Asterisk can't limit "reef safe" sunscreen claim to only 2 ingredients

Locklin v. StriVectin Operating Co., 2022 WL 867248, No. 21-cv-07967-VC (N.D. Cal. Mar. 23, 2022)

StriVectin makes sunscreen products that it labels “REEF SAFE* SUNSCREEN.” Fine print says that the product does not contain two particular ingredients that are widely thought to harm coral reefs. But plaintiff successfully alleged that the sunscreen contains four other ingredients that endanger the reefs (avobenzone, homosalate, octisalate, and octocrylene) and that the label is therefore misleading.

The complaint alleged that specific facts about the four chemicals were supported by studies, e.g., that octocrylene “has been shown to accumulate in various types of aquatic life” and “adversely impacts coral reefs, even at low concentrations, by accumulating in coral tissue and triggering mitochondrial dysfunction.” A graphic from the National Oceanic and Atmospheric Administration that describes how sunscreen washes off human skin and wreaks havoc on marine life, including coral lists octocrylene as an ingredient “that can harm marine life.” The U.S. Virgin Islands has banned octocrylene, and the Republic of the Marshall Islands has banned avobenzone. Palau recently enacted a nationwide ban on sunscreens containing any one of numerous ingredients, including octocrylene. And a bill in Hawaii would ban both of those.

StriVectin argued that the asterisk and back-package explanation sufficed to avoid misleadingness, because it had sufficiently defined “reef safe” narrowly to mean “does not contain two particular chemicals that harm coral reefs.”

The court thought this was “absurd.” While

asterisks might cabin sweeping claims or further define ambiguous language, … a company can’t say something misleading on the front of a label and escape liability by stating “that’s not actually what we mean” in fine print on the back. Imagine a product labeled “VEGAN*” on the front that contained chicken meat. The producer could seek no shelter by explaining on the back that “vegan” in this context means “contains no beef.” Or imagine a product labeled “SAFE* FOR HUMAN CONSUMPTION” on the front, with a caveat on the back stating that it “contains no cyanide.” If the product contained a lethal dose of ricin, the label would obviously mislead. StriVectin does not have free rein to define “reef safe” to mean anything it wants.

Here, the allegations indicated that StriVectin made a “promise” on the front that it “retracted” on the back.

Whether the studies cited proved reef endangerment wasn’t at issue at this stage. “Indeed, the complaint would plausibly allege that the chemicals harm the reefs even if it had cited to no study—because the body of the complaint ‘detail[s] the specific ingredients’ and how they threaten reefs, it does enough at this stage to state a claim.” In fact, “even if the chemicals pose only a serious—but ultimately uncertain—threat to coral reefs, that may well be enough to prove that the company’s ‘reef safe’ claim is false or misleading to a reasonable consumer who cares about avoiding using products that endanger the reefs.” Also, these weren’t lack of substantiation claims. The complaint identified “specific facts pointing to actual falsehood.”

And  Locklin had standing to pursue injunctive relief becaues he alleged that he would purchase StriVectin’s sunscreen again were the “reef safe” claim true.  

Museums and moral rights

Hermon Atkins McNeil, The Sun Vow (at the NY Metropolitan Museum of Art):

Note the card displayed below--on the left, in black on white: "By the 1890s, sculptural representations of Native American and western themes had become extremely popular. While living in Chicago in the early 1890s, MacNeil had learned of a rite of passage that captured his imagination: before a boy on the threshold of manhood could be accepted as a warrior, he was required to shoot an arrow directly into the sun. If the chieftain judging the boy's prowess was so blinded by the sun's rays that he could not follow the flight of the arrow, it was said to have gone 'out of sight,' and the youth had passed the test. MacNeil portrayed the dramatic moment following the arrow's release, heightening both the visual impact of the composition and the sense of narrative suspense."

On the right, in white on black: "How will MacNeil's story end? The figures are suspended, held captive by a vow that the artist later admitted he perhaps made up. This representation of the futility of Indian action fosters a belief in their aimlessness. Where will the arrow land? It cannot. Ineffective and undirected, it must disappear. This reinforces a limited vision of Native success in which the youth, the next generation, must move beyond the blinded elder. In a celebration of naivety, the child smiles slightly at the release of the powerless arrow, contributing to the acknowledgement of landless future generations--of Natives forcibly separated from their territories, and from themselves. This depiction participates in a ritual of blindness to a civilizing violence understood as necessary.--Jackson Polys (Tlingit)"

Implied falsity and infant formula

Evolve Biosystems, Inc. v. Abbott Labs., 2022 WL 846900, No. 19 C 5859 (N.D. Ill. Mar. 22, 2022)

Evolve (and the Regents of the UC) sued Abbott for patent infringement related to an infant formula product; Abbott counterclaimed for false advertising under the Lanham Act and unfair competition under Illinois and California state law. “Evolve countered with its own counterclaims under these same laws. Specifically, Evolve alleges that Abbott made false and misleading advertising statements about Abbott’s competing Similac Probiotic Tri-Blend product.” The court denied Abbott’s motion to dismiss.

Evolve sells a Bifidobacterium longum subsp. infantis (“B. infantis”) probiotic product for preterm infants called EVIVO. “Research indicates that EVIVO, in combination with human milk oligosaccharide prebiotics, promotes B. infantis colonization in the infant gut, improving patient outcomes. Evolve’s EVIVO product is used in newborn intensive care units (“NICUs”) across the country.”

“[R]umors began to emerge that Abbott was preparing to launch a B. infantis product that would compete with EVIVO,” allegedly causing Evolve to lose business. And Abbott allegedly did intend to launch directly competing a B. infantis product—called Similac Probiotic Tri-Blend. It prepared marketing materials for Tri-Blend and listed it for sale on Abbott’s website. Evolve allegedly continued to lose business from potential customers who paused discussions with Evolve to wait for Tri-Blend’s imminent release.

Evolve’s EVIVO product utilizes a particular strain of B. infantis, which is allegedly better than other species/strains and can “grow more robustly in an infant’s gut,” which then can improve patient outcomes. Evolve alleges that using its products “significantly reduced necrotizing enterocolitis ... compared to cohorts receiving no probiotics” and “significantly reduced late onset sepsis ... compared to those receiving the probiotics bacterium L. reuteri and those receiving no probiotics.” Tri-Blend allegedly uses a different B. infantis strain rendering it less effective such that it “may not survive well in the infant gut.”

Abbott advertised that Tri-Blend has “potency” and “stability” and is composed of “high-quality probiotic strains,” while allegedly being aware that B. infantis is more important than other probiotics and that the strain in Abbott’s product is not as effective as the strain in Evolve’s product. Abbott also states that Tri-Blend is a “unique blend,” and its marketing materials and advertisements proclaim that multi-strain probiotics “have functional advantages over single strain probiotics.” Abbott instructed its sales representatives to convey that message to customers in order to distinguish between Tri-Blend and competing products like Evolve’s EVIVO. Abbott allegedly intended to suggest to consumers that the BB-02 B. infantis strain comprises one-third of the colony-forming units in the Tri-Blend product, but it hasn’t verified that.

Rule 9(b): Evolve sufficiently pled the who, where, what, and how. “Abbott is correct that Evolve has not pleaded exact times and exact locations, that is when and where the challenged statements or labels were delivered to ‘hospitals and NICUs.’ Yet, Rule 9(b)’s particularity standard requires ‘flexibility when information lies outside of [the] plaintiff’s control.’ And as between the parties, it is Abbott that knows the exact times and dates of its sales pitches and product deliveries to its customers in this case. Therefore, Evolve’s pleading satisfies Rule 9(b).”

Puffery: Were “statements that Tri-Blend is a ‘unique blend’ with ‘high-quality probiotic strains,’ exhibits ‘potency & stability,’ and has ‘functional advantages over single strain probiotics’ ” actionable? First, statements are not puffery if they can be tested—if they make “objective claims” that describe “specific or absolute characteristics of a product capable of testing.” “Second, commercial statements are not puffery if reasonable consumers could rely on them in their purchasing decisions—if they are ‘specific’ enough to induce ‘consumer reliance.’” Evolve alleged that the physical characteristics of the strains causing them to differ were measurable, as were the strains’ clinical effects on preterm infants. It was reasonable to infer that probiotic viability in manufacture and transport was also measurable, and that potential consumers—here, hospitals and their NICUs—are aware that infant probiotic products can be tested for function and efficacy. Thus, it was reasonable to infer that customers of infant probiotic products rely on such commercial language as “poten[t],” “stabl[e],” and “high-quality” to denote the products’ function and efficacy. So too with statements that Tri-Blend is a “unique blend” with “functional advantages over single strain probiotics,” which “invokes a testable comparison between single-strain and multi-strain probiotics.” Abbott’s own exhibits specifically cited a scientific study to support the statements that Abbott’s Tri-Blend product is a “unique blend” and that multi-strain probiotics “may have functional advantages over single strains.” Another stated that Abbott’s product has been subjected to “controlled, rigorous testing,” that its “product potency & stability [is] ensured,” and that the product was “tested.”  Consumers could reasonably treat these as statements of fact.  Nor was the use of the word “may” in “may have functional advantages over single strain probiotics” protection against misleadingness, since Evolve was entitled to present evidence of actual consumer understanding.

