Friday, September 30, 2022

Suffolk University Law School IP Center, Fourth Annual Intellectual Property & Innovation Conference

Panel: Design Patents, moderated by Sarah Burstein, Suffolk University Law School, panelists include:

Meredith Lowry, Partner, Wright Lindsey Jennings

John Maltbie, Director of Intellectual Property, Civil Enforcement, Louis Vuitton Americas

Darrell Motley, Shareholder, Banner Witcoff; Adjunct Professor of Law & Supervising Attorney for IP Clinic – Patents, Howard University School of Law

Burstein: What role do design patents play in LV’s strategy?

Maltbie: Looking predominantly through TM, anticounterfeiting as bread and butter. Design patents play a role when we have them, typically a handbag/jewelry/diamond cuts/chain designs/shoes. Always nice to throw in but not a mainstay of protection program. Issue: legal is often the last to know of new designs, so you need to know before the design is launched: need to explain that legal needs to be part of the process. Seems like a lower bar for entry for design patent than TM protection. Growing area for us; not core but nice to have.

Lowry: For many people/products, the first few years are the only years that matter, and design patents are a tool for that. [Burstein notes that you can pay a fee for faster prosecution, 4-6 months, even 60 days is possible.]

Motley: Useful when utility patent protection isn’t available. [Burstein: even when you don’t pay, design patents issue faster than utility patents. There is a lot of demand right now that is slowing design examination.] Apple v Samsung changed perceptions. [Apparently Shark Tank also talks about design patents.]

Burstein: what changes have you seen?

Lowry: people are now more likely to be aware of design patents when they come in. More partial designs. Interest in having more assets to tout to investors/venture capitalists.

Burstein: in the past, small inventors were sometimes diverted to design patents by skeevy methods (even though the design patent may have been broader in some ways than the utility patent); this may have contributed to the disrepute/neglect of the design patent regime.

Maltbie: they used to have a bad rap but that is changing/changed.

Q: important issues now?

Maltbie: Article of manufacture definitions, as Burstein has written about. Is the text that defines the article or is it the drawing? What you call it makes a difference—and can make a difference to anticipation as well. But manipulation of the description is then a risk.

Virtual designs: how do you get potential IP protection on the design patent side for designs that don’t exist in physical space? Can you enforce physical design patents against someone in the virtual space?

Lowry: you can file hundreds of embodiments and the PTO will say one design. You either dedicate all of those other embodiments to the public or you file another application claiming priority to the first. Pending design patents are not published. If that happens there’s no real way of knowing about submarine design patents. You get the first through and 99 more are pending. Any later designs aren’t based off the first dates—they’re 15 years from issuance, not filing. So in theory there are certain product packaging manufacturers that are essentially doling those out when they see their competitors starting to use a slightly similar design & they can push one specific design through quickly while the others continue pending. Potential for continuing for 50 years! She doesn’t have a good proposal for fixing this, but it’s open. [Why not shifting to application date as with utility patents?]

Burstein: would publishing design applications after 18 months like utility patents help?

Lowry: wouldn’t help with the child applications. Instead, would propose that child applications should be disclosed with issued patents so people can understand there’s still a risk.

Burstein: there are still children pending from the iPhone application filed in 2007.

Maltbie: would like to see more on enforcement: how close does it have to be? Attorneys in practice often like a multifactor test, whereas design patents seem more black & white. Consider My Other Bag: did design patent cover a 2D image of a 3D bag printed on a tote bag? Ultimately decided not to litigate that, thought (apparently wrongly) that the TM claims were strong enough.

Lowry: lack of an ornamentality threshold is a problem. You see things that aren’t designs but, e.g., slabs of granite.

Maltbie: with fashion designs it’s possible to miss your window—you can get a TM registration and have no one to enforce it against by the time it issues. One strategy we’ve seen: use design patent period to build secondary meaning, as happened with Coca-Cola bottle.

