute the software in a commercial setting.”

Trademark claims: As to nominative fair use, Neo4j argued that it didn’t apply because defendants had used the mark to identify their own product, “Neo4j Enterprise”/“Government Package for Neo4j,” before rebranding that as ONgDB. But that wasn’t a Neo4j product; it was made of the last public Neo4j EE code, the Neo4j CE code, and “glue code” authored by others, even though defendants assured potential customers that it was the “same official Neo4j Github Repositories as Neo4j Inc uses for their paid commercial licensed builds” except distributed under an open source license.

Thus, this was not nominative fair use, but rather a use that created the misleading perception that defendants’ products were Neo4j products.  “Any reasonable consumer reading about ‘Neo4j Enterprise’ would conclude that they are getting official Neo4j EE, or in the case of the ‘Government Package for Neo4j,’ consumers would conclude they are getting Neo4j EE in a specialized government package.” So too with defendant’s iGov’s use of the Neo4j Mark in its email address and URL.

By contrast, to the extent Defendants offer “support services” targeted at software that Neo4j Sweden or Neo4j USA provide on an open source basis, “use of the Neo4j Mark to explain those services could potentially benefit from a fair-use defense because such uses reference Plaintiffs’ products, not Defendants’.” They were also permitted by NFU to describe their product as an unaffiliated or independent “fork” of Neo4j source code “because that phrasing makes clear that the product is not itself a Neo4j product.” Perplexingly, the court also suggested that in comparative advertising defendants would be bound by Neo4j’s trademark guidelines, which does not seem exactly right unless those guidelines happen to reproduce the law (perhaps they do).

As Judge Kozinski once did, the court seemed to treat non-nominative uses as confusing by definition without further analysis (even citing the old terrible “metatags” cases for this result), so the bad conduct was a mix of stuff that probably was confusing and stuff that is more questionable: (1) extensively using “Neo4j’ and “Neo4j Enterprise” on iGov and PureThink websites without proper trademark notices; (2) using embedded “Neo4j” links to Neo4j USA’s website and GitHub repository on their websites; (3) hyperlinking to Plaintiffs’ build instructions, support documentation and change logs containing the Neo4j Mark rather than creating and hosting their own with the ONgDB name; and (4) using “Neo4j Enterprise” and “ONgDB” interchangeably to promote ONgDB on their websites.

Embedded links to Neo4j’s sites and documentation, along with the repeated references to “Neo4j,” “including in the title of the products themselves, create the misleading perception that Defendants and Plaintiffs are affiliated.” Plaintiffs’ motion for summary judgment on the trademark claims was granted.

False advertising under the Lanham Act/UCL: Neo4j alleged two basic categories of falsehoods: (1) statements that ONgDB and Neo4j Enterprise are “free and open source” versions of or alternatives to commercially licensed Neo4j EE; and (2) statements that ONgDB is a “drop-in replacement for an existing commercial licensed distribution of the same version number” of Neo4j EE.

For (1), Neo4j argued that “the Neo4j Sweden Software License did not permit Defendants to remove the commercial restrictions imposed by the Commons Clause,” so ONgDB is not “free and open source.” The court found that there is no reasonable interpretation of the Neo4j Sweden Software License that permits licensees such as defendants to remove the Commons Clause and redistribute the software under the standardized AGPL license. Thus, these statements were false.

For (2), Neo4j argued that ONgDB is not a true drop-in replacement because ONgDB contains source code filed that were wrongly licensed under the AGPL in violation of Neo4j Sweden’s copyright and because the software was not of the same quality and did not contain all of the features of Neo4j EE. Defendants argued that “drop-in replacement” didn’t mean that all the features were the same, but rather that users could move their data from a Neo4j instance and place into an ONgDB instance of the same version and have it function.

Neo4j rejoined that, even if “drop-in replacement” merely indicates compatibility, iGov’s representations related to ONgDB versions 3.5 and later are still false. After Neo4j EE 3.5 was released entirely closed source, GFI “no longer could ... reliably guarantee that [ONgDB] was a drop-in replacement”; it was “too hard to demonstrate” with the Neo4j EE code becoming more divergent. Yet iGov continued to make drop-in replacement claims for later versions. Thus, representations that the equivalent versions of ONgDB were “drop-in replacements” could not be verified and were therefore false or misleading. [Is this a lack of substantiation holding?]

As for earlier versions, were the statements misleading? Even though the phrase didn’t necessarily indicate identicality on its own, the full context of the statements implied it. [Not clear if the court is doing a necessary implication analysis; it is focusing on what defendants said, not on consumer reaction evidence.] E.g., the website said that “commercial packages available from Neo4j Inc and their partners are essentially support offerings ... [i]f you do not need support for your ONgDB Enterprise or Neo4j Enterprise open source licensed distribution, then simply download ONgDB Enterprise as a drop in replacement for an existing commercial licensed distribution of the same version number.” It further provided a chart comparing Neo4j EE and “Neo4j Enterprise open source license,” which is captioned: “There are no physical differences between Neo4j Enterprise commercial and AGPL open source licenses!” “No reasonable consumer would understand these statements to indicate mere compatibility with Neo4j EE.”

Further evidence of misleadingness was that consumers who chose ONgDB and encountered technical issues reached out to Neo4j USA for help, “indicating that those consumers thought they were operating genuine Neo4j EE.”

Materiality: “Because Defendants misrepresented ONgDB as a free version of Neo4j EE licensed under the APGL, there is no doubt that this price differential (free versus paid) was likely to influence customers purchasing decisions.” So statements about a free replacement were material.The court also found nothing to rebut Neo4j’s evidence that customers chose ONgDB based on misrepresentations to Neo4j’s commercial detriment. Summary judgment granted on state and federal false advertising claims.

False designation of origin: Yep.