What about the allegedly implied misrepresentation that infantis BB-02 accounted for 1/3 of the product? Abbott argued that its label wasn’t “commercial advertising or promotion.” But that phrase means nothing more than “promotional material disseminated to anonymous recipients.” The label was that. It was plausible that describing the product as a “blend” of three ingredients implicitly conveys to consumers the message that those three ingredients are present in equal parts.

SmileDirect may indirectly deceive: "implicit misrepresentation of FDA approval" theory is not precluded

Ciccio v. SmileDirectClub, LLC, 2022 WL 843774, No. 3:19-cv-00845 (M.D. Tenn. Mar. 21, 2022)

The district court doesn’t seem to be having much fun with this case, but issues a thorough and thoughtful opinion that highlights a big conflict in false advertising law—not a split, but a conflict about when courts will consider implicit falsity/misleadingness, the other side of which was represented by last week’s Bimbo Bakeries decision.

Roughly: Orthodontists accused SDC of falsely advertising its plastic aligners as equivalent to traditional orthodontic treatment. Here, SDC sought to narrow the scope of bitterly-fought discovery by getting rid of any claims based, in whole or in part, on allegations that SmileDirect improperly marketed itself as in compliance with federal regulations governing dental devices. The plaintiffs alleged that “[a]t no time has SmileDirect informed consumers that it is in violation of the [Food, Drugs, and Cosmetics Act (‘FDCA’)] and illegally practicing dentistry” and that “[b]oth of these nondisclosures are highly material and highly fraudulent because consumers would be reluctant to use SmileDirect’s aligners in any capacity if they knew that they were being sold in violation of both federal and state law.” Plaintiffs alleged that, “[a]s a manufacturer of its aligners, SmileDirect was legally obligated to seek FDA clearance for such product,” but that it has instead opted to “flout these legal requirements and is selling its product, which should be labeled and sold only by prescription, in an essentially over-the-counter fashion.”

SDC argued that the court should dismiss any such claims because “only the Food and Drug Administration can enforce the FDCA.”  [Procedural discussion, and discussion of an related Tennessee Consumer Protection Act issue, omitted.]

POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102 (2014), would seem to support plaintiffs’ arguments that they could enforce the Lanham Act even against FDA-regulated activity. SDC distinguished Pom Wonderful by noting that here, the allegations are about FDA approval. Nonetheless, the allegations were not trying “to police or otherwise interfere with SmileDirect’s dealings with the FDA, nor are they trying to enforce any provision of the FDCA in the FDA’s stead.” Instead, they were arguing that SDC’s marketing misled consumers about its FDA clearance status. (Citing JHP Pharms., LLC v. Hospira, Inc., 52 F. Supp. 3d 992, 1000 (C.D. Cal. 2014) (“[I]f a product has been approved [by the FDA], consumers may take some assurance that it ... meets the agency’s ... standards. This makes an FDA-approved product a more attractive product ....”) The plaintiffs were not alleging that SDC’s disclosures/nondisclosures violated the FDCA, or that there was a general duty to disclose FDA clearance/approval status. Rather, they argued that SDC’s “particular marketing strategy and materials, in the unique context of the orthodontic industry and the particular consumer expectations predominant in that industry, were misleading in a way that could have been, but was not, rectified by such a disclosure.” This was ok, same as in Pom Wonderful: “the Lanham Act applies to this industry just like any other, and ‘[n]othing in the text, history, or structure of the FDCA’ suggests a carve-out for this particular type of unfair competitive practice.”

The defendants even conceded that a false affirmative claim of FDA approval could be subject to the Lanham Act. But they argued that preclusion applied to a theory that the ads falsely implied FDA approval/clearance. The court previously concluded that plaintiffs sufficiently pled “that the defendants misleadingly characterized their products and services as equivalent to traditional orthodontic treatment.” Although plaintiffs didn’t identify specific affirmative claims that SDC’s aligners were FDA-cleared or -approved, they did make a lot of braces-equivalence claims, and the plaintiffs’ theory was that, “in the context of orthodontic care, a reasonable consumer would read SmileDirect’s assertions of equivalence to traditional orthodontic treatment to suggest that such approval or clearance occurred. Whether that is actually true is a factual question ….”

The court rejected SDC’s proposed explicit/implicit division on FDA-related claims as making “little sense.” “The possibility that a consumer can be misled by omission and/or implication is both factually undeniable and well-recognized by the law. Why, then, would that type of well-recognized claim be precluded, if a substantively equivalent claim based on an affirmative statement would not?” The court also noted “substantial practical challenges to applying such a rule,” since “every misrepresentation involves an omission of the true information,” and a plaintiff may, “ ‘[t]hrough word games, ... style his or her complaint as a material misrepresentations [case] or [an] omissions case’ without any change in the substance. Treating one type of claim as wholly precluded and the other as permissible would cause the viability of a plaintiff’s claim to hinge on distinctions too malleable to be safely relied upon, at least in borderline cases.”

So too with allegedly implied claims of dental licensure.

Comment: I am completely aligned (so to speak) with the court here. But it has to be said that Mead Johnson/Bimbo Bakeries analysis is in conflict—not a split, because the same courts that have adopted Mead Johnson say that they accept that implied falsehoods are actionable; they just won’t tell you in advance which ones—because Mead Johnson says that courts are not allowed to recognize some false implications even when shown to exist via empirical evidence. Honestly, preclusion is a better reason than most of those cases have given. Would confining liability only to explicitly false claims avoid some chilling effects? Sure! That’s why it’s a useful test in Rogers v. Grimaldi. But Rogers is a test for protecting noncommercial speech; in commercial speech, we tolerate a lot more potential chill to protect consumers.

As a practical matter, plaintiffs here are better positioned to avoid Mead Johnson than some other plaintiffs because they plead that the implication comes from the entire marketing campaign, not from a single word whose meaning a court could decide consumers were wrong about.

clicking on competitor's ads isn't commercial advertising or promotion

Motogolf.com, LLC v. Top Shelf Golf, LLC, 2022 WL 834790, No. 2:20-cv-00674-APG-EJY (D. Nev. Mar. 21, 2022)

Weird edge case! Motogolf bought online ads on a pay-per-click contract “wherein ads would stop appearing to others if they were clicked a certain number of times in a given period.” Defendants allegedly “sought out Motogolf’s ads and repeatedly clicked on them, causing Motogolf’s ads to disappear sooner and increasing Motogolf’s advertising budget,” and allegedly interfered with its vendor relationships by accusing them of the same behavior. Motogolf sued for violations of the CFAA, the Nevada Computer Crimes Law (NCCL), the Lanham Act, the Nevada Deceptive Trade Protection Act (NDTPA), and Nevada’s Racketeer Influenced and Corrupt Organizations (RICO) law, and for intentional interference with contractual relations and intentional interference with prospective economic advantage.

Previously: The CFAA and NCCL claims were kicked out Motogolf had not plausibly alleged the defendants accessed Motogolf’s website without authorization. Intentional interference with contract went because Motogolf had not identified any specific vendor that the defendants allegedly interfered with. NDTPA and Lanham Act claims were dismissed because Motogolf didn’t plausibly allege the defendants’ click activity was likely to deceive or cause confusion. Nevada RICO failed because Motogolf had not plausibly alleged that the defendants’ conduct involved taking property.

Motogolf filed an amended complaint; the court allowed the CFAA amendment to allege disruption of its website.  But the Lanham Act claim still failed, even explicitly styled as § 1125(a)(1)(B), not § 1125(a)(1)(A).

“Motogolf alleges that by clicking on the ads, the defendants misrepresented that they were legitimate potential customers of Motogolf.” But clicking on an ad is not plausibly commercial advertising or promotion. “There is no allegation that the defendants’ click activity is communicated to any consumers, much less widely disseminated to the purchasing public.” [Wouldn’t the relevant “public” be Motogolf, in this theory? So the false clicks would be disseminated to them, though I agree that it doesn’t really fit the false advertising model. I think this likely fits into the category of commercial conduct--possibly not even speech from a First Amendment perspective, like contracts aren't--but not commercial advertising or promotion, though not really for the ordinary reasons given.] And even if it were commercial advertising, “there is no allegation that the false statement is about the defendants’ own products or Motogolf’s products.” A misrepresentation of oneself as a potential consumer isn’t about products. [Is it about “commercial activities,” the oft-forgotten phrase in §43(a)(1)(B)?] “And because they are misrepresenting themselves as consumers to Motogolf only, they are not making a material representation that is likely to influence other consumers’ purchasing decisions.” [Citing Lexmark; again, the gist seems right, but there does seem to be economic injury “flowing directly from the deception wrought” by defendant’s conduct.] 

Bread and lawsuits: consumer beliefs about what "local" means don't matter

Bimbo Bakeries USA, Inc. v. Sycamore, Nos. 18-4062, 19-4031,19-4040 (10th Cir. Mar. 18, 2022)

Previous discussion (one of four opinions in the case that I blogged).

