Wednesday, July 20, 2022

Google public policy fellowships partnering with different tech policy organizations: applications open

Google has relaunched its Public Policy Fellowship program. This fellowship is designed to support organizations at the forefront of Internet and tech policy and enhance their research, analysis, and advocacy efforts. Google is partnering with the 12 organizations listed below:

  • The Aspen Institute

  • Bipartisan Policy Center (BPC)

  • The Cato Institute

  • The Center for Democracy and Technology

  • National Taxpayers Union Foundation

  • Open Technology Institute

  • Progressive Policy Institute

  • Public Knowledge

  • R Street

  • TechFreedom

  • Tech Policy institute

  • UnidosUS

The application is currently open. Interested students should apply to the fellowship before Friday, August 12th using this link

(c), TM, and other claims from busted partnership to sell colored copper fixtures

Chiusa v. Stubenrauch, 2022 WL 2793579, No. 3:21-cv-00545 (M.D. Tenn. Jul. 15, 2022)

The parties in this case are former business associates, which is one reason there are so many different claims. Stubenrauch is the controlling member of CV, which makes and sells unusually colorful “residential fixtures and décor made from aged and/or etched copper.” 

examples of finishes from opinion

Chiusa is the owner and operator of CC, which “create[es] commercial websites and sell[s] various products for manufacturers.”

The parties worked together to launch a website selling Stubenrauch’s copper lampshades and mirrors. They then agreed that Chiusa would create and operate a website, colorcopper.com, marketing and distributing Stubenrauch’s copper sheets “to a new industry for copper countertops, bar tops and kitchen backsplash.” Though the parties went forward, “they never signed a formal written document memorializing and defining the nature of their business relationship.” [Reminds me of the recent Twitter meme: terrify your lawyer in five words. “There’s no written agreement” will do it.]

CC has a recent trademark registration for a design mark “consist[ing] of the stylized wording ‘COLOR COPPER.COM”, [with] a diamond shape between the wording ‘COLOR’ and ‘COPPER’ made up of four smaller diamonds, each diamond having a pattern inside of it,” COPPER.COM disclaimed.


Chiusa alleged that it was a normal supplier-distributor relationship, in which consumers would order through the colorcopper.com website he controlled, Stubenrauch and CV would then fill the order and usually dropship the finished product directly to the customer using Chiusa’s shipping account except when they shipped to Chiusa who’d send it on.

After nearly a decade, however, Stubenrauch contacted another man, Wasser, about creating a new website for CV. Stubenrauch told Wasser that he was free to use photos and text from Chiusa’s website. Chiusa eventually discovered this and declined an offer to work with Wasser, who allegedly “proceeded to misappropriate the moneys coming in through the website while never delivering any copper products to customers,” eventually “abscond[ing] with the money.”

Chiusa, allegedly concerned for his own reputation, took down CC’s http://www.colorcopper.com and also refused to sell the site to Stubenrauch. “In in an attempt to right the ship and offset his losses, Stubenrauch created a new website.” The new site, coloredcopper.com, apparenlty used many of the photographs that Chiusa had used and reproduced at least some portions of the original site’s text.

Chiusa has a copyright registration for the website obtained during this dispute. “The certificate expressly states that the ‘[p]revious version of the website’ is excluded from the registration, but that language is not accompanied by any clarification regarding which elements were new, and therefore (at least potentially) covered by the registration, and which were old, and therefore subject to the disclaimer.”  Chiusa also has a registration for a brochure, stating that he created “text, photograph(s), [and] artwork on p.1” therein. “The copy of the brochure deposited with the copyright office is 50 pages long and consists primarily of photographs depicting products and product features purportedly available from ‘ColorCopper.com.’”

The site also uses a logo that is allegedly too similar to CC’s logo.


“Stubenrauch also allegedly created a new website directly competing with another of Chiusa’s ventures,” an “ancillary business selling various types of epoxy products over the internet” under the trade name ULTRACLEAR EPOXY. Stubenrauch’s epoxy website also used language that appeared to be taken directly from Chiusa’s site. There’s a similar copyright registration for this site.

Chiusa’s claims: willful copyright infringement; breach of the oral distribution agreement; trademark infringement, false advertising, trade dress/trade name infringement, and false designation of origin undre the Lanham Act; a Tennessee Consumer Protection Act claim; and conversion.

Copyright: Defendants argued that plaintiffs didn’t sufficiently identify protected elements of the websites and brochure, given that the registrations provided “little, if any, guidance for sorting the claimed elements from the non-claimed elements. Moreover, there are likely some elements of the underlying works that are not only not Chiusa’s, but are not protectable by copyright at all…. [S]imple facts and common turns of phrase that appear in marketing materials—for example, about the features of a material or technology—are not protected by copyright.”

The court noted that functional/utilitarian features of marketing materials might be excluded from protection, citing Star Athletica.

Given the pleading standard, dismissal at this stage was not warranted, even though defendants might well be right that many elements of the underlying websites were purely functional and/or factual and are not entitled to copyright protection. “[O]ther elements, such as the visual depictions and creative verbal descriptions included on the websites and in the brochure, are plausibly entitled to protection. While the plaintiffs could have been more precise in breaking down all of the constituent elements for which they are asserting protection, . . . plaintiffs have specifically identified at least some plausibly protected elements in the websites and brochure that were replicated in some of the defendants’ materials,” including specific photos from the Chiusa website.

Likewise, the epoxy website included “a number of full sentences that appear verbatim (or nearly so) on the plaintiffs’ site,” e.g.:

[UltraClear epoxy/DuraClear™ epoxy] boasts the most advanced level of shine, gloss, reflectivity, clarity and depth, and it locks in those optical qualities forever. The most sophisticated system of synthetic polymeric-based protection available. Our Commercial-grade epoxy is engineered specifically for Bar Tops, Tabletops & Countertops.

This text contained “some creative elements that are plausibly entitled to protection, such that outright copying would be prohibited.” In a footnote, the court noted defendants’ argument that the overlapping text was selected for SEO reasons, not expression-based reasons, but the court declined to resolve whether that mattered to protectability, “because the plaintiffs have sufficiently pleaded infringement of other elements.” Still, “the cited text is neither an unintelligible list of keywords nor separate from the user-facing portions of the websites, and the defendants identify no caselaw suggesting that such language becomes exempt from copyright protection merely because its author had search engine results in mind, among the other functions of the text, when writing it.”

Likewise, at this stage only, the court rejected the argument that plaintiffs failed to plead ownership of the copied elements. At least for the copper website and the brochure, the delay in registration could prevent any presumption of ownership based on the prima facie validity of the registration.  “The lack of that presumption, however, is primarily a hindrance to a plaintiff’s ability to make his case, not his ability to plead it. Regardless of any delay in seeking registration, a plaintiff can state a claim by sufficiently pleading actual ownership.” At this stage, the bare-bones allegations that the “copyrighted pictures, images, text, and artwork embodied” in the websites and brochure were “either created, taken, bought by, or assigned to” the plaintiffs were barely enough, given that it was plausible that plaintiffs might have come to hold the rights to different elements in different ways, e.g., Chiusa could have written some text himself, purchased rights to a photo, and commissioned another photo as a work for hire.

The court cautioned that it was paying attention to the ownership issue, resolution of which would likely require “considerably more detail than they have pleaded.” Still, “defendants have not identified any caselaw suggesting that, in order to state a plausible claim for relief for copyright infringement, a plaintiff must plead not only ownership itself but also the detailed story of how the plaintiff obtained that ownership.”