Relief: Given the First Amendment interests involved, the Court “may not enjoin nominative use of the mark altogether.” Though it could be tweaked later, the court enjoined the specific things it had found to be false/misleading, including “free and open source drop-in replacement.” (I’m actually not sure how targeted the injunction was, since it also barred “infringing” on the marks or causing false association with Neo4j, so it isn’t all that clear what defendants can do.)

individualized smear campaign wasn't plausibly commercial advertising or promotion

Meredith Lodging LLC v. Vacasa LLC, No. 6:21-cv-326-MC, 2021 WL 2546273 (D. Or. Jun. 21, 2021)

The parties compete to manage vacation rental properties located in Oregon. Meredith alleged that Vacasa “has embarked on a smear campaign surgically targeted at [Plaintiff’s] homeowner customers, designed to unfairly snuff out that competition.” The court found that the alleged statements weren’t “commercial advertising” covered by the Lanham Act.

Allegations: With the goal of increasing its market share, Vacasa “sent out promotional mailers to homeowners with properties located in the same geographic areas where [Plaintiff] manages vacation rental properties.” It “began a campaign to systematically contact and try to poach business from Homeowners under exclusive contract with [Plaintiff]. In many instances, [Defendant’s] representatives have made false or misleading statements about [Plaintiff] to these Homeowners.”

The question was whether the alleged misrepresentations were “sufficiently disseminated.” Ordinarily, “the actions must be ‘part of an organized campaign to penetrate the relevant market,’ which typically involves ‘widespread dissemination within the relevant industry.’ ”

Each alleged falsehood came in the form of a phone call from an employee or representative of Vacasa to an individual under contract with Meredith to manage their vacation rental property. The purpose of each call was to convince the individual to switch companies. There were five alleged examples of false statements in calls to owners: (1) rep stated there were “reviews on VRBO for [Plaintiff] stating that there is a lack of cleanliness,” that Plaintiff “had no manager for negative reviews,” and claimed Defendant “could manage the property better”; (2) rep stated that Vacasa “had heard a lot of complaints about [Plaintiff] and its housekeeping teams”; (3) rep said that homeowners had switched over a “lack of cleanliness,” but rep couldn’t corrpoborate this; (4) rep said that Vacasa “had been talking to a lot of unhappy [Plaintiff] customers”; (5) rep led owner to believe “during the first minutes of the call that he was associated with [Plaintiff] (even though he was not) before trying to persuade her to leave [Plaintiff] and switch management of the” home to Vacasa.

Putting aside whether all these statements were falsifiable, five calls to potential customers, even coming during a short period of time, wouldn’t typically qualify as the “widespread dissemination within the relevant industry” seen in false advertising claims. Although Vacasa allegedly had an actual widespread promotional campaign in the relevant market, Meredith didn’t allege that those advertisements contained any false or deceptive representations.

True, “depending on the relative market at issue, communications made to only one prospective customer may qualify as sufficient dissemination under the right circumstances.” But the complaint didn’t allege that the market for managing vacation rental properties was so limited that communications reaching just five consumers was sufficient. It alleged only that “there are a finite and relatively low number of homes suitable for short term vacation rental management in the relevant geographic areas.”  This wasn’t specific and factual enough. The market for hamburgers is also “finite,” but “a handful of phone calls from Ronald McDonald himself to potential burger buyers falsely touting the health benefits of Big Macs would not support a claim for false advertising under the Lanham Act.” And the complaint also alleged that the relevant market was big enough to justify both an Oregon Coast headquarters and a Central Oregon headquarters, as well as “local offices and locally-based staff and support teams in Bella Beach, Waldport, Depoe Bay, Neskowin, Pacific City, Manzanita, Seaside, and Sunriver.” Further, the complaint alleged that the market is large enough that Meredith has “multiple managers to manage negative reviews.” “That Plaintiff requires multiple managers to respond to negative reviews in a market with a ‘relatively low number of homes’ appears to confirm that either (1) the market is larger than argued by Plaintiff or (2) Plaintiff has bigger problems than Defendant’s allegedly misleading phone calls.” [Yikes.]

If Meredith did replead, the court would consider expedited, targeted discovery about falsity, but signalled further skepticism by commenting that “even the Ritz Carlton has guests unhappy with the accommodations” while suggesting that it would be willing to find falsity if, when Vacasa made the statements, it lacked knowledge that some of Meredith’s customers switched to Vacasa over housekeeping concerns. Footnote: The court also questioned whether it could take judicial notice “of the fact that there are dozens of reviews online predating the allegedly false statements that take issue with the cleanliness of properties managed by Plaintiff.” How would you do that without considering their truth? The court seems to think that went to reputation for cleanliness: “This is not to say Plaintiff necessarily has a reputation for uncleanliness. Only that in the vacation rental industry, a company essentially arguing that it had no reports of uncleanliness appears to be patently unreasonable. This is akin to a restaurant, no matter how esteemed, arguing it had never served one customer who walked away unsatisfied.”

AAA's expansion to home security derailed by trademark

AAA Alarm & Security Inc. v. A3 Smart Home LP, 2021 WL 3857417, No. CV-21-00321-PHX-GMS (D. Ariz. Aug. 30, 2021)

Another expansion case, like the ones Uber has had. AAA Alarm began in 1985, serving over 8000 customers across Arizona and spending nearly $200,000 since 2014. In late 2019, AAA Alarm began receiving “communications from people who believed they were AAA Alarm & Security customers, but who were actually customers of Defendant.” AAA Alarm documented over 200 instances, as well as mailed documents and emails directed to A3, including “three unemployment insurance notices from the Arizona Department of Economic Security, a request from a fiduciary to modify the terms of her ward’s service, checks and cancellation notices addressed to Defendant from its customers, and alarm permits from the City of Phoenix,” as well as false alarm notices from government entities. 

The American Automobile Association of Northern California, Nevada, and Utah (that is, the best known AAA) acquired an Arizona security business, SAFE Security, in late 2018 and changed its name to A3 Smart Home LP. It began operating under the brands “AAA Smart Home” and “AAA Smart Business.” A3 Smart Home has approximately 20,000 customers in Arizona.

