Tuesday, October 26, 2021

Seen in NYC: the Twix bar that isn't.

 Yum. "A shortbread cookie topped with a layer of caramel, a layer of chocolate ganache, dipped in dark chocolate and drizzled with white chocolate."



Timeshare case: proof of causation/damages is difficult especially w/o grasp of Bayesian probability

Wyndham Vacation Ownership, Inc. v. Sussman, 2021 WL 4948099, No. 6:18-cv-2171-GAP-DCI (M.D. Fla. Sept. 20, 2021)

In this timeshare exit false advertising litigation, the court excludes Wyndham’s expert. Timeshare exit entities like defendant TET used “online advertising and oral sales pitches to timeshare owners to convince them to sign up for TET’s service.” TET then contracted with Sussman, an attorney, who would receive a timeshare owner’s documents, send letters on behalf of that owner to timeshare businesses, and communicate with those businesses to get the owner out of his or her obligations. Wyndham claims that TET and Sussman falsely advertised and induced timeshare owners to breach their contracts with Wyndham by ceasing payments. Wyndham’s expert surveyed timeshare owners who are not related to this case to gauge their responses to TET’s advertisements. Scene-setting:

A repeated issue in all these cases is how the timeshare companies can prove that the timeshare exit entities caused their damages—i.e., did the entities induce each of the timeshare owners at issue to stop making their timeshare payments. The most obvious route to proving these cases would be to solicit testimony from the owners as to their reason for breaching their contracts. However, these lawsuits have involved hundreds of timeshare owners, and obtaining testimony from every owner would be a labor-intensive effort. Hoping to avoid such a task, the timeshare companies have attempted, with little success, to find a shortcut.

It's not enough to add up the total of all missed payments without a link between the defendants and the owners’ actions. In a previous timeshare case, the court ruled that, “absent direct testimony from the owners regarding their missed payments, [plaintiff] would not be permitted to proceed to trial based on the expert’s testimony.” The court then “entertained the possibility that statistical evidence, rather than direct testimony, might support causation.” The plaintiff thus offered a statistical expert who used a subset of “influenced” accounts and extrapolated those to the remaining hundreds of accounts at issue.  “This testimony was excluded as unreliable due to the +22% margin of error the expert’s method produced, and significant issues with the way the expert obtained his data.”

This time, Wyndham tried a consumer survey of timeshare owners. Respondents saw a TET webpage, a video performance of TET’s sales presentation script, and a welcome email that TET used. Survey questions included whether respondents believed they were being told to stop making timeshare payments and whether they would be inclined to stop making timeshare payments. The expert opined that, based on the survey: (1) 32.2% of the respondents believed the statements in the emails told them to stop making timeshare payments; (2) 18.5% of those respondents were either very likely or somewhat likely to act on those instructions and stop making payments; and (3) the survey results “demonstrate that [TET] customers were likely misled by [TET’s] sales practices and believed that it was appropriate to cease making payments to their timeshare company.”

However, the expert did not perform any statistical or other analysis comparing the sample population to Wyndham’s owners. He didn’t explain explain why his methodology reliably enabled the trier of fact to apply his results on causation to the owners at issue in this case. “[T]his case is not about the average consumer. This case is about an identified set of timeshare owners, every one of whom acted on facts and circumstances specific to him or her. [The expert] may have analyzed timeshare owners in general but his failure to connect his analysis to the Wyndham owners renders his remaining opinions irrelevant to this case.” A jury couldn’t extrapolate the results to the 270 defaulting Wyndham owners at issue, especially since, per the survey, only 16 of those 270 would likely stop making payments as a result of TET’s ads, and it wasn’t clear which 16 to pick for purposes of calculating damages.

[This last bit seems like an error about the nature of the universe of Wyndham owners at issue—as I understand it, the 270 did stop, one way or another, so rather than the probability of whether someone who saw the ads would rely on the ads to stop making payments, P[A|B], we really need to know whether someone who stopped making payments did so because they saw the ads, P[B|A], something that needs more information to be calculated even if we know P[A|B]. The survey is relevant to show P[A|B], which itself is relevant to the overall question though insufficient on its own.] 

Wyndham Vacation Ownership, Inc. v. Sussman, 2021 WL 4949162, No. 6:18-cv-2171-GAP-DCI (M.D. Fla. Sept. 27, 2021)

With the expert out, Sussman did much better on the substantive causes of action. The remaining claims against him were for contributory false advertising in violation of the Lanham Act; tortious interference with existing contracts under Florida law; civil conspiracy to commit tortious interference; and violations of Florida’s Deceptive and Unfair Trade Practices Act.

The Lanham Act false advertising claim was based solely on TET’s oral sales presentations (OSPs).  Such oral statements, if widely disseminated, can be commercial advertising.  But there wasn’t sufficient evidence that TET “routinely” told Wyndham’s timeshare owners to stop making timeshare payments in the OSPs. TET’s script for the OSPs didn’t contain an instruction to cease making timeshare payments. The owner testimony wasn’t consistent—only one said she was told to stop making timeshare payments during a sales presentation. TET officers’ testimony didn’t specify that any instructions to stop payments were disseminated during a sales presentation. Thus, Sussman got summary judgment.

Tortious interference: There was no testimony that Sussman ever told a TET-referred client to stop paying. “In every owner deposition that Wyndham submitted, the owner states they stopped paying because of TET, not Sussman. In fact, when asked about Sussman, the owners stated that they had no recollection of speaking with him or who he even was.” No tortious interference.

Conspiracy to commit tortious interference: Was there an agreement with TET? Not a written one, but “Sussman told TET that he would not accept any owner who had not stopped or did not intend to stop making payments to his or her timeshare company. Sussman explained that this was because he could not successfully negotiate a release for any owner who continued to make payments on their timeshare—i.e., carry out the service he was being paid to do.” Thus, a jury could reasonably find an agreement that TET would interfere with Wyndham’s contracts.

What about damage causation? Three relevant owners testified that they stopped paying because of TET, so that created an issue of fact on whether TET caused the breach for those three. But what about the other 247 relevant owners? There was only testimony about TET’s general practices in communicating with clients, and the fact that 208 of the 250 relevant owners stopped making their timeshare payments after hiring TET. “Wyndham’s circumstantial evidence may permit a juror to infer that TET interfered with some contracts, but no juror could reasonably infer from this evidence that TET proximately caused Wyndham’s damages…. Without some form of direct testimony from these owners or expert testimony to fill in the gaps between TET’s general practices and the decisions of the individual owners, Wyndham cannot prove causation.” TET’s CEO stated by affidavit that,while some company representatives advised clients to stop making payments, TET did not have a companywide policy of doing so,” and that “clients had varying reasons for not wanting to pay; some had already planned to stop making payments and others could not afford to pay anymore.” Without the owners’ testimony, a factfinder couldn’t determine which owners would have stopped paying regardless of TET’s involvement.

FDUTPA: Sending letters about the timeshares fell within FDUTPA’s definition of trade or commerce. However, as to loss causation, Sussman was entitled to summary judgment on the damages claim with respect to any owner who didn’t testify about causation, though injunctive relief was still possible. 

Monday, October 25, 2021

Court rejects "buy button" false advertising claim because consumer hasn't yet lost access to "purchased" content

Caudel v. Amazon.com, 2021 WL 4819602, No. 20-cv-00848-KJM-KJN (E.D. Cal. Oct. 15, 2021)

Disagreeing with a case against Apple, the court here concludes that Amazon’s “buy” option that doesn’t give consumers ownership does not harm consumers who haven’t (yet) lost access to the content, rejecting the price premium theory for reasons that don’t make much sense to me.

The complaint alleges that Amazon charges around $10 less for renting electronic video content rather than purchasing it, but that the “buy” button doesn’t actually give consumers ownership, and that reasonable consumers would not agree to the higher fee if they understood that purchased video content might disappear from their digital libraries at some point in the future.

“[T]he majority of courts have consistently found economic injury when the products contain an actual defect and are allegedly worth less than what the consumer paid. But see Andino v. Apple, Inc., No. 20-01628, 2021 WL 1549667, at *2 (E.D. Cal. Apr. 20, 2021).” [No discussion; just a “but see” and a summary of the result.]  Although Caudel alleged that she “receive[d] a product worth less than [its actual] value,” there was just “a potential risk” of losing video content, which is “not concrete and particularized” as to her.

Me: But what about the price premium she alleged she personally paid? Why is that not concrete and particularized as to her, not to mention not just “imminent” but materialized in the money gone from her pocket? The implicit claim is that if there wasn’t an “actual defect,” then there can’t have been a price premium, but plenty of things can be worth less than you paid for them without an “actual defect.” That’s kind of the point of false advertising law generally, and certainly the “Made in the USA” cases make clear that deviation from what you were promised as part of the bargain is a potential cause of economic loss.