Trademark: Defendants argued that “color copper” is just an ordinary and straightforward way to describe copper that has been treated to have a striking color. At this stage, the court need not resolve whether plaintiffs pled—or could prove—any rights in “color copper” the phrase on its own or colorcopper.com, the registered design mark sufficed to plead ownership of a protectable mark. The registration was rebuttably presumed valid.

As to the phrase “color copper,” the court rejected plaintiffs’ argument that it was arbitrary. Plaintiffs reaosned that “a mere description of the copper would refer to it as ‘colored’ or ‘colorful,’ rather than using ‘color’ as an adjective.” [Note effects on the scope of their rights against descriptive uses.] No: “a grammatically flawed description is still a description. A consumer who heard the phrase ‘color copper’ would reasonably assume that it referred to copper that was, for some reason, not the ordinary color—and they would be correct.” Still, plaintiffs plausibly pled secondary meaning [at least of the design mark, I think[ and also plausibly pled that at least some of defendants’ materials infringed.


comparison of marks

The similarities in logos weren’t limited to the two-letter difference in the word element; both used descending font sizes, all caps, bright colors for “Color” or “Colored,” followed by a duller tone for “copper.com” And each logo used a pictorial design consisting of four squares in similar, although not identical, colors and patterns evocative of the underlying copper products; “indeed, the defendants’ logo of stacked squares looks somewhat like a person simply shuffled the plaintiffs’ logo squares together. It is entirely plausible that an ordinary, unsophisticated consumer could be confused by these similarities.”

Nonetheless, the court cautioned that “defendants’ arguments, although not sufficient to warrant dismissal of the plaintiffs’ claims, raise serious and real issues about the boundaries of the plaintiffs’ rights that may well persist in this case”:

The plaintiffs have no authority to prevent any competitor from using ordinary language to describe colorful copper. Nor do they have any right to prevent a competitor from adopting a non-confusing name or logo that, like theirs, evokes the features of multicolored copper products. There are, therefore, significant limits to what the plaintiffs can expect to prevent the defendants from doing. The court’s holding therefore should not be construed to suggest that the plaintiffs are likely to establish rights that are nearly as broad as they seek. What matters for the purposes of Rule 12(b)(6), however, is whether the plaintiffs have plausibly alleged some trademark infringement, and they have done so. The court therefore will not dismiss those claims.

A nice statement that should probably guide the parties’ discussions.

Trade dress: Plaintiffs didn’t provide much detail about what they meant by that; the epoxy websites looked nothing like each other. While the copper websites looked more similar, “most instances of resemblance arise out of the use of the allegedly copyright-protected photographs. While those uses may be illegal under copyright law, it is implausible that those photographs themselves are distinctive in the marketplace as signals of the origin of the underlying goods, and the First Amended Complaint provides no meaningful basis for reaching such a conclusion.” Given the breadth of trade dress, plaintiffs are under more of a burden to tell courts what they mean when they use the phrase in pleading infringement. In particular, they should, to the extent feasible, “separate[ ] out and identif[y] in a list” each of the “discrete elements which make up th[e] combination” of features that the plaintiffs seek to protect. They did not do so here, so the court dismissed the trade dress claims.

False advertising: The allegations identified “merely describe the supposed underlying trademark infringement.” The plaintiffs speculated that defendants made false claims about their epoxy, but didn’t include any factual allegations supporting that. The plaintiffs therefore have not identified any basis for supporting a claim for false advertising that is not wholly redundant with their trademark infringement claims.” Dismissed.

Trade name infringement: Not a separate claim. At this stage in our trademark jurisprudence, “a ‘trade name’ is not a distinct piece of intellectual property that can be ‘infringed’ distinctly from its protectability as a trademark.” It may be a distinct concept, but it does not create a distinct cause of action. Also dismissed.

False designation of origin: This, by contrast, is listed in the statute, but,

[a]s a practical matter, … the issue typically comes up ony when the nature of a particular allegation is such that there may have been a false designation of origin distinct from simply infringing on another’s trademark and creating confusion about a product’s source. For example, false designation of origin may come up, distinctly from trademark infringement, when a seller has falsely attributed a product to a particular geographic location or particular artisan. Allegations of that sort, however, are not at issue in this case.

So was this just another label for trademark infringement? The plaintiffs argued that they were alleging that “Stubenrauch and CV falsely designated themselves as the authors of the Infringing CV Website and the Infringing Epoxy Website, as well as the actual services offered on Plaintiffs’ Websites. Thusly failing to properly designate Plaintiffs as the author and the source of the services being advertised on Plaintiffs’ Websites is a material misrepresentation as to the origination of the Works embodied in the Infringing CV Website and the Infringing Epoxy Website which creates a likelihood of confusion that mistakenly causes the public to draw the conclusion that Mr. Stubenrauch and CV are the authors of the Works.”

Dastar definitively bars this kind of claim as to goods. Can plaintiffs successfully characterize this as a claim about services to evade Dastar? I think plainly not, given that consumers aren’t buying the service of website design from defendants, and defendants are in fact both the origin of the goods and of any services related to delivering the goods—the only things that consumers plausibly buy. The various Sound Choice cases are pretty clear on this point, which is reinforced by the fact that the only likely confusion actually alleged in the above quote is about the authorship of the works.

True, the reference to “services” allowed “a false designation of origin claim that is redundant with trademark infringement.” I think the court should have asked “which services have their origin allegedly falsely designated in this theory?”

Still, that doesn’t matter very much, and the court was very clear that any claim “based on a false statement of authorship of a creative work—like a website—should be brought pursuant to copyright laws, not the Lanham Act.” Thus, the false designation of origin claim was dismissed, without prejudice to plaintiffs’ ability to rely on “potentially overlapping arguments” in support of their trademark infringement claims. [A little confusingly stated, but I think overall it’s clear that the court will allow traditional trademark claims but not reverse passing off claims based only on the presence of copied material.]

TCPA: Defendants’ conduct was covered by the TCPA to the extent that it replicated the Lanham Act claim that survived. They argued, however, that plaintiffs didn’t sufficiently allege ascertainable loss, as required by the TCPA. Under that law, “[a]n ascertainable loss is a deprivation, detriment, or injury that is capable of being discovered, observed, or established.” This was a potential problem because the parties were not in competition by the time the defendants took their allegedly improper actions.

The plaintiffs were only ever in the colorful copper business because they were distributing the defendants’ products in conjunction with the defendant, and they stopped doing so in connection with the Wasser situation—not the later alleged infringement. The plaintiffs, at least according to the story told in the First Amended Complaint, did not have an independent competing operation that could be harmed by the infringement in real time. No sale has gone to the defendants that could have gone to the plaintiffs.

The court thought it was still “possible” to identify an ascertainable injury in such circumstances, but plaintiffs hadn’t done so. Conclusory language of injury “might be sufficient in a case in which the facts themselves make the nature of the underlying damages obvious. In this instance, however, more explanation was required.” Mere invasion of a right was insufficient under the TCPA without ascertainable harm.

I ask again, as I often do: why doesn’t this problem also defeat Article III standing for trademark infringement?

Breach of contract: Dismissed for contract reasons: plaintiffs didn’t explain what conduct constituted breach.