Who owned AAA for security services? The court found that AAA Alarm had priority, mostly skipping over secondary meaning. A3’s claim that security services were within AAA’s natural zone of expansion was too broad:

Defendant’s assertion that it holds seniority over any service related to security, safety, and the home, stretches this confusion analysis to breaking point. Indeed, if the American Automobile Association were permitted to claim seniority in the AAA mark over any product or service in such broad categories of business, it could protect the AAA mark in potentially unlimited markets. Defendant entered the Arizona alarm and security market over 30 years after Plaintiff by purchasing a customer base in an industry it had not previously occupied.

AAA Alarm made sufficient use over this period, with over 3000 current customers. “This use is sufficiently public so as to identify the mark in an appropriate segment of the public mind.”

With that out of the way, the multifactor confusion test clearly favored AAA Alarm, despite the expense of the services. Surprisingly to me, the court found “AAA” arbitrary “because there is no fundamental connection between the letters and security services, and the letters offer no description of the products they are associated with.” I would have thought that the standard meaning “first” (or at least “first in the phone book”) made AAA descriptive. But once conceptual strength was set, the court pointed to the history of AAA Alarm’s advertising and present expenses of over $5000 a year on search engine optimization. “These advertising expenditures and the arbitrary nature of the mark support a finding that the mark is strong enough to be protectable.” In a reverse confusion case, “[t]he relative obscurity of Plaintiff as a small business does not undermine this conclusion.”

Along with the actual confusion evidence noted above, AAA Alarm showed “at least one critical customer evaluation posted on the web concerning Plaintiff that was actually intended for Defendants.” Although a few misdirected letters may not be relevant confusion that affects consumers’ purchasing decisions, “confusion is not limited to evidence of diverted customers.” “And Plaintiff demonstrated at the hearing that the first result for a search for ‘AAA Alarm & Security,’ Plaintiff’s name, is an advertisement for Defendant’s services.”

Irreparable harm was also shown. “Defendant’s use of the AAA mark could continue to confuse consumers and diminish the distinctiveness of Plaintiff’s brand, thereby preventing Plaintiff from controlling its reputation. Plaintiff presented evidence that personal referrals are a significant portion of its business.” The likelihood of confusion was itself irreparable harm, even without considering the TMA’s statutory presumption. (Comment: In the 9th Circuit, that’s clearly wrong about pre-TMA law, but it hardly matters except to suggest that many courts were already desirous of collapsing confusion and harm as inquiries.)

Given that “Defendant entered a market with an existing smaller business using their desired mark, and either declined to investigate or chose to ignore Plaintiff’s presence,” the court set a $20,000 bond for the preliminary injunction.

9th Circuit: desire to purchase properly labeled product is too abstract for injunctive relief standing

In re Coca-Cola Products Marketing & Sales Practices Litig. (No. II), 2021 WL 3878654, No. 20-15742 (9th Cir. Aug. 31, 2021)

The Ninth Circuit limits its injunctive relief standing jurisprudence in light of TransUnion.

The district court certified a class in a multidistrict consumer action alleging mislabeling of Coke as having “no artificial flavors. no preservatives added. since 1886” even though Coke contains phosphoric acid, and allowed it to pursue injunctive relief.

Under previous circuit precedent, “a previously deceived consumer may have standing to seek an injunction against false advertising or labeling, even though the consumer now knows or suspects that the advertising was false at the time of the original purchase, because the consumer may suffer an ‘actual and imminent, not conjectural or hypothetical’ threat of future harm.” The two examples: (1) “she will be unable to rely on the product’s advertising or labeling in the future, and so will not purchase the product although she would like to” and (2) “she might purchase the product in the future, despite the fact it was once marred by false advertising or labeling, as she may reasonably, but incorrectly, assume the product was improved.”

Here, however, none of the plaintiffs alleged a desire to “purchase Coke as advertised, that is, free from what they believe to be artificial flavors or preservatives.” Instead, they alleged that “if Coke were properly labeled, they would consider purchasing it.” But “such an abstract interest in compliance with labeling requirements is insufficient, standing alone, to establish Article III standing,” and merely considering a purchase isn’t an imminent injury.

Two named plaintiffs specifically “explained that they were not concerned with phosphoric acid, but rather with whether Coca-Cola was telling the truth on its product’s labels. Both asserted that they would be interested in purchasing Coke again if its labels were accurate, regardless of whether it contained chemical preservatives or artificial flavors.” But that was no more than alleging “a bare procedural violation,” which isn’t enough for standing.  As a case quoted by TransUnion said, “[a]n ‘asserted informational injury that causes no adverse effects cannot satisfy Article III.’ ” Thus, plaintiffs’ “desire for Coca-Cola to truthfully label its products, without more, is insufficient to demonstrate that they have suffered any particularized adverse effects.”

Wednesday, September 15, 2021

two "kills 99.9% of germs" cases, divergent results

Mier v. CVS Pharmacy, Inc., 2021 WL 1559367, No. SA CV 20-01979-DOC-ADS (C.D. Cal. Mar. 22, 2021)

Another pandemic case, this one alleging that CVS’s Advanced Formula Hand Sanitizer misleads consumers by representing that it kills 99.99% of germs. The front label read “Kills 99.99% of Germs*.” The asterisk referred to language on the back label: “*Effective at eliminating 99.99% of many common harmful germs and bacteria in as little as 15 seconds.” Mier alleged that many types of germs are not killed by alcohol-based hand sanitizers and that no scientific evidence supports the claim that alcohol-based hand sanitizers kill 99.99% of all germs.

He properly alleged an injury in fact, and plausibly alleged misleadingness. This was not a lack of substantiation claim: Mier alleged the existence of scientific studies that show that hand sanitizer doesn’t kill 99.99% of all germs, that certain types of bacteria are becoming alcohol-resistant, and that alcohol-based hand sanitizers do not kill many non-enveloped viruses, bacterial spores, and protozoan cysts.