Puzzlingly calling a venue name a "title," court nonetheless rejects claim against MTV show

MGFB Properties, Inc. v. ViacomCBS INC., 2021 WL 4843905, NO. 5:19cv257-RH-MJF (N.D. Fla. Sept. 22, 2021)

The Flora-Bama lounge and entertainment complext is “regionally famous,” and MTV created a national TV series, MTV Floribama Shore. The district court granted summary judgment on the resulting trademark claims, reasoning that plaintiffs’ likelihood of confusion showing was “not strong enough to meet the standard that applies to artistic works. This is so in part because the plaintiffs and defendants use the competing marks in substantially different settings.” From the fact section:

The record gives no reason to believe that, had there been no Flora-Bama, the defendants would have come up with the name Floribama Shore on their own.

This does not mean, however, that the defendants intended to benefit from the plaintiffs’ goodwill. The defendants believed the name Floribama Shore was superior on its own merit to such alternatives as “Florida Shore” or “Gulf Shore.” The show, after all, would feature the perceived culture on a Florida panhandle beach—a culture that was a closer match to Alabama than to many places on the Florida coast or Gulf of Mexico, including, for example, those in south Florida. “Floribama” fit.

The plaintiffs’ evidence of likely confusion, “while not strong,” would have withstood summary judgment in a commercial use case. “But the standard is more exacting when a junior user’s artistic expression is in the mix.” The court applied Rogers v. Grimaldi with the original title-v-title exception, not the Ninth Circuit version that first rejected the exception but later reincorporated title-v-title into the broader Gordon v. Drape Creative epicycle. The Eleventh Circuit adopted Rogers, but did not specify whether it was adopting the Rogers title-v-title footnote, so the court here turned to subsequent Second Circuit precedent, specifically Cliffs Notes, Inc. v. Bantam Doubleday Dell Publishing Group, Inc., 886 F.2d 490 (2d Cir. 1989). This was a title-v-title case in which Rogers did not strictly apply, but the First Amendment concerns for protecting the defendant’s noncommercial speech warranted applying the likely confusion factors with special care. In Twin Peaks Productions, Inc. v. Publications International, Ltd., 996 F.2d 1366 (2d. Cir. 1993), another title-v-title case, the court emphasized: “the finding of likelihood of confusion must be particularly compelling to outweigh the First Amendment interest recognized in Rogers.” The Eleventh Circuit subsequently cited Cliffs Notes with approval for the propositions that Rogers is generally applicable to works of artistic expression and that, “when deciding whether an artistically expressive work infringes a trademark,” a court must “carefully ‘weigh the public interest in free expression against the public interest in avoiding consumer confusion.’ ”

The court rejected defendants’ argument that, under the Ninth Circuit Empire test, an artistically relevant title can violate the Lanham Act only if it explicitly misleads as to the source or content of the work. “If that were indeed the law, and if ‘explicitly’ were construed as strictly as the defendants say it should be, then the defendants would easily prevail on the Lanham Act claims in the case at bar.” But it isn’t clear that’s what the Ninth Circuit thinks, after Gordon, and anyway the title-v-title exception plus First Amendment-flavored balancing to favor artistic works is superior (apparently because it gives more weight to “the interest in trademark protection,” though why that should ever override First Amendment rights to engage in noncommercial speech in cases of nonexplicit misleadingness—that is, why liability for implied endorsement would satisfy strict scrutiny—is left as an exercise for the reader).

[FWIW, in my view Cliffs Notes is better than Gordon because Gordon inappropriately generalized the very particular circumstance of the title of a conventional expressive work to create a rule that allows the plaintiff to prevail even when the putative infringement stemmed from use in content, e.g., the punchline of a joke. Stated that way, it is a much broader exception to Rogers and a much less justified one. For one thing, the only reason the Rogers court even contemplated liability for noncommercial speech was the special marketing role played by titles in particular. For another, the followup Second Circuit case, Cliffs Notes—unlike Gordon—says you have to remember the important First Amendment interests at stake even when you’re back in multifactor test land.]

Why is this even relevant, anyway? As the court notes, “[t]he plaintiffs’ use of its mark Flora-Bama relates primarily to its facility, not to the title of an artistic work.” Unconvincingly, the court says,

But the mark has occasionally been used in the title to artistic works, and in any event, artistic works are performed at the Flora-Bama. So the exception applies to the plaintiffs’ claims, at least to the extent the defendants’ title MTV Floribama Shore could be found misleading and confusingly similar to the plaintiffs’ titles.

This part is not persuasive. “Occasionally been used in the title to artistic works” is a red herring. It does not appear that any trademark rights stem from such uses—they seem to have been referential—or that plaintiffs own any valid trademark rights for artistic works (the ones mentioned in the opinion are CMT’s broadcast of a show, Kenny Chesney: Live from the Flora-Bama and Chesney’s song Flora-Bama). [I’m sure they have contracts saying that they permitted these uses, but so what? That doesn’t give them affirmative trademark rights for songs or TV shows.] Likewise, the idea that because songs are performed at a venue, then the venue is an “artistic work” with a “title” doesn’t make sense. That’s like saying that, because Ford Motor Co. has published corporate histories in its name, sponsors Masterpiece Theater, and creates extensive social media content, “Ford Motor Company” is now a title for Rogers purposes, or that the existence of The Texas Rangers: The Authorized History or The Code: An Authorized History of the ASME Boiler and Pressure Vessel Code makes those entities into titles for Rogers purposes.

Nonetheless, defendants still win.

Strength: Incontestability “counts for more in the Eleventh Circuit than in most others.” But the “nature of the mark” was more important. It was “geographically descriptive—a portmanteau of the names of the two states on whose border the plaintiffs’ establishment sits,” but also commercially strong in pointing specifically to plaintiffs, at least before the MTV show. Similarity: Pronunciation was identical, spelling slightly different, MTV always used “Shore” after “Floribama,” and they usually insert “MTV” before “Floribama.” Also, “[t]he graphics are wholly distinct.” Overall cuts both ways.

And here is where the weirdness of calling the name of a venue a “title” kicks in. On the similarity of goods and services, the court appropriately focused on the things in which plaintiffs had rights—bar/lounge/concert services. Thus, the parties’ goods and services were highly dissimilar, as were the trade channels/customers.

Intent was neutral: Defendants copied the name, but there was

a convincing explanation for choosing the name on the merits, unrelated to the plaintiffs’ goodwill. While not previously used for the purpose, the term “Floribama” well describes the geographic area hosting the culture depicted on the defendants’ show. And Floribama Shore follows the pattern set by Jersey Shore, the first show in the series. The defendants’ target market—a national television audience—far exceeds the reach of the plaintiffs’ goodwill. There is no reason to believe the defendants adopted Floribama Shore for their national television series based not on the title’s own merit but to trade on the Flora-Bama’s regional popularity.

Actual confusion: also neutral, despite “the plaintiffs’ poorly constructed surveys and some evidence of confusion, primarily in social media.” This evidence was “scant” and mostly “ambiguous,” e.g., “a social-media user’s misspelling of ‘Floribama’ in a post about the defendants’ show hardly indicates confusion with the Flora-Bama. Social media abound with misspellings and grammatical errors, and it is unlikely many English majors post comments about the defendants’ show.”  So too with casual inquiries by Flora-Bama customers—such customers “may suspect there is a connection, or may suspect there is none, or may simply be making small talk.” There was no evidence of material confusion:

The record includes no evidence that any individual ever decided to watch—or not to watch—Floribama Shore because the individual believed the show was related to or endorsed by the Flora-Bama. And the record includes no evidence that any individual ever decided to go—or not to go—to the Flora-Bama because the individual believed it was related to or endorsed by Floribama Shore. The same is true of the parties’ collateral products, including the plaintiffs’ shows and licensed song.

Given the First Amendment interests at stake, this wasn’t enough. “Here the defendants’ primary intent was expression—conveying to the audience the subject of the television series—not exploiting the plaintiffs’ mark,” and the court emphasized “the substantial disparity in how the plaintiffs and defendants use their marks.” This result also protected “the small amount of consumer products Viacom CBS has sold using the Floribama Shore name,” which generated $99 in revenue. [Citing Empire:] “When Rogers and its progeny protect use of a mark in the title of an artistic work, the same ordinarily is true for the sale of consumer products that display the title and are otherwise noninfringing.”

The court would also construe state law to avoid a conflict with the First Amendment (and apply the rule that state and federal trademark principles are generally the same), including state dilution law.

Then some more sigh-worthy dicta: Although the Florida dilution statute has an explicit exclusion for “[n]oncommercial use of the mark,” the court wasn’t convinced that “use of a mark in an artistic work is always noncommercial,” because previous cases finding that noncommercial speech was noncommercial involved lampoons, documentaries, or “speech intended primarily to express a viewpoint,” Smith v. Wal-Mart Stores, Inc., 537 F. Supp. 2d 1302 (N.D. Ga. 2008), so the court declined to settle the issue. [Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894 (9th Cir. 2002), cited as the “lampoon,” was super super clear that its result did not depend on the nature of the commentary but on the characterization of the song as noncommercial speech, but I suppose the court here thought the facts overrode the stated reasoning.]