Bimbo sells Grandma Sycamore’s Home-Maid Bread; it sued defendants, who include the baker who developed the Grandma Sycamore’s recipe, for trade secret misappropriation, trade dress infringement, and false advertising when it sold a comparable bread product, Grandma Emilie’s, with the tagline “Fresh. Local. Quality.” The district court kicked out the trade dress claim on summary judgment and sent the other claims to the jury, which returned a verdict favoring Bimbo on both and awarded over $2 million in damages for trade secret misappropriation, which the court increased by nearly $800,000 for willfulness. The district court remitted the false advertising damage award from over $8,000,000 to under $85,000 to reflect that it wasn’t sure whether Utah residents (the ones surveyed) had the same definition of “local” as others. The court of appeals affirmed on trade dress and reversed on the other claims, leading to total defeat for Bimbo.

Grandma Sycamore

Grandma Emilie

Grandma Sycamore “seeks to emulate bread made at home—for example, the bread is baked in a special pan so that two loaves can be pulled apart, giving the bread a ‘breakaway side’”—and has been “immensely popular” in Utah. Hostess sold a homemade bread product in Utah known as Grandma Emilie’s, then went bankrupt in 2012; defendant USB acquired a Salt Lake City bakery, several warehouses throughout Utah, and the Grandma Emilie’s line. USB soon decided to make Grandma Emilie’s in-house and closed its Salt Lake City bakery. When it chose packaging, it “took into consideration” the Grandma Sycamore’s packaging. It used the “Fresh. Local. Quality” tagline at points of sale and placed the tagline on its trucks. Along with Salt Lake City, U.S. Bakery had bakeries in Alaska, Idaho, Montana, Oregon, and Washington. “It sold bread products under the ‘Fresh. Local. Quality.’ tagline throughout those states regardless of where the products were baked, as well as in California and Wyoming, before moving away from the tagline in mid-2015.” It briefly used “Freshly Baked in Utah” until it shut down the Salt Lake City bakery.

Trade dress: Bimbo claimed the following elements: “(1) a horizontally-oriented label; (2) a design placed at the top center of the end; (3) the word ‘White’ in red letters; (4) the use of a red, yellow, and white color scheme; and (5) stylized font below the design outlined in white.” Based on the packaging for Grandma Sycamore’s and its competitors in the homemade bread products space, the district court found “[t]he combination of [Bimbo Bakeries’] purported trade dress is clearly generic” and concluded it was “not subject to protection” under the Lanham Act because combining those elements was “the custom in the industry.” The court of appeals agreed, rejecting Bimbo’s argument that the trade dress was protectable because consumers associate it with Grandma Sycamore’s; Bimbo Bakeries spent millions of dollars advertising its product; and USB intentionally copied it.

USB submitted evidence that the homemade bread products that compete with Grandma Sycamore’s “all tend to combine the purported trade dress elements.” “The purported trade dress claimed by Bimbo Bakeries is thus defined at a broad enough level of generality to sweep in its competitors. Bimbo Bakeries may well have a protectable Grandma Sycamore’s trade dress, but its claim in this litigation extends far beyond its product’s more specific attributes.” Bimbo’s arguments didn’t counter the evidence of what was customary in the category. Though it offered a survey, the court doubted its value and reliability: “

The expert asked consumers whether they thought a picture of Grandma Sycamore’s exact package with just the “Grandma Sycamore’s” name removed (but several other features more specific than the purported trade dress, including the “Home-Maid Bread” marker, still on it) came from a single source, rather than asking about the far more general purported trade dress alleged by Bimbo Bakeries. Recognizing the Grandma Sycamore’s packaging with two words omitted is not the same as associating every iteration of the highly general purported trade dress claimed by Bimbo Bakeries with solely Grandma Sycamore’s.

[Discussion of trade secret claim omitted; the court’s opinion is heavily redacted even though the court of appeals agreed that “[n]o reasonable juror could find that the compilation is not generally known or readily ascertainable.” Then what justifies the redaction?]

Following Mead Johnson and similar cases, the court found that “local” was not a falsifiable factual claim, no matter what Bimbo’s survey said. Local has too many possible meanings: “that a company hires local workers, that it uses local materials, that it is locally based, that it participates in outreach efforts with local organizations, or that it donates money to local causes.”  But even assuming that it meant manufacture,

the word lacks any specific objective meaning beyond the general concept it conveys. Definitions of ‘local’ and views about whether something is “local” vary wildly, so the word’s usage in marketing can only communicate U.S. Bakery’s position that its products are local. … Without more, then, the veracity of a locality claim cannot be judged in an empirically verifiable way. Locality is fundamentally subjective. Without any consensus definition of what “local” objectively means, we are unable to conclude that a claim of locality admits of being proven true or false.

Also, it wasn’t clear how large the area defined by “local” could be, or its borders. Something could be local but just across the state line, or from the other side of the same state and not local.

[Here’s the question, though: What if a substantial number of reasonable consumers agree on one definition, while substantial numbers of reasonable consumers don’t have a definition or have other definitions? That is, the survey might find that, to a subset of consumers, the word does have a specific objective meaning. Usually, deceiving a substantial number of reasonable consumers suffices for liability. The survey is the “more,” or could be if courts were willing to consider reasonable consumers to be actual consumers—which they sometimes do!

Anyway, “local” was just opinion, not specific or detailed enough to be falsifiable. “Drawing a particular and verifiable factual meaning from as vague a word as ‘local’ … requires ‘a more specific assurance,’” and the court found none here, because the survey didn’t help. “All it can do is juxtapose U.S. Bakery’s own opinion about when something qualifies as ‘local’ with the opinions of its customers. And while they may often differ, it is the very essence of opinions that they differ.”

Comment: It’s not so much that this is obviously wrong, but it gives the court the power to disregard any empirical evidence that ordinary consumers think differently than the court does. What are the boundaries of this argument?  Would the court find that products imported from France could be “local” (because we might be speaking in galactic terms)? But even setting that aside, what kinds of statements are falsifiable by evidence of consumer reception? The thing that annoys me about this line of cases is that they never tell you what’s on the other side. If the answer is “things where the consensus definition is shared by essentially 100% of the population,” then we are no longer allowing misleading claims to be governed by the Lanham Act—and our survey thresholds are all wrong. For example, in the McNeil v. Pfizer “Listerine is as effective as floss” case, the court rejected Pfizer’s argument that “effective” was not falsifiable and credited the survey showing that about a third of consumers took away the message that Listerine could replace floss—not for nothing, roughly the deception rate in the survey here. But why doesn’t the floss survey just indicate that opinions differ about what “as effective” means, as it is the essence of opinions to do?

The court addresses people like me by worrying that Bimbo’s theory would allow “a bakery selling ‘local’ bread in a supermarket one block away from its production line [to] be liable for false advertising whenever customers interpret ‘local’ as baked in-store, as several survey respondents did here.” [Why doesn’t the “substantial number of reasonable consumers” standard guard against this risk?] “That is a difference of opinion, not commercial deception, and we share our sister circuits’ concerns with using consumer surveys to transform non-actionable statements into Lanham Act claims of fact.” “If a statement is not one of fact, it is legally irrelevant whether consumers agree with it.” We don’t care what consumers think about the matter, because we don’t trust them to give good answers to surveys, because surveys are unpredictable and could produce liability “for a wholly unanticipated claim the advertisement’s plain language would not support,” and the resulting “unintended” liability would chill commercial speech.

Again, this concern is not unfounded, but I don’t see what the limiting principle is. If there are three reasonable meanings, one of which is false, is a survey ok? What about five? I also think this logic makes nonsense of the black-letter requirement that “misleadingness” be proven by extrinsic evidence. We don’t trust surveys, except that we require them (unless we agree there’s falsity by necessary implication). We should get rid of these epicycles, which have zero basis in the statute, and let the factfinder consider all the relevant evidence. But, of course, courts don’t trust juries.  [Oh, and also, about that “unintended” liability: The Lanham Act is supposedly strict liability, at least if you are a trademark defendant. False advertising, courts aren’t so sure!]

Anyway, putting “local” within a tagline using two other words that didn’t provide any more specific meaning to “local” (as “baked in Utah” briefly did) didn’t change anything. “All three words in the tagline are inchoate buzzwords, ‘unquantifiable and subject to an individual’s fancy.’”

OK, so read the following passage and tell me: which claims are subject to proof of implicit falsity by survey, if “some segment” means “28%”?

It is possible that, as Bimbo Bakeries argues, some segment of consumers (1) interpreted the “Fresh. Local. Quality.” tagline’s use of the word “local” as an assertion that U.S. Bakery’s products were locally baked, (2) determined that locally baked meant baked within the state of sale, and (3) found that false fact material to the decision to purchase the product. But not every subjective interpretation of ambiguous language is actionable false advertising.  When the language in question is incapable of objective verification as to truth or falsity, it is not a statement of fact, and no amount of misunderstanding will give rise to an action under the Lanham Act.