But would a reasonable consumer, reading the labels as a whole, interpret them to mean that the product “kill[s] every conceivable disease-causing microorganism”? The back label couldn’t, for purposes of a motion to dismiss, take away the alleged falsity of the front. “If anything, as the Plaintiff suggests, the mention of the Product’s speed and efficiency on the back label may be read as an additional claim, having the effect of reassuring a consumer of the Product’s efficacy.” Anyway, reasonable consumers aren’t required to look for corrections to the front in small print on the back.

There was also no preemption by the FDCA, despite a lot of regulation of antimicrobial products. Nothing about the case required interpretation of federal law or regulation.

Under Sonner, Mier could seek equitable relief under FAL and UCL to the extent that his claims are premised on alleged future harm.

Souter v. Edgewell Personal Care Company, --- F.Supp.3d ----, 2021 WL 3892670, No. 20-CV-1486 TWR (BLM) (S.D. Cal. Jun. 7, 2021)

Plaintiff alleged that advertising for Wet Ones misrepresented that the hand wipes kill 99.99 percent of germs and that the hand wipes are “hypoallergenic” and gentle.” The court dismissed the claims.

For the efficacy representations, plaintiff alleged that the active ingredient in these hand wipes, benzalkonium chloride, is ineffective against certain viruses, bacteria, and spores, which comprise more than 0.01 percent of germs and can cause serious diseases. “Some of those diseases include polio, norovirus, human papillomavirus, picornavirus, crypotosporidium, and C. difficile,” as well as COVID-19. For the skin safety representations, plaintiff alleged that the hand wipes contained ingredients that are “known allergens or skin irritants.”

The court first got rid of defendants’ dumb argument against standing: that Souter never got sick or suffered skin damage due to the hand wipes, which of course is not required for constitutional or statutory standing under the usual California statutes. Likewise, Rule 9(b) was satisfied.

However, the allegations didn’t plausibly plead that a reasonable consumer would be misled.

Efficacy:

No reasonable consumer would believe that a hand wipe advertised to kill 99.99 percent of germs would be effective against the bacteria and viruses that Plaintiff names. For example, Plaintiff does not explain how or why a reasonable consumer would take a hand wipe’s representation that it kills 99.99 percent of germs to mean that it would also be effective against HPV, a sexually transmitted disease, or the norovirus and polyomavirus, which are food-borne illnesses. It also seems implausible that a reasonable consumer would believe that a hand wipe would be effective against polio, a virus that has not had an active case in the United States since 1979. … If anything, a reasonable consumer would likely suspect that a hand wipe would be effective against bacteria often found on hands, and Plaintiff has not alleged how likely these strains of bacteria appear on hands.

Skin safety:

No reasonable consumer would read “hypoallergenic” and “gentle” to mean that it is completely free of ingredients that can cause an allergic reaction. … And what is more, a reasonable consumer may not even think those words suggest anything about the hand wipes’ ingredients as opposed to the hand wipes’ performance. In other words, a reasonable consumer may take “hypoallergenic” and “gentle” to mean something about the effect of the hand wipes when applied on the skin—i.e., that it would not cause skin irritation and be smooth and gentle—regardless of its ingredients, such as whether they contain skin irritants. Either way, “hypoallergenic” and “gentle” do not suggest anything about how the hand wipes may affect the central nervous system, lungs, eyes, kidneys, or the liver, as Plaintiff argues here.

However, there was no preemption, and the doctrine of primary jurisdiction didn’t warrant avoiding a decision. As to the latter, misleadingness is “not a technical area in which the FDA [has] greater technical expertise than the courts.” As to preemption, the plaintiff wasn’t asking the court to impose additional labeling requirements, but challenging the present label as misleading.

LinkedIn posts weren't commercial advertising or promotion for pediatric orthopedics

Orthopediatrics Corp. v. Wishbone Medical, Inc., No. 3:20-CV-929 JD, 2021 WL 3887243 (N.D. Ind. Aug. 31, 2021)

Plaintiffs “have an interest in a patented computer program that allows medical professionals to more easily determine the correct way to position bones for optimal healing after orthopedic procedures.” They alleged that defendants copied the program and infringed the patent, as well as engaged in a smear campaign against plaintiffs in an effort to steal market share in the pediatric orthopedic industry. I’m only going to discuss the false advertising aspects.

There is an ongoing, separate litigation about ownership of the relevant patent; plaintiffs alleged that the two inventors assigned the patent to plaintiff Orthex. Defendants allege that one inventor was contractually bound to disclose and assign to a separate entity any patent he received related to his work on the idea. There was ongoing litigation in Florida in which that entity, IMED, was suing the inventor and two of the instant plaintiffs over the alleged breach.

Plaintiffs alleged that Wishbone employees—including a former OrthoPediatrics employee—engaged in a smear campaign mostly on FB and LinkedIn, including by sharing “articles and reports on the ongoing Florida state court case and another Indiana state court case OrthoPediatrics brought against Wishbone and a former employee.” When one employee shared an article about the Indiana state court litigation, Wishbone’s COO/Secretray/Treasurer commented on the post “suggesting that OrthoPediatrics was following former employees in an effort to ruin their lives.” The poster added a comment of his own stating “[t]he only way [OrthoPediatrics] can compete is to constantly harass us with lawsuits. It is sad.” In another comment, he stated that OrthoPediatrics had been bullying Wishbone for years and that the company was engaged in “evil behavior.” And in another LinkedIn post, he wrote comments that were supportive of the claim that OrthoPediatrics had stolen the patent and suggested that OrthoPediatrics’ actions in doing so were “just the tip of the iceberg.”

