IIC decision also says some things about false advertising: materiality may not be presumed from literal falsity

Select Comfort Corp. v. Baxter; 996 F.3d 925 (8^th Cir. 2021)

You probably know that the court of appeals sent this case back for retrial on an initial interest confusion theory. I won’t say much about that, though I do have a big question, but there are also false advertising aspects of the case.

The parties compete in the market for adjustable air mattresses and related products. Plaintiffs’ registered trademarks include “SLEEP NUMBER”, “WHAT’S YOUR SLEEP NUMBER”, “SELECT COMFORT”, and “COMFORTAIRE.” The defendants allegedly “compounded internet-related confusion by making fraudulent misrepresentations and failing to dispel confusion when consumers contacted Defendants’ call centers.” The case went to a jury only on point of sale confusion, not initial interest confusion, and the jury found in defendants’ favor (including a finding, untouched on appeal, that Select Comfort did not have trademark rights in “Number Bed”).

TM: The court of appeals found that, because there was a question of fact about how sophisticated mattress consumers are, the initial interest confusion theory should be submitted to the jury. I have practical questions: Given that a jury already found no likely point of sale confusion, can point of sale confusion evidence be part of the retrial? The court of appeals heavily relied on evidence of “actual confusion” in reversing—but is that evidence of IIC? Should the jury instructions limit the jury to deciding whether there was initial interest confusion? The most relevant comment made by the court of appeals is not super helpful in answering these questions: “As a practical matter, the ability to determine the inferences the jury drew from the evidence is substantially clouded by (1) the interrelated nature of the infringement, dilution, and misrepresentation claims in this case, (2) the mixed verdict, and (3) our conclusion that summary judgment and instructional error occurred.” (The dilution claims are now out of the case because Select Comfort didn’t meaningfully appeal the jury’s rejection thereof.) The court or appeals also commented that relying on IIC might change the available damages and relief—how exactly?

The evidence of internet use:

Defendants had used Plaintiffs’ actual trademarks as paid search terms and as identical phrases in their own web-based advertising in text pages, combined text and graphical pages, as terms embedded in linked internet address urls, and in other fashions. Examples included website links that presented Plaintiffs’ trademarks as identical phrases (e.g. personalcomfortbed.com/vSleepNumber or www.personalcomfortbed.com/cComfortaire). In addition, Defendants used phrases similar to Plaintiffs’ trademarks, often with words broken up in a grammatically non-sensical fashion. Examples included the use of terms such as “Sleep 55% Off Number Beds” and “Comfort Air Beds on Sale” in online advertisements.

There was also disputed survey evidence on actual consumer confusion, and “instances of actual confusion, often from transcripts of call-center interactions, messages from customers, or messages from call-center employees.”

The transcripts and recordings of call-center interactions appeared to show that Defendants’ call-center employees at times attempted to promote confusion and at other times attempted to dispel confusion. Finally, evidence included statements from Defendants’ principals in which they described confusion as between Plaintiffs’ and Defendants’ brands as a “good thing” and, in response to reports of confusion, indicated that their advertisements were “working.”

How much of this is even relevant for determining whether IIC exists?

False advertising: the jury found for Select Comfort on seven false advertising claims and for defendants on the remaining eight, awarding about $160,000 in disgorgement and nothing on lost profits.

The court of appeals held that the instructions erroneously allowed the jury to presume materiality from literal falsity. The instructions allowed a presumption of materiality from “(1) a literally false statement; (2) a false statement relating to the inherent quality or characteristic of a product; or (3) a deliberately false or misleading statement that was comparative or implicated a competitor or its product.” (1) was the error. (2) and (3) “are essentially definitions for materiality that describe types of statements reasonable persons would recognize as likely to influence a purchasing decision.” But literal falsity doesn’t necessarily entail materiality. “[A]n inference of a statement’s materiality based merely upon its falsity is neither so clear nor direct that it might support a burden-shifting presumption in a plaintiff’s favor.” Thus, it was error, and not harmless error, so the court of appeals reversed and remanded for a new trial on those seven claims.