Separately, plaintiffs failed to show the requisite Florida fame, rather than fame in the Flora-Bama’s geographic area.

"virologist developed" etc. plausibly implies disease prevention

Corbett v. PharmaCare U.S., Inc., 2021 WL 4866124, No. 21cv137-GPC(AGS) (S.D. Cal. Oct. 19, 2021)

This is a putative class action for violations of consumer fraud statutes in the sale of Sambucol, a dietary supplement that contains a “proprietary extract” of black elderberry. Plaintiffs brought the usual California claims; warranty claims; and Massachusetts and Missouri consumer protection claims.

“In March 2020, sales of the elderberry supplements increased by 415% over prior years as consumers sought to buy products that would offer ‘immune support’ from the coronavirus.” Plaintiffs had two theories: (1) the products were illegal to sell under the FDCA/DSHEA and California’s Sherman Law; and (2) false advertising by affirmative statements and omissions:

Under the DSHEA, a “new” dietary ingredient (those not used in the United States before 1994), may be used in dietary supplements but must first be submitted to the FDA prior to sale unless the ingredient has been “present in the food supply as an article used for food without being chemically altered.” … Dietary supplements that contain undisclosed NDIs are “adulterated” for purposes of the FDCA. Because the elderberry extract was not marketed as a dietary ingredient in the U.S. before 1994, and is an NDI, the FAC maintains that Defendant did not notify the FDA with the required NDI notification for its elderberry extract. As such, Plaintiffs allege that Defendant’s Products are illegal to sell because the elderberry extract is adulterated and misbranded under the FDCA and California’s Sherman.

In addition, defendant allegedly made prohibited implied disease claims, not merely structure/function claims, by marketing the products as “scientifically tested”, “virologist developed”, “developed by a world renowned virologist”, along with advertising that the products “support[ ] immunity” or claim “immunity support.” “Scientifically tested” was allegedly misleading because no published studies of the products exist, and the existing studies test a different elderberry extract, and because it improperly suggested that the products were effective against disease. And the products were allegedly misbranded because the labeling fails to include adequate directions for use and because they claimed “high antioxidant levels” in violation of regulations.

The named plaintiffs allegedly saw and relied on the misleading representations, and believed that the products were legally sold supplements.

PharmaCare argued that plaintiffs lacked California statutory standing because the alleged fact that the products were illegal didn’t establish standing. However, plaintiffs alleged material misrepresentations and reliance. The Ninth Circuit has explained that the “misrepresentation of prescription pet food as medicine or FDA-controlled can be a material fact for a reasonable consumer—particularly for a pet owner who is dealing with possibly a sick or unhealthy pet,” and so too for humans. “They do not merely allege a regulatory violation but base their claims on misrepresentations arising from regulatory violations.”  The same analysis applied to Missouri’s consumer protection law, which requires “a causal connection between the ascertainable loss and the unfair or deceptive merchandising practice” but not reliance. And to Massachusetts law, which does require reliance.

NLEA preemption:  The NLEA expressly preempts any state law that establishes “any requirement respecting any claim of the type described in section 343(r)(1) of this title made in the label or labeling of food that is not identical to the requirement of section 343(r) of this title.”  PharmaCare argued that its use of the phrase “supports the immune system” was an acceptable structure/function claim and thus allegations of an implied disease claim were preempted.

 As FDA regulations state, “[i]mplied disease claims do not mention the name of a specific disease, but refer to identifiable characteristics of a disease from which the disease itself may be inferred.” Courts may consider extra-label materials when determining whether certain advertising is an implied disease claim. The FDA warned that its general rule wasn’t “intended to establish whether any particular structure/function claim is appropriate for any specific product,” and that “an otherwise acceptable structure/function claim might nevertheless be false or misleading for other reasons.” But, as an example, “supports the body’s antiviral capabilities” or “supports the body’s ability to resist infection” would be a disease claim, in contrast to “supports the immune system,” “[a] more general reference to an effect on a body system that did not imply prevention or treatment of a disease state...” Id. The FDA explained that the distinction “is one of specificity.”

PharmCare argued that “supports the immune system” “helps you...stay healthy” and “arms you with the best protection nature has to offer” were acceptable structure/function claims. By themselves, that would be true, but plaintiffs also alleged label and extra-label statements and alleged that, “viewed in their totality, they are either explicitly or implicitly claiming to mitigate or prevent disease.” In particular, “scientifically tested”, “[v]irologist [d]eveloped”, contain “the most extensively researched” extract “in the world” and “[d]eveloped by a world renowned Virologist,” allegedly necessarily implied disease prevention “because a virologist is an expert that deals with viruses and the disease they cause.” So to with other claims like “stay healthy through the toughest season” which allegedly implied cold/flu protection, and a FAQ entry answering  “What are the traditional uses of black elderberry?” with the statement that it is “used in traditional remedies for colds, coughs, and upper respiratory infections.” PharmaCare’s homepage website states, “Get that NOT WORRIED ABOUT A 5 HOUR FLIGHT IN THE MIDDLE SEAT kinda feeling”: a reasonable consumer could understand this statement as promising protection from the COVID virus or other transmissible diseases. 

Tuesday, October 19, 2021

Tiffany blues

 Today's swag for use in class, Stuart Semple's Tiff (or is it Tiff---?):




packaging


Wednesday, October 13, 2021

Trump loses motion to dismiss Electric Avenue case on fair use grounds

Grant v. Trump, No. 20-cv-7103 (JGK) (S.D.N.Y. Sept. 28, 2021)

Eddy Grant sued Trump and his campaign for retweeting a pro-Trump video that used Grant’s famous “Electric Avenue” without authorization. Although the motion to dismiss was far better argued than the average Trump filing, it still failed—in the process signaling that the effects of Warhol may not be limited to visual art, as many had hoped.

The animated video was 55 seconds long. It begins with a depiction of a high-speed red train that displays “Trump Pence KAG [Keep America Great] 2020.”

After the red train passes, the beginning of Electric Avenue can be heard clearly, along with an excerpt of a speech by President Biden. Around the same time, a slow-moving handcar, operated by an animated likeness of President Biden, comes into view bearing the words "Biden President: Your Hair Smells Terrific." The video—in particular the contrast between the trains and the unflattering nature of the excerpted language from President Biden—appears intended to criticize President Biden and depict the strength of former President Trump's campaign.

Grant’s song appears throughout the last 40 seconds of the video.

Fair use can rarely be decided on a motion to dismiss, the court said, and this wasn’t one of those cases.

Transformativeness: Just because the video and song served different purposes didn’t make the video transformative. “While it is true that the animation is partisan political commentary and the song apparently is not, the inquiry does not focus exclusively on the character of the animation; rather, it focuses on the character of the animation's use of Grant's song.” Under Warhol, when there isn’t “obvious[]” comment or relation back, or use of the original “for a purpose other than that for which it was created,” then “the bare assertion of a ‘higher or different artistic use[]’ is insufficient to render a work transformative.” Here, “the video’s overarching political purpose does not automatically render its use of any non-political work transformative.”

The use of the song itself in the video was “best described as a wholesale copying of music to accompany a political campaign ad.” Compared to other political cases like the Don Henley/Running on Empty case, “the use here does far less—if anything—to modify the song or to comment on the song or its author,” whereas in Henley defendants changed lyrics and provided their own vocals, and supposedly poked fun at Henley’s own liberalism, and still that wasn’t transformative because the ad took too much in relation to any legitimate parodic purpose. Here, there was no editing of the “lyrics, vocals, or instrumentals at all.” Further, “the animation does not use Electric Avenue as a vehicle to deliver its satirical message, and it makes no effort to poke fun at the song or Grant.” This was less-favored satire rather than parody, and “defendants have offered no justification for their extensive borrowing.”

Cariou, by contrast, involved fair uses where works were “obscured and altered to the point that [they were] barely recognizable.” The non-fair-use-as-a-matter-of-law works in Cariou “superimposed other elements that did not obscure the original [work,] and … the original [work] remained ...     a major if not dominant component of the impression created by the allegedly infringing work.” Likewise, in Warhol, there was no fair use because the secondary work “retain[ed] the essential elements of the [original work] without significantly adding to or altering those elements.”

So too here. Electric Avenue wasn’t edited at all and was “instantly recognizable”; the additional audio of President Biden’s speech did nothing to obscure the song; and the song, which lasted over 2/3 of the video was, “a major component of the impression created by the animation, even though it appears that the video's creator could have chosen nearly any other music to serve the same entertaining purpose.”