First, the court found that the litigation privilege—if it applied to the various claims at issue—would not cover these statements, which were too remote from actual litigation. Social media posts “sharing articles about the state cases and by offering their own, often negative, statements as to what the litigation says about OrthoPediatrics as a company” would not be covered, nor would the other communications alleged in the complaint (an email saying the employee’s “goal with litigation was to put pressure on OrthoPediatrics’s stock price” and “very general allegations” that Wishbone contacted current and potential OrthoPediatrics customers to spread misinformation):

The Defendants have not presented, and the Court has not found, any case that has extended the litigation privilege to statements like those at issue here, which at best have a barely tangential connection to the actual proceedings of the ongoing litigation. Additionally, there is no evidence that protecting these social media posts and other communications, even those that are arguably commenting on the ongoing litigation, would serve the recognized purpose of the privilege to protect free expression that is integral to the judicial system’s functioning.

Lanham Act claim: Were these alleged statements commercial advertising or promotion? The answer depends on industry practice. “There is also no requirement that the communication be broadly distributed to the public, just that there be some public dissemination as opposed to, for example, simply person-to-person correspondence.” Although the Seventh Circuit hasn’t adopted Gordon & Breach, the court looked to that test for guidance as well. Taken together, the complaint didn’t plausibly allege commercial advertising or promotion.

First, the court wasn’t convinced that the social media posts or other alleged statements were commercial speech. (This seems dodgy—they have the usual obvious economic interest of competitors.) The statements didn’t themselves propose a commercial transaction. They didn’t advertise any alternative or promote a specific product. Although one could “infer a possible economic motivation for a subset of the social media posts,” there was “no evidence to suggest that the posts were broadly disseminated to consumers or that they had any economic impact.”

More persuasively, even if this was commercial speech, plaintiffs failed to plead facts showing that the statements were made to influence consumers or were disseminated to the relevant purchasing public within the pediatric orthopedic industry. Plaintiffs never alleged that “social media is a place where potential customers in the pediatric orthopedics space go to receive information about companies and products.”

And finally, plaintiffs didn’t adequately allege materiality. Vague allegations of reputational harm didn’t make clear that the reputational harm was in the eyes of consumers or that the communications actually translated to any lost sales or other economic harm.

Defamation: Plaintiffs failed to allege malice, even in a conclusory way.

Weight Watchers' pandemic termination of in-person services didn't violate consumer protection law

Quintanilla v. WW Int’l, Inc., 2021 WL 2077935, No. 20 Civ. 6261 (PAE) (S.D.N.Y. May 24, 2021)

Weight Watchers shut down in-person services due to the pandemic. Quintanilla alleged that WW’s cancellation of in-person services, and transition of its workshop services online, without issuing refunds or any reduction in membership fees, violated the usual California consumer-protection statutes and constituted breach of contract, unjust enrichment, and money had and received.

WW offered three types of subscription-based memberships: (1) the Digital Membership, which provided access only to WW’s website and app; (2) the Workshop + Digital Membership, which added weekly in-person group workshops led by a WW coach; and (3) the Personal Coaching + Digital Membership, which added one-on-one personal coaching.

Quintanilla alleged that she chose the Workshop + Digital Membership “in part, because she wanted to participate in the weekly in-person support meetings.” WW’s T&C state that “[i]n [WW]’s sole discretion and without prior notice or liability, we may discontinue or modify any aspect of the Offerings.”

While Quintanilla had standing to claim damages, she lacked standing to seek injunctive relief. Her continued subscription couldn’t manufacture standing now that she knew the truth. She “ ‘will not again be under the illusion’ that WW would maintain in-person workshops, else sua sponte reduce prices or issue refunds, during this, or a future, pandemic.”

California consumer protection claims: WW argued that no reasonable consumer would have taken any statements by WW about its in-person workshops to mean that “WW would never, even faced with a once-in-a-century pandemic, modify the in-person aspect of those workshops,” especially given its terms of service. 

The court agreed with WW. “[N]o reasonable consumer could have understood such representations to mean that WW promised to keep offering such services even in the face of a deadly pandemic, and in defiance of dictates of the civil authorities.”  The terms of service bolstered this conclusion, reserving the right to modify services, and would have disabused a reasonable consumer who’d believed otherwise. (Are reasonable consumers required to read the entire terms of service?) The T&C also allowed Quintanilla to cancel her membership and seek a refund in the event of, inter alia, “a Workshop closure.” But she didn’t do so, and WW’s failure to sua sponte issue a refund was not wrongful.

The breach of contract claim also failed “for the straightforward reason that her contract with WW does not mention, let alone promise, in-person workshops.”

acrimony among right-wing pundits isn't commercial advertising or promotion

Corsi v. InfoWars, LLC, 2021 WL 2115272, No. A-20-CV-298-LY (W.D. Tex. May 25, 2021) (R&R)

This is a defamation case with a Lanham Act chunk. The parties are various right-wing public figures. Plaintiffs alleged that, in InfoWars videos, Alex Jones made false claims that Corsi “seemed to be extremely mentally degraded to the point of ... dementia,” had a stroke, and does not tell the truth, and Roger Stone falsely stated that Corsi was fired from a prior job, is an alcoholic, often lies, is willing to perjure himself, and is a “deep state” operative and a “fraud” who seeks to make political conservatives look bad. Stone also allegedly attacked plaintiff Larry Klayman’s reputation, stating that Klayman “could be the single worst lawyer in America,” has “never actually won a courtroom victory in his life,” and is an “idiot” and an “egomaniac.”

Plaintiffs alleged that they were competitors of defendants “as conservative media personalities, broadcasters, authors and columnists on social media and elsewhere.”

Dealing only with the Lanham Act claims: Plaintiffs’ alleged injuries didn’t fall within the Lanham Act’s zone of interests. As other courts have held, “[t]he mere fact that the parties may compete in the marketplace of ideas is not sufficient to invoke the Lanham Act.” This was not commercial advertising or promotion, but rather “expressions of opinions as commentary during a radio show.” (Is failure of the defendant to engage in commercial advertising or promotion really the same thing as failure of the plaintiff to allege that it falls within the statute’s zone of interests? Doesn’t matter a lot, but the court does seem to conflate them.)

