consumer reliance negates puffery so "healthy" could be actionable

Johnson-Jack v. Health-Ade LLC, --- F.Supp.3d ----, 2022 WL 562827, No. 21-cv-07895-LB (N.D. Cal. Feb. 24, 2022)

Plaintiffs brought the usual California claims in this putative class action challenging use of the term “Health-Ade” to market kombucha-inspired beverages, including Health-Ade Kombucha, Health-Ade Plus, Health-Ade Booch Pop, Health-Ade pop, and Health-Ade Mixers. “Health-Ade” allegedly misleadingly implied that the defendant’s products are healthy when they are not because they contain sugar. “Most courts in this district have found that mislabeling claims based on this theory (i.e., that it is deceptive to market products with added sugar as healthy based on studies linking excess sugar consumption to disease) can survive a motion to dismiss and that the term ‘healthy’ is not puffery.” This opinion joined them.

The plaintiffs plausibly alleged that the products were, in fact, unhealthy by citing scientific studies that allegedly link the consumption of sugar-sweetened beverages to negative health outcomes.

As for deceptiveness, the prominent use of the word “health” and the homophonic connection between “ade” and “aid” made it plausible that reasonable consumers would construe “Health-Ade” to mean healthy. “[T]he use of a cross on some of the subject products …, which evokes the Red Cross symbol, also militates in favor of finding that it is plausible that consumers would construe ‘Health-Ade’ to mean healthy.” 

Version of Health-Ade Plus with large yellowish white cross on yellow

Health-Ade plus with red cross on white background

Becerra v. Dr Pepper/Seven Up, Inc., 945 F.3d 1225 (9th Cir. 2019), held — based on dictionary definitions — that the word “diet” when used “in a soft drink’s brand name is understood as a relative claim about the calorie content of that soft drink compared to the same brand’s ‘regular’ (full-caloric) option” and not a promise of weight management. The defendant here argued that dictionary definitions of “ade” and “kombucha” alert reasonable consumers to the presence of sugar. But the issue was not whether the name implied the absence of sugar; the issue was a putatively misleading message of healthfulness. The dictionary definitions did not dispel that. Likewise, as opposed to “100% Manuka Honey” where reasonable consumers know that bees forage, it wasn’t impossible to have a healthy drink, and there was also no basis to hold as a matter of law that reasonable consumers know that beverages with added sugar may be unhealthy.

Was the term “healthy” puffery? Not necessarily, “because consumers rely on it when purchasing food products.” Because the definition of puffery is vague/etc. statements on which reasonable consumers would not rely, “the principal issue when evaluating claimed puffery is whether a consumer would rely on the challenged term. Whether a term is easily defined or measured is secondary and merely informs the reliance analysis.” [In fact, courts go back and forth on this, usually without explaining themselves, which is why this is a plausible statement of the law. If consumers do rely on a claim, then the core justification for calling it puffery disappears—but that may create a falsifiability problem, if the term is in fact vague/has many meanings. But it would be reasonable and perhaps helpful to distinguish vagueness from consumer reliance and deal with vagueness at the falsifiability stage. The embarrassing part of that approach is that we’d have to admit that “reasonable” consumers may well rely on vague claims without thinking them through—the reasonable consumer does not often engage in an extensive exercise of reason for an average claim encountered in the marketplace, given how many such claims there are.]

Prior cases have found that the addition of adverbs and adjectives can turn an actionable objective term like “nutritious” into a non-actionable subjective term like “unbelievably nutritious” because the modifier “unbelievably” makes consumers less likely to rely on those terms. And  the Ninth Circuit has also stated that the term “ ‘nutritious’ ... standing on its own, could arguably constitute puffery, since nutritiousness can be difficult to measure concretely.” But district court cases have found the term non-puffery in specific contexts, especially given the existence of food-labeling regulations, which consumers might use to calibrate their willingness to rely on such statements. And, as in a previous case, “[t]he meaning of the word ‘healthy’ or ‘health’ in this case can be measured against whether or not Defendant’s products are found to be unhealthy based on the scientific studies and evidence provided by Plaintiff.” Thus, “if the plaintiff plausibly alleges the existence of scientific studies showing that the consumption of the subject product is ‘unhealthy,’ then the court cannot find that the term “healthy” is puffery when used to market purportedly unhealthy foods.” The studies “suggest that whether the defendant’s products are healthy or not can be determined according to scientific standards.”

And there was no preemption because the challenged term wasn’t a “health” claim or “nutrient content” claim, which are the relevant types of labeling statements governed by federal law.

Finally, the plaintiffs had standing to seek injunctive relief “because the difficult-to-ascertain nature of the alleged misrepresentation suggests that the plaintiffs will not be able to rely on the labeling statements in the future.” Inability to rely was an ongoing injury.

unrelatedness of goods trumps use of identical name for health records app, hand sanitizer

Healthvana, Inc. v. Telebrands Corp., 2022 WL 562265, No. CV 20-04305 DDP (SKx) (C.D. Cal. Feb. 23, 2022)

Healthvana operates a health app, Healthvana, and has a trademark (registration) for use in connection with software and software as a service. The app initially focused on delivering the results of HIV tests, and tests for other sexually transmitted diseases, to patients. Healthvana then shifted the focus of its digital platform to Covid test records, and later vaccination records. “At all times, Healthvana’s customers have not included end users of software or the Healthvana app, but rather governmental entities, healthcare firms, medical officers, laboratories, and employers.”

Telebrands markets and sells “As Seen on TV” consumer household products via websites, phone numbers, and big box retailers. Among its products is a line of “Hempvana” products. Telebrands made a pandemic-related effort to market and sell a hand sanitizer product, but retailers were historically reluctant to carry products associated with hemp, so it used “Healthvana” for its hand sanitizer. Its marketing efforts included a “direct response” TV commercial and a website, and later expanded to big box stores.

In March 2020, Healthvana objected, and Telebrands’ counsel indicated that it would rebrand as “Handvana.” “By April 17, Telebrands represented that all changes had been made. Several hundred thousand bottles of hand sanitizer, however, had already been produced with the older, ‘Healthvana’ label. Those bottles were filled and shipped to big box customers sometime after April 17.” Healthvana sued in May 2020 for trademark infringement, unfair competition, and false advertising in violation of both federal and state law, as well for cybersquatting under ACPA.

Telebrands won summary judgment.

Strength: “fanciful or perhaps suggestive,” so “some degree of protection”; no discussion of marketplace strength, which probably tells you how this might go.

Relatedness of goods: “Products and services related to a general industry may, in some cases, be related to each other, insofar as consumers are likely to associate one party’s products with the other party.” But “health” as part of a name was related to the industry, so “the fact that both parties’ products relate to the same, very general industry is of little moment.” Plus, “the universe of health-related products and services” is very broad. Nor was the relevant universe “Covid-related products,” since hand sanitizer is not “Covid hand sanitizer” but indisputably general hand sanitizer. Telebrands’ TV ad didn’t use the word “Covid” [I bet litigation counsel is grateful for FDA compliance efforts carried out in writing the copy!]. And even if Telebrands focused on the Covid-related market, the court was “skeptical that Healthvana’s phone app software would necessarily be ‘related to’ every other product in the universe of arguably Covid-related products, including hand wipes, cleaning solutions, masks, gloves, face shields, prescription medicines, vaccines, pulse oximeters, UV-sanitizers, thermometers, and so on.”