Brown v. Netflix, Inc., 462 F. Supp. 3d 453 (S.D.N.Y. 2020), aff’d, 855 F. App'x 61 (2d Cir. 2021), found a documentary’s unauthorized use of a song to be transformative and fair, but that case was readily distinguishable. That film used 8 seconds of a song as part of the film’s “commentary on the burlesque art form and its resurgence in Portland, Oregon.” The film combined the burlesque performances “with cultural commentary on topics such as gender, sexuality, and the artistic process,” and incidentally captured a dancer’s use of the song as background for her performance. “The use here is different in magnitude and kind: the song plays for more than two-thirds of the animation and plays no discernible role in communicating the video’s overarching political commentary.” Brown, by contrast, used the brief excerpt as part of a performance about which the documentary was commenting, and the content of the song “substantively contributed to the burlesque act.”

Also, the use here was commercial because “commercial” in §107 doesn’t mean commercial, but “whether the user stands to profit from exploitation of the copyrighted material without paying the customary price.” [Really sad that GvO didn’t address this—there seems to me no chance that the current textualist Court would accept this conflation of a factor one consideration with factor four’s market inquiry.] The use in Henley was commercial because defendants “stood to gain publicity and campaign donations from their use of Henley’s music.” Here, “the possibility of commercial advantage cannot be excluded at this point, especially in light of the instruction from the Second Circuit Court of Appeals that ‘the profit/non-profit distinction is context specific, not dollar dominated.’”

Another SDNY case, MasterCard Int’l Inc. v. Nader 2000 Primary Comm., Inc., No. 00-cv-6068, 2004 WL 434404 (S.D.N.Y. Mar. 8, 2004), held that a political advertisement’s parody of a popular MasterCard commercial was a noncommercial use because the candidate used the original work “as part of his communicative message, in the context of expressing political speech.” But that wasn’t the same as the use here. “Nothing about the song was integral to the video’s political message,” and in their arguments, “the defendants explicitly disclaim any overlap between the purposes of the song and the video.” [Note the move here from whether the defendant’s overall product was commercial to whether the use of the plaintiff’s work was commercial—I am not sure that’s supported by the statute; I am sure that carving works up this way is going to make fair use harder to litigate and resolve, and will require inquiry into meaning that contrasts sharply with Warhol’s disavowal of any such inquiry—a sort of heads I win, tails you lose effect. FWIW, I think the use here is plausibly nontransformative but noncommercial, and that market effect can make noncommercial uses unfair.] Confirming that the court is making its commerciality finding dependent on its transformativeness finding, the court reiterates that the video wasn’t parodying the song or using it for commentary, unlike the Nader ad. “Moreover, there is a well-established market for music licensing, but the defendants sought to gain an advantage by using Grant's popular song without paying Grant the customary licensing fee.”

Nature of the work: creative and published, but “the fact that a work is published does not mean that the scope of fair use is per se broader.” But factor two has limited weight.

Amount/substantiality: Quantity and quality favored plaintiffs. “The introductory portion of the song that is used in the animation is immediately recognizable. The excerpted portion of the song also includes the chorus, which … is of central importance to the original work.” While the excerpt was only 17.5% of the song's total length, it played for 72.7% of the ad’s duration. The quantity and value were plainly not reasonable in relation to the purpose of the copying. "

Market effect: Market analysis “embraces both the primary market for the work and any derivative markets that exist or that its author might reasonably license others to develop, regardless of whether the particular author claiming infringement has elected to develop such markets.” And it was “plain that widespread, uncompensated use of Grant’s music in promotional videos—political or otherwise—would embolden would­be infringers and undermine Grant's ability to obtain compensation in exchange for licensing his music.” Grant didn’t need to show that he intended to enter the market for licensing music to promotional videos, especially on a motion to dismiss, given the defendants’ burden to show lack of market harm.

The fourth factor also, per GvO, “take[s] into account the public benefits the copying will likely produce.” Though political speech, and in particular “[t]he act of ridiculing and lampooning public figures[,] is a rich part of our First Amendment tradition,” denying fair use—especially denying a motion to dismiss on fair use—won’t chill “legitimate political satire. Creators of satirical videos like the one at issue here must simply conform any use of copyrighted music with copyright law by, for example: paying for a license; obtaining the copyright owner's permission; or ‘transforming’ the chosen song by altering it with new expression, meaning, or message.” Defendants could reassert fair use at the summary judgment stage on a more developed factual record.

Tuesday, October 12, 2021

over dissent, 9th Cir. denies injury presumption to false advertising claimant

Quidel Corp. v. Siemens Medical Solutions USA, Inc., 2021 WL 4622504, No. 20-55933, No. 3:16-cv-03059-BAS-AGS (9th Cir. Oct. 7, 2021)

Quidel appealed the grant of summary judgment to Siemens on Quidel’s Lanham Act false advertising claims and related state claims. The case is about tests that detect thyroid stimulating immunoglobulins for management of Graves’ disease. There are two kinds of assays: (1) TSH receptor antibody (TRAb) assays, which detect both stimulating and blocking thyroid immunoglobins (TSI and TBI) and which are therefore apparently less useful and (2) TSI only assays. Quidel alleged that Siemens advertised (1) but provided (2).

First, the majority found that even if Siemens falsely advertised its assay, that wasn’t material to labs’ decision to purchase Siemens’ product over Quidel’s. Testimony from the relevant labs showed they didn’t rely on the relevant advertising materials, e.g., testimony that a lab engaged in its own internal validation process. Inferences to the contrary would be unreasonable under the circumstances:

At most, statements reflecting the lab representatives’ reliance on information in the package insert and internal debate by the laboratories’ decision-makers pertain to the required element of deception, not materiality. The extensive vetting completed by these sophisticated experts leading to their eventual purchase of Siemens’ assay overcomes Quidel’s position that the challenged statements amount to conflicting evidence on materiality. In other words, the nature of the audience—highly-skilled and credentialed professionals—is such that representations about the type and quality of an assay are not reasonably likely to influence their purchasing decisions even if it attracted the labs’ primary interest.

And there was no triable issue on actual injury based on allegedly false advertising to the physicians. Quoting the district court: “Quidel cannot claim that its damages are caused by the lab carrying the product which in turn leads to the physicians ordering the product from the lab,” because it is “the labs [that] decided which product to carry on their own, not as a result of Siemens.” And Quidel didn’t follow the FRCP in trying to present an alternative damages theory.

Disgorgement without proof of harm is appropriate in false comparative advertising cases, but any such presumption of harm was inapplicable when, as here, the “advertising does not directly compare defendant’s and plaintiff’s products.”

Also, and weird to present it this way, Siemens didn’t engage in false advertising to doctors. It said that its Immulite assay detects stimulating antibody “preferentially” —i.e., with bias—in favor of stimulating over blocking antibodies. “Had Siemens informed the physicians that Immulite detects stimulating antibody ‘only,’ as it represented elsewhere, then the statement would be false.” And although the ad specifically referenced Quidel’s product, the ad wasn’t comparative as to the challenged element.  Quidel didn’t dispute the actual comparative statement about the assays’ performance data—on clinical sensitivity and specificity—which was FDA-approved. In context, there wasn’t a false comparative ad.

Footnote: To be sure, “a competitor need not prove injury when suing to enjoin conduct that violates section 43(a). But Quidel has not met the elements for a permanent injunction. See eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).” [Not in the majority opinion: Overruled as applied to §43(a) by the TMA. So does false advertising have an injury requirement or not?]

Judge Bennett dissented, noting among other things that the TMA brought in a presumption of irreparable injury. The dissent would find triable issues on materiality and injury for both labs and doctors.

Materiality is about significance to the consumer’s decision. “Drawing all reasonable inferences in Quidel’s favor, Siemens’s statements that expressly or impliedly communicated that Immulite is a TSI assay and not a TRAb assay were material to the laboratories’ decision to switch from Thyretain to Immulite.” One lab’s representative testified that whether Immulite was a TSI assay was an important factor to the lab and that the lab wanted to replace Thyretain with another TSI assay, not with a TRAb assay. The other lab’s representative testified that it wanted a TSI assay and would not have been interested in Immulite if it were a TRAb assay. “Quidel also submitted evidence that scientists within LabCorp did not want to switch to Immulite because it appeared to be a TRAb assay. And in advertising Immulite, Siemens repeatedly highlighted the distinction between TSI and TRAb.”

A rational juror could easily infer from this evidence that whether Immulite was a TSI assay was an important factor to the laboratories—one likely to influence their decisions—and that Siemens made the representations it did because it knew the distinction between TSI and TRAb was important to the purchasers. Indeed, that the laboratories were only interested in a TSI assay to replace Thyretain supports that the laboratories would not have even considered Immulite had Siemens advertised it as a TRAb assay. Put another way, a juror could easily find that Siemens’s statements were likely to influence the laboratories’ purchasing decision because its statements attracted the laboratories and prompted them to conduct their own tests before ultimately purchasing Immulite.Siemens’s alleged false statements were the catalyst that led to the purchasing decision and therefore likely influenced the purchasing decision. Thus, I would find a triable issue on materiality.