Tuesday, September 14, 2021

legal memo to existing customers wasn't "commercial advertising or promotion"

IHS Global Ltd. v. Trade Data Monitor, LLC, 2021 WL 2134909, No. 2:18-cv-01025-DCN (D.S.C. May 21, 2021)

A trade secret/similar case in which IHS owns a database called Global Trade Atlas, which it acquired from the people who founded defendants, and you can basically guess what happened next.

The false advertising counterclaim arose from a legal memo that IHS sent to customers who had been contacted by two people on behalf of defendant TDM:

We understand that you have been contacted by Trade Data Monitor offering an equivalent service to the Global Trade Atlas. As you may be aware TDM is a business owned by an individual who sold the GTI business (including the GTA) to IHS, and TDM also employs a number of former colleagues of IHS [ ]. I’d like to make you aware that for a number of reasons we have commenced proceedings against TDM to protect our proprietary and other rights. Notwithstanding any proceedings we bring against TDM, we remain committed to support you and all of our GTA customers and to the long-term development of the Global Trade Atlas.

This wasn’t “commercial advertising or promotion” because, first, it was sent to only 9 customers, less than 1% of customers, and communicating with “such a minuscule subset of the relevant market can hardly comprise a ‘sufficient[ ] disseminat[ion] to the relevant purchasing public.’” Second, the memo was not “part of an organized campaign to penetrate the relevant market.” It was “a responsive communication to existing customers” rather than “an active advertisement intended to penetrate a market.”

Nor did the memo breach the nondisparagement clause in the parties’ contract. It didn’t “unjustly discredit” the principal or “detract” from his reputation; it didn’t even say that defendants violated the law or breached a contract.

Peloton's innovation claims were puffery, but music ads were a problem

Peloton Interactive, Inc. v. Icon Health & Fitness, Inc., 2021 WL 2188219, No. 20-662-RGA (D. Del. May 28, 2021)

The parties “compete in the at-home fitness market and offer products that allow consumers to attend live and on-demand fitness classes from home.” They’re fighting over cross-allegations of patent infringement, violation of state deceptive trade practices acts, and violations of the Lanham Act. I’m only addressing ICON’s counterclaims for false advertising, not the patent part of the ruling.

ICON counterclaimed that Peloton has made false claims in advertisements regarding its status as an innovator and as a tech company, e.g., that it was a “very hardcore technology company. We make a tablet computer better than apple ... We are as hardcore of a tech shop as anything in NYC right now.” Peloton also stated that was Bike is the “first of its kind.” ICON said this was false advertising, particularly because Peloton licensed the relevant technology from ICON. “Innovator” and “hardcore technology company” were non-actionable puffery. So was “first of its kind,” apparently for vagueness/bluster reasons.

ICON also challenged statements by Peloton’s CEO implying that Peloton has no competitors, such as “Nobody else provides them, so we’re kind of a category of one.” These too were broad, generalized claims of superiority without any reference to a specific product or characteristic.

Finally, ICON alleged that Peloton engaged in a misleading, bait and switch advertising scheme with respect to the availability of music on its platform. Though none of the cited ads referenced any artist or song in particular, the court understood ICON to be alleging “that the playlists linked in the Instagram posts contained music that Peloton lacked a license to or soon removed from its platform.” Peloton rejoined that its challenged Instagram posts “advertise only the availability of Peloton’s playlist feature.” These claims did survive. “Telling consumers that they can ‘find the perfect tunes for [their] on demand ride[s]’ and ‘see the artists and songs powering your on-demand rides’ and linking to specific playlists reasonably suggests that the songs contained in the playlists are available on Peloton’s platform.”

State-law claims were treated similarly.

gold buyer's "up to 90%" payment claims were plausibly misleading

Express Gold Cash, Inc. v. Beyond 79, LLC, 2020 WL 9848431, No. 18-CV-00837 EAW (W.D.N.Y. Dec. 15, 2020)

Previous opinion.  The parties compete in the market for buying gold from ordinary people.

In 2010, the Today Show—a morning television show aired on the NBC network—aired a segment in which it mailed a single item of gold to ten different mail-in precious metals dealers and compared the prices offered. The Today Show received the highest offer from Defendant, which offered 90% of market value. From 2011 to the present, Defendant has published various advertisements stating that it is ranked or rated “#1” by the Today Show.

Previously, some false advertising claims were dismissed, but claims “based on the Today Show-related advertising” were sufficiently pled. Plaintiff sought to amend the complaint, omitting, inter alia, claims regarding “latest payouts” stock photographs but adding allegations that defendant “deceives customers by falsely advertising on its website that it offers the ‘highest payouts in the industry’ and ‘will pay you ... up to 90% for your precious metals.’ ” It sought to add additional allegations about customer reviews and test transactions, and about how defendant’s business operations materially changed since 2010.

Proposed new claims regarding defendant’s statements that it pays “up to 90%” of the value of gold and has the “highest payouts in the industry” were not futile. Plaintiff detailed three test transactions in which the potential sellers were initially offered 33-53% of the value of their gold items, only receiving final offers of up to 87% of the items’ value after a series of negotiations in which the defendant was unresponsive and gave false information. While the proposed complaint didn’t plausibly allege literal falsity—it didn’t show that defendant never pays 90% and it didn’t provide context on standard payouts in the industry—it did plausibly allege misleading advertising. That’s a question of fact. Further, the plaintiff identified “specific customer reviews that evidence confusion regarding the prices paid by Defendant, including reviews stating ‘[Defendant] should do what they advertise and pay 90% of what the gold/jewelry is worth,’” etc. These specific factual allegations were sufficient to make it plausible that consumers were confused or misled.

The defendant argued that these allegations improperly to hold it liable for “statements made directly to individual consumers.” True, wide dissemination is required for commercial advertising or promotion, but the ads challenged here were statements on defendant’s public webpage and otherwise disseminated to the public; individual consumers’ complaints were evidence of those statements’ effects.