Similarity:

defendant's logo that somehow got uploaded first: Brown "health," black "vana" with part of v replaced by leaf [probably the hemp link coming back] and an umlaut over the middle a

plaintiff's logo: gray text with blue heart logo that has an internal outline of a checkmark

The court compared the marks as used in the marketplace, with different color, font, and imagery. The marketplace itself differed: Healthvana’s mark was on an app, and Telebrands’ in the physical market. Similarity only weighed “very slightly” in favor of confusion.

Actual confusion: The court rejected most of Healthvana’s purported “hundreds of instances of actual confusion.” “[S]tand-alone enquiries and misdirected communications” are not evidence of actual consumer confusion. Especially in electronic formats, such evidence may demonstrate only that consumers were “inattentive or careless, as opposed to being actually confused” about the source of a product. However, there was evidence that some consumers did believe that Healthvana was the company selling Healthvana-brand hand sanitizer, favoring a finding of confusion.

Marketing channels: Sharing the internet as marketing channel wasn’t enough; this factor disfavored likely confusion.

Consumer care: Consumers of Healthvana’s software product “are sophisticated entities such as governments and laboratories who, if Healthvana’s revenues are any indication, pay non-negligible amounts for Healthvana’s services and products.” Telebrands’ consumers, “on the other hand, are not likely to be sophisticated or to exercise a high degree of care when purchasing a relatively inexpensive bottle of hand sanitizer.” Using the least sophisticated consumer as the measure, this factor weighed somewhat in favor of a likelihood of confusion. [This analysis shows the weakness of choosing “least sophisticated party” in all circumstances. That only makes sense if the least sophisticated party is a plausible purchaser of both sets of goods/services. Anyone thinking of contracting with Healthvana—regardless of how careful or careless they were tossing goods into a cart at Wal-Mart—would take a lot more care.]

Intent: Minimally important, and there was no evidence that Telebrands intended to confuse or deceive either its own or Healthvana’s customers. “Although Healthvana makes much of the fact that Telebrands shipped out ‘Healthvana’ labeled bottles even after agreeing to change its branding, the evidence is undisputed that the bottles had already been produced. A de-identification period spanning a matter of weeks hardly constitutes evidence of any bad intent on Telebrands’ part.”

Product line expansion: No evidence of intent to expand; weighed against confusion.

Balancing the factors: Actual confusion weighed in favor of confusion; mark strength, mark similarity, and degree of care weighed slightly in favor of confusion; but the other factors were either neutral or weighed against confusion, and the unrelatedness of the goods weighed “heavily” against likely confusion. Telebrands was entitled to summary judgment. [Surprised? I think it’s really unrelatedness+degree of care used for the more expensive product doing the work.]

False advertising: This analysis is interesting mostly because it makes clear how much higher the causation standards are in §43(a)(1)(B) than in §32/§43(a)(1)(A) analysis. Competition wasn’t required for liability as long as there was commercial injury, including harm to reputation, but injury must be shown to come “as a result of the false statement.”

Although [Healthvana’s] evidence certainly indicates reputational harm to Healthvana, the link between consumer anger and the allegedly false statements is less clear. Healthvana’s First Amended Complaint alleges that Telebrands falsely stated that its version of Healthvana was a “trusted brand since 2015,” had “over 100 million satisfied customers,” that Telebrands’ sanitizer contained an ingredient used in hospitals, and that Telebrands had maintained a website since 2019, when in reality the website went live in 2020.

But Healthvana didn’t identify any complaint related to any of the allegedly false statements.

Cybersquatting:  Healthvana challenged Telebrands’ registration and use of healthvanafoam.com but could not show bad faith:

Healthvana appears to rely on the fact that Telebrands’ website was still operational on April 4, four days after Telebrands voluntarily agreed to change its Healthvana branding. As discussed above, a de-identification period of less than one week hardly demonstrates bad faith or intent. Furthermore, given the court’s trademark analysis, above, Telebrands’ belief that its use of the domain name was lawful was a reasonable one.

Next on the chopping block? Mikos attacks the PTO's lawful use requirement

Robert A. Mikos, Unauthorized and Unwise: The Lawful Use Requirement in Trademark Law, 75 Vanderbilt Law Review 161 (2022)

Abstract:

For decades, the United States Patent and Trademark Office (“PTO”) has required trademark owners to comply with sundry nontrademark laws governing the sale of their trademarked goods and services. Pursuant to this “lawful use requirement,” the Agency has refused or even cancelled registration of thousands of marks used on everything from Schedule I controlled substances to mislabeled soap. This Article subjects the Agency’s lawful use requirement to longoverdue scrutiny. It suggests that in requiring compliance with other laws for registration, the PTO has lost sight of the one statute it is supposed to administer. In the process, the Agency has overstepped the limits of its statutory authority and undermined federal trademark policy. Whether a mark owner has used its mark to sell improperly labeled soap or an illicit drug, the PTO has no mandate, and no convincing policy reason, to deny the owner the substantial benefits of registration. Simply put, the Agency’s lawful use requirement has no place in trademark law.

I’d never given the question much thought, and I was initially skeptical but largely convinced by the argument. I doubt that the PTO can’t ever identify “per se” violations of the law—it seems quite possible to distinguish between violations of the law that can’t be corrected by any voluntary action by the claimant other than discontinuing sales of the unlawful product (e.g., marijuana; products that need label approval from another agency but don’t have it) and violations of law that can be corrected by voluntary action while still making use of the putative mark on the goods (e.g., incompletely labeled cosmetic; failure to label country of origin). But that is a different question from whether the PTO has the statutory authority to do this, whether the PTO can apply its rules consistently, or whether it is a good idea to ask the PTO to do so.

2(c) unconstitutional as applied to TRUMP TOO SMALL

Another round of “how far does this putatively narrow decision extend?”

In re Elster, No. 20202205 (Fed. Cir. Feb. 24, 2022)

Elster sought to register the phrase “TRUMP TOO SMALL” in standard characters for use on shirts. [Note lurking failure to function issue that might be an independent problem.] The examiner rejected on 2(a) and 2(c) grounds, but the TTAB affirmed only on 2(c), so the court doesn’t reach whether 2(a) can cover this kind of disparaging mark.

Besides resisting constitutional analysis, the TTAB reasoned that the 2(c) bar was narrowly tailored to advance two compelling government interests: protecting the named individual’s rights of privacy and publicity and protecting consumers against source deception.

While Tam and Brunetti were decided as viewpoint discrimination cases, the Federal Circuit had already decided that Brunetti involved unconstitutional content discrimination, whether analyzed under Central Hudson or strict scrutiny. [As I’m writing about in more detail, it’s weird that, more than 75 years after the Lanham Act was enacted, courts are not willing to tell us whether its scope matches or exceeds that of commercial speech.]

Brunetti established that, though 2(c) is not a speech ban, denying trademark registration “disfavors” the speech being regulated and thus must be analyzed as a free speech question. Paraphrase: Although content discrimination may be allowed when viewpoint discrimination is not, it makes no sense to say that First Amendment scrutiny of registration is only of whether there is viewpoint discrimination. “Elster’s mark is speech by a private party in a context in which controversial speech is part-and-parcel of the traditional trademark function.” Trademark registration is not like a limited public forum, because “refusals chill speech anywhere from the Internet to the grocery store.”  [This is where things get weird and tangled because all the cases on which this reasoning relies talk about the government suppressing speech, whereas registration confirms rights to suppress the speech of others. But anyway, the First Amendment protects speech that’s sold for profit. And speech printed on a t-shirt.

