Friday, October 29, 2021

facially plausible false advertising claim can be added to TM complaint

In case you're looking for a roadmap for leave to amend: 

Ideavillage Products Corp. v. Copper Compression Brands LLC, 2021 WL 5013799, No. 20 Civ. 4604 (KPF) (S.D.N.Y. Oct. 27, 2021)

Ideavillage sued CCB for trademark infringement and false designation of origin related to Ideavillage’s “Copper Fit” line of copper-infused compression garments. Here, the court granted leave to amend to add a false advertising claim.

Ideavillage uses the “As Seen on TV” model to sell its stuff, as well as its own website/Amazon. One of its  most popular products is a line of copper-infused compression clothing, marketed under the trademark “Copper Fit,” allegedly designed to alleviate muscle and joint soreness and pain. Defendants also market and sell copper-infused compression products online, including on their own website/Amazon. They allegedly advertise their products using the term “copper” in close proximity to the term “fit” “and have deliberately caused searches for Copper Fit products to yield results for Defendants’ products” [the horror!].

The deadline for amended pleadings was in January 2021, with fact and expert discovery currently set to close in November 2021, and January 2022, respectively, after several extensions. In May 2021, plaintiffs moved for leave to file a second amended complaint to add a false advertising claim based on statements on CCB’s website. A “court should freely give leave when justice so requires,” but when a scheduling order is in effect, deadlines for amendment of pleadings “may be modified only for good cause and with the judge’s consent.” The “primary consideration” in determining whether good cause exists “is whether the moving party can demonstrate diligence.” The standard is typically not met “when the proposed amendment rests on information that the party knew, or should have known, in advance of the deadline.”

Plaintiffs alleged that they only recently discovered that certain website statements were (allegedly) false and misleading after they initiated a test buy of certain of defendants’ products “[i]n or about late January 2021,” and performed tests on samples of these products. This allegedly revealed the falsity of representations that Copper Compression products have the “highest copper content, [g]uaranteed” and that their products are constructed with “85% copper-infused nylon[.]”

Defendants argued that plaintiffs should have investigated sooner. “While the Court agrees with Defendants that Plaintiffs likely could have initiated test buys of and performed tests on Defendants’ publicly available compression products earlier, Plaintiffs have nevertheless presented acceptable justification for their delay.” Plaintiffs argued that, despite their general awareness of the relevant statements, it was only through discovery that they “recently [became] aware of the extent to which Defendants prominently, and repeatedly use these claims in connection with” their advertising. Materials revealed in discovery can support a finding of good cause.

Though plaintiffs weren’t wholly unable to investigate sooner, they weren’t dilatory once they became aware of the key facts. They initiated test buys in or about late January 2021, received the products in or about mid-February 2021, and received preliminary testing results in or about mid-April 2021. “Within a matter of weeks,” they informed defendants of their intent to add a claim and then in mid-May filed notice of the motion to amend. “At this relatively early stage in the proceedings, with fact discovery still open and prior to any dispositive motion practice, the Court does not find that Plaintiffs’ failure to investigate Defendants’ advertising claims at an earlier time, when it had no basis to suspect their falsity, constitutes a lack of diligence that would negate a showing of good cause.”

There was no reason to “conflate Plaintiffs’ knowledge of certain of Defendants’ advertising with knowledge of the existence of a viable claim for false advertising.” Using ads that have been on defendants’ website since the inception of this case didn’t defeat a finding of good cause, because “[a party] need not prove that they uncovered new facts or law in order for this Court to grant leave to amend.”

Moreover, permitting the amended complaint wouldn’t be prejudicial in any legally relevant respect. “[M]ere allegations that an amendment will require the expenditure of additional time, effort, or money do not constitute ‘undue prejudice.’ ” Though it would expand the scope of discovery somewhat, it would not alter “the focus of the entire case,” or cover new products. In addition, defendants apparently already conducted their own testing, which they paid for before the formal institution of a false advertising claim. Also, “as discovery is ongoing and ample time remains before trial, allowing the amendment would not significantly delay the resolution of the dispute.”

Nor would amendment be futile.   Plaintiffs specified at least two allegedly deceptive statements: (i) that defendants’ products “contain the highest amount of copper,” and (ii) “that all of Defendants’ Products are made with 85% copper-infused nylon.” They alleged materiality and deception as well as injury to them as direct competitors. It wasn’t important that they failed to specify which lab they used or to attach the test results to the complaint, or to allege that none of defendants’ products contained 85% copper.

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