Conversion: Dismissed because all allegedly appropriated property was intangible and not subject to the conversion cause of action. Even ignoring the preempted copying-copyrighted-material allegations, registering a different, similar domain name does not constitute conversion of an existing domain name.

Tuesday, July 19, 2022

Amicus in Capitol Records v. Vimeo

 Addressing the proper standards for knowledge & right and ability to control under the DMCA. Amicus available here. Thanks especially to Laura Heymann, who did the lioness's share of drafting.

Monday, July 18, 2022

Is a merchandising right part of TM? one PA judge thinks probably not

Pennsylvania State Univ. v. Vintage Brand, LLC, No. 4:21-CV-01091 (M.D. Pa. Jul. 14, 2022)

Penn State sued Vintage for selling screen-printed items with old Penn State logos. Vintage counterclaimed, alleging that Penn State’s registrations were invalid and should be cancelled on account of the ornamentality of the use. The court declined to dismiss the counterclaim for cancellation, reasoning that a symbol on goods does not identify a third-party source of the goods if it merely “creates an association” with the trademark owner.

Penn State has a 1984 registration for the word mark PENN STATE for lots of stuff; it also has a registration for the “Pozniak Lion,” which Vintage Brand alleged was used as a school logo until it was phased out in 1987. Penn State registered this image in 2017 for use on metal novelty license plates and apparel. And it has a 2017 registration for the Penn State seal, which displays the Pennsylvania Coat of Arms ringed by the University’s name and date of founding, for various apparel and drink-related goods.

Vintage pled that each was “used as mere decoration, printed in large font and in a prominent location, and [do] not serve to identify Penn State as the source or origin of the goods”; that “[o]n information and belief, consumers perceive . . . [the marks] to be merely a decorative feature of the goods and not an indication of the source of the goods”; and finally that their “overall commercial impression . . . is purely ornamental or merely a decorative feature[,] . . . [and they] do not identify and distinguish Penn State’s goods from those of others and, therefore, do not function as a trademark.”

Though Vintage had the burden of showing invalidity, it had pled sufficient facts to indicate that it could meet this burden. (The court noted that it understood that Vintage was making an “as applied” challenge to the categories of goods at issue, not a challenge to the entirety of the registrations. I’m not sure this term is applicable. If the registrations for those categories are subject to cancellation, that’s not “as applied”—the registrations would be gone in those categories, presumably on failure to function/abandonment grounds. The reality, as the court noted elsewhere in its discussion, is that scope and protectability are entwined in this case: the key issue is whether Vintage can put the matter across the front of T-shirts, etc., not whether Penn State could get a valid registration for its marks used as marks.)

Using traditional ornamentality analysis—whether the matter was serving “solely as attractive ornamentation” and not “also as a symbol that identifies and distinguishes a single source”—the uses here were plausibly ornamental. Placement considerations—positioning on the goods as if they were the communication/decoration consumers wanted, rather than in the traditional “brand spots”—favored ornamentality. But even with that placement, the matter could still identify the source of goods. Nonetheless, it was plausible that “consumers believe that the essence of these marks is to signal their support for the University, not that the University has produced, approved, or guaranteed the quality of the item.” There was no bright-line rule making it implausible that consumers would perceive the matter as anything but a trademark indicating origin of the goods, as opposed to a signal of their own preferences.

Implicit in the court’s discussion of “affiliation” is the correct point that affiliation can easily be unidirectional. If I wear a Georgetown sweatshirt, I am indicating my support for/feelings of affiliation with Georgetown. But Georgetown is indifferent to me, and no reasonable consumer would look at me and think I represent Georgetown—otherwise all that collegiate licensing, where they let anyone who pays walk out the door with branded gear, is a massive naked licensing scheme. So use to signal the consumer’s “affiliation with” or “support for” an entity does not necessarily mean use that signals formal affiliation on the entity’s side.

The court discussed many merchandising cases and found that, with the exception of Boston Pro. Hockey Ass’n v. Dallas Cap & Emblem Mfg. Inc., 510 F.2d 1004 (5th Cir. 1975), they insisted that a trademark must function as a source-indicator; signifying merely a mark’s own presence on goods was insufficient. Even the Fifth Circuit, the court noted, has subsequently claimed that Boston Hockey was about source confusion and thus a fact-dependent inquiry about source identification (“the analysis turns not on whether consumers tie the symbol to the trademark holder, but on whether they tie the product to the trademark holder”). This is consistent with the basic premise of trademark protection. (The court noted some similar language from the TTAB, and similar walking back.)

Where “the mark itself is the product,” it performs a “non-trademark function.” The key question is whether it also performs a trademark function of signalling source. And this, the court ruled, was a factual question not amenable to resolution on a motion to dismiss given the allegations of the counterclaim, even though Penn State might ultimately succeed on the merits. “[T]rademark law requires more than a mental association between the trademark and trademark holder. … [T]he consumer must instead believe that the trademark indicates that the trademark holder is the source, sponsor, or is otherwise affiliated with the good—a question of fact.”

The court ended with some observations drawn from the scholarly literature criticizing a broad merchandising right. Trademarks aren’t supposed to incentivize creation; they are supposed to indicate source. In the absence of that function, monopolization is a bad, not a good. Dastar provides a hook for questioning a broad merchandising right, given its statement that “origin” “should not be stretched to cover matters that are typically of no consequence to purchasers.” Moreover, in the absence of an “official” claim, the proper remedy may be a disclaimer. The court referred to “recent Supreme Court cases” as supporting this conclusion (citing Bonito Boats, Kellogg, Traffix, and Stiffel)—super interesting to me because First Amendment cases strongly support a disclaimer remedy, outside the narrow trademark context.

The court pointed out that the facts remained for development, but might still support a disclaimer remedy given that consumer confusion might result from misunderstanding of the law, rather than confusion about specific factual situations:

Though the data is now decades old, early N.F.L. trademark cases saw consumer confusion rates above 50%. These results are not determinative here and can certainly be quibbled with at the margin….

But the case for a disclaimer rather than an injunction lies at the base, not the margin. Consumer-survey data taken at the same time as the N.F.L. cases showed widespread belief among consumers that “[n]o product can bear the name of an entertainer, cartoon character, or some other famous person unless permission is given for its use”—a belief that appears to have come from what they thought the law required. The circularity is apparent: the law only offers protection if there’s belief, yet the belief comes from consumers’ (mis)conception about the law. It would seem perverse to award market exclusivity based on a fake-it-until-you-make-it approach. If consumers’ confusion stems from their incorrect belief that goods bearing Penn State’s emblem must be licensed, shouldn’t that belief be corrected, not perpetuated?

Good question! The court indicated its interest in factual development both of the actual confusion question and the source of any consumer confusion, indicating that confusion based on miscomprehension of the law would likely be redressed by a disclaimer.

“The modern collegiate trademark- and licensing-regime has grown into a multibillion-dollar industry. But that a house is large is of little matter if it’s been built on sand.”

I’ve been saying for a while that the transformation of the federal judiciary along ideological but IP-indifferent lines is going to lead to large and unpredictable changes in IP doctrine. Here is one possible example.