So, whether the standard was intermediate or strict scrutiny, the government needed at least a substantial interest in enforcing the restriction.

First, applicant had a “substantial” First Amendment interest in criticizing a public official. Such criticism “does not lose its constitutional protection merely be cause it is effective criticism and hence diminishes [public figures’] official reputations.”

The government responded that this interest was outweighed by its substantial interest in protecting state-law privacy and publicity rights, grounded in tort and unfair competition law.

Privacy” “Here, there can be no plausible claim that President Trump enjoys a right of privacy protecting him from criticism in the absence of actual malice—the publication of false information ‘with knowledge of its falsity or in reckless disregard of the truth.’” Time, Inc. v. Hill, 385 U.S. 374, 388 (1967). (Comment: As implicitly recognized in the subsequent discussion, Time extends this analysis beyond government officials to newsworthy matters, but the opinion is not pellucidly clear about whether 2(c)’s as-applied unconstitutionality extends to all nonconfusing uses of a person’s name or only to government officials or only to public figures; my guess is the last, but then again nonconfusing uses of an unknown name probably don’t trigger many 2(c) rejections in the first place).

Anyway, “[w]ith respect to privacy, the government has no legitimate interest in protecting the privacy of President Trump, ‘the least private name in American life,’ from any injury to his ‘personal feelings’ caused by the political criticism that Elster’s mark advances.”

What about the right of publicity? “The government, of course, has an in terest in protecting against copying or misappropriation of an existing mark, just as it has an interest in preventing misappropriation of other forms of intellectual property.” Neither party cited San Francisco Arts & Athletics, Inc. v. U.S. Olympic Com mittee, 483 U.S. 522 (1987), but that case allowed the government to bar even nonconfusing unauthorized uses that “nevertheless may harm the USOC by lessening the distinctiveness and thus the commercial value of the mark.” But “[n]o similar claim is made here that President Trump’s name is being misappropriated in a manner that exploits his commercial interests or dilutes the commercial value of his name, an existing trademark, or some other form of intellectual property.” [Note that this conclusion is accomplished by (again, mostly implicitly) holding that state ROP laws are constitutionally required to, and therefore do, exempt newsworthy uses.]

The government also has an interest in avoiding false endorsements, but that wasn’t at issue here. “No plausible claim could be or has been made that the disputed mark suggests that President Trump has endorsed Elster’s product,” and 2(a) already bars false endorsement. See, e.g., Bridgestone/Firestone Rsch., Inc. v. Auto. Club de l’Ouest de la Fr., 245 F.3d 1359, 1363 (Fed. Cir. 2001) (“This protection of rights of personal privacy and publicity distinguishes the § 2(a) false suggestion of connection provision from the § 2(d) likelihood of confusion provision.”). [Seen this way, not for nothing, 2(c) as incremental protection over 2(a) looks more viewpoint-based, because it will do work only in cases of nonconfusing marks, which are likely to be disparaging ones.] Footnote to legislative history “evincing Congress’s desire to prevent the use of presidential names to promote unsavory or other commercial products.”

Stripped to the ROP alone, that interest “does not support a government restriction on the use of a mark because the mark is critical of a public official without his or her consent.” The Restatement of Unfair Competition recognizes that the First Amendment limits the ROP, and so do courts around the country, e.g., Cardtoons, Saderup, ETW, Hart v. Electronic Arts (3d Cir., citing the part of the case that protected the montage against liability), Lohan v. TakeTwo Interactive (NY).

“The right of publicity is particularly constrained when speech critical of a public official is involved. The Restatement specifically notes that the right of publicity would be unavailable to ‘a candidate for public office’ who sought to ‘prohibit the distribution of posters or buttons bearing the candidate’s name or likeness, whether used to signify support or opposition.’” Thus, there was no valid publicity interest that could “overcome the First Amendment protections afforded to the political criticism embodied in Elster’s mark.” The government recast 2(c) as merely representing “a targeted effort to preclude federal registration that facilitates a particular type of commercial behavior that has already been banned by most states” but “our review of state-law cases revealed no authority holding that public officials may restrict expressive speech to vindicate their publicity rights, and the government cites no such cases.” Rather, most of the cases cited by the government “involve a routine use of a public figure’s name or likeness to promote a product or the misappropriation of the commercial value of their identity.”

Thus, the defense of 2(c) as applied failed at the government interest stage. There was no need to address any overbreadth problems. “It may be that a substantial number of section 2(c)’s applications would be unconstitutional. The statute leaves the PTO no discretion to exempt trademarks that advance parody, criticism, commentary on matters of public importance, artistic transformation, or any other First Amendment interests. It effectively grants all public figures the power to restrict trademarks constituting First Amendment expression before they occur.” But the court left final resolution of overbreadth for another day.

Some Robinhood statements about security were falsifiable, but Ps didn't properly allege they relied on those statements

Mehta v. Robinhood Financial LLC, 2021 WL 6882392, No. 21-cv-01013-SVK (N.D. Cal. Sept. 8, 2021)

Plaintiffs alleged that unauthorized third parties were able to access approximately 2,000 Robinhood customers’ accounts and deplete their funds due to Robinhood’s insufficient security measures. Previously, the court denied Robinhood’s motion to dismiss claims for negligence and violations of the California Consumer Privacy Act (CCPA), the constitutional right to privacy, and the unlawful and unfair prongs of the Unfair Competition Law (UCL). The court dismissed claims for breach of contract and violations of the Customer Records Act (CRA), CLRA, FAL, and fraudulent prong of the UCL with leave to amend; this opinion addressed the amended complaint. Robinhood moved again to dismiss.

Plaintiff sufficiently alleged the existence of promises to reimburse customers for losses from unauthorized account activity.

Were Robinhood’s claims about its security measures mere puffery? Previously, the court held that statements that Robinhood “take[s] privacy and security seriously” and is “[d]edicated to maintaining the highest security standards” were puffery. Robinhood’s Financial Privacy Notice states: “To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.” Those were “specific, non-subjective guarantee[s]” on which a reasonable consumer could rely. Plaintiffs also alleged falsity, pleading that Robinhood’s systems “lack[ ] simple and almost universal security measures used by other broker-dealer online systems” and “Robinhood fails to verify changes in bank account links and failed to store user credentials in an encrypted format.”

Still, UCL claims under the fraudulent prong, CLRA, and FAL claims failed.

Was it plausible that plaintiffs relied on the Financial Privacy Notice? Plaintiffs argued that “it would be unrealistic or otherwise unfair to expect a plaintiff to pinpoint the exact representation she relied on amid a sea of representations.” This was a close call, but the court determined that the plaintiffs didn’t allege enough about the statements they actually saw and actually relied on; motion granted with leave to replead.

Harvard/Yale/Stanford Junior Faculty Forum, June 2022: call for papers

 Request for Submissions

Harvard/Yale/Stanford Junior Faculty Forum

June 9-10, 2022, Harvard Law School

Harvard, Yale, and Stanford Law Schools are soliciting submissions for the 22nd session of the Harvard/Yale/Stanford Junior Faculty Forum, to be held at Harvard Law School on June 9-10, 2022. Twelve to twenty junior scholars (with one to seven years in teaching) will be chosen, through a double-blind selection process, to present their work at the Forum. One or more senior scholars will comment on each paper. The audience will include the participating junior faculty, faculty from the host institutions, and invited guests. The goal of the Forum is to promote in-depth discussion about particular papers and more general reflections on broader methodological issues, as well as to foster a stronger sense of community among American legal scholars, particularly by strengthening ties between new and veteran professors.