Remember, this is about language, not about whether the underlying claim received by consumers—this bread was baked in Utah—is “[]capable of objective verification.”

‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean—neither more nor less.’

‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’

‘The question is,’ said Humpty Dumpty, ‘which is to be master—that’s all.’

I suspect the court thinks that this Alice in Wonderland quote supports its position—but only because the court is the master, not consumers.

Anyway, all Bimbo’s claims were too broad: it had a protectable trade secret and a protectable trade dress, but claimed them too broadly for protectability, and “local” was also “too broad to convey anything verifiable …. Bimbo Bakeries’ claims fail as a matter of law because of their breadth.”

Kentucky bourbon distilled in Indiana?

Victory Global, LLC v. Fresh Bourbon, LLC, 2022 WL 785039, No. 5:21-62-KKC (E.D. Ky. Mar. 14, 2022)

Both parties are “owned by African Americans, and both sell bourbon.” Plaintiff operates under the name Brough Brothers Distillery. Brough Brothers claims to be the “first and, and presently, the only African-American owned bourbon distillery in the Commonwealth of Kentucky .....” Fresh Bourbon allegedly falsely advertises that Fresh Bourbon is the “first black-owned bourbon distillery in Kentucky,” and makes other related false claims, which is allegedly false because it’s not a distillery, which requires both federal (TTB) and Kentucky (KABC) licenses. Fresh Bourbon responded that it distilled its “Fresh Bourbon brand of Kentucky bourbon in cooperation with an appropriately licensed Kentucky distillery.” Brough Brothers alleged Lanham Act false advertising, common law unfair competition and tortious interference, and a claim under a Kentucky statute that prohibits use of false brands to deceive consumers.

Fresh Bourbon counterclaimed for Lanham Act false advertising. Although Brough Brothers began distilling bourbon at a distillery in Louisville, Kentucky in December 2020, that bourbon isn’t yet on the market. “All of the Brough Brothers bourbon currently on the market was distilled in Indiana,” and thus it allegedly isn’t “Kentucky bourbon.” Likewise, Fresh Bourbon alleged that Brough Brothers does not own a distillery in Kentucky because it does not own the building in which it is currently distilling bourbon.

First, Fresh Bourbon, a direct competitor, had constitutional and statutory standing. Second, there was no preclusion by state and federal alcohol regulations. Although relevant laws require alcohol labels to be truthful and nonmisleading, that isn’t enough for preclusion. POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102 (2014), reasoned that the FDCA and the Lanham Act complemented each other, and market competitors have extra expertise in assessing unfair competition; so too here. Even though the FDA doesn’t preapprove all ads or labels, whereas the TTB has to approve labels for any distilled spirit, that wasn’t significant. What did matter was lack of an express preclusion provision, especially since the FDCA and the Lanham Act had coexisted for the entirety of the latter’s existence; if there was a problem requiring preclusion, Congress probably would have done something about it. This was also true here. “[T]he Court finds this especially significant and powerful evidence that Congress did not intend TTB oversight to be the exclusive means of ensuring the proper labeling of bourbon and other distilled spirits.”

As for the state law claims, Kentucky has some specific requirements for whiskey labeling, and the KABC can revoke a licensee’s permit for any violations of the statute. But that didn’t create state law preclusion either. Indeed, a Kentucky statute provides that “a person injured by the violation of any statute may recover from the offenders such damages as he sustained by reason off the violation....” “Thus, the Kentucky legislature, far from indicating that competitors may not pursue claims for violations of the state’s whiskey labeling requirements, appears to have granted them a private right of action.”

But did Fresh Bourbon state a claim? Only in part.

Brough Brothers conceded that its bourbon currently on the market was distilled in Indiana but argued that this bourbon was aged and bottled in Kentucky. Thus, the counterclaim had to focus on whether a “Kentucky bourbon” must be distilled in Kentucky.

But the bottle label—on the back—“explicitly states that the bourbon was distilled in Indiana.” So this was like Pernod Ricard USA, LLC v. Bacardi U.S.A., Inc., 653 F.3d 241 (3rd Cir. 2011), where Bacardi’s “Havana Club” rum could not have deceived reasonable consumers about Cuban origin because it said—on the front—that it was “Puerto Rican Rum” and on the back that it was “distilled and crafted in Puerto Rico.” So too here. True, the label contains “drawings of various images, some of which are associated with Kentucky.”

But the Brough Brothers bourbon currently on the market does have some association with Kentucky. The bottle label states it was bottled here. Further, the Brough Brothers are themselves from Kentucky. The bottle label states this also. The Kentucky-associated images do not specifically indicate that the bourbon was distilled in Kentucky. Furthermore, to the extent any consumer might get that impression, the back of the bottle label explicitly states that the bourbon is “DISTILLED IN INDIANA.” Thus, much like the label at issue in Pernod Ricard, the Brough Brothers label could not mislead any reasonable consumer about where the bourbon inside was distilled.

OK, a couple of comments. (1) As to Pernod Ricard, my students noted that, given pervasive mainlander confusion about whether “Puerto Rico’s in America,” that disclosure might well have been insufficient to avoid deception, and (2) on the front and on the back are different things, as tons of consumer protection cases hold, especially given the existence of Kentucky-associated images on the front. The court thought that any uncertainty generated by the front of the bottle would have been dispelled by the back—but reasonable consumers do not necessarily read the entire label, especially if they think they know the answer based on the front; why would they check, given the Kentucky imagery? This certainly seems inappropriate to resolve as a matter of law. Compare Kay v. Copper Cane, LLC, 549 F.Supp.3d 1014 (N.D. Cal. 2021). But I will note it as an example of using a normative, rather than a descriptive, concept of the reasonable consumer.

However, Fresh Bourbon also alleged that the Brough Brothers “website and promotion” of its bourbon currently on the market also uses Kentucky references and imagery to suggest that the bourbon was distilled in Kentucky. Allegedly, “nowhere on the Brough Brothers Internet website do they acknowledge that their bourbon is Indiana Bourbon, or at least not Kentucky bourbon,” but instead claim to be “Kentucky’s first African-American owned distillery.” This could mislead a reasonable consumer about where the bourbon on the market was distilled.

What about the “distillery” claim itself, where Brough Brothers allegedly didn’t own the building?

Brough Brothers’ statement that it owns a distillery is not a false or misleading statement of fact about its product or services. … It is common practice … for business owners to lease the facilities from which they operate their businesses. An individual who operates a coffee shop out of a leased space can truthfully state that he owns a coffee shop; … and a licensed distiller that operates a distillery out of a leased space can truthfully state that it owns a distillery. These statements would not lead a reasonable consumer to believe that the business owner owns the building from which it operates its business.

political speech isn't covered by Lanham Act but is protected by Cal anti-SLAPP law

Mosafer Inc. v. Broidy, 2022 WL 793029, No. 2:21-cv-06320-MCS-JC (C.D. Cal. Feb. 4, 2022)

Mosafer, a travel business that “aligns its branding with the State of Qatar,” sued several defendants for making public statements allegedly disparaging the State of Qatar and harming the Mosafer parties’ brand, which is closely aligned with the country. They alleged violation of California’s FAL and UCL, false advertising under the Lanham Act, trade libel, and negligence. The Broidy parties counterclaimed against Mosafer, Qatar, and other parties for filing the complaint with the improper purpose to silence them from criticizing Qatar, alleging violation of Virginia’s business conspiracy statute, abuse of process, and violation of RICO. They also asserted several other claims against Qatar alone for engaging in a “hack-and-smear campaign” against Broidy, including CFAA, DMCA, and DTSA claims.

The court first found the California anti-SLAPP statute applicable to the state claims. “[M]aking statements using print media, the Internet, and social media that Qatar is a safe haven for terrorists and extremists, commits human rights abuses, and should be boycotted” were all political opinions on issues of public interest. The court rejected Mosafer’s argument that the speech was unprotected because the activities of which they complain were illegal under the Foreign Agents Registration Act (FARA).

True, the anti-SLAPP statute “cannot be invoked by a defendant whose assertedly protected activity is illegal as a matter of law and, for that reason, not protected by constitutional guarantees of free speech and petition.” However, “unless the conduct conclusively is shown or admitted to be illegal, a defendant can still invoke the anti-SLAPP statute.” There was neither a concession nor “uncontroverted and conclusive evidence” that the movants actually violated FARA.

The state-law claims then failed. First, they were untimely. “Under California law, the statute of limitations begins to run as soon as the plaintiff knew or should have known it sustained any significant injury, even if the plaintiff is not at the time aware of the facts necessary to establish the claim or the legal theory that would support it.” The complaint was filed mid-2021, and the injuries allegedly began in mid-2017, which was outside the statute of limitations for everything but the UCL. Although defendants allegedly intentionally concealed their identities and the purported disinformation conspiracy, Mosafer was still aware of its injuries. “Facts later discovered concerning the source of the injury or the identity of the defendants have minimal bearing on the accrual of the claims.” Anyway, Mosafer pled that various news sources, including the New York Times and the Associated Press, reported about Broidy’s alleged unregistered foreign lobbying efforts in March and April 2018. “These publications in internationally recognized news sources gave the Mosafer Parties constructive notice of alleged wrongdoing on which they predicate their claims.” Even if the continuing violation and continuing accrual doctrines applied, Mosafer pled no facts about any remaining defendant’s wrongful acts after October 2017, so it was still too late.