Friday, July 15, 2022

Likely confusion alone justifies liability but not damages or profits in exercise equipment case

Max Rack, Inc. v. Core Health & Fitness, LLC, 2022 WL 2751685, --- F.4th ----, 2022 WL 2751685 (6th Circuit Jul. 14, 2022)

The court of appeals, over a dissent that would have upheld everything, upholds a jury confusion verdict on fairly thin grounds, and upholds the trial court's rejection of the jury's damage award, but rejects a profits enhancement/attorneys’ fee award to avoid double-counting and reliance on theories that would not be sufficient to uphold the underlying jury verdict. So a lot of interesting discussion of what suffices for a profits and damages award.

Max Rack invented a piece of gym equipment, the Max Rack. For years, Max Rack sold Max Racks through licensing agreements with defendant Core. “When Max Rack’s last patent expired, however, Core Health decided to compete against Max Rack by selling an identical machine under a new name—the ‘Freedom Rack.’” It was produced by the same Chinese manufacturer and was thus substantively identical.

Max Rack alleged two kinds of infringement during this transition: Core allegedly continued to sell “Max Racks” without authorization, and attempted to sell Freedom Racks by using the “Max Rack” name. “A jury agreed, awarding Max Rack $1 million in damages and $250,000 in Core Health’s profits.” The jury also found that the infringement was intentional. The district court upheld the liability finding, doubled the profits award, and granted attorney’s fees to Max Rack. This appeal followed.

Continued manufacture and sale of the Max Racks after the agreement expired was a traditional ex-franchisee situation; the other accused uses basically were failing to purge every reference to the Max Rack from the Core website and user manual even after the transition to the Freedom Rack. For example, there was evidence that “Core Health waited until over a month after the agreement’s expiration to update its website and other marketing materials.” When they did try, they missed some references. (The court appears not to understand that search engines may not be immediately updated, and refers to evidence that a Google search showed “a link to Core Health’s website with a caption underneath the link that used the ‘Max Rack’ name” after the agreement expired. But there were other instances that really were on Core’s website after the relevant period, including a couple as late as trial.)

Although Core had six months to sell off any units it had started making before the expiration date, it sold another 24 later than that, and 9 units whose label it changed to “Freedom Rack” before shipping. It also didn’t pay Max Rack royalties for 238 sales within the six-month period. Before trial, it did pay up for those 271 sales, paying royalties for the 238 and its profits for the remainder, plus interest.

Freedom Rack remains the only machine on the market like the Max Rack; the plaintiff has not licensed another producer.

After trial, the district court denied Core Health’s motion for judgment as a matter of law or for a new trial, upheld the $250,000 profit award and doubled it because of Core Health’s conduct during discovery, awarded Max Rack attorney’s fees, and enjoined Core Health from using the Max Rack mark without acknowledging that it is registered to Max Rack. But it overturned the $1 million in damages because there was no evidence of actual confusion.

Underlying legal violation: The court assumed that the state law matched the federal law in requiring likely confusion, which seems correct, even though the court chided the parties for lumping all the claims together.

This case wasn’t a typical infringement case where multifactor confusion analysis is required. One part was a distinct claim “that a holdover licensee has continued to use a licensor’s mark after their agreement expired,” which follows a “more categorical” rule: “proof of continued, unauthorized use of an original trademark by one whose license to use the trademark had been terminated is sufficient to establish ‘likelihood of confusion.’ ”

The jury could reasonably have found that Core Health violated the licensing agreement by selling Max Racks after that agreement expired. The admitted sales of 24 Max Racks outside the six-month liquidation window were enough for a finding of intentional infringement. [The court doesn’t consider the difference between services and goods here—the franchise cases involve services, not lawfully made goods, which implicate first sale, especially since Core doesn’t seem to have been operating under the Max Rack name.] Payment of the profits on those units reduced Core’s monetary liability, but not the violation. “In addition, the jury reasonably (if just barely) could have found that Core Health began to manufacture Max Racks after the agreement expired in November 2015.”

The district court, however, relied instead on theory two: continued use of “Max Rack” on Core’s site. But the evidence of this was “relatively insubstantial.” First, it was legal error to rely on evidence that a third-party reseller used the Max Rack mark when selling Freedom Racks on its website, given that Max Rack neither asserted a contributory liability theory nor developed evidence for it (indeed, the evidence showed that Core told resellers about the change).

Second, a Google search for “Max Rack” produced a “hit” to an unidentified page on Core Health’s website (see note above) and, third, a stray “Max Rack” reference remained in the Freedom Rack owner’s manual. Though evidence of Core’s continued use of the mark was “close,” it was enough to create a likelihood of confusion for purposes of finding a violation of the Lanham Act, albeit not enough to justify a damage award.  “To prove a violation, Max Rack needed to show only that Core Health’s use of the Max Rack name would likely confuse consumers over whether the Freedom Rack was affiliated with the owner of the Max Rack mark in some way. Max Rack did not need to show actual confusion or past injury.”

And there was no dispute that there was some continued use of the mark, even if accidental, including an outdated photo of a Max Rack with a partially concealed “Max Rack” logo on a black bar. Arguments that these uses were minor and harmless went “more to whether Max Rack established damages than to whether it established a violation.” [Again I ask whether this is consistent with current Article III standing jurisprudence.]

These references could “perpetuate the ‘perception that’ [Core’s] Freedom Racks were affiliated with the Max Rack brand,” given that the goods were the same, the parties were “potential” competitors, and the mark was identical. “Indeed, if we accepted Core Health’s argument that these uses of ‘Max Rack’ did not violate the Lanham Act because they were trivial, Core Health could continue with them indefinitely. Max Rack would remain powerless to stop Core Health from, say, using the picture of a Max Rack to sell its Freedom Racks.”

The court went out of its way to say that plenty of uses of “Max Rack” would have been fine, such as in comparative advertising or in claims that the Freedom Rack was identical to the Max Rack, or even that “Core Health used to make the Max Rack for Max Rack, Inc.” But the actual references weren’t procompetitive, unlike those hypotheticals. [Suppose Core put a disclaimer on each page that said: “Core Health used to make the Max Rack for Max Rack, Inc.” Any remaining references to the Max Rack instead of the Freedom Rack on this page should be disregarded.” Sufficient?] “Whether innocent or not … the references still could have created a likelihood of confusion.”

Under the circumstances, Core was, just barely, not entitled to a new trial. This was so even though the jury was exposed to inflammatory arguments about the parties’ “addendum” agreement that purportedly entitled Max Rack to perpetual royalty payments even after patent expiration. When Core acquired the assets of its predecessor in interest, it concluded—correctly—that this addendum was unenforceable under well-established patent law, and Max Rack didn’t even bother to assert a violation of the addendum in its suit. Nonetheless, at trial, Max Rack brought it up a lot; counsel referred to Core’s noncompliance with this invalid addendum as “fraudulent,” and the jury asked about whether it was enforceable during deliberations. Still, given the high standard for reversing a denial of a new trial, Core failed, especially since the court’s instructions explained that the jury need not consider the addendum’s legality and that Core had correctly interpreted the law. The jury’s damages award was already overturned, and the trial court could reasonably conclude that there was no spillover requiring a fully new trial, especially given that Core admitted that 24 sales post-agreement were infringing.

Profits award: The $250,000 “had a reasonable basis in the evidence when read against the Lanham Act’s burden-shifting approach to proving profits.” Core didn’t challenge the “abstract conclusion that equity allowed for a profits award,” only the sufficiency of the evidence, and the evidence was sufficient. Max Rack had only a modest burden to prove Core’s “sales.” Even considering the issue de novo, there was sufficient evidence.