NOTE: We intend to hold the Junior Faculty Forum in person, subject to COVID protocols at the time. We anticipate that in-person meetings will be possible, but masking and vaccination requirements may still be in effect. We will follow all applicable governmental and Harvard University guidelines, and we appreciate your understanding of the uncertainties.

TOPICS: Each year the Forum invites submissions on selected topics in public and private law, legal theory, and law and humanities topics, alternating loosely between public law and humanities subjects in one year, and private law and dispute resolution in the next. For the upcoming 2022 meeting, the topics will cover these areas of the law:

Antitrust

Bankruptcy

Civil Litigation and Dispute Resolution

Contracts and Commercial Law

Corporate and Securities Law

Intellectual Property

International Business Law

Private Law Theory and Comparative Private Law

Property, Estates, and Unjust Enrichment

Taxation

Torts

A jury of accomplished scholars, not necessarily from Harvard, Yale, or Stanford, will choose the papers to be presented. There is no publication commitment. Harvard will pay presenters’ and commentators’ travel expenses, though international flights may be only partially reimbursed.

QUALIFICATIONS: Authors who teach law in the U.S. in a tenured or tenure-track position and have not been teaching at either of those ranks for a total of more than seven years are eligible to submit their work. American citizens or permanent residents teaching abroad are also eligible provided that they have held a faculty position or the equivalent, including positions comparable to junior faculty positions in research institutions, for less than seven years and that they earned their last degree after 2012. We accept jointly authored submissions, but each of the coauthors must be individually eligible to participate in the Forum. Papers that will be published prior to Forum are not eligible. There is no limit on the number of submissions by any individual author. Faculty from Yale, Stanford, and Harvard Law Schools are not eligible.

PAPER SUBMISSION PROCEDURE: Electronic submissions should be sent to Rebecca Tushnet at rtushnet@law.harvard.edu, with the subject line “Junior Faculty Forum.” The deadline for submissions is March 8, 2022. Remove all references to the author(s) in the paper. Please include in the text of the email and also as a separate attachment a cover letter listing your name, the title of your paper, your contact email and address through June 2022, and which topic your paper falls under. Each paper may only be considered under one topic. Any questions about the submission procedure should be directed both to Rebecca Tushnet and her assistant, Matthew Nicola, mnicola@law.harvard.edu.

FURTHER INFORMATION: Inquiries concerning the Forum should be sent to Matthew Stephenson (mstephen@law.harvard.edu) or Rebecca Tushnet (rtushnet@law.harvard.edu) at Harvard Law School, Norman Spaulding (nspaulding@stanford.law.edu) at Stanford Law School, or Christine Jolls (christine.jolls@yale.edu) or Yair Listokin (yair.listokin@yale.edu) at Yale Law School.

Rebecca Tushnet

Matthew Stephenson

Norman Spaulding

Christine Jolls

Yair Listokin

Copyright Office Technical Measures Consultations

The other sessions overlapped with my teaching, unfortunately, including Register Perlmutter’s opening remarks. 

11:00AM – 12:30PM Session 2

Meta, Rob Arcamona: Meta takes © and creativity very seriously, developed content protection tools beyond legal obligation. Developed hand in hand w/content owners; voluntary cooperation is successful.

Microsoft, Lauren Chamblee: Historically engaged w/rightsholders for © concerns. Four key points: (1) One side fits all approach is burdensome for different stakeholders depending on level of control over content, different platforms attracting different content—search engine and cloud computing policies differ. (2) certain measures are harder to implement in cloud space. Customers/sensitive industries like healthcare, finance, and banking that use encryption. Cloud providers can’t implement certain measures that might work elsewhere. (3) Implementation can present resource challenges for smaller platforms/platforms w/ few infringement challenges. Forcing them to reallocate resources not justified by the infringement on their platforms can be bad and lead to overblocking. (4) incentivize innovative solutions addressing specific concerns on specific platforms rather than adopting generic solutions that don’t work in context.

GitHub, Rose Coogan: More than 73 million creators—students, developers, startups, NGOs, governments using GitHub to collaborate on open source. Large part of what makes developer community from other communities. Not traditional © content. Unique expertise on code too; code is different from photos, music, videos; some of the most valuable code on GitHub is licensed openly.  Remediation not removal is often the goal—changes to the code rather than removing often resolves the problem, e.g. addressing violation of open source license by adding attribution etc. under terms of relevant license. Taking down code is significant; consequences of removal often disproportionate to interests of © owner; can break lots of programs that depend on availability of that code. Analysis of infringement claims for code can be not very simple. Tech measures at scale will rarely if ever be acceptable proxy for analyzing infringement claims.

CTIA, Kathryn Dall’Asta: Wireless communication industry. Flexible, not one size fits all.

Wikimedia Foundation, Jacob Rogers: DMCA compliance lead for 7 years. Nonprofit hosts several projects including Wikipedia, 100s of 1000s of users contributing content around the world. Designed to be freely available licensed or public domain; we occasionally use fair use images where no free image is available, such as when a famous work has been destroyed. Careful justifications/written record when we make those exceptions. Limitations of tech measures: our users have their own processes for reviewing © works and their own tools for flagging for potential review, leading to very small number of DMCA notices. When we do get them, esp from automated tools, they are very low quality. Less than 1 in 5 notices are valid for our projects. Tend to discourage/demoralize our volunteers, so we review very carefully and reject when invalid. Encourage CO to think carefully about smaller nonprofit and educational uses.

Organization for Transformative Works, Rebecca Tushnet: The Organization for Transformative Works (“OTW”) is a nonprofit established to protect and defend fans and fanworks from commercial exploitation and legal challenge. The OTW’s nonprofit, volunteer-operated website hosting transformative noncommercial works, the Archive of Our Own, was launched in late 2009. It has over 4.2 million registered users, hosts over 8.5 million unique works, and receives approximately 440 million page views per week, on a budget of slightly over half a million dollars per year. [I made a NYT comparison but other sources disagree with the numbers I found—so it’s probably most fair to say that we’re in roughly the same class as the NYT for visits.]

Our story explains why it is a mirage to float the idea of standard technical measures adequate to distinguish infringing materials from non-infringing materials on the Archive of Our Own and similar websites. Like most large websites that are not in the news every day, we receive very few copyright claims despite our size. I have been working with the OTW since its inception, and we have never received more than a handful of copyright claims per year. Our modal DMCA notice is from a person who deleted their account without removing their works and now wants them removed even though they initially posted the works to the site. We do receive copyright claims based on titles or trademarks, which are invalid, and while we occasionally receive a valid claim not based on an initially authorized posting, our records indicate that we have never received a second copyright notice based on rights in the same complaining work.

Given all this, the idea of using technical measures to prescreen content is foolish and counterproductive. It would impose substantial costs that we don’t have the resources to afford and would have prevented literally zero of the claims we have received over 13 years in existence, sacrificing 8.5 million new creations for no purpose. We are unusually successful for a nonprofit website, but we are not unusual in the nonexistent benefit of technological filtering or our inability to afford such features—the cost-benefit analysis for websites like ours is just completely different from the cost-benefit analysis of charismatic megasites like Facebook.