UCL-fraudulent/FAL: Statutory standing requires “lost money or property as a result of” the false or fraudulent statements or conduct at issue. The majority view [among federal courts; I bet the Cal. SCt eventually disagrees as to competitors] is that plaintiffs have to allege their own reliance, not their customers’, so Mosafer lacked statutory standing. The minority view is specific to competitor suits, and Mosafer didn’t allege competition with any of the defendants.

Also, the UCL-fraudulent, FAL, and Lanham Act claims had to be dismissed [the last not on anti-SLAPP grounds, of course] because  they were “predicated on noncommercial activities by the defendants. Claims under these statutes can reach only commercial speech.” The statements were political speech. “The only identified activities even tangentially related to commerce are statements advocating a ‘boycott’ of an entire country. Even so, none of these activities pertain to the Mosafer Parties, their business, their products or services, or their competitors. There is no close question here; the activities are clearly not commercial because there is no proposed commercial transaction.”

Trade libel: None of the alleged speech

specifically mentions or pertains to the Mosafer Parties, let alone disparages their products, their business, or their alignment with Qatar.… If the law afforded a remedy to any private company that aligned its brand with a country any time a publication disparaged the country, Victorinox (maker of Swiss Army knives), IKEA (purveyor of Swedish furniture), and Volkswagen (manufacturer of German-engineered cars) would have happy shareholders and overworked litigation attorneys.

Negligence: The alleged duty arose from FARA, but FARA doesn’t provide a private cause of action and can’t be used as the basis of a negligence claim.

UCL-unlawful: Failed because it required a violation of some other law; there was none.

Counterclaims: Qatar was a sovereign and immune from the counterclaims; the initial complaint didn’t constitute “an action brought by a foreign state,” the allegedly relevant exception under the Foreign Sovereign Immunities Act. The Mosafer parties were US citizens, not agencies or instrumentalities of Qatar, nor were they plausibly agents or alter egos of Qatar under common law principles.

As to the other parties, the anti-SLAPP statute applied to the claims against them. Did the foreign counterclaim-defendants have constitutional rights of petition or free speech protectable by the anti-SLAPP statute? Yes, because the filing of the complaint occurred within the US, and “[t]he First Amendment ... protects the speech of non-citizens as well as speech abroad.”

The counterclaims lacked merit, given the litigation privilege, and the court would reach the same result under FRCP 12(b)(6) if the anti-SLAPP statute didn’t extend to foreign defendants. Also, the Virginia business conspiracy claim failed because California law applied under standard choice of law principles, and RICO claims failed because they were RICO claims. (OK, because filing the complaint wasn’t tortious/unlawful, and can’t be a predicate act regardless—the cases hold that “[a]busive or sham litigation does not constitute a RICO predicate act”—and the second alleged predicate act, publishing a press release, wasn’t wire fraud or other racketeering activity. But isn’t it simpler to say that the claims failed because they were RICO claims?)

The parties now have to move for attorneys’ fees and, one assumes, pay each other’s attorneys.

"patented" claim plausibly material to consumers

Eyenavision, Inc. v. EnChroma, Inc., No. 2:21-cv-00246-RJC, 2022 WL 783428 (W.D. Pa. Mar. 15, 2022)

Eyenavision sued EnChroma, the assignee of a patent (the ‘286 Patent) related to optical filters for lenses intended to assist individuals who suffer from color vision deficiency (CVD), aka colorblindness, to differentiate between colors. The parties compete in this market. EnChroma allegedly advertises that its lenses are “patented,” but Eyenavision alleged that EnChroma’s lenses do not practice the relevant patent and therefore brought false marking, Lanham Act false advertising, and unfair competition claims. It also sought a declaratory judgment of noninfringement of the ‘286 patent (the court denied the motion to dismiss the patent infringement counterclaim).

False marking under 35 U.S.C. § 292: This requires competitive injury as the result of false marking. Eyenavision pled sufficient facts to an inference of intent to deceive the public in purportedly falsely marking the EnChroma lenses as covered by the ‘286 Patent, given its allegations of an extensive patent prosecution record and EnChroma’s intimate familiarity with the specific scope and content of the patent’s claims. EnChroma’s own allegations in its counterclaim about the early-2000s breakthrough that eventually led to the technology at issue and its clinical research into the technology at issue for more than a decade prior to the launch of its CVD lens technology supported these allegations. Eyenavision also alleged that EnChroma sold its lenses on its website under a banner that states: “#1 patented lens technology for color blindness.” This was enough to allege intent to deceive.

Further, Eyenavision plausibly alleged competitive injury by alleging that it was commercializing its own CVD lens technology, which was the subject of at least one issued US patent and at least two pending US patent applications, and that they were direct competitors in the CVD lens market, which was a “very specific and relatively new market.”

The same allegations also sufficed for Lanham Act false advertising. The parties’ products were clearly in direct competition, and it was plausible that the “patented” claim was likely to influence consumers’ buying decisions when choosing which CVD lenses to purchase. So too with unfair competition through false advertising under Pennsylvania common law.

Recommended reading: Buccafusco on (the wrongness of) independent creation

Tightly argued and persuasive.

Christopher Buccafusco, There’s No Such Thing as Independent Creation, and It’s a Good Thing, Too

Abstract:

Independent creation is the foundation of U.S. copyright law. A work is only original and, thus, copyrightable to the extent that it is independently created by its author and not copied from another source. And a work can be deemed infringing only if it is not independently created. Moreover, independent creation provides the grounding for all major theoretical justifications for copyright law. Unfortunately, the doctrine cannot bear the substantial weight that has been foisted upon it. This Essay argues that copyright law’s independent creation doctrine rests on a set of discarded psychological assumptions about memory, copying, and creativity. When those assumptions are replaced with contemporary accounts of how human memory influences the creative process, the independent creation doctrine becomes empirically meaningless. Independent creation, as copyright law understands it, does not exist.

Because the independent creation doctrine lacks any meaningful legitimacy, it has become a site of legal privilege and bias. Copyright law’s treatment of independent creation has favored some creators’ claims at the expense of others, privileging plaintiffs, older creators, and wealthier creators. These biases distort the law’s attempt to optimally regulate cultural production. This Essay offers several proposals for addressing these concerns, from rebalancing legal doctrines to a more radical solution: the wholesale jettisoning of independent creation. Copyright law does not need the independent creation doctrine, and it would be better off without it.

 

reasonable consumers wouldn't think salicylic acid was natural

Mustakis v. Chattem, Inc., 2022 WL 714095, No. 20-CV-5895 (GRB)(AYS) (E.D.N.Y. Mar. 3, 2022)

Do reasonable consumers think salicylic acid is natural, whether or not it can be derived from natural sources? The court says no, which is a bit weird given that it apparently can be.

Mustakis sued Chattem, the maker of “Selsun Blue Naturals” anti-dandruff shampoo, alleging that its name misled consumers into believing that the shampoo contains no synthetic ingredients in violation of GBL §§ 349 & 350/leading to unjust enrichment.

The term “Naturals” appears prominently on the front label in green font. Directly below, it says “Antidandruff Shampoo / Salicylic acid 3%.” The shampoo also contains synthetic ingredients including disodium EDTA, panthenol, and benzyl alcohol.

Looking at the label as a whole, “it is implausible that a reasonable consumer would be misled into believing the Product contains no synthetic ingredients…. No reasonable consumer would believe that a product containing three percent salicylic acid is entirely free from synthetic ingredients.”  Footnote: The plaintiff didn’t allege that salicylic acid was an unnatural ingredient. “Although defendant’s disclaimer defense is premised upon the assumption that the reasonable consumer would believe salicylic acid is artificial, fascinatingly, salicylic acid can be obtained from white willow bark and wintergreen leaves.” But today it is commercially biosynthesized from phenylalanine. The complaint did allege that “citric acid” no longer comes from fruit.

The front label prominently disclosed the exact proportion of salicylic acid: three percent. And the label didn’t claim that “Selsun Blue Naturals” was “all natural” or “100% natural.” Also, the back label discloseed “the synthetic ingredients plaintiff complains of as well as a number of natural ingredients such as lavender and rosemary extract, which supports the defendant’s use of the term ‘Naturals.’”

“Although a number of courts have found plausible deceptive acts and false advertising claims in cases involving ‘natural’ products, a line must be drawn. Here, the Product’s front label conspicuously discloses that the shampoo is three percent salicylic acid, an ingredient which the reasonable consumer would, it would seem, assume is unnatural.” Plaintiff alleged that he and other consumers “value natural products for important reasons, including the belief that they are safer and healthier than alternative products.” But that didn’t make sense for this product, where “the principal ingredient prominently featured on the front of the Product has long been known to be anything but safe and healthy. As the front label of the Product prominently identifies this chemical on the same line as the text which identifies the product in the bottle, it seems implausible that a reasonable consumer could be misled.”