Core had some points in its favor. Core sells many different weightlifting machines; it “likely” wouldn’t be enough for Max Rack to put in evidence of Core’s total sales to shift the burden. “Instead, a plaintiff likely must show some connection between the identified ‘sales’ and the alleged infringement.” But the court didn’t need to decide whether “stray references” to “Max Rack” on Core Health’s website tainted all Freedom Rack sales and allowed Max Rack to seek Core Health’s profits for those sales, because the profits award could have been tied to Max Rack’s alternative infringement theory: that Core Health sold over 200 Max Racks without authorization; its own figures suggested that it $188,787 in profits on 218 Max Racks sold in 2016. “Max Rack also poked holes in the validity of Core Health’s cost figures, suggesting that its inflated numbers hid its true profits.” Thus, the jury’s award could have rested on the ex-franchisee theory.

However, doubling the award was an abuse of discretion. Congress specifically barred using a profits adjustment as a penalty; it can only be done to compensate, because “a fact finder might sometimes have trouble identifying the precise amount of profits generated by a defendant’s infringement.” It would be improper to rely on a defendant’s bad faith or on discovery violations that didn’t interfere with calculating its profits. Although the district court properly noted that the law bars punitive enforcement, it based the increase on Core’s “evasive discovery conduct” in terms of documenting its product costs. However, the court granted Max Rack’s motion to exclude nondisclosed evidence from trial, preventing Core from showing some of its costs. It was then double-counting to use that conduct to enhance the profits award: that excluded evidence would have benefited Core, not Max Rack, and so the exclusion increased the chances of overcompensation, not undercompensation. Max Rack had no difficulty proving Core’s total sales. There was therefore no compensation-based rationale for doubling the award. Answering the dissent’s objection that maybe the excluded evidence would have shown lower costs and higher profits, the majority notes that “Max Rack itself moved to exclude any further cost evidence…. That decision effectively amounted to a second sanction for Core Health’s failure to produce its cost evidence.” Matters would have been different if Core had refused to turn over sales data.

The court of appeals also affirmed the district court’s decision to vacate the jury’s $1 million damages award. Rejecting Max Rack’s argument that Romag signalled that no bright-line rules should be required in this area, the court reaffirmed the traditional rule that a damage award requires some evidence of actual loss, not just of likely confusion. This can be evidence of lost sales (not available here, since Max Rack had no competing product), lost royalties (not available here since Core paid them before trial), lost goodwill (not available here because the products were always made by the exact same Chinese manufacturer; there was nothing “inferior” about what customers got so they couldn’t have “soured” on Max Rack’s brand), or damage-control costs, e.g. “advertisements clarifying that the owner has no affiliation with the infringer” (none here).

Before awarding marketplace damages like those for lost sales, “courts generally require a plaintiff to show that an infringing mark has actually confused some consumers about the mark’s affiliation with the plaintiff’s good (not just that it is likely to do so). Because juries might have trouble quantifying these losses, this actual-confusion evidence helps ensure that they at least exist.” But damage-control costs wouldn’t require this, nor would royalty-based damages if due, since royalties provide an objective measure of damages.

Under these circumstances, neither of Max Rack’s theories sufficed to recover damages. The royalties/profits from 262 Max Racks sold without authorization were paid before trial, with interest, and the profits award from 9 machines that the jury could have found were sold to consumers as “Max Racks” but shipped as “Freedom Racks” were already paid-for with the profits award; damages would be an impermissible double recovery.

Max Rack’s second theory, that Core Health sold an unknown number of Freedom Racks by keeping “Max Rack” references on its website, failed because there was no evidence of actual consumer confusion from these “minor” uses. Nor was there evidence of other harm to Max Rack, given its failure to produce a competing product. “Max Rack would have made no sales regardless of Core Health’s conduct.” And since the Freedom Rack was identical to the Max Rack, there was no “goodwill” injury that could have resulted from an inferior product’s use of its name.

Romag said that willfulness was only important, not required, for a profit award because such a “categorical requirement” was inconsistent with § 1117(a)’s text.

Max Rack asks us to treat actual confusion in the same way because § 1117(a) does not list actual confusion in the text either. But we need not decide how Romag affects the traditional actual-confusion prerequisite for marketplace damages. Even if we treated actual confusion as an “important” factor, Max Rack identifies nothing to show that Core Health’s stray references to “Max Rack” caused it harm. No matter the governing legal standard, Max Rack’s speculation of harm would not suffice to justify a damages award.

Max Rack argued that other courts have presumed actual confusion (and shifted the burden to a defendant to disprove it) when the defendant has intentionally deceived the public by using a deceptive mark or comparative false advertising. But the jury’s finding of intentional infringement “rests most reasonably on Core Health’s continued sales of Max Racks in violation of the licensing agreement, and Max Rack already received full compensation for those sales. No reasonable jury, by contrast, could have found that Core Health’s few extraneous references to the Max Rack mark in its Freedom Rack advertisements were intentional (rather than accidental).” So the court didn’t decide whether this rule applied either.

Attorneys’ fee award: Also an abuse of discretion because the discovery misconduct didn’t meet the standard for exceptionality under the totality of the circumstances, where “nothing about this case looks unusual.” Max Rack did not have a “noticeably stronger” “litigating position” given Core’s payment of a lot of profits/royalties before trial. Its two infringement theories after those were removed were both “thin” on evidence: “close to the hazy border dividing what a jury can (and cannot) reasonably find.” Likewise, Core didn’t litigate in an unreasonable manner; its discovery failure mostly harmed itself. And Max Rack distorted the litigation with repeated inappropriate references to the addendum. “In short, if this case warranted attorney’s fees, we fail to see what case would not.”

The district court “relied on precedent that it read as creating a bright-line rule permitting fees if a defendant’s intentional infringement continued after the plaintiff sued.” But this was error given Octane Fitness, and, again, the intentional infringement finding “reasonably rested on Core Health’s unauthorized sales of Max Racks,” which “ended well before the trial.”

A dissent would have affirmed the district court in full because it’s theoretically possible that the jury would have revised its estimate of costs downwards with other evidence and because Core should have removed all references to Max Rack earlier.

Trademark injury, irreparable harm, and statutory standing: what is going on?

Trial Lawyers College v. Gerry Spence Trial Lawyers College at Thunderhead Ranch, 23 F.4th 1262 (10th Cir. 2022)

Mostly a TM case, with some interesting stuff going on. There are either two dueling boards or two separate entities at issue; the district court granted a preliminary injunction to some board members against co-members. The court of appeals held, among other things, that the district court was within its discretion to find irreparable injury and to enjoin certain representations, but abused its discretion as to ordering removal of certain sculptures (incorporating the claimed mark) from the contested facility where co-members conducted lawyer-training programs.

The Trial Lawyers College trains trial lawyers; its board splintered into two factions, known as the “Spence Group” and the “Sloan Group.” The Sloan Group is the plaintiff, alleging trademark infringement and related claims.

At the time of decision, pre-TMA, there was no presumption of irreparable injury. But the district court properly found a significant risk of harm that couldn’t “be compensated after the fact.” The logic of the presumption of injury reflects the difficulties of showing irreparable harm in trademark infringement cases; the district court could reasonably find irreparable harm from the Sloan Group’s evidence of efforts to “differentiate the College from competitors,” including “registration of trademarks, investment in branded merchandise, and restrictions on use of the College’s name when alumni give presentations,” plus evidence of likely confusion from the Spence Group’s ads referring to its own program as the “Trial Lawyers College,” displaying the College’s trademarks, sending mass emails to the “GerrySpenceTrialLawyersCollege@Thunderhead Ranch” listserv, identifying members of the Spence Group as the “Directors” of the College, and using a misleading signature that incorporates the College’s name.