In addition, our constituents routinely report that they have trouble making transformative fair uses elsewhere on sites like YouTube, notwithstanding that they are fair uses, which filtering software cannot detect. We are, for example, deeply concerned about identifying Scribd’s BookID as a potential model, when Scribd has rightfully acknowledged its significant limitations, including its routine misidentification of public domain materials and quotes that get caught in its filters. The same problems arose for Audible Magic, especially with the pandemic shift to live streamed performances, when classical concerts were wrongly flagged as copies of existing recordings, and for Content ID, showing that misidentification is a pervasive problem without a technical fix.

RIAA, Victoria Sheckler: Internet is amazing but is also a vehicle for distributing pirated content, unfairly competing w/licensed content. Appreciate voluntary technical measures developed to ID sound recordings and determine what to do w/them.

Cloudflare, Alissa Starzak: Tech measures used by platforms do not work for infrastructure providers and could have profound impacts on privacy and security. Cloudflare takes voluntary tech measures that would be completely inapplicable to others—rightsholders object that we protect sites from attack even though we don’t host; we can route the complaints to the host. Natural instinct is that one measure should be equally applicable to all sorts of providers, but that mistakes the diversity in the system.

Black Music Action Coalition, Willie “Prophet” Stiggers: Founded to combat racism in the music industry. Appreciate CO efforts; looking to protect Black artists.

Pex, Megumi Yukie: Provides technical measures for ID’ing, protecting and licensing © works through Attribution Engine.

Q: how do current tech measures affect users, rightsholders, providers?

Scheckler: the existing measures help radically in id’ing content, facilitating license/use, protecting/stopping unauthorized use. TDEX is a multistakeholder body creating better licensing of music. Automated permission technologies include third-party services like Audible Magic and Pex and proprietary systems like Content ID. None are perfect but dramatically ease friction.

Chamblee: some are applicable to platforms that host UGC that has a lot of rightsholder content. Harder on, e.g., enterprise platform where providers don’t have access to content hosted on their site. Can pass on complaints to customer w/o having access to content. Tech measures that are useful in one place aren’t always useful in other contexts.

Scheckler: not a one size fits all policy. What works on a search engine won’t necessarily work on UGC platform. But that doesn’t end the inquiry. We do have certain APIs w/large search engines to assist them identifying infringement.

Starzak: there are lots of kinds of measures; the CO notice was focused on large platforms’ uses. But tech measures that allow rightsholders to submit claims are part of the ecosystem too. We have a variety of different players. The idea of standardization under legal process is very different than voluntary mechanism. Once a gov’t process starts, it starts to look like a legal regime and not a voluntary regime. Goal is to think about different voluntary measures, not one size fits all.

Rob Arcamona: interested in continuing voluntary cooperation. Infringement is against our TOS, and developing new system is in our users’ interests, since they are often creators; we want to create a system that works for them. Not only are some services different from social media, one social media platform may differ very much from each other. [Respect for getting FB’s antitrust message out in this space!] The types of speech and the types of infringement that occur on one may not occur on another. Narrowly tailored solutions are the most effective.

Rogers: we have a similar thing at Wikimedia. One of the most requested tool from volunteers is a better tool to detect plagiarism. Want to assure our projects are freely available for use; the importance of variation is critical. When we see CO mentioning tools that rely on scanning works before upload, that raises lots of concerns; preempts open discussion and user processes used on Wikipedia and could be very disruptive.

Scheckler: think about implementation characteristics. Automated content recognition: how good is the tech to ID the work at issue, which depends on the type of work. Second, once you recognize that work, what are you going to do about it? That’s tailoring for specific platforms and users. Wants to distinguish b/t underlying tech and business rules for implementing it on any given platform.

Yukie: Pex sees benefits to all sides in using our tech measures. © holder can register assets and ID content and be fairly compensated; all sizes of rights holders can benefit, including indiv. creators who might not have same level of access/opportunity to monetize. Smaller and up and coming OSPs get a cost-effective solution that allows easy licensing and provide authorized content. Might not have the same access to level playing field in seeking licenses directly from rights owners. One of our clients: up and coming app that allows users to upload clips of selves dancing to popular music; friendly competition. To succeed, needs to allow DanceFight users to use the songs. Pex allows DanceFight to afford this in absence of large resources/name recognition. Users don’t have to worry about takedowns; can also register their © works in our asset registry.

Stiggers: Which artists’ organizations are at the table in these discussions? We haven’t been at the table for the most part.

Arcamona: We regularly meet with large studios and individual creators and organizations that represent individual creators including those on the panel today [does he mean RIAA?]. Development has to be deliberate.

Dall’Asta: Narrow tailoring b/c there are differences in implementation and what’s appropriate.

RT: Sorry to be a party pooper, one size doesn’t fit all is not a full description of the tradeoffs. In other fora, content owners complain viciously about Content ID missing stuff; I’m sure there is underblocking and there is also a lot of overblocking especially of fair use and public domain material (Fox runs a NASA clip and then NASA content gets blocked). So the tradeoff is not just are you big enough to justify using these measures but also these measures have serious costs to creators.

Coogan: One size fits all doesn’t work. We’ve found that automated notices are very rarely valid—that has to be taken into consideration.

Q: what features of new technical measures would be important to success?

Rogers: Note there are less scrupulous organizations that use content ID tools to harass people making appropriate lawful uses. Don’t just think about the technical tools, but think about what bad actors will do with the technical information they’re getting. An ID tool should avoid ID’ing people who are in cross hairs in the first place.

Arcamona: Have to develop with eye towards misuse, both intentional or unintentional (like Fox forgetting to exclude its NASA clip). Has to be deliberate.

Scheckler: there are differences b/t Wikipedia and fandom sites and sites that trade on music. We often see completely bogus counternotices—the focus on abuse has to be on both sides of the house. Tech measures can still move the ball forward.

RT: Designing for abuse is a great idea and not something that 512 and 1201 did. For example, privacy concerns with notices and counternotices. I’m sure there are abusive counternotices but what I’ve seen is about Google and Google does have side deals that allow rightsholders to override counternotices. We should have people who don’t focus on © but do focus on abuse talk to us about system design. One thing that would help: a clear statement from the CO that screening DMCA notices for quality does not disentitle a platform from the safe harbor w/r/t other instances of putative infringement.

Starzak: Laboratory of experiments is useful on the abuse and innovation sides.

Yukie: misuse and fair use: Pex has tried to address these w/processes. Fingerprinting and matching itself should be available to everyone. All rightsholders should be able to register and license content. But to properly implement that there need to be anti-misuse provisions. So we try to prevent rightsholders to prevent claiming content they don’t own, and have downstream dispute mechanisms.

RT: Germany’s proposed implementation of new © rules w/quantitative thresholds for filtering, mandatory ADR—nobody is talking about it, but some of the companies here might have to implement it. One Q: are they going to do it worldwide? That could obviate some parts of this proceeding and make other questions salient.

Chamblee: Europe does exclude enterprise service platforms and online source code sharing platforms, so this proceeding is broader.

Q: what role do you see tech measures playing in the future and how will that play out in costs/benefits for those involved in their use?

Starzak: what you’ve heard from everyone is that there are already a lot of tech measures already in play. They will continue to be developed. Q even on the European side is what does that look like and what effect does that have in the long term? That depends on implementation!