Nor was the court persuaded that “highest payouts in the industry” were mere puffery or opinion. Particularly when coupled with the specific assertion that such payouts were up to 90% of an item’s value, that wasn’t vague or unbelievable.

student social media use of school colors/logo not plausibly confusing

Arizona Board of Regents v. Doe, 2021 WL 3684116, No. CV-20-01638-PHX-DWL (D. Ariz. Aug. 18, 2021)

Doe, a real asshole (“deeply unsympathetic,” to use the court’s terms), advertised “ASU Covid Parties” on a similarly-named Instagram account and spewed a lot of bile as well as, in its first post, using ASU’s colors. The Board sued Doe for trademark infringement and related claims; Doe defaulted. Nonetheless, the court—correctly—refused to allow the Board to expand trademark and false advertising law to this conduct. The only evidence of actual confusion was a tweet: “#ASU having COVID parties and claiming it’s a hoax? I am stopping my alumni [membership] and removing my alumni sticker from my car and sending back my ASU alumni plate. I am embarrassed to be associated with thus [sic] ignorant behavior.”

Interestingly, Instagram allegedly refused a TM takedown request because “the reported party appears to be using your trademark to refer to or comment on your goods and services,” despite persistence by ASU’s outside counsel.  However, when the Board sued and moved for a TRO, Facebook agreed to disable the “asu_covid.parties” account and prevent the accountholder from creating new accounts, so the Board agreed to dismiss it as a defendant.

All of ASU’s claims required likely confusion or deception. That just wouldn’t happen to a reasonably prudent consumer. Only one post, the first, used ASU’s distinctive maroon and gold colors and ASU’s logo, and the surrounding context would prevent likely confusion. The accountholder posted the first two comments in the thread, the second of which was: “Those of you coming back to Phoenix. We about to get fucking lit.” “Although it is not uncommon for universities to attempt to appeal to students by imitating their vernacular, no university would drop the f-bomb in an official party invitation,” and a reasonable consumer would not have thought ASU was inviting them to get drunk. “Many of the subsequent messages from the ‘asu_covid.parties’ account affirmatively criticized—often in profane and vulgar terms—ASU’s leadership and official policies. … Many things can be said about these offensive and outrageous statements, but it is not plausible (to put it mildly) that a reasonably prudent consumer would believe ASU was the source or origin of them.”

Although the one tweet called out “#ASU,” it wasn’t clear from the “haphazardly worded tweet” whether this individual was actually confused or simply disgusted that ASU students were sponsoring COVID parties. Even assuming that 0.0002% of the alumni base believed that the profanity-laden posts were actually coming from ASU, that didn’t show confusion. “Tellingly, the comments to the posts suggest that readers believed the ‘asu_covid.parties’ account belonged to a student or group of students, not the university.” And Doe “expressly identified himself as a community advisor (i.e., student) and railed against ASU’s administration and official policies.”

Even if other factors like strength of the mark and similarity of marketing channels favored the Board, “the remaining Sleekcraft factors are unimportant” in a case, such as this one, where “no rational trier of fact could find that a reasonably prudent consumer...would likely be confused.”

What about initial interest confusion? It didn’t apply because even the initial post using maroon and gold  “was too crude and profane to create initial confusion as to its source and origin.” But, “[m]ore broadly, it cannot be the case that every social media post written by a college student that happens to use the school’s colors and/or logo in the post, and identifies the school’s location as the location of the poster, creates initial interest confusion and qualifies as an actionable trademark violation.”

State trademark dilution: the court, somewhat disappointingly, declined to exercise jurisdiction over the claim rather than resolving it.

Monday, September 13, 2021

infant/child painkiller case dismissed as preempted

Youngblood v. CVS Pharmacy, 2021 WL 3700256, No. 2:20-cv-06251-MCS-MRW (C.D. Cal. Aug. 17, 2021)

Another infant/children acetaminophen consumer protection case. This one dismisses the claims as completely preempted by the FTCA.

Plaintiffs argued that their claims are consistent with the FDCA and FDA regulations because of the federal prohibitions on false or misleading labeling. However, a Tentative Final Monograph (TFM) issued by the FDA in 1988 and rendered a final administrative order under the FDCA in 2020 was more specific. TFM prescribes labeling requirements for over-the-counter analgesics for children, including acetaminophen. It directs that products for children between two and 12 years of age be labeled “for Children,” bear specific warnings for that age group, and provide specific dosing instructions for different age ranges. Products for “[c]hildren under 2 years” must bear the instruction “[c]onsult a doctor.” A drug complying with the TFM and general labeling regulations “is generally recognized as safe and effective and is not misbranded.”

One recent case with the same theory rejected preemption on the same grounds, while another found preemption. The court here found that the plaintiffs’ theory sought to do more than bring the packaging at issue in line with federal requirements. Plaintiffs complained that the infants’ product, which is labeled for children between two and three years of age, “does not state that it is ... the same medicine contained in the Children’s Product.” They sought “clear disclosures that there is no pharmacological distinction between ‘Infant’s Product’ and ‘Children’s Product’ and that the two products can be used interchangeably in a manner that is safe to infants and children alike.” They didn’t explain how these requirements were identical to the requirements of the 1988 TFM. A win for them would penalize CVS for not making “representations beyond what the 1988 TFM requires for children’s acetaminophen products.”

two Zillow false advertising cases, divergent outcomes

REX - Real Estate Exchange Inc. v. Zillow Inc., No. C21-312 TSZ, 2021 WL 3930694 (W.D. Wash. Sept. 2, 2021)

Rex sued Zillow and the National Association of Realtors for antitrust and false advertising violations. Surprisingly, the antitrust claims survive, as do false advertising claims agains Zillow.

NAR “is the nation’s largest trade association for real estate professionals.” Membership includes multiple listings services (MLSs). NAR’s optional Segregation Rule requires members’ listings obtained through MLSs internet data exchange feeds to be “displayed separately from listings obtained from other sources.” NAR also adopted a mandatory rule that requires a seller’s agent to include in any MLS listing a predetermined offer of commission to a buyer’s agent, thereby prohibiting any party from later modifying that commission. “NAR’s members allegedly encourage their customers to offer high commissions for buyers’ agents, resulting in historically high, static commissions throughout the United States, with total commissions averaging about 5.5 percent of a home’s sale price.”