This was enough to find a risk to the College’s reputation and goodwill. Though this harm could at least partially come from “the loss of valuable board members and the suspension of in-person programming because of a global pandemic,” that just made it difficult for the Sloan Group to quantify its harm, which is consistent with a finding of irreparable injury. Likewise, while a 10% drop in donations was quantifiable in money, it could also serve as evidence of irreparable harm—that “the Spence Group’s confusing statements and advertisements have undermined the distinctiveness of the College’s trademarks.” Likewise, although inquiries from alumni weren’t necessarily evidence of actual confusion, they could show likely confusion and support an irreparable harm finding.

However, the district court “went too far by requiring the Spence Group to remove two sculptures. The sculptures appeared at a ranch, owned by a member of the Spence Group, which the College had previously used for programs. The sculptures included a logo registered as (1) the cattle brand for the ranch and (2) the trademark of the College.” This was a mandatory injunction and not justified by the situation, given that training programs at the ranch were already suspended due to the pandemic; a prohibitory injunction “disallowing training programs at the ranch as long as the sculptures remained visible to attendees” would have been ok.

The district court also enjoined the Spence Group from purporting “definitively to be [the College]’s true Board unless and until such time as the state court makes a ruling to that effect” and using “linguistic plays on words or various terms associated with The Trial Lawyers College to create or cause confusion as to whether [the Spence Group] [is] acting as The Trial Lawyers College.”

This didn’t go beyond the Lanham Act’s scope, since it imposed “restrictions to prevent confusion over the entity owning the trademarks.”

One subsequent ruling: 

Trial Lawyers College v. Gerry Spence’s Trial Lawyers College at Thunderhead Ranch, 2022 WL 2718075, No. 1:20-cv-80-JMC (D. Wyo. Mar. 29, 2022)

Dealing with some counterclaims, notable for assumptions made about harm in the context of statutory standing that at least are in tension with claims in the irreparable harm context like those in the court of appeals opinion.

Two individual defendants, including Spence, counterclaimed against plaintiff and its board members. The counterclaims allege among other things that the counterclaim defendants tried to benefit from Defendant Spence’s name and likeness to promote “their ‘version’ of TLC,” including by using videos of him on a Facebook page seeking donations. They also allegedly solicited monetary donations purporting to preserve Spence’s “dream” and made false statements about his wishes, e.g., “Would Gerry Spence have let this happen?” [I note that strong evidence suggests that the answer is “yes.”] They alleged violations of the Lanham Act (false endorsement and false advertising) and misappropriation of name/likeness under state law.

After getting rid of individual counterclaim defendants on personal jurisdiction grounds, the court rejected the Lanham Act counterclaims on standing grounds.

Article III injury must be (1) a concrete and particularized injury-in-fact that is (2) fairly traceable to the challenged action and (3) likely to be redressed by a favorable decision. The false association/false advertising claims based on Spence’s name sufficiently alleged Article III injury for standing purposes by alleging the existence of confusion and reputational harm, even without further facts alleged “explaining how his reputation has suffered or detailing expenses they have supposedly incurred to dispel any myths.” This also sufficed to put the counterclaimants within the Lanham Act’s zone of interest.

Was this commercial speech? This is a mischaracterization—the real question is, was this “commercial advertising or promotion”? The court (understandably considering itself bound by bad Tenth Circuit precedent) confused the analysis by using the outdated-after-Lexmark version of the test that asks whether the parties were in commercial competition with each other, but that didn’t end up mattering either, since they plausibly were, given that “Defendants’ use of Plaintiff’s Mark for a different entity after all sparked this entire civil action.”

Arguments applicable to all Lanham Act claims: (1) Does the Lanham Act protect all uses of Spence’s name? Even without a registration, Spence’s name is protectable if it serves as a source identifier, which it plausibly does, given his alleged reputation for trial lawyer services.  ETW v. Jireh is not to the contrary—it didn’t refuse to protect Tiger Woods’ name. Also, that situation, where Woods asserted rights against a painter who depicted one of his victories, was “very much unlike the business dispute we have here, where two groups are essentially fighting over control of a business. Defendant Spence seemingly has more interest in protecting his name from competitors who offer the same type of services (lawyering skills) than a random artist who painted a portrait of him in the courtroom.” [An example of the practical merger of protectability and scope: this is part of the analysis that concludes that Spence alleged a protectable interest.]

Likely confusion: The court identified four sources of alleged confusion: (1) Plaintiff posted videos of Spence on its Facebook page; (2) it advertised with the cattle brand and falsely claimed a continued connection to Thunderhead Ranch; (3) its executive director listed her employer as “Gerry Spence Trial Lawyer’s College”; and (4) that it sent fundraising emails seeking monetary donations, expressing a desire to “preserv[e] Gerry Spence’s dream” and stating, “Would Gerry Spence have let this happen?”

Plaintiff argued that its uses weren’t false or misleading because of Spence’s long-time association with Plaintiff. “The Court agrees that Plaintiff’s continued use of the videos on Facebook neither misleads nor likely confuses consumers.” Spence founded Plaintiff and taught trial skills for Plaintiff, and the videos were created during that relationship. “No facts alleged show that Plaintiff’s use of Defendant Spence’s image in that context misleads or confuses the public or is likely to do so. Instead, the facts alleged show that the video identifies Defendant Spence’s actual association with Plaintiff as a past instructor.”

The other uses didn’t suffice because “Defendants have nowhere alleged how Defendant Spence, or his new trial university, has suffered from Plaintiff’s use of his name based on his past affiliation with Plaintiff.” Without such injury, there was no statutory standing (the court mistakenly characterizes this as part of the zone of interests inquiry, not the separate proximate cause inquiry). The counterclaimants didn’t allege facts showing that they suffered injury. Merely conclusorily alleging “actual damages and irreparable harm and damages” to “reputation” or expenses incurred to “dispel the myths [Plaintiff has] dispersed” were insufficient. “At bottom, Defendants plead such vague allegations regarding damages that we cannot infer a cause of action under the Lanham Act from their complaint.” Serious question: how does this standing reasoning match up with the presumption of irreparable harm from likely confusion under the TMA?

Likewise, the state-law claims for appropriation of name or likeness failed for want of sufficient allegations of injury. “The Restatement and other states who have recognized this tort … require the plaintiff prove damages he or she has suffered to state a claim upon which relief can be granted.”

Wednesday, July 13, 2022

IP on vacation in Vancouver

 As is my hobby, I took some pictures of IP-relevant things. I still haven't personally encountered cannabis products imitating national brands, though.

Mining museum emphasizing US patents acquired, which is an interesting datapoint about the influence of US patents extraterritorially.