RT: Jennifer Urban et al—DMCA Plus and DMCA Classic—empirical work shows that business forces do drive innovation over and above and perhaps regardless of the legal framework. As Europe’s struggles with implementing its changes continue, it may be that it is very hard for law to affect what the tech does/can do. This is a space to monitor but perhaps law doesn’t have all that much to say.

Scheckler: costs will go down b/c that’s what time does to the cost of tech. [That’s not really true of costs of overblocking—it’s a limited definition of costs.]

Arcamona: Effectiveness is the key question, and that comes from customization and voluntary cooperation among industry members. Systems for incentivizing creativity and promoting it on our platform: we have an independent artist program allowing licensing on our platform, and we cover the costs for that—collaboration can protect © and expression.

Rogers: Not just seeing what tech evolves but what evolves to be effective is very important. Using algorithms to help humans do better work is likely to be more productive in long run than automated tools, which both over- and under-identify.

Coogan: we see a lot of third party submitters with an automated system that searches platform for keywords like company name, w/o considering context of use. W/o humans able to evaluate what comes out of the results, we see a lot of invalid takedowns, which goes to effectiveness. Existing tools are based on music or video and do not take into account things like code. [Preach!]

Chamblee: In certain platforms, fair use might be particular concerns—have to be tailored to the platform.

RT: Echo Rose Coogan’s statements on the last question: existing tools are optimized for video and music; super important point that hasn’t gotten much airtime, which is why we are so concerned about touting Scribd as a model. Compare Amazon experience where they told the CO at the 512 roundtables that over half of the takedowns they get for their Kindle Direct self publishing arm—also text—are invalid.

More COOL stories: USDA shield not plausibly misleading of origin, but "Product of USA" might be

Thornton v. Kroger Co., 2022 WL 488932, No. CIV 20-1040 JB/JFR (D.N.M. Feb. 17, 2022)

269 print pages!

Thornton sued over logos that allegedly misrepresented the US origin of meat. She alleged both health and moral concerns about foreign beef, which she alleged was produced under dangerous and environmentally destructive/harmful labor conditions.

examples of challenged labels: USDA Choice, "produced in the USA" over American flag

The court held that federal law did not preempt her claims; she was not seeking to reinstate country-of-origin labeling requirements for beef, but to avoid false advertising, which was consistent with federal law (which specifies that labels can’t be false/misleading). She challenged both use of a “U.S.D.A. CHOICE/Produced in the USA” graphic, as well as use of the official USDA grade shields in red, white and blue. Although Kroger claimed that it was no longer using “ ‘Produced in the USA’ language in connection with any beef advertisements,” the court pointed out that it saw promotional stickers saying that in the store, and thus “understood” Kroger’s statement to mean only that the logos were no longer in mailings or other out-of-store ads.

Likewise, the New Mexico Unfair Practices Act’s safe harbor provision didn’t exempt the defendants’ conduct because it wasn’t “expressly permitted” by USDA. Defendants fundamentally argued that federal law dictated that “labels which indicate that products which only have been processed in the United States can be labeled as a United States product, regardless whether these labels are false or misleading.” The court disagreed.

Part of the problem came from the feds themselves:

It takes a certain amount of mental gymnastics to reconcile the Agricultural Marketing Act’s plain language—as well as the USDA’s public pronouncements—about how the USDA grade shields promote “American beef” and “American agricultural products,” with the thicket of USDA regulations that implicitly undermine those stated goals.

Comment: The feds have long preferred the interests of packers over those of US ranchers. “Although the Defendants’ practice of using USDA grade shields on their labels and in advertisements may be prevalent and customary in the retail industry, and the USDA may even ratify that use to the extent that the shields are used to indicate ‘American agricultural products,’ ‘[n]either inferential pre-conduct agency permission nor post-conduct agency review has even been held to satisfy the requirement of the statute.’” A regulatory “patchwork” that defendants argued gave them permission was not a safe harbor and USDA never approved the conduct at issue here.

Similarly, the dormant commerce clause didn’t preclude the claim. Because advertising beef as “U.S.D.A. CHOICE/Produced in the USA,” or with the USDA official grade shield, is permissive and not mandatory, it was possible for the defendants to comply with state law without affecting international trade agreements. “It is difficult to see how, if the Defendants can no longer advertise imported beef products with promotional stickers or advertising graphics indicating that those products have a geographic origin in the United States, this would upend WTO rulings.”

Core plausibility: It was plausible that the “Produced in the USA” claim was deceptive, but not that the red white and blue USDA official shield was (plaintiffs had argued that defendants should have to use the black and white version). As to the first, it was plausible that consumers would believe that the advertised beef was from cattle born and raised in the United States when it was not. But “on their face, the official USDA grade shield states merely the beef’s grade and implies that it has passed USDA inspection.”

USDA choice shield in red white and blue

It was true that, viewed in conjunction with government statements about the meanings of the grade shields, the shields could be misleading, but Thornton didn’t allege reliance on government statements. The court wouldn’t attribute the government message to defendants. Thornton didn’t plead sufficient facts to show that the public would have relied on the government statements. The court commented that liability would be possible for some third party statements. “If, for example, the USDA or AMS ran television advertisements every night stating that the USDA grade shields are symbols of high quality American beef and that their purchase supports rural America, then Thornton plausibly could allege, and the Court could conclude, that reasonable consumers could be misled by the Defendants’ use of the official USDA grade shields, even though the Defendants’ advertisements are not facially misleading.” But that wasn’t alleged here.

Breach of warranty was plausible for “Produced in the USA,” which was ambiguous as applied to beef products. Thus, the jury should determine its meaning as the ultimate factfinder. [Compare the reasoning here—perfectly good common-law reasoning—with the reasoning on the preliminary injunction motion, which invokes Lanham Act distinctions.]

For the preliminary injunction, Thornton lacked a substantial likelihood of success on the merits because she didn’t show that the general public was aware of or relied on government statements about the official shield grades—which were the only thing she sought preliminary injunctive relief on. Also, and this is something that the court doesn’t seem to know is a total innovation, “because the official USDA grade shields are not inherently misleading, they enjoy First Amendment protection, and Thornton does not demonstrate that a PI is the least restrictive method of vindicating the important State interest in truthful commercial speech.” That is, the court seemingly unites the explicitly misleading/implicitly misleading divide from the Lanham Act with the inherently or actually misleading/potentially misleading divide from an older line of First Amendment cases about direct government regulation. This doesn’t work super well—including because “actually misleading” includes situations where the statement is ambiguous but shown to deceive consumers, so the First Amendment divide encompasses both parts of the Lanham Act categorization system.

This was an invited confusion, since defendants insisted that the court should use the Lanham Act explicit/implicit distinction to evaluate the case, requiring “evidence (usually in the form of market research or consumer surveys) showing how the statements are perceived by those who are exposed to them.” The court, in adopting this view, cited a lot of Lanham Act cases—including a quote saying “Lanham Act”—without explaining why this standard was also the standard for consumer protection cases: “While it is true that the issue whether an advertisement is misleading is a factual question to which individual jurors would bring their own opinions, perceptions, and experience—and would ultimately determine, were this case to go to trial—the Court determines that, in the absence of consumer surveys, market research, or expert testimony to the contrary, a reasonable jury would not consider the USDA grade shields to be misleading facially.” The USDA grade shields “do not assert facially anything about the beef’s origin, but assert only the meat’s grade and that it passes USDA inspection standards.” Although the court was “reluctant … to require consumer surveys for implicit falsehood claims at the PI stage,” it still found the distinction between explicit and implicit falsehood “worth considering when determining whether Thornton meets her burden of production.”