This relates to a key but underlitigated issue: since materiality is often supposed to be an objective test, in theory you can infer that the element was satisfied without even hearing from the consumers. As the dissent puts it:

Even if a jury were to determine (were the question relevant) that the laboratories ultimately purchased based on their own tests, that doesn’t matter to whether the representations were likely to influence the purchasing decisions. Indeed, even in the light most favorable to the moving party, it would be difficult for anyone to seriously claim that the purchasing decisions would have been the same had Siemens represented what Quidel claims is the truth (even with puffery): “Immulite—An exceptional TRAb assay!”

This is a more sensible approach given the fact that people who have already made a purchase are particularly likely to insist that they would have made it anyway (so as not to feel like suckers) and in general people aren’t great at telling you why they did things. Here there’s more of a paper trail than there usually is, but (as the dissent notes) that doesn’t defeat these dynamics. The dissent would have held that “even if the laboratories’ purchasing decision may have been partly influenced by their own testing, that fact would not preclude a juror from concluding that Siemens’s statements were likely to (and did, at least in part) influence their purchasing decision.”

The dissent would not have fully credited the testimony that internal testing was the driver of the decision for purposes of summary judgment:

[A] reasonable juror could reject this testimony given that the laboratories’ witnesses had strong incentives to give testimony validating their prior decisions. The laboratories’ sophisticated experts would be reluctant to admit that they had been deceived and had incorrectly recommended switching to Immulite.

What about injury? A presumption of injury could apply either if (1) Quidel and Siemens operate in a two-player market, or (2) Siemens engaged in false comparative advertising. But the majority neglected to address the two-player market scenario, and the evidence supported that characterization of the market. The labs wanted to replace Thyretain with Immulate, not a TRAb assay. “Because the laboratories considered only Immulite and not TRAb assays, a factfinder could reasonably infer that Quidel and Siemens operate in a two-player market—the TSI player market.” Quidel’s survey evidence supported that inference by showing that a majority of the physicians surveyed are likely to order both a TSI assay and a TRAb assay for a patient, indicating that they aren’t competitors.  

The dissent would also have found a triable issue on whether the advertising to doctors was false comparative advertisement. The advertising contained statements that allegedly communicated that Immulite was a TSI assay and not a TRAb assay: “TRAb tests are not designed to discriminate stimulating, blocking, and neutral antibodies often present in [Graves’ disease] patients. The Immulite ... assay is specifically engineered to preferentially detect stimulating antibody.” And it expressly compared Immulite to Thyretain: “[Immulite’s] [s]uperior clinical sensitivity for diagnosis of Graves’ disease (98.6%) vs. Thyretain bioassay (92%).” “[A] factfinder could conclude that it was a false comparative advertisement because it falsely communicated that Immulite, like Thyretain, is a TSI assay (not a TRAb assay), and Immulite is better than Thyretain. The majority errs by failing to construe the DocAlert as a whole and in favor of Quidel.” [I’m more sympathetic to the dissent’s argument here: if you make a claim that you are in a particular class of tests—“not TRAb,” here—and then compare yourself to the other member of that class, that’s a comparison about membership in the class.]

Also, because a presumption of injury could apply, Quidel could establish harm sufficient for a permanent injunction. Cite to TMA: “Quidel, if successful on its Lanham Act claims, might obtain permanent injunctive relief without affirmative proof that it suffered irreparable harm.” [But, unlike a TM plaintiff, it does still need to provide reson to believe that it suffered some kind of harm in its prima facie case; here that role would be played by the two-player market/false comparative advertising presumption of harm.]

if it's on the label, courts can presume consumers saw it

Bailey v. Rite Aid Corp., 2021 WL 4469638, No. 4:18-cv-06926 YGR (N.D. Cal. May 26, 2021)

Rite Aid moved to reconsider a previous ruling denying a motion to dismiss Bailey’s claim against Rite Aid’s marketing of its over-the-counter acetaminophen gelcaps as “rapid release.” The court declined. “According to Rite Aid, Bailey failed to show that the members of the proposed class were exposed to Rite Aid’s allegedly deceptive conduct.” That exposure was dependent on class members seeing both gelcaps and tablet/caplet forms and comparing them, Rite Aid argued, but Bailey didn’t show that consumers did compare them. Rite Aid also argued that it survey showed that “there is a high likelihood that significant numbers of consumers do not make the product comparison on which Plaintiff’s deception theory is predicated and upon which the Court granted certification.”

But there was no meaningful dispute that the members of the proposed class were exposed to the labels and prices of Rite Aid gelcaps and tablets “because such prices and labels were placed within eye-view of consumers as a result of Rite Aid’s product-placement policies.” Bailey wasn’t required to show that the proposed class members who were exposed to these prices and labels were likely to have compared them. “Courts find that exposure exists where a court reasonably can infer that the class members would be able to see the misrepresentation at issue.” Being on the label routinely satisfies that standard.

The court also found Bailey’s advertising expert’s evidence to be persuasive; that went to whether consumers were deceived into thinking that Rite Aid gelcaps are faster acting than Rite Aid tablets after comparing them and relied on that. And Rite Aid’s survey wasn’t enough to avert any factual issues given its own flaws, which included limited images.

defendant moots claim by ending activity in a way that would require gov't consent to restart

Snarr v. HRB Tax Gp., Inc., 2021 WL 4499416, No. 19-cv-03610-SK (N.D. Cal. Aug. 24, 2021)

Snarr alleged that HRB violated the usual California statutes by creating a “bait and switch” program to lure customers into paying for defendants’ services to file tax returns. Unfortunately, instead of creating its own free file system, the IRS engaged with private, for-profit companies to develop online tax services and to make them available for free to certain taxpayers. Defendants are part of Free File, Inc., a company formed to offer those services; FFI entered into agreements with the IRS about the services.  The then-current agreement (just expired) provided specific guidelines for members’ services.

Defendants allegedly advertised Free File widely “but then used a variety of methods to divert potential customers into Defendants’ own programs, which charged a fee.” For example, “Defendants purposely made it difficult to find” the free part of the system “by placing a ‘noindex’ tag on the webpage for the free part of the system, with the result that the search engines did not go to that page but instead to Defendants’ system which required payment of fees”—allegedly a classic bait and switch.

Defendants mooted the case—which requested public injunctive relief to get around an arbitration agreement—because the allegedly violative conduct “ceased and cannot reasonably be expected to recur.” Defendants terminated their membership in the IRS’s Free File Program. They purportedly had no intention of seeking readmission to the Free File Program or participating in the Free File Program in the future. To restart, they’d be required to petition the IRS to reapply for admission and would have to agree to the IRS requirements (though those requirements only vaguely refer to usability and not to deceptive marketing). Because defendants couldn’t by their own choice simply resume the complained-of conduct, the voluntary cessation exception to mootness didn’t apply.

Although defendants allegedly continued to market other “free” services of their own, outside the formal Free File Program with the IRS, and would use the same bait and switch approach, the claim for public injunctive relief was limited to the confusion that defendants created between the Free File Program with the IRS and their own paid programs. They no longer possessed the bait. “To the extent that Defendants now market other ‘free’ services in a misleading way, another lawsuit against them may be possible. But the case currently before the Court is moot.”

challenging defendant's clinical proof claim is falsity, not lack of substantiation

Woodard v. Labrada, 2021 WL 4499184, No. EDCV 16-189 JGB (SPx) (C.D. Cal. Aug. 31, 2021)

Woodard brought the usual California claims and some others, including NY claims, against Labrada for its weight loss products. Some tidbits:

Labrada argues that Woodard was bringing a prohibited “lack of substantiation” claim. “In the false advertising context, a claim lacks substantiation when it is premised on the absence of evidence or inconclusive evidence; a claim is provably false when evidence contradicts or conflicts with the claim.” This was the latter.

Each Labrada label claim had asterisks leading to “references” purporting to establish the validity of each claim.

When a defendant “puts the clinical proof for its product at issue,” and the clinical proof does not support the claims about the product, the claims are best characterized as false rather than unsubstantiated. In other words, a defendant’s scientifically unsupported representation is false if the defendant asserts it is supported by scientific proof.

That was the situation here for Labrada’s claims: “increases fat burning,” “curb[s] appetite and food intake,” “reduce[s] body weight,” “helps support significant fat loss,” and serves as a “fat loss aid.” Yet one of the studies cited by the label has been disproven and retracted. Plaintiff’s expert further opined that many of the referenced studies were methodologically flawed and didn’t produce results consistent with the claims on the labels. One label recommended a smaller dosage than the dosage utilized in the referenced studies. He concluded that “any statements that the specific papers cited on the product labels support the efficacy statements made are, in my opinion, false and misleading.” This created a triable issue on falsity.