Is this Karuna can too close to Coca-Cola?
Love this "no name" branding (registered trademark)!
This all-red chocolate shoe probably doesn't fall within the scope of Louboutin's rights, though I don't know the situation in Canada.
LV-esque chocolate handbag.
The next images are from UBC's anthropology museum: Linda Vallejo, Brown Belongings (series). Artist's statement in English: "Brown Belongings represents ten years of concentrated work on visualizing what it means to be a person of color in the United States. These works reflect what I call my 'brown intellectual property'--the experiences, knowledge, and feelings I have gathered over more than four decades of study in Chicano/a and American Indigenous communities." Behind the Coke bottle, a quote from the artist with her name in Coca-Cola font.
Ester Hernandez, Sun Raid (2008). Artist's statement in English: "In 2008, I created a new version of Sun Mad, entitled Sun Raid, which talks about the new face of farm workers who are now mostly indigenous peoples from Oaxaca. Although these migrant workers are very much needed to harvest our crops, they are totally disrespected and have become scapegoats for our failed economic policies. Many have become targets for Immigration and Customs Enforcement agents' raids and deportation. We have globalized money, trade, and commerce, but we haven't globalized fairness toward work and labor."


Wednesday, July 06, 2022

Juul RICO and consumer protection classes certified despite different "nicotine journeys" among users

In Re Juul Labs, Inc., Marketing Sales Practices & Prods. Liab. Litig., Case No. 19-md-02913-WHO, 2022 WL 2343268 (N.D. Cal. Jun. 28, 2022)

A lot going on here, including a certification of a RICO class, believe it or not. I don't even have a RICO tag! I am skipping a lot of the elements.

Plaintiffs moved to certify four classes of purchasers of JUUL products on “theories that defendants’ marketing of JUUL was unlawfully deceptive, JUUL was unlawfully marketed to youth, and JUUL products are not fit for ordinary use.” The court rejected defendants’ arguments that the putative classes were too heterogenous for certification:

Some of the identified differences – for example, differences in advertisements that the named plaintiffs or class members may have seen over time or differences in the amount of JUUL product purchased – are simply not material. Given the legal standards applied to plaintiffs’ claims, other identified differences – what an advertisement meant or portrayed to a specific named plaintiff or class member – are not material for purposes of class certification. Still more purported differences hinge on classic “battles of the experts” that must be resolved by the trier of fact. For example, will the trier of fact believe plaintiffs’ experts that JLI’s marketing campaigns conveyed a Unique Selling Proposition (“USP”) that made JLI’s alleged failures to disclose material? Or will the trier of fact believe JLI’s experts that no such USP can be inferred from JLI’s marketing, especially given changes in JLI’s marketing materials over the whole class period? At base, defendants’ attacks on plaintiffs’ experts present common questions that cannot be resolved at this juncture and do not preclude certification.

The four classes were (1) a nationwide purchaser class (RICO); (2) a nationwide youth class (RICO); a California purchaser class (UCL, CLRA, FAL, common law fraud, unjust enrichment, implied warranty of merchantability, Magnuson-Moss Warranty Act); and a California youth class (UCL and unjust enrichment). All were limited to individuals who purchased JUUL products from brick and mortar or online retailers (with the usual exclusions for those involved in the litigation).

Skipping factors about which little need be said, defendants argued that the class representatives weren’t typical because they varied in dates of first use, what they knew about JUUL prior to first use/purchase, their experience with cigarettes/other nicotine products, when they became aware of JUUL’s potential addictiveness, and how they were affected by that (what defendants call their “nicotine journey”). But the key was “whether specific differences identified by defendants are material to the claims at issue and the legal theories underpinning each of the four classes plaintiffs seek to certify.”

Defendants didn’t identify unique injuries or unique defenses for the named plaintiffs sufficient to make them atypical. Apparently, one named plaintiff for the putative youth class didn’t know that JUUL even contained nicotine; “[h]is lack of knowledge that JUUL contained nicotine and his lack of prior history of smoking are fairly common among the Youth class members, as defendants’ own chart acknowledges.” Another never attempted to purchase online, so he never encountered “the allegedly deficient age-verification system that forms part of the youth marketing claims,” and was prevented from buying other products by the same system “when he fraudulently attempted to use someone else’s identification.” “But the illegality of the youth purchases is a common issue among the youth class and is not unique to any particular Youth class member.” Whether this subjected him and another named plaintiff to an unclean hands defense was a common issue and would be evaluated later.

Predominance: Different nicotine journeys could form the basis for a factfinder’s rejection of the claims, perhaps, but experts could battle about the key questions: “whether JLI’s marketing presented a consistent USP, whether reasonable consumers would find misrepresented or omitted information material, whether the reach of those marketing materials was sufficient to support a presumption of reliance, whether JLI’s marketing was ‘youth-oriented’, and how much of the youth-driven consumption can be linked to JLI’s own conduct.”

The fraud-based advertising claims centered on defendants allegedly having conveyed that JUUL products were less addictive than cigarettes and omitting material information that would have informed consumers about the truth. Plaintiffs alleged, with support from their experts, that varying images and words “conveyed consistent messages about JUUL products that would be likely to deceive reasonable consumers in similar ways.” As to package labeling, the claims centered on an allegedly consistent false/misleading comparison of a JUUL pod to one pack of cigarettes and statements that JUUL is an “alternative for adult smokers.” Omission-based claims centered on defendant JLI’s failure, before mid-2018, to state that nicotine was addictive; “failure to disclose that JUUL products used a unique formulation and design that was highly effective at creating and maintaining addiction”; and failure to disclose that use of the products poses a significant risk of injury and disease.

All these claims predominated over individual issues. Among other things, as to the RICO claims, reliance is not required in racketeering fraud cases. Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008).

Defendants tried to argue that the products’ addictiveness meant that consumers were acting in irrational ways that weren’t subject to class action treatment. But “[s]imply because a product is addictive does not obviously alter the analysis for the legal claims at issue. The arguments JLI actually makes – different people had different reasons for using JUUL and different understandings of whether nicotine was in the product or whether nicotine was addictive or otherwise dangerous – would apply to most types of consumer products cases that are certified.” Also, “even addicted consumers had other product options … that reasonable consumers could have preferred if JLI had disclosed the alleged health risks and high degree of addictiveness and potent nicotine delivery from using JUUL products.”

Plaintiffs’ damages models using conjoint analysis also met the requirements of Comcast: they fit plaintiffs’ theories of recovery. So did a full refund model for the youth purchaser classes. Though a number of cases have rejected a full refund model, none dealt with “underage or otherwise allegedly inherently unfair or illegal sales.” “Plaintiffs’ theory is that because it was illegal or inherently unfair to market and sell the JUUL product to youth, youth purchasers received no value from it at all.” Defendants argued that at least some of those sales weren’t its fault, but defendants could test causation at a later stage for youth RICO claims, and the UCL made intervening causes irrelevant to the restitution model. Relatedly, plaintiffs provided evidence that JLI intended “to create a viral uptake in the use of its product through its marketing of youthful and healthy themes,” so even if class members got the product from other people who had themselves relied on the marketing, that would still qualify as a predominant question. Under the circumstances, plaintiffs had sufficient evidence of proximate causation of their overpayment for JUUL as a result of viral advertising campaigns:

[E]ven if some significant portion of the class did not see or rely on JLI marketing materials before their first purchase – a question debated by the parties and their experts – the particular allegations in this case may nonetheless fit within the recognized third-party proximate causation line of cases.

In another sign of the power of RICO, defendant Altria’s argument that it wasn’t involved for a big chunk of the class period, so the damages model didn’t fit it, failed because “all defendants who participated in the RICO enterprise are liable for the entire injury caused by the enterprise’s illegal conduct, regardless of whether they personally participated in every aspect of the conspiracy.”