[For such a comprehensive opinion pursuing almost every thought down multiple possible pathways, it is surprising that the court spends no time distinguishing the Lanham Act from consumer protection law. The plaintiff here doesn’t even have Lanham Act standing; applying the implicit/explicit distinction—which stems not from the text of the Lanham Act but from judicial interpretation of it in part to deal with worries about anticompetitive suits brought by competitors to suppress competition—would seem to require more justification.]

The red, white and blue scheme was potentially misleading—the court rejected defendants’ arguments that it could not indicate geographic origin as a matter of law. Unlike the words “American Girl” as a trademark for shoes, the terms here were “literal descriptors of the products on sale, and denote the beef’s quality and character.” Milso Indus. Corp. v. Nazzaro, 2012 U.S. Dist. LEXIS 123999 (D. Conn.), also held that the defendant’s company name, “Liberty Casket,” and the iconography of the Statue of Liberty and the American flag “evoke clear associations with the United States of America,” but were “too general to evoke any specific geographical associations or to support an inference that there is an implied claim of domestic manufacture.” But plaintiff’s survey didn’t test the right question—it asked about omission of a made in China label, not what messages were conveyed by the US iconography. The court read it only to require that “pertinent and targeted consumer surveys must support adequately any such allegations, particularly at the summary judgment stage.”

Defendants argued that “no reasonable consumer would believe that these USDA grading shields imply anything about the origin of beef,” because the “USDA grading criteria [are] publicly available on the USDA’s website,” and also in USDA consumer guides, “none of [which] suggest that these shields have anything to do with where the cow was born.” 

defendants' partial reproduction of USDA website not referencing geographic origin for meaning of grades

They showed the court part of the blog post, but two paragraphs above that, the USDA said:

The USDA grade shields are highly regarded as symbols of safe, high-quality American beef. Quality grades are widely used as a “language” within the beef industry, making business transactions easier and providing a vital link to support rural America. Consumers, as well as those involved in the marketing of agricultural products, benefit from the greater efficiency permitted by the availability and application of grade standards.

The other website said basically the same thing. Thornton’s belief that the shield signified US origin “is not unreasonable in light of the USDA and AMS’ statements that the grading shields are ‘symbols of high-quality American beef’ and which provide a ‘vital link to support rural America.’”  Still, Thornton didn’t plead that either she or the general public was aware of or relied upon the government websites’ statements about the official USDA grade shields when they purchase beef products.

The court was somewhat less sympathetic to defendants’ arguments that Thornton couldn’t prove that she bought non-US-raised beef because they commingle all the meat in processing. “[T]he regulatory scheme currently in place permits the obfuscation of beef products’ origins. … Federal guidance allows imported beef to be indistinguishable from domestic beef.” As the White House has noted, “[M]ost grass-fed beef labeled ‘Product of USA’ is actually imported. That makes it hard or impossible for consumers to know where their food comes from and to choose to support American farmers and ranchers.” The President has issued an Executive Order directing the Secretary of Agriculture

to ensure consumers have accurate, transparent labels that enable them to choose products made in the United States, consider initiating a rulemaking to define the conditions under which the labeling of meat products can bear voluntary statements indicating that the product is of United States origin, such as “Product of USA.”

Thus, Thornton had a substantial likelihood of proving that some of the beef that the Defendants sell and which they advertise using the official USDA grade shields originates, in fact, from foreign countries. But that was immaterial without misleadingness.

Next move: even assuming misleadingness, Thornton didn’t show likely success on the merits because she didn’t show that enjoining use of official USDA grade shields on beef would be the least restrictive method of regulating potentially misleading speech. [I don’t understand why her proposal—make them use black and white shields—wouldn’t allow all the truthful benefits without the misleading aspects, which sure sounds like the least restrictive alternative.]

black and white version of shield

When commercial speech is only potentially misleading, that is, when “the information also may be presented in a way that is not deceptive,” then it may not be banned outright. In contrast, inherently misleading speech is “incapable of being presented in a way that is not deceptive.” But because the official grade shields are not inherently misleading, as concluded above [where the court concluded that they were at best implicitly misleading—here’s the equation of inherent with implicit], they were protected by Central Hudson. “Thornton does not demonstrate that enjoining the Defendants’ use of the official USDA grade shields is the least restrictive means of ensuring that consumers are not misled about the beef products’ origin.”

Thornton also couldn’t show irreparable injury. She argued that this wasn’t just about her health, but also about “extreme degradation practices” such as “deforestation” and the use of slave labor in countries such as Brazil and Argentina. But she didn’t show that this injured her, or how the proposed injunction would remedy those ills.

There was also an important public interest in using the shields: to indicate the beef’s grade to retailers or consumers.

Coffee clash: "up to" on label plausibly misleading where instructions would produce only 70-80% of that

In Re Folgers Coffee, Marketing Litig., No. 21-2984-MD-W-BP, 2021 WL 7004991 (W.D. Mo. Dec. 28, 2021)

Each canister of Folgers coffee includes a similar label that appears prominently on its front and indicates that the coffee grounds in the canister “MAKES UP TO” a certain quantity of “FL OZ CUPS” of coffee. On the back, Folgers provides instructions on how to brew its coffee, telling consumers to use one tablespoon of ground coffee to make one serving—which means a 6 fl. oz. cup—of coffee. However, consumers cannot make the quantity of cups advertised on the label if they use one tablespoon per cup.

For example, a 30.5 oz. cannister of Folgers Classic Roast advertises that it makes up to 240 cups of coffee, which, according to the instructions, requires 240 tablespoons, or 1200 grams of ground coffee. But the 30.5 oz. cannister contains only 865 grams of ground coffee, meaning that if a consumer followed the instructions on the back of the cannister, she could make only 70% of the number of cups advertised on the Label.

Plaintiffs sued for false advertising; the cases have been consolidated here. The court finds that plaintiffs plausibly pled misleadingness, though there are details for each relevant state law.

Defendants moved to strike allegations related to the putative nationwide class for plaintiffs’ negligent misrepresentation, fraud, and unjust enrichment claims. “But while there are no doubt many differences among these bodies of law, at this juncture, the Court lacks the information necessary to determine with certainty that the certification of a nationwide class is impossible.” Also, the court would not hold that it lacked personal jurisdiction over absent class members from states from which there were no named plaintiffs; absent class members are not “parties” in the same sense that members of a mass tort action are.

However, plaintiffs couldn’t recover punitive damages under California or Missouri law because plaintiffs didn’t plead the requisite knowledge/evil motive.

Defendants argued that plaintiffs had to find a purchaser of each of the 42 separate Folgers products using the allegedly misleading label. But this standing question would be “more efficiently resolved at the class certification stage by limiting the class definition,” at which point the court would resolve whether substantial similarity in the product misrepresentation would suffice for class treatment.

Plaintiffs are plausibly suffering some ongoing harm—they continue to desire to buy Folgers but can’t rely on the labels—and so they had standing to seek injunctive relief.

Defendants argued that the instructions weren’t plausibly misleading. They provide that, “[f]or best brewing results,” consumers should use one tablespoon of coffee to produce one 6-oz serving of coffee, or 1//2 of a measuring cup to produce ten 6-oz servings. Like the front labels, the instructions provide that each canister “makes up to” a certain number of “suggested strength 6 fl oz servings.”