In addition, plaintiff’s expert identified studies “that could lead a reasonable trier of fact to find that the weight loss claims on the labels are false,” such as a study that concluded that one ingredient “failed to produce significant weight loss and fat mass loss beyond that observed with [a] placebo.” Another recent study similarly concluded that “the current evidence is insufficient to recommend green coffee as an adjuvant within weight management therapy.” Although other studies had conclusions that arguably supported the ingredients’ efficacy for weight loss, plaintiff’s expert distinguished those studies throughout his report for failing to include placebo groups, utilizing small sample sizes, and suffering from other methodological issues that biased the results. Anyway, the conflict meant there was a triable issue of falsity.

Labrada argued that the plaintiffs needed scientific studies that its product specifically, and not the purported active ingredient, lacked efficacy to show falsity. That’s a no. Defendants admitted that the sole active ingredient was a proprietary version of the tested green coffee ingredients. Scientific studies demonstrating their lack of efficacy were therefore sufficient to create a triable issue.

What about individual defendant Mr. Labrada? In California, “[d]irectors or officers of a corporation do not incur personal liability for torts of the corporation merely by reason of their official position, unless they participate in the wrong or authorize or direct that it be done.” Plaintiffs failed to raise a triable issue as to Mr. Labrada’s personal liability for the company’s alleged tortious conduct. Though there was evidence of Mr. Labrada’s personal participation in the marketing, sale, and advertisement of the Labrada Products, there was no evidence that Woodard suffered personal harm or property damage as a result of the allegedly false label claims, as required by California law.

However, as to Mr. Labrada’s personal liability for Woodard’s false advertising claims under the FAL, CLRA, and UCL, summary judgment wasn’t warranted. Personal liability could apply “based on [a defendant’s] personal participation in the unlawful practices and unbridled control over the practices[.]” Plaintiffs showed a triable issue of prarticipation and control. The company’s COO testified that Mr. Labrada was “responsible for the marketing and advertising”; he changed promotional language on both product labels and was one of several people responsible for the inclusion of the referenced studies on the labels. Mr. Labrada confirmed that he “oversaw the marketing and advertising” at the company and had final review of advertising materials. This was sufficient, though a joint venture theory of liability failed because an employee isn’t in a joint venture with the employer.

Monday, October 11, 2021

counting chickens: should disgorgement be harder for false advertising than for TM?

Certified Neutraceuticals Inc. v. Clorox Co., 2021 WL 4460806, No. 18-cv-0744 W (KSC) (S.D. Cal. Sept. 29, 2021)

The Clorox defendants sell dietary supplements using the raw materials provided by Certified’s competitor, Avicenna. Certified alleged Lanham Act false advertising based on allegations that the Clorox defendants and Avicenna engaged in a scheme to falsely advertise the source of chicken collagen used in dietary supplements sold to retail consumers. Clorox allegedly labeled their Collagen2 Joint Complex product as containing “Chicken Sternum Collagen Type II,” but the collagen in the product is allegedly not pure sternal collagen, but rather collagen produced by Avicenna using chicken carcasses of inferior quality which are much more inexpensive to produce. (I am left wondering desperately what makes chicken sternal collagen better than other chicken collagen; Google suggests that it is the most human-collagen-like part of the chicken, at least according to purveyors of same.)

In a prior case between Avicenna and Certified, a different judge granted summary judgment in Avicenna’s favor on Certified’s Lanham Act claim because “Certified brought its claims with unclean hands by engaging in the same improper conduct for which it faulted Avicenna—publishing false statements about a product being ‘patented’ without a patent.” But that didn’t relate to the subject matter of this claim.

Literal falsity: The evidence showed that CJC does in fact contain sternal chicken collagen; Avicenna claims that its process produces 90 percent sternum cartilage. “Independent testing of Avicenna’s collagen backs this up, showing batches purchased from Avicenna contained sternal chicken collagen in substantially similar amounts to Certified’s product. It is therefore literally true for the Clorox Defendants and Avicenna to advertise their products as containing sternal chicken collagen.” But Certified argued that defendants were advertising their producst as 100% sternal chicken cartilage. Avicenna has advertised its product as “Avian (Chicken) Sternum Cartilage” and “Chicken (Avian) Full Frame Sternum Cartilage.” There was a triable issue on the first product name, which was a single ingredient: it could necessarily imply that 100% of the product was that ingredient. “By advertising its purportedly single-ingredient product as chicken sternal collagen, Avicenna appears to be representing that the entire product is chicken sternal collagen.” However, the second name wasn’t literally false because it was “an accurate depiction of Avicenna’s manufacturing process: deriving chicken sternum collagen from the full frame of a chicken.”

Also, the Clorox defendants did not advertise their product as comprised of only a single ingredient. They advertised that CJC contains 2,400 mg of sternal collagen among other ingredients. There was no actual evidence that CJC did not in fact contain 2,400 mg of sternal chicken collagen.

Misleadingness: There was no evidence of likely consumer deception. Certified’s only survey was “not representative of a population that actually consumes the product,” but instead surveyed rheumatologists. There was no evidence that rheumatologists actually influence buyers of the product. And the rheumatologists reviewed the supplement label on Clorox’s product, not Avicenna’s. “Avicenna has produced declarations of its customers stating Avicenna never represented its product as 100% sternum and that customers understood that it was not.”

Injury: Certified alleged monetary damages in the form of lost customers, reduced profits, additional advertising costs, and lost market share. It offered a list of lost customers and evidence that its profits declined and Advertising and Promotion expenses increased over disputed time periods. However, the list was overstated (it was just a list of past customers), and five customers Certified purported to have lost to Avicenna testified that they did not purchase Avicenna’s product based on the alleged misrepresentation. Certified argued that it was nonetheless entitled to damages on an unjust enrichment theory. The court disagreed because the advertising at issue wasn’t comparative, and so proof of past injury or causation was required. Certified’s evidence showed sales increased over the relevant period, though profits decreased because of a large increase in the cost of sales. “[I]t is not reasonable for the Court to assume the significant unaccounted for increase in the cost of sales, which could be attributed to the cost of goods sold among other things, is a direct result of Defendants’ product labeling.” Thus, Certified failed to show damages.

What about disgorgement? “15 U.S.C. § 1117(a) and Lindy [the key 9th Circuit precedent] both address damages in false comparative advertising cases, where a defendant violates ‘any right of the registrant of a mark registered in the Patent and Trademark Office.’” As a reminder, §1117(a) specifically also says “a violation under section 1125(a)” immediately after the quoted words. Romag should therefore be as good law for false advertising under §1125(a)(1)(B) as for trademark, but I’m not super surprised that courts are still intoning “trademark” as if that were somehow a sufficient distinction.

The court granted summary judgment on damages, but didn’t preclude injunctive relief: “[A] competitor need not prove injury when suing to enjoin conduct that violates section 43(a).” [Is this still true after TransUnion?]

Juxtaposition doesn't necessarily mean one claim bleeds into another

Engram v. GSK Consumer Healthcare Holdings (US) Inc., 2021 WL 4502439, No. 19-CV-2886(EK)(PK) (E.D.N.Y. Sept. 30, 2021)

GSK sells “2 in 1 Lipcare” Chapstick: it provides moisturization and sun protection … but the former lasts longer than the latter. Engram alleged that this was misleading; the court disagreed and dismissed the complaint under NY GBL §§ 349 and 350 (and unjust enrichment).

The front of the package and the front of the tube both contain a circle, bisected horizontally. In the top half of the circle is the phrase “8 HOUR MOISTURE,” written in white letters against a blue background. In the bottom half, in blue letters on a white and gray background, is the phrase “SPF 15.”

 


Could the proximity of these claims lead a reasonable consumer to conflate them and think that they’d get 8 hours of SPF 15 protection? The court thought not. The back tells users to “apply liberally 15 minutes before sun exposure”; “reapply at least every 2 hours”; and “use a water resistant sunscreen if swimming or sweating.” The amended complaint alleged that a third-party survey showed that “259 of [respondents] (64.4%) believed that the Product provided 8 hours of sun protection based on the packaging.” But the respondents were shown a picture of the front of the Chapstick tube, but not the full package — including the reverse of the package, where the direction to “reapply at least every 2 hours” appears.



Context is key, but some context matters more than others:

Where the front of a package makes a bold and blatant misstatement about a key element of a product, there is little chance that clarification or context on the reverse of the package will suffice to overcome a deception claim (especially at the motion-to-dismiss stage). But when the front of the package is better characterized as ambiguous than misleading, courts looking at the alleged misrepresentations in their full context and are more likely to grant a motion to dismiss.

There’s a spectrum of claims from absolutely true, to ambiguous, to misleading, to outright false, and this case was at most ambiguous. “From the front of the package itself, it is plain that the Defendant is emphasizing the moisturizing properties of the product.”  But the package made no durational claim about the SPF protection on the front at all. The back of the package put any ambiguity to rest. “[I]t is not too much to expect a reasonable consumer to review the directions on an SPF product for information on how often to reapply it — particularly where, as here, a similar set of directions is present on all sunscreen products pursuant to FDA regulations.” It was also relevant to the court that the tube and packaging “both provide limited space on which to advertise the product and publish the required Directions…. [T]he Defendant’s ability to separate the moisture and SPF claims is limited by the amount of packaging real estate available. This limit makes the presence of a clear disclaimer on the reverse all the more salient.”