 

licensee can use 43(a) to protect exclusive territory

Brown Bottling Gp. v. Imperial Trading Co., 2022 WL 667780, No. 3:19-CV-142-HTW-LGI (S.D. Miss. Mar. 4, 2022)

Brown Bottling alleged that it had the exclusive bottling, distribution, and sale rights for Pepsi & Dr. Pepper soft drinks in an exclusive geographic territory encompassing much of central and southern Mississippi, as well as two counties in Alabama. Defendants are “various wholesale distribution companies that trade in a variety of goods” that have been selling the soft drinks to retailers within Brown Bottling’s exclusive territory.

Today I learned about the Soft Drink Interbrand Competition Act, 15 U.S.C. § 3501, which provides:

Nothing contained in any antitrust law shall render unlawful the inclusion and enforcement in any trademark licensing contract or agreement, pursuant to which the licensee engages in the manufacture (including manufacture by a sublicensee, agent, or subcontractor), distribution, and sale of a trademarked soft drink product, of provisions granting the licensee the sole and exclusive right to manufacture, distribute, and sell such product in a defined geographic area or limiting the licensee, directly or indirectly, to the manufacture, distribution, and sale of such product only for ultimate resale to consumers within a defined geographic area: Provided, That such product is in substantial and effective competition with other products of the same general class in the relevant market or markets.

But this doesn’t seem to provide a private right of action; Brown Bottling argued that its references to the Soft Drink Act in its complaint were just providing pertinent history/context for the unfair competition/tortious interference claims.

Tortious interference: At this point, Brown Bottling successfully alleged wrongful interference, specifically, that by transhipping products into its exclusive region via unauthorized channels, defendants sold “materially different, non-genuine, sub-par and outdated” products, consequently damaging Brown Bottling’s reputation within its exclusive territory. And it successfully alleged knowledge of its rights due to the C&Ds it sent, along with damages (though the court didn’t mention specifics).

Lanham Act violations: §43(a) claims can be asserted by a non-trademark owner. (That … doesn’t seem like the core problem here, as long as the Pepsi is actually Pepsi.) As the licensee, Brown Bottling had “standing to bring false affiliation claims under Section 43(a).” Then the court recited the elements of false advertising under §43(a)(1)(B), and then it identified the multifactor confusion test as the relevant test, so your guess is as good as mine about what provision is at issue. But it’s probably §43(a)(1)(A), given that the court thought it relevant that, “when a defendant uses a plaintiff’s exact marks ... courts within this Circuit have determined that a thorough analysis of the digits of confusion is unnecessary and a presumption of confusion exists.” But actual confusion isn’t required if the public believes that “the mark’s owner sponsored or otherwise approved the use of the trademark.” [Is it actually Pepsi? Then they did!]

Brown Bottling alleged that defendants failed sufficiently to exercise quality control over the trademarked products sold to local retailers and consumers; that because the products look similar, Brown Bottling’s customers have no way of readily detecting the differences with regard to the quality and composition of the products they purchased; and that defendants sold materially different, non-genuine, sub-par, and outdated products to unwitting retailers and consumers. [Does Pepsi really want Brown Bottling disparaging other regions’ Pepsi?] The court concluded—without addressing first sale or whether retailers could be confused about who they were buying Pepsi from—that this stated a viable claim for false association.

 

 

Applying Romag to false advertising cases

Harbor Breeze Corporation v. Newport Landing Sportfishing, Inc., --- F.4th ----, 2022 WL 664918, No. 19-56138 (9th Cir. Mar. 7, 2022)

Plaintiffs sued defendants for violating § 1125(a). A jury found that defendants had engaged in materially false or misleading advertising about the parties’ competing whale-watching-cruise business in violation of the Lanham Act, but the jury awarded $0 in actual damages. “The jury also declined to award the equitable remedy of disgorgement of profits, which had been submitted to the jury with the agreement of all parties.” The district court then permanently enjoined defendants from engaging in specified false advertising and denied plaintiffs’ request for attorneys’ fees. The court of appeals reversed in part, vacated in part, and remanded; the district court had instructed the jury using pre-Romag law requiring willfulness for disgorgement.

“Viewed in the context of the evidence and the arguments at trial, the error would ordinarily warrant reversal of the judgment.” Defendants argued that the now-error was immaterial, because the decision rested with the district judge, but the district judge too thought that willfulness was required.  Remand for new trial, though it didn’t have to be a jury trial.  The fee issue would also have to be relitigated in case the disgorgement retrial affected the assessment of some of the relevant circumstances, such as “the manner in which the case was litigated” and the “need in particular circumstances to advance considerations of compensation and deterrence.”

dissatisfaction w/Amazon's partner program isn't TM infringement/false advertising

Melwani v. Amazon.com, Inc., 2022 WL 670919, NO. C21-1329RSM (W.D. Wash. Mar. 7, 2022)

Melwani owns the Royal Silk trademark for “a wide variety of products.” His marks are enrolled in Amazon Brand Registry, and Royal Silk Direct maintains an authorized Royal Silk “storefront” on Amazon.com. Nonetheless, Melwani alleged that Royal Silk was “plagued” by third party infringers, and his legal actions and notices allegedly resulted in the removal of about 200 infringing listings from Amazon.com that were attributed to about 100 different unauthorized third-party sellers over the last 2-3 years. Melwani alleged that Amazon’s Brand Registry has not offered proactive brand protection and that it has been “almost impossible” to remove any listing through Amazon’s Brand Registry.

His  “central allegation of wrongful conduct” was that, “when customers use Amazon’s Search Box (the search bar at the top of its e-commerce website) to search for ‘Royal Silk,’ results regularly include many products not manufactured by Plaintiff. These products are sold by other third-party sellers and Amazon itself.” For example, one search for “Royal Silk” under all departments on Amazon.com, yielded 60 product listings. Seventeen were for official Royal Silk products; 40 listings were “totally unrelated” to the query Royal Silk—of which 8 were paid sponsored ads for sellers who allegedly purchased the keywords “Royal Silk”; 32 were for third party sellers who allegedly “likely” purchased this keyword; and the remaining 3 were third party infringers, unlawfully using or showing the words “Royal Silk” in their product listings. But the Royal Silk Amazon storefront didn’t show up, nor “any product listings for Royal Silk pocket squares or handkerchiefs, of which there are allegedly over 200 product listings.” [So: is Amazon just bad at search?] Similar searches were also “frustrating”; Melwani alleged that the search results were “erroneous, scattershot, mingled” as well as “consistently confusing, misleading, false, and deceptive.”

Melwani alleged misappropriation of his trademark through use of “Royal Silk” as a keyword/metatag in ways that confuse the customer, “rob and thwart Plaintiff’s ability to exercise his right to quality and image control,” and ultimately allow Amazon to “unlawfully profit[ ] from its own targeted use of Plaintiff’s marks.” He also alleged that Amazon “avoid[s] serving up infringers when it comes to keyword searches for its own products” by not allowing third party sellers to bid on “Fire TV” or “Echo Show” or “Ring Doorbell.”

Infringement:  Multi Time Mach., Inc. v. Amazon.com, Inc., 804 F.3d 930 (9th Cir. 2015), held as a matter of law that “[b]ecause Amazon’s search results page clearly labels the name and manufacturer of each product offered for sale and even includes photographs of the items, no reasonably prudent consumer accustomed to shopping online would likely be confused as to the source of the products.” MTM was directly on point and precluded any liability, given the search results that were part of the complaint’s allegations. It didn’t matter that, if a user searches “royal silk,” the phrase will appear in the URL for the search page. “[T]he URL merely shows how the website’s data is organized and/or the search term entered by the consumer, and … this does not violate trademark law.”

False designation of origin/false advertising: Lasoff v. Amazon.com, Inc., 741 F. App’x 400, 401 (9th Cir. 2018), “rejected trademark infringement claims like Mr. Melwani’s, holding that ‘Amazon is permitted to use a trademarked search term to direct consumers to competing products, as long as the search results are clearly labeled.’” And it dismissed false advertising claims as “duplicative of his infringement claim.” In providing results for trademarked search terms, “Amazon did not make any statements about the quality of Mr. Lasoff’s products.” So too here.

But the false designation of origin claim wasn’t dismissed because the court didn’t think Amazon addressed it (I don’t see why—how could it differ from trademark infringement here?).

Trademark dilution: Not plausibly pled to be famous, but leave to amend.