REX is a licensed broker that employs licensed real estate agents across the nation, but it is not a member of NAR or any MLS and thus has not agreed to comply with any of NAR’s rules. Home sellers who choose REX’s services can negotiate a buyer agent commission, and thus pay a total average commission of 3.3 percent of a home’s sale price. REX lists its customers’ homes on various real estate aggregator websites, including two of Zillow’s websites, Zillow.com and Trulia.com, the first and fourth most visited real estate aggregator sites in the US. REX’s listings were historically displayed on Zillow’s primary search page alongside the listings of MLS participants.

But then “the growth and substantial inventory of Zillow-owned homes placed Zillow in a new position: Instead of focusing on being an open access point for consumers to display and access residential real estate listings, Zillow’s interests turned to its own substantial home inventory.” In late 2020, Zillow announced that it would join forces with NAR and several MLSs, publicly committing that “all Zillow-owned homes will be listed on the MLSs with commissions paid to agents representing buyers.” NAR’s mandatory Buyer Agent Commission Rule is allegedly the “paramount reason that real estate commissions are two to three times higher in the United States than in comparable international markets.” Zillow also announced that it would begin to use MLS data feeds to populate its websites.

Zillow’s redesigned website, complying with NAR guidelines, created a separate page or tab, called “Other listings,” that is concealed behind the primary results page or tab, called “Agent listings.” As a result, consumers see only a portion of available homes at a time. Even though REX’s customers’ homes are all listed by licensed real estate agents, its lisitngs are now in “Other listings” rather than “Agent listings.” REX alleged that this was deceptive and harmful, and resulted in views plummeting on Zillow’s websites, causing “a corresponding drop in sales and...lost brokerage service revenues to” REX.

redesigned tab; "other listings" in gray, top right

views after the change

The court found that the antitrust claims were sufficiently well pled.

Lanham Act claim: Was this commercial advertising or promotion? The key question was the Gordon & Breach element asking whether the challenged commercial speech was “for the purpose of influencing consumers to buy defendant’s goods or services,” a requirement not affected by Lexmark.

The complaint alleged that Zillow joined the NAR and MLSs to promote its inventory of Zillow-owned homes. It then changed its websites to comply with the new MLS rules and insulate MLS brokers from competition. The allegations that Zillow adopted the misleading labeling system “for the purpose of influencing its customers to use the Zillow Offers business, as well as the services of other MLS agents, by concealing or discouraging the services of non-MLS agents like Plaintiff,” were sufficient.

However, REX failed to state a Lanham Act claim against NAR. “There are no other allegations explaining what NAR did to design or encourage this particular labeling system on Zillow’s websites, let alone when, where, and how NAR did it.”

So too with the Washington Consumer Protection Act claims. Zillow argued that its conduct was “reasonable in relation to the development and preservation of [its] business.” That was a factual issue inappropriate for a motion to dismiss, even if such a business purpose defense was available. But NAR got off the hook for the same reasons as with the Lanham Act claim. 

Picket Fence Preview, Inc. v. Zillow, Inc., No. 2:21-cv-00012, 2021 WL 3680717 (D. Vt. Aug. 19, 2021)

Picket Fence, which publishes listings for homes that are for-sale-by-owner (FSBO), alleged that Zillow’s policy of providing free online listings for FSBO homes violated the Vermont Consumer Protection Act and the Lanham Act and constituted state law unfair competition. The court dismissed the claims.

“A major incentive for homeowners to advertise with [Plaintiff] is reaching potential buyers directly through [Plaintiff’s] publications and avoiding a 6-8% real estate commission” that is typically paid to real estate agents and brokers. When an FSBO seller lists real property on Zillow, potential buyers see “Contact Agent” prominently displayed. Agents can allegedly pay to get their name on the listing or to be the only contact for a listing. The “Get More Information” tab lists the contact information for “Premier Agents” first “and the owner is listed at the bottom of the list.” Zillow allegedly makes it difficult or impossible to contact the owner.

This is allegedly a bait and switch; FSBO sellers “may lose potential sales” from these listings “because Premier Agents may redirect potential purchasers to other properties if the [FSBO seller] is not willing to share a commission with the Premier Agent” or if another property would provide the Premier Agent with “a better commission.” While Zillow “claims that it is offering a service for free, [ ] in reality [it] is charging the Premier Agents so they can advertise on the website of those free ads and receive hijacked inquiries from deceived buyers.”

Picket Fence, which charges for FSBO listings, allegedly lost a lot of business to Zillow, and was one of the few remaining FSBO publications to survive Zillow.

First, Picket Fence lacked standing to sue on behalf of FSBO sellers.  And it couldn’t sue under the VCPA because it wasn’t a consumer. Nor could it bring a predatory pricing claim because it didn’t allege that the free listings weren’t free or below cost, or that there was a dangerous probability that Zillow would raise prices once competitors were driven from the market.

Lanham Act claim: Lexmark standing existed, but deception wasn’t plausibly pled. Picket Fence argued that Zillow misleadingly failed to “disclose that interested shoppers would be directed to Premier Agents.” However, since 2017, Defendant’s website has included a disclaimer stating that “[b]y pressing Contact, [potential buyers] agree that Zillow Group and its affiliates, and real estate professionals may call/text [potential buyers] about [their] inquiry.” And Picket Fence failed to identify any representation that any sales would be “commission free” or any promise that a real estate agent would not be involved in a subsequent sale. “An FSBO seller remains free to refuse to deal with a real estate agent and free to refuse to pay a real estate agent’s commission even if it uses Defendant’s website. Defendant’s listing focuses only on a preliminary step in a real estate transaction with no promise as to what happens thereafter. Stated differently, a customer who is promised a free listing is not promised a commission free sale either directly or by implication.”