The survey didn’t help because “the key question was phrased so as to put respondents in an untenable position.” It asked: “Viewing the packaging above, how many of hours of SPF 15 sun protection do you think the product provides?” But respondents only saw the front of the package, “which does not contain any answer to the question posed.” Respondents were thus differently situated from the “reasonable consumer.”

disparagement campaign in niche jewelry market could violate Lanham Act

Roberto Coin, Inc. v. Goldstein, No. 18-CV-4045(EK)(ST), 2021 WL 4502470 (E.D.N.Y. Sept. 30, 2021)

Defendants Goldstein and his company Kings Stone supplied plaintiff RCI with a gemstone they called “black jade.” “After RCI stopped sourcing black jade from Kings Stone and found a new supplier, Goldstein contacted a number of stores selling RCI jewelry and disparaged RCI’s stones. Both sides now claim the other is liable for false advertising, among other claims.” For example, Goldstein allegedly told one of RCI’s customers that RCI’s stones were to real black jade as cubic zirconia is to diamond. Defendants also allegedly infringed RCI’s trademarks by using photographs of Roberto Coin jewelry and RCI’s logo in Kings Stone’s advertising after RCI terminated the relationship. Kings Stone counterclaimed that RCI made false claims about (a) the gemological content of the stones from its new supplier and (b) whether those stones had been “certified” by a laboratory. The counterclaims/third party claims were dismissed for failure to prosecute and the results on the plaintiff’s claims were mixed.

When things were going well, Kings Stone provided RCI with an analysis prepared by the National Gem Testing Center — a gemstone testing laboratory based in China — stating that the mineral content of its stones was “black amphibole jade.” About eighteen months after the parties split up, RCI discovered that the Defendants were using photographs of RCI jewelry alongside RCI’s logo, as well as the name “Roberto Coin,” on Kings Stone’s Instagram feed. Instagram ultimately removed the posts. Goldsein also sent marketing materials incorporating RCI images to various vendors, including in a PowerPoint presentation. He stated that he believed RCI “knew about” and “was okay” with this.

Goldstein solicited Borsheims, a jewelry retailer that sold RCI products (including the Roberto Coin “Black Jade” collection), touting Kings Stone’s black jade as “exclusively certified by the china NGTC and the prestigious US based AGL as Black jade.” Borsheims wasn’t interested.

Goldstein emailed Borsheims again, this time pretending to be a customer looking for a “gift for a jade connoisseur.” He expressed interest in a specific Roberto Coin product and asked Borsheims to provide him with “a gem certificate that verifies its authenticity as genuine black jade.” Borsheims’ employee wrote back to say that she had contacted RCI, and that “while they do not have official certificates of authenticity for their jade gemstones, they provided me with the attached card detailing the certification of the jade along with further details.” The “attached card” said: “The most fascinating black amphibole jade, 100% natural identified and certified by China’s National Gemstone Testing Center (NGTC) is the protagonist of the homonymous ‘Black Jade’ collection.” Goldstein responded that the product

does not come with any certification as to its authenticity that the black jade is genuine. If there is no certification available, then legally you cannot claim or advertise that it is black jade, no less then [sic] claiming a cubic zirconia being a real diamond .... My black jade comes with full certification by 3 major Gemological Labs. When dealing with my certified black jade stones you are assured of the highest quality and no reputational risk to your company by selling non certifiable black jade. The real black jade jewelry companies are doing great with our line with sales exceeding the best projections.

A followup email from Goldstein said that “[w]e have asked Roberto Coin directly numerous times for confirmation of the black jade authenticity and we have not received any response.” He then threatened Borsheims with “filing for class action status on this matter to protect [his] business and the consumers being misled by false advertising.” He said that Borsheims needed to “take remedial action otherwise we will include your company in this [action] since we have legally notified you.... And yes even borsheims has to be held accountable.” Afterwards, Borsheims told RCI it was “removing the black jade” offerings from Borsheims’ website.

Goldstein also contacted other RCI retailers (Macy’s, Neiman Marcus, and Saks Fifth Avenue) seeking confirmation that RCI’s black jade was certified.  He told Saks’s parent corporation that RCI’s black jade was “not ... authenticated or certified as advertised,” and had similar exchanges with Macy’s and Neiman Marcus. He emailed them to say he would be filing a lawsuit against RCI: “I am part of a group of gemstone dealers selling genuine and certified black jade, that are in the process of filing a class action lawsuit against Roberto coin for selling non authenticated black jade.” He said he was letting the retailers know about his lawsuit as a “courtesy” so that they could “take remedial action ... and remove any questionable product that cannot be authenticated.” At his deposition, Goldstein acknowledged approaching “every customer that was advertising the black jade.”  He testified about the steps he took to identify every RCI retailer and that it was a “huge amount of communication.”  (He also emailed “basically industry wide” announcing his counterclaims in this case, reaching “various jewelry-industry players: newsletters and magazines, trade associations, and additional retailers” and analogizing the situation to an earlier scandal about gem misclassification; there was a bribery aspect to that situation but he testified that he wasn’t aware of the bribery part.)

Macy’s and Saks Fifth Avenue also stopped selling the Black Jade collection. Saks, Borsheims and Bloomingdales alone returned jewelry valued at more than $380,000 from the Black Jade collection. “At least one jewelry retailer apparently understood Goldstein to be challenging the authenticity of the gemstones in RCI’s Black Jade collection, as opposed to merely questioning whether RCI had obtained an authentication from a laboratory.”

RCI’s position was that there is no industry-wide “certification” for the “authenticity” of black jade, because “black jade” is not a scientific category. Instead, it contended that “jade” is generally used in the industry to describe two different but related minerals, nephrite and jadeite, and that the term “black jade” cannot constitute false advertising. It did, however, obtain certifications from various gemological labs, including one certifying that RCI’s gemstones were comprised of “Natural Amphibole Material”; another certifying “amphibole and other minerals”; an NGTC certification certifying “Black Amphibole Jade”; and another certifying “Black Nephrite Jade.” However, RCI obtained the latter two certifications — including the one from NGTC — after it emailed the card promoting its stones as “[t]he most fascinating black amphibole jade .... 100% natural identified and certified by China’s National Gemstone Testing Center (NGTC)” — to Saks and Borsheims.  

Lanham Act false advertising: RCI alleged two overlapping subcategories, (1) claims that RCI’s black jade was fake or inauthentic (e.g., Goldstein’s emails to Borsheims discussing the impact that the sale of “Fake black jade” has on Goldstein’s business, making a cubic zirconia/diamond comparison, and calling his company one of “the real black jade jewelry companies”) and (2) statements that RCI’s stones lacked some form of certification or authentication.

Falsity: RCI showed sufficient evidence of literal falsity of (1) to continue, but (2) was murkier. The “not authenticated” statements weren’t literally false, “as RCI did not (at the time) possess a certification expressly confirming that its stones were ‘black jade.’” But given RCI’s evidence that there is no established mineralogical category for “black jade,” a jury could find implied falsity, especially since one retailer seemed to understand the statement as questioning whether the stones were “somehow counterfeit.” A falsity finding would be premature, since a factfinder should address implied falsity and the parties continued to dispute which stones RCI submitted to obtain its certifications. “The existing record does not definitively rule out the possibility that RCI commingled stones from Goldstein and its subsequent supplier, or definitively establish the provenance of the stones RCI submitted for evaluation.”

Goldstein also made legal claims in his emails, e.g., “[i]f there is no certification available, then legally you cannot claim or advertise that it is black jade.” This wasn’t itself actionable, because “a layman’s statements about the illegality of another party’s conduct do not violate the Lanham Act absent a ‘clear and unambiguous ruling from a court or agency of competent jurisdiction’ that the conduct is lawful.” However, a jury could consider them “to the extent they imply (as a factual matter) that RCI was misleading its retailers or other customers about the content of its stones.”

Commercial advertising or promotion: Since the statements to retailers weren’t identical, the court had to decide whether to consider them individually or in the aggregate when assessing the breadth of dissemination. “Goldstein’s statements should be aggregated when assessing the breadth of dissemination, because they were made during a compressed time period (approximately three weeks in April 2018) and concerned similar subject matter (the authenticity and authentication of RCI’s black jade).”  A jury could reasonably conclude that they constituted a single “campaign.” Once that was done, the dissemination was sufficiently broad to qualify as advertising or promotion. The court noted, that, “[o]n the one hand, the global market for fine jewelry is perhaps enormous.”  But “the market for name-brand, artistically produced luxury jewels is surely a discrete subset of that industry.” RCI’s evidence showed that the five prominent department stores that Goldstein emailed accounted for “over 23% of RCI’s gross profits on sales from the black jade collection” in themselves. “[O]n this record, a reasonable jury could conclude that the relevant market is confined to higher-end jewelers like Neiman Marcus, rather than every seller of precious stones in the world,” and that Goldstein communicated with a sufficiently large proportion of that market—a “huge” amount of communication in his own words.