NY unfair competition/dilution: These require bad faith, and the only supporting fact alleged was that Amazon is “generally aware of Plaintiff’s infringement concerns and related legal actions,” which wasn’t enough. Even “[p]rior knowledge of a senior user’s trade mark does not necessarily give rise to an inference of bad faith and may [actually] be consistent with good faith.” Thus, “[m]ore than inaction is needed here.”

competitor's alleged hijacking of Facebook page could violate 43(a)

Pan 4 America, LLC v. Tito & Tita Food Truck, LLC, 2022 WL 622234, No. DLB-21-401 (D. Md. Mar. 3, 2022)

Plaintiffs alleged that they employed the individual defendants in part to manage social media advertising and promotion for plaintiffs’ baking businesses, aka La Baguette. They then allegedly “hijacked” plaintiffs’ Facebook page—their main online platform—to promote Tito & Tita, a competing business. The FB page had “photographs and prices of La Baguette’s products, the street address of the retail bakery, and a phone number to place orders for pick-up or delivery.” In spring 2020, the page allegedly had over 4,000 followers.

One individual defendant allegedly changed the name of the Facebook page to “Tito & Tita Langley” and replaced the address and phone number listed on the page. This meant that past events and posts by La Baguette now appeared to have been posted by “Tito & Tita Langley.” He allegedly “preserved some descriptions, prices and photos of La Baguette’s products, as well as other content relating to plaintiffs’ business.” In addition, “many consumer posts and responses thereto” that predated the change allegedly remained under the new name, alongside “empty posts” where the content has been deleted but the posting date remains, reinforcing “the misimpression that Tito & Tita...is merely a continuation of or successor to the La Baguette business.”

Unable to access the Facebook page, plaintiffs shifted to an alternate Facebook page created by another employee, but it does not have a large following (only about 260 followers). Plaintiffs allegedly faced a “precipitous drop” in call-in orders that coincided with the early months of the pandemic. They allegedly received complaints from customers about poor quality products that had in fact been ordered from and prepared by Tito & Tita.

Section 43(a) claims: The court rejected defendants’ argument that plaintiffs didn’t identify “any actual or affirmative” misleading statement or “any representation that was literally false or otherwise implied that ‘Tito & Tita’ was a successor or continuation of [La Baguette].” It sufficed to allege that (i) two historic events held by La Baguette now appear to have been held by Tito & Tita, (ii) old posts and communications on the page and interactions with La Baguette’s followers now appear to have originated from Tito & Tita, and (iii) Tito & Tita has passed off its products as La Baguette’s, including by leaving “descriptions, prices, and photos of Plaintiffs’ baked good offerings...on the page,” id. ¶ 45, and mimicking distinctive product offerings. “Additionally, due to the nature of Facebook, Facebook users who followed La Baguette before the name change would now appear to have followed Tito & Tita instead.” Thus, Tito & Tita allegedly “represented it was associated with all the historic La Baguette content it failed to delete, associated with or endorsed by La Baguette as a successor, and endorsed by all La Baguette’s existing Facebook followers…. Tito & Tita allegedly modified content, rendering it false or misleading, then used that content to kick start its competing business.” Plaintiffs sufficiently alleged likely confusion and statutory standing. The possible alternative cause of business losses—the pandemic—didn’t “undermine the reasonable inference that the alleged drop could be the result of Tito & Tita’s changes to the Facebook page, as it does not account for the confused and disappointed customers.”

This could also be unfair competition under Maryland law.  Tito & Tita argued plaintiffs never owned the Facebook page and have no right to it, but that was a novel question. “The law on the ownership of a social media pages created by employees for employers is evolving rapidly and varies between jurisdictions. If this litigation continues and defendants wish to repeat this argument, they should support their assertion that they own the Facebook page with authority.”

And it could be tortious interference with prospective business or economic relations.

It was not, however, conversion, which does not extend to intangible property not associated with the transfer of some document (either physical or digital) embodying the right to that property. In Maryland, the Court of Appeals has warned against “expand[ing] conversion so much that it could essentially swallow other torts, such as unfair competition and wrongful interference with contractual or business relations....” The Facebook page was an “online advertising and promotional platform,” not a digital document. The same problem defeated the detinue claim (“detinue lies for the recovery of personal chattels unjustly detained by one who acquired possession of them either lawfully or unlawfully, or the value of them if they cannot be regained in specie”).

But breach of fiduciary duty and contract claims survived, as did unjust enrichment and civil conspiracy.

           

Side panel disclosure not enough to avoid "flushable" false advertising suit

Wyant v. Dude Prods., Inc., 2022 WL 621815, No. 21-cv-00682 (N.D. Ill Mar. 3, 2022)

Plaintiffs sued the makers of Dude Wipes [I really must ask: are men ok?] for falsely advertising them as “flushable” under California’s CLRA/UCL/FAL, NY’s GBL, Illinois’s ICFA, and breach of warranty. Plaintiffs alleged that Dude Wipes “are not flushable because they do not disperse in a reasonable amount of time after flushing or clear sewage systems without causing clogs.” Two of the three packages in the complaint have dagger footnotes by “flushable” directing consumers to the side panel: 

A long list of "do not flush" instructions directing consumers, among other things, to consult "local rules" and not flush if "you are unsure of system capability"

Plaintiffs alleged that they relied on the front label and did not read the side panel disclaimer before purchasing. “After flushing the Wipes, Plaintiffs experienced problems with their home plumbing systems.”

Plaintiffs lacked Article III standing for injunctive relief because they wouldn’t repurchase a product they knew to be deficient. Also, restitution and disgorgement claims under the UCL and FAL had to be dismissed because plaintiffs didn’t plead that they lacked an adequate remedy at law.

The court declined to dismiss the claims based on the side panel disclaimer. “Even if reasonable consumers referenced the side panel to assess the front label’s assertion, the disclaimer language does not destroy Plaintiffs’ claims.” The factual allegation, which the court presumed to be true at this stage, was that Dude Wipes are never flushable. For the same reason, express warranty claims survived, though implied warranty of merchantability went because plaintiffs didn’t allege that Dude Wipes were unfit for their ordinary use (“personal hygiene”).

9th Circuit finds noncompetitor lacks statutory standing in nondisparagement false advertising case

ThermoLife Int’l LLC v. BPI Sports, LLC, 2022 WL 612669, No. 21-15339 (9^th Cir. Mar. 2, 2022)

The court of appeals upholds the rejection of ThermoLife’s false advertising claims (Lanham Act and Florida’s FDUTPA) on statutory standing grounds.

ThermoLife’s allegations were too speculative to establish proximate causation. “ThermoLife operates at a different level of the supply chain than BPI.” It sells compounds/licenses its technology for use in sports nutrition supplements, while BPI produces its own dietary supplements. And, unlike in Lexmark, ThermoLife didn’t plead facts showing “anything like a 1:1 relationship between ThermoLife’s lost sales or licensing fees and any potential sales diverted to BPI due to its false advertising.” It didn’t allege that its ingredients were necessary to/had no other use than making the same supplement made by BPI. Instead, its complaint showed that there were many competing supplement companies. It wasn’t enough to allege that products containing its ingredients have similar health benefits or were sold side-by-side on websites to BPI’s product. “In a dietary supplement market that is robust with competitors and different products, this is insufficient to show that sales captured by BPI leads to a direct loss of dietary supplements containing ThermoLife ingredients.” Even if some supplements containing ThermoLife ingredients were direct competitors with BPI’s products, ThermoLife didn’t allege that its licensing arrangement causes it to lose fees proportionally to those products’ lost sales.

Plaintiff Muscle Beach, a supplement seller, did allege direct competition. “But Muscle Beach failed to allege any facts that show consumers consider its products to be substitutes with BPI’s products.” Alleging the use of similar language to describe their health benefits was is insufficient to show direct competition, and Muscle Beach didn’t provide any photographs of its products being listed side-by-side with BPI products or provide any customer review stating a preference for one over the other.

Failing Lexmark also meant that plaintiffs failed to meet the standing requirements for common law unfair competition and Florida Deceptive and Unfair Trade Practices Act claims. “After all, claims of unfair competition under state statutory and common law are substantially congruent to claims made under the Lanham Act,” and a FDUTPA claim requires “actual damages” caused as a result of a defendant’s unfair conduct. Note: the parties apparently didn’t dispute that the same analysis applied to all claims, but I think this was a mistaken concession (understandable in the realities of litigation, but conceptually unsatisfying). Actual damages aren’t the same thing as zone of interests/proximate cause, and broad language of substantial congruence is taken from cases about the substantive standard for liability, not cases about statutory standing—which concept has generally not gotten much scrutiny as applied to common law or state statutory claims.

I'm joining Trademark & Unfair Competition Law, w/ Jane C. Ginsburg, Jessica Litman, & Mary Kevlin

I'm very excited to announce that I've signed on to this casebook, available through Carolina Academic Press including in a more-affordable looseleaf version. I have enjoyed teaching the casebook for many years and I particularly appreciate its division of registration from infringement. I'm looking forward to working on updates (the task of the next few years, as there is a full new edition this year). If anyone is interested in notes, slides, or example midterms/exams, I'm always happy to share.