Similar reasoning applied to the UCL/FAL/CLRA claims. Here the dispute centered on whether every class member was exposed to the allegedly misleading marketing. “As recognized in In re Tobacco II, and reiterated by numerous Ninth Circuit opinions that followed, as long as named plaintiffs are able to demonstrate reliance on JLI’s marketing that caused them injury, a presumption of reliance arises to on behalf of all class members.” In the case of misrepresentations, that “conclusive presumption” of reliance arises only where “the defendant so pervasively disseminated material misrepresentations that all plaintiffs must have been exposed to them,” while for an omission, “a plaintiff must show that the defendant’s nondisclosure was an immediate cause of the plaintiff’s injury-producing conduct,” though it need not be the sole or even predominant cause if it was a substantial factor in the plaintiff’s decision. “That one would have behaved differently can be presumed, or at least inferred, when the omission is material.”

Variations in different marketing campaigns and channels (social media versus traditional media) did not defeat predominance. There was (contested) evidence that “a main purpose of corporate use of social media to introduce and market a product is to spur third-party content to create the viral response JUUL allegedly achieved,” so whether third-party content had to be distinguished from JUUL and its influencers’ content was an issue for the factfinder.

Defendants also argued that the ad campaign wasn’t decades long, as in In re Tobacco II Cases.

But the appropriateness of applying the “presumption of reliance” does not depend on the length of marketing campaigns containing or furthering the impact of a misrepresentation as much as on the campaigns’ “reach.” Here, there is classwide proof showing the “message” or USP of JUUL was received by a significant portion of the class members – Californians who purchased JUUL products from brick and mortar or online retailers – that supports the presumption.

Plaintiffs offered expert testimony that “all of JLI’s campaigns convey a similar message or USP (of a tech lifestyle and product that satisfies, that is free of health and safety risks), despite variations in words, themes, or target audiences.” Defendants’ attacks on those experts generally went to weight rather than admissibility. “That the ‘look’ of particular advertisements varied, that different text was used, or that different channels delivered the messages, does not necessarily undermine plaintiffs’ experts’ opinions that the themes and USP were consistent across the relevant time periods.”

Defendants were also free to argue to the factfinder that “the start of investigations by the government and media of the health and safety of e-cigarettes at some undefined point during the class period,” and that JLI’s introduction of a “black box warning” about nicotine in mid-2018 made a difference to what a reasonable consumer would have thought about its representations or omissions.

The court also noted that the fact that “a consumer may consider many factors in determining whether to purchase a product does not mean that misrepresented or omitted information cannot be material.” Materiality does not require sole causation.

What about the label, with its pod versus pack comparison? The presumption of reliance also applied to that (subject to proof of materiality), even if the label statements were “discrete [discreet?] and not prominent on the packaging.” Likewise, the court rejected defendants’ argument that online purchasers wouldn’t have seen the label. “Given the context and record in this case – especially considering that class members were typically repeat purchasers of a product whose sole purpose is the delivery of nicotine – that some online purchasers may not have viewed the package prior to one or more purchases is not significant at this juncture (although possibly relevant to damages or restitution).” This was not a large item or one-time purchase case involving information provided only post-purchase.

Moreover, even if some buyers knew that JUUL had nicotine and others didn’t, that didn’t affect the materiality of the claims that plaintiffs alleged defendants made: “that JUUL products were portrayed as healthy but engineered and designed to make them more addictive and that use of those products created health hazards.” A factfinder could find that information material to nicotine-naïve consumers and cigarette smokers alike.

A nice statement: “There will always be differences between purchasers of consumer products. Unless those differences cause them to view the misrepresentations or react of the omitted information in a significantly different matter, those distinctions do not undermine the disputed but sufficient showing by plaintiffs of a presumption of classwide materiality.”

JLI argued that all equitable claims, including the youth class in its entirety, failed under Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir. 2020), because class members have complete theoretical legal relief under the CLRA or RICO claims. But plaintiffs alleged inadequate remedies at law. JLI argued that plaintiffs’ damages expert’s conjoint analysis showed that the equitable relief of restitution was duplicative of the damages sought in the California purchaser class, requiring dismissal. But this was a common issue, not a reason to deny class certification, and whether plaintiffs’ equitable claims fully overlapped their damages claims concerning each set of defendants couldn’t be resolved at this juncture, “especially because each set of defendants repeatedly argues that they are differently situated with respect to the timeframe of their conduct and the types or amount of damages/restitution potentially available to the classes under the various claims.”

Standing/uninjured consumers: TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), says that plaintiffs must demonstrate standing for each claim that they press and for each form of relief that they seek. Since many purported class members were addicted to nicotine, JLI argued, they got what they wanted and weren’t harmed. But “consumers had a range of e-cigarettes or other nicotine-delivery devices that were available,” and a factfinder could agree with plaintiffs’ expert evidence “showing that had JLI not misrepresented its product and omitted material information, consumers would have paid less for JUUL products or have chosen different nicotine-containing products.” Also, though defendants argued that consumers who bought JUUL to resell it could suffer no injury, consumer protection law’s overpayment injury happens at the time of sale, and RICO doesn’t recognize a pass-on defense.

Superiority: if there was an aggregate damages award, defendants could introduce evidence of sales to resellers and illegal purchases by youth class members to reduce it, if those were relevant defenses (not resolved here; itself a common issue). They could also use their own and retailers’ records to show that they sold at a discount to reduce the award. And they could contest any particular class member’s entitlement to participate in a claims process. (Although JLI pointed to studies that establish “frequent product misidentification of e-cigarettes” amongst consumers, there was no evidence that JUUL products – “that to this point neither side has disputed have a very unique and obvious design” – were included in that confusion.)

If JLI timely decided to raise an arbitration agreement defense, that could also be dealt with by altering the class definition.

The court also rejected a bunch of Daubert challenges. I was particularly interested in the treatment of the opinions of Dr. Sherry Emery (U Chicago), who currently studies the impact of media marketing on the sales of e-cigarettes for the CDC. She opined on the youth-focused marketing of JUUL, and JLI criticized her for, among other things, not distinguishing between JUUL’s own content and third-party social media not under JLI’s control. “But the thrust of her opinions is that JLI’s own, intentional youth-focused-marketing and its own use of social media to push out those campaigns were intended to and did ‘seed’ significant third-party content.” Her analysis of sales data and user interaction/response to various phases of JLI’s-own campaigns did not amount to an attempt to hold JLI liable for another’s content. “It is instead showing why JLI’s own actions and content intended and caused the subsequent content.” Though this was contestable, it was not the same as holding JLI responsible for third-party content on a ratification theory, which the court rejected.

There was also a lot on damages expert Hal Singer and his conjoint analysis, which studied possible versions of JUUL with different disclosures about addictiveness and safety. Among the criticisms that went to weight rather than admissibility were defendants’ critiques that it was wrong to conduct a conjoint survey in 2021 when the relevant conduct was up to seven years prior—the court pointed out that there’s really no alternative—and that the survey failed to define “addiction” or what it meant for products to be “twice as” or “half as” addictive as a pack of cigarettes for respondents.

There were also disputes about how Singer should have handled the very real phenomenon of respondents who were willing to pay more for a product that was “twice as addictive” as cigarettes. This wasn’t a trivial number: 40% in one survey and 18% in another. But since conjoint analysis is designed to identify what the marginal consumer would have paid, Singer’s treatment was acceptable (but of course subject to cross-examination).