Defendants argued that plaintiffs couldn’t plead deception if they didn’t try to scoop out every grain of ground coffee to see how many servings they could make. The court was appropriately dismissive of this argument: they’re allowed to use math to show that it would be impossible to brew that many cups at that recommended strength with that measurement method.

Next, defendants argued, the instructions also allowed for a “Pot Method,” not just a single-serving method; the Pot Method requires half a measuring cup (8 tablespoons) to brew ten servings. “The problem with this argument, as Plaintiffs point out, is that most Folgers products contain only about 70% of the tablespoons of grounds necessary to brew the listed number of cups using the Single-Serving Method, so even if a consumer used exclusively the Pot Method, she still could not brew the listed number of cups.” That is, the Pot Method would still only get them to around 80% of the advertised label numbers.

Finally, defendants argued that the label’s “up to” claim could not mislead a reasonable person to conclude that the contents of the cannister are guaranteed to make the listed number of cups. Comment: But nor would a reasonable person think that there was a guarantee that the contents would not make the listed number of cups if brewed as directed.

“Multiple courts discussing similar language have concluded that if a seller represents that a good produces ‘up to’ a certain quantity of something, and there is a significant disparity between that quantity and the amount a consumer can actually produce, ‘a fact question is presented as to whether a reasonable consumer’ would be deceived.” A prior similar case concluded otherwise, reasoning that “up to” was a promise that the canister could make those amounts “under certain circumstances.” But the complaint alleged a “huge disparity” between the amount produced by following the instructions and the amount indicated on the labels. “So while it might not be reasonable for a consumer to expect to always brew the exact quantity of coffee advertised on the Labels, a consumer might reasonably expect to brew close to that number at least some of the time, especially if she exclusively used the more efficient Pot Method.” On the allegations of the complaint, it was impossible to do so.

A bunch of more specific holdings follow:

The Missouri Merchandising Practices Act provides a cause of action against any person who makes a “misrepresentation ... or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce.” For a plaintiff to recover, she must show that she “suffered [ascertainable] pecuniary loss.” She has suffered an ascertainable pecuniary loss if there is a “difference between the actual value of the property and what its value would have been if it had been as represented.” This was sufficiently pled; the amount of the loss didn’t need quantification at this stage. Likewise, materiality was plausible: a reasonable consumer would plausibly consider how much she’d receive to be important in deciding to buy.

Usual California statutory claims: Similar.

NY: Personal jurisdiction arguments not reconsidered from earlier proceedings.

District of Columbia Consumer Protection Procedures Act: Like the old California regime, the CPPA enables private individuals to act as “private attorney[s] general” in enforcing consumer protection laws. “The result is that a consumer can obtain damages and injunctive relief on behalf of the population of D.C. without (1) representing a class or (2) alleging an ongoing injury.” But he still needed to show a risk of future harm to have standing for injunctive relief, and he didn’t.

The Florida Deceptive and Unfair Trade Practices Act: FDUPTA has three elements: (1) a deceptive act or unfair practice; (2) causation and (3) actual damages. Same result as for Missouri/California.

The Illinois Consumer Fraud and Deceptive Business Practices Act and Uniform Deceptive Trade Practices Act: ICFA requires “actual pecuniary loss,” analyzed as above. IDTPA provides for only injunctive relief, so plaintiffs couldn’t obtain damages, attorney fees, or disgorgement thereunder, though injunctive relief was available based on ongoing inability to trust the label.

The Washington Consumer Protection Act requires: (1) an unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in his or her business or property; (5) causation. A deceptive trade practice has public interest impact “when (1) it is part of a pattern or generalized course of conduct, and (2) there is a real and substantial potential for repetition of defendant’s conduct after the act involving plaintiff. This claim survived.

Common law breach of express warranty under the laws of named plaintiffs’ respective states: The number of cups was plausibly an express warranty. Defendants argued that plaintiffs failed to satisfy various states’ pre-suit notice requirements. Florida requires that before filing suit, a buyer “must within a reasonable time after he or she discovers or should have discovered any breach notify the seller of the breach.” However, Florida district courts have generally held that “seller” does not include “manufacturer” under this statute, and hence, that the notice requirement does not apply to manufacturers. Washingon had similar wording, but there appeared to be no state authority on whether Washington defines “seller” broadly or narrowly; the court thus followed other courts which have applied the Florida approach.

What about Texas and Illinois, which do require pre-suit notice? Plaintiffs did send letters to defendants, but none of the letters came from plaintiffs who bought goods in Texas or Illinois, and thus they didn’t raise claims under Texas or Illinois law. “Further, under both Texas and Illinois law, initiation of a lawsuit is not an adequate notice of a breach of warranty claim, and express warranty plaintiffs are required to provide notice to upstream manufacturers.” So those claims were dismissed.

Implied warranty of merchantability: Defendants argued that California requires “privity of contract” between a manufacturer and buyer to maintain such a claim, and all plaintiffs purchased their coffee canisters through a retail intermediary. But California recognizes an exception to this rule where “the plaintiff relies on written labels or advertisements of a manufacturer,” and thus is a third-party beneficiary. 534 F.3d 1017, 1023 (9th Cir. 2008) (citing Burr v. Sherwin Williams Co., 268 P.2d 1041 (Cal. 1954)). Texas claims failed for want of pre-suit notice.

Common law claims for fraudulent and negligent misrepresentation: All of the states at issue in this MDL “rely, at least to some extent, on the Restatement (Second) of Torts in defining misrepresentation claims.” The Restatement states: “One who fraudulently makes a misrepresentation ... for the purpose of inducing another to act ... is subject to liability to the other in deceit for pecuniary loss caused to him by his justifiable reliance upon the misrepresentation” and: “One who, in the course of his business, profession, or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance ... if he fails to exercise reasonable care or competence in obtaining or communicating the information.”

The primary differences are that “fraudulent misrepresentation requires proof that the defendant knew the statement was untrue or was reckless as to whether the statement was true or false, while negligent misrepresentation only requires that the defendant failed to exercise reasonable care or competence to obtain or communicate true information,” and negligent misrepresentation requires that some sort of “special relationship between the parties” exist, although the nature of that relationship varies from state to state.

The complaint explicitly alleged that defendants “knew or should have known that each of the Products falsely and deceptively overstates the number of servings of coffee that can be made.” And “knowledge[ ] and other conditions of a person’s mind may be alleged generally” in a fraud case. From the complaint, it was reasonable to infer that there were two alternatives: “either Defendants tested the number of cups it is possible to make from each cannister, or they did not. If the former is true, Defendants had actual knowledge that the Labels were false; in the latter case, Defendants had no basis whatsoever for making the representations.”

What about the “special relationship” part of negligent misrepresentation theory? This was required in NY and California, meaning something beyond “mere receipt of an advertisment.” Illinois imposes a comparable requirement that the defendant be “in the business of supplying information,” and Illinois courts have held that “manufacturers of tangible noninformational goods” (like coffee) are not in the business of supplying information. So those state claims were dismissed. However, the remaining states—Florida, Missouri, Washington, and Texas—didn’t impose a special relationship requirement for negligent misrepresentation claims.

Nor were remaining misrepresentation claims under California, Missouri, and Texas law barred by the economic loss doctrine.

Unjust enrichment claims also survived, because it was too early to determine whether they were merely duplicative of other remedies.