"free-range" is not puffery for eggs (or chickens)

Mogull v. Pete & Gerry’s Organics, LLC, 2022 WL 602971, No. 21 CV 3521 (VB) (S.D.N.Y. Feb. 28, 2022)

Mogull alleged that eggs marketed by defendant Nellie’s as “free-range” are actually not “free-range.” The packaging describes its eggs as “free-range,” includes images of hens outdoors, and states:

Most hens don’t have it as good as Nellie’s. 9 out of 10 hens in the U.S. are kept in tiny cages at giant egg factories housing millions of birds. Sadly, even “cage-free” is now being used to describe hens that are crowded into large, stacked cages on factory farms, who never see the sun. Nellie’s small family farms are all Certified Humane Free-Range. Our hens can peck, perch, and play on plenty of green grass.

Defendant’s packaging also states its eggs come from “Outdoor Forage” hens. Its website features images of hens roaming outdoors alongside statements such as “[o]ur happy hens are free to roam and strut throughout their wide open pasture. They peck at bugs and flowers, cluck around in groups, and just live as free as a bird all day long.” It also says: “[b]eing free-range means that during most times of the day and year, our hens are free to roam outside as they please,” which is different than being “cage free, which typically does not involve any amount of outdoor access.” A YouTube ad shows hens roaming in an open meadow, with narration explaining defendant’s hens are not “cage free,” but “free-range,” and “free-range hens get to live their lives like real hens, with access to pasture everyday in good weather.”

Mogull alleged that Nellie’s hens are “crammed” into overcrowded sheds 20,000 at a time and have no or limited access to outdoor space. She cited photographs allegedly of defendants’ henhouses, which are “virtually indistinguishable ... from the example [Nellie’s] show[s on its website] as being not ‘Free Range’ where hens are essentially ‘liv[ing] inside a space much like an overcrowded warehouse.” She alleged that a reasonable consumer would understand “free-range” to mean hens are not confined and are able to move comfortably indoors and roam outdoors based on a number of sources. For example, she cited a YouTube video in which shoppers who purchased Nellie’s eggs were shown a video of the purported conditions on Nellie’s farms and responded that the video did not comport with their understanding of “free-range.” She also alleged that USDA and FDA definitions of “free-range” are more akin to those views.

She alleged reliance and a price premium.

Defendants argued that the statement was merely puffery. But plaintiff adequately alleged that “free-range” is an affirmative claim about a product’s qualities—i.e., that the eggs were produced by hens with extended access to indoor and outdoor space—and is, therefore, not “an exaggeration or overstatement expressed in broad, vague, and commendatory language.”

Nor were the challenged statements true because defendant’s farming practices meet the “Certified Humane Free-Range” qualifications. The court noted that “free-range” was displayed as a standalone phrase throughout defendant’s packaging, and only appeared once directly adjacent to “Certified Humane.” Its website is “nelliesfreerange.com,” and the phrase “free-range” was stated throughout separately from the “Certified Humane” designation. “Accordingly, it is plausible a reasonable consumer would not understand ‘free-range eggs’ to convey that Nellie’s eggs meet the ‘Certified Humane’ standard.”

At this stage, the complaint also sufficiently alleged facts giving rise to a strong inference of fraudulent intent for purposes of the fraud claim. And plaintiff alleged sufficient pre-suit notice to allow a breach of express warranty claim. The court also rejected defendant’s argument that she didn’t sufficiently allege breach because she didn’t show that the eggs she purchased came from a hen that did not have access to the outdoors. It was enough to allege that many of defendant’s hens are not able to access the outdoors.

5th Cir affirms fair use on a motion to dismiss, fee award to D

Bell v. Eagle Mountain Saginaw Independent School District, No. 21-10504 (5th Cir. Feb. 25, 2022)

“The softball team and flag corps at a public high school outside Fort Worth used their Twitter accounts to post a motivational passage from sports psychologist Keith Bell’s book, Winning Isn’t Normal.” He sued; the court of appeals affirms a finding of fair use on a motion to dismiss and an award of attorneys’ fees.

Bell continues to market his 1982 72-page book, and also sells merchandise, “including t-shirts and posters that display the passage that was quoted in the tweets.” The passage is “separately copyrighted,” by which I take it the court means “separately registered.” Bell allegedly offers licenses for its use. The passage offers a number of bromides about “winning” (the court repeats the whole thing, making the opinion yet another place the passage can be found freely online). The theme: winning is unusual, so winners must be unusual and “want it more.” [I find this stuff actively toxic, but then again I do believe that chance favors the prepared or, as a debate coach of my acquaintance said, “The harder you work, the luckier you get.”]

Anyway, Bell goes around suing unauthorized users of the passage, mostly public schools or nonprofits that publish the passage on social media. That’s what Chisholm Trail High School’s softball team and color guard did in 2017, on Twitter, to under 1000 followers, crediting Bell. Bell discovered them “soon after they were posted,” but waited almost a year to notify the district, which promptly “removed both posts, told Bell that the mistake was a ‘teachable moment,’ and announced it was implementing a training program to avoid similar incidents.” [I hope it modifies the training program to talk about fair use!] Bell sued anyway.

“[F]air use is an affirmative defense that can support Rule 12(b)(6) dismissal.”

Factor one: Not transformative, but noncommercial, which weighs in favor of the school district. Bell argued that the tweets could “indirectly” benefit the school by bolstering its “professional reputation.” “Enhanced reputation can be a commercial benefit, such as when a scientist falsely presents another’s article as her own.” But the tweets didn’t do that. “The tweets attempted to motivate the student members to perform at their best, not to motivate donors to contribute to the programs. There is no logical theory for how tweeting Bell’s motivational message to inspire students would enhance the reputations of these programs, let alone how that might lead to some tangible benefit for the school district later on.” Good faith also favored the school district, and transformative use is not “absolutely necessary.” In its absence, other factors like commerciality “loom larger,” but here that helped the school district.

Nature of the work: Somewhat creative, but very published. “Bell is entitled to the inference that the school chose the WIN Passage because it combines and condenses these principles in a particularly inspiring way.” But this was of “meager” help to Bell, since “[t]he nature of the work is widely considered the least significant fair-use factor,” and it only weighed for him narrowly in the first place.

Amount/substantiality: Accepting his allegation that the passage was the heart of the work, the court saw no need to separately address his argument that the separate registration meant that the school district copied the “whole” work. [Not for nothing, the Second Circuit has wisely rejected assessing factor three by counting registrations. NXIVM Corp. v. Ross Institute, 364 F.3d 471 (2d Cir. 2004).] “If that were all, copying the WIN Passage would be qualitatively significant. The pleadings, however, also indicate that the WIN Passage was freely accessible before the softball team and flag corps posted it.” Sony held long ago that if an unauthorized use “enables a viewer to see such a work which he had been invited to witness in its entirety free of charge, the fact that the entire work is reproduced . . . does not have its ordinary effect of militating against a finding of fair use.” Quoting a small excerpt that was “already freely available to the public” rendered the third factor neutral.

Effect on the market: Harm was implausible. In a footnote, the court rejected Sony’s rule that noncommercial use is presumptively not market-harming, reasoning that “the Supreme Court has since clarified that no such presumption exists, see Patry § 6:4 (“[T]he burden of proving the defense always remains on the party asserting it.”); Campbell, 510 U.S. at 584–85; Harper & Row, 471 U.S. at 566–69.” [Ugh. First, it’s troubling to have the first cite be a treatise paraphrasing what the Supreme Court did. Second, I think this is just a legal mistake: Sony says that noncommerciality creates a presumption in favor of the defendant on the fourth factor, and the Supreme Court has never rejected that; rather, it has explicitly rejected the opposite rule—that all commercial uses are presumptively disfavored.]

Anyway, the complaint alleged that widespread use of the passage on social media could reduce “the incentive to purchase Winning Isn’t Normal or related merchandise.” But that’s not plausible. The tweets don’t reproduce enough of the work to substitute for it, and, “[i]f anything, the properly attributed quotation of a short passage from Winning Isn’t Normal might bolster interest in the book; it is free advertising.” Nor is a tweet “a market substitute for a coffee mug”; viral sharing might increase demand for those, but not plausibly decrease it.

Bell also alleged interference with his theoretical market for licensing tweets, but it was not plausible that there was a “traditional, reasonable, or likely to be developed market[]” for licensing tweets. “[D]espite being embroiled in litigation for years, Bell is unable to allege that anyone has ever purchased a license before posting the WIN Passage on social media—much less a public school district, which has no commercial interest in its online presence.” The fact that he extracted settlements from alleged infringers does not a real market make. “Absent any plausible allegation that public schools would willingly pay to tweet the WIN Passage, Bell’s licensing concerns ‘are purely speculative.’” Factor four favors fair use.

Result: fair use. “[C]opyright law’s goal of promoting creativity would be better served by allowing the use than preventing it.”

Fee award: “[A]ttorney’s fees to the prevailing party in a copyright action is the rule rather than the exception and should be awarded routinely.” There was no abuse of discretion in “following the normal rule.” Bell had “a long history of suing public institutions and nonprofit organizations over de minimis uses of his work” and made “exorbitant demands for damages in hopes of extracting disproportionate settlements.” “Attorney’s fees were thus an appropriate deterrent, both with respect to Bell and other copyright holders who might consider a similar business model of litigation.”