Trademark infringement: Goldstein admitted that he posted photographs of RCI’s jewelry on Kings Stone’s Instagram feed.  RCI’s logo — the letters “RC” with a diamond shape beside them—was superimposed. He used these materials to promote Kings Stone’s black-jade business, and used his PowerPoint similarly. Goldstein argued that he had oral authorization as part of the deal to supply black jade to RCI. (Nominative fair use would be relevant outside the Second Circuit, though use of the logo would definitely pose a problem.) He argued that he’d provided a discount on stones in exchange for this authorization and that such a deal was a “common industry practice.”

The court was unconvinced: “[I]t strains credulity to think that the parties agreed on the duration of the trademark license — specifically, that it would exist in perpetuity — without any corresponding agreement on the period of time for which RCI and its affiliates would purchase stones from Goldstein (a period that, in the end, lasted only about a year).” But more importantly, the Statute of Frauds prevented reliance on such permission, irrespective of credibility. What he had in writing—purchase orders memorializing a “discount price” from Kings Stone and an email from Roberto Coin stating that the “RC brand will bring you lots of credibility in the market”—wasn’t enough to set out the material terms of an agreement. Thus, RCI won summary judgment on its infringement claims.

However, the court would let a jury resolve the question of damages, including willfulness.

Defamation/trade disparagement:  There was sufficient evidence for a jury to find special damages, based on lost customers and revenue. Otherwise, factual questions remained, as with the Lanham Act false advertising claim. Tortious interference: same. Specifically as to the lawsuit threats: “[A] lawsuit or the threat of a lawsuit is wrongful [for purposes of a tortious interference claim] if the actor has no belief in the merit of the litigation.” “It is also wrongful if the actor, having some belief in the merit of the suit, nevertheless institutes or threatens to institute the litigation in bad faith, intending only to harass the third parties and not to bring his claim to definitive adjudication.”

GBL Section 349:  The alleged conduct was not consumer-oriented, even it wasn’t a “garden-variety” dispute between competitors. There was no specific evidence that the “public interest [wa]s harmed” by defendants’ actions.

Mexican origin claims revitalized by survey

Govea v. Gruma Corp., 2021 WL 4518457, No. CV 20-8585-MWF (JCx) (C.D. Cal. Aug. 18, 2021)

Previous discussion. The amended complaint fares better: the tortilla packages at issue plausibly misrepresented Mexican origin. Plaintiffs added allegations that “[u]n pedacito de México” translates to “a piece from Mexico,” in addition to “a piece of Mexico.” And they alleged a consumer survey that showed 401 participants the following image: 

It then asked: “Based on the label of the product, where do you believe the product is made?” 70.1% of participants answered Mexico. Gruma argued that the survey was unreliable because it failed to use open-ended questions and controls and failed to consider whether the participants actually zoomed in on the label or read any of its text. “Even if Gruma is correct that the Survey suffers from certain flaws, the Survey at least demonstrates that it would not be ‘impossible for the plaintiff to prove that a reasonable consumer was likely to be deceived.’” Thus, dismissal at this stage was unwarranted. As with another recent case, Rodriguez v. Olé Mexican Foods Inc., 2021 WL 1731604, No. EDCV 20-2324 JGB (SPx) (C.D. Cal. Apr. 22, 2021), the packaging “evokes the spirit of Mexico, which … may also mislead a reasonable consumer about the Tortillas’ geographic origin.”

Plaintiffs had standing to seek injunctive relief because they desired to buy the tortillas in the future, but were currently unable to rely on the packaging.  

Friday, October 08, 2021

Disney's Toy Story 4 daredevil not legally risky

K & K Prods., Inc. v. Walt Disney Studios Motion Pictures, No. 2:20-CV-1753 JCM (NJK) (D. Nev. Sept. 23, 2021)

Evel Knievel was a famous motorcycle daredevil with an “iconic wardrobe: a white jumpsuit embellished only by star-spangled red, white, and blue patriotic insignia with a matching white cape and helmet and a motorcycle adorned by red, white, and blue colors.” “In 1973, Ideal Toys released the Evel Knievel Stunt Cycle, a toy which features a doll of Evel Knievel in his signature…jumpsuit and matching helmet.” The toy came with a red “energizer”, which wound up the toy to be released. K&K claimed rights relating to Evel Knievel, including trademarks, copyrights for audio/visual works, right to publicity, existing licenses, contracts, and common law rights.

image from complaint
EK toy and comparison to EK

EK Daredevil Stunt Set
70s TV ad (I love that the plaintiffs grabbed it off social media)

Toy Story 4 featured a new character, Duke Caboom, who rides a Canadian-flag-colored motorcycle and dresses in a white jumpsuit, helmet, and cape with Canadian insignia. His insecurities are revealed by a flashback to a 70s era scene where a child is playing with his Duke Caboom doll while watching the commercial advertisement for the “Duke Caboom Stunt Cycle.” The toy could not perform as advertised in the commercial. In his final stunt, Duke Caboom tries to jump 40 feet across an amusement park and through lights fabricated to look like a ring of fire. He fails. Disney promoted Toy Story 4 with materials featuring Duke Caboom and also sold Duke Caboom Merchandise, including a Duke Caboom doll in a white jumpsuit with a cape and belt buckle adorned by a red Canadian insignia, a matching helmet and motorcycle, and a red “launcher.” 

traumatic flashback

toy with launcher; other toy images below







“Toy Story 4 actors, directors, and producers referenced the Evel Knievel inspiration for Duke Caboom in six separate interviews.” Consumers and critics likewise noted the similarities.

side by side comparisons



K&K’s false endorsement/false description, trade dress infringement, trademark dilution, and state law claims including right of publicity claims all failed on a motion to dismiss. Rogers applies to the Lanham Act and coordinate state law claims, and this isn’t a difficult Rogers case. K&K simply failed to plead facts indicating that Toy Story 4 wasn’t an expressive work, or that associated merchandise wasn’t sufficiently attached to the “host” expressive work. “It is … well-established that advertising and the sale or licensing of consumer goods related to an expressive work like a film are incorporated into the same Rogers test analysis.”

Obviously, “the alleged allusion to Mr. Knievel bears substantial artistic relevance to the creative work.”  K&K argued that Duke Caboom wasn’t artistically relevant to the film because it does not add “any original material element” to Toy Story 4 and is used “solely to import Evel Knievel…into the film.” That’s not a way around Rogers. “The court is not willing to make the unreasonable inference on the facts that the Duke Caboom’s appearance is simply a gratuitous showing of an Evel Knievel-esque motorcycle stuntman.”

Nor was there any explicit falsity that would confuse consumers into thinking that the “celebrity is somehow behind the [the film] or that [he] sponsors the product.” The “nature of [Disney’s] behavior” and not “the impact of the use” on consumers was the key, even if there had been consumer confusion evidence. The court unnecessarily points out that the toy has “a different name, appearance, and backstory from Evel Knievel.” More to the point, the use of a mark alone is not enough to satisfy this prong of the Rogers test, otherwise “it would render Rogers a nullity.” Even if Disney’s use of Evel Knievel was “blithe,” it was nonactionable without explicit misleadingness.

ROP: The Nevada ROP statute specifically exempts uses that are an “attempt to portray, imitate, simulate, or impersonate a person in a… film” and uses “in connection with an advertisement or commercial announcement for a use permitted by this subsection.” As for the toys, the court predicted that Nevada would imitate California, as it has done in similar situations before, and adopt a transformative use defense. This could be resolved on a motion to dismiss, especially since ROP laws implicate broad free speech interests and “a speedy resolution is desirable because protracted litigation may chill the exercise of First Amendment rights.” Here, Evel Knievel was one of the raw materials for the work, not the “sum and substance” of the work; the work was primarily Disney’s own expression; Disney provided the marketability and economic value of the work because it’s Disney and people already like Disney; and Toy Story 4 wasn’t just a mere exploitation of the fame of through a conventional portrait, superseding the artist’s skill and talent. In California terms, this was more Kirby (video game with a reporter from outer space character who looked like a real singer) than Comedy III (conventional charcoal portrait).

As in Kirby, Duke Caboom was “reminiscent” of Evel Knievel, but not a literal depiction. Unlike the sports videogame cases “where the video game avatars looked the exact same outside of their name and hometown, Duke Caboom is not a carbon copy of Evel Knievel minus a few details.” 

Distortions of a celebrity figure “are not, from the celebrity fan’s viewpoint, good substitutes for conventional depictions of the celebrity and therefore do not generally threaten markets for celebrity memorabilia that the right of publicity is designed to protect.”