Presentation: High Hopes: Cannabis Trademarks at the USPTO, Rachael Dickson, Visiting Assistant Professor, Intellectual Property and Entrepreneurship Clinic, Suffolk University Law School

State-legal marijuana is widespread, but TM act requires lawful use in federal commerce. PTO policy: if record indicates that goods/services violate federal law, registration is refused. If currently unlawful, ITU will be refused where actual lawful use isn’t possible at the time of filing; applicant can’t have bona fide intent to lawfully use the mark. Refusals can’t be overcome if goods contain marijuana or intended for use with marijuana. After 2018 farm bill defining hemp as distinct from marijuana: Appropriate identification w/correct wording can allow hemp goods, but FDCA refusal may still apply even if Controlled Substances Act doesn’t apply b/c hemp can’t be turned to CBD for ingestible/medicinal/therapeutic use—but huge spike in CBD-related applications occurred as a result of 2018 change. False statements to PTO do occur and are bad ideas.

CSA doesn’t apply to clothing/ornamental matter, slogans, information about controlled substances even if it seems to encourage use of marijuana, marks for clearly legal goods (e.g. smoking cessation, drug testing), and marks that include “weed” or other references but don’t actually contain cannabis and say so in the ID.

PTO is checking specimens more closely, so even if you have magic words in your ID, if your specimen clearly shows therapeutic etc. use, it can be rejected. Generally approves fabric goods infused with CBD if they don’t claim medicinal/therapeutic benefits. W/r/t non-cannabis derived CBD, other cannabinoids, other drugs, the practice is sometimes inconsistent/evolving but also generally refused.

What’s next? After Farm Bill, applicants were allowed to amend to filing date as of first legal date for hemp sales and amending ID to meet the legal requirements. PTO is likely to move slowly and conservatively post-federal legalization; FDCA refusals still likely for many products unless marijuana is completely descheduled.

RT: Interested in reaction to Robert Mikos’s recent paper which would seem to attack the statutory authority for many of these rejections.

A: Generally agree with it but getting the PTO to agree is a very different matter.

Monday, September 26, 2022

standard setting bodies don't proximately cause Lanham Act injury when states adopt their recommendations

Geomatrix, LLC v. NSF Int’l, 2022 WL 4369950, No. 20-13331 (E.D. Mich. Sept. 21, 2022)

Geomatrix sued defendants for Sherman Act violations and false advertising in the market for onsite wastewater treatment systems, aka septic systems. The antitrust claims failed because they were antitrust claims/because of Noerr-Pennington (First Amendment protection for petitioning government trumps antitrust laws); the false advertising claims also failed.

Two competitors are defendants, as well as NSF, a nonprofit accredited by ANSI that “certifies many of the onsite wastewater products brought into commerce.” Both NSF employees and employees of product manufacturers sit on the relevant committee, and one defendant’s employee served as chair of a subcommittee charged with the development of a new standard for high-strength wastewater, and allegedly essentially ran the Wastewater Technology standard-setting process on behalf of NSF between 2010 and 2020.

According to the complaint, increasing environmental regulations and other constraints have led for demand for more advanced technologies to ensure sewage is thoroughly treated before it reenters the water table. There are two main options: an “aerobic treatment unit” known as an “ATU,” or “Contained System,” which “works more like a mini-municipal wastewater treatment plant, cleaning the water within a controlled environment before its release.” The majority of plaintiff’s competitors allegedly produce contained systems. The second option is “Treatment and Dispersal”/“Open Bottom” systems, which operate much more like a traditional septic system, but use more advanced dispersal devices which allow in oxygen (thereby increasing the growth of microorganisms) and provide additional filtration as effluent leaches back into the ground. Geomatrix largely produces treatment and dispersal systems, which are allegedly both cheaper to install and operate than contained systems. But competitors have allegedly used misinformation to limit their uptake.

Each manufacturer pays NSF annually to renew the “listing” for each wastewater products it has certified under its standards. So, Plaintiff theorizes that NSF participated in the conspiracy to protect its own revenue since the majority of the products it certified are contained systems.

The advertising-related allegations involved disparaging a Geomatrix product that was already certified; adopting the disparaging term “uncontained” system to refer to its products; and otherwise disparaging the safety and efficacy of treatment and dispersal. Geomatrix was allegedly “unable to receive approvals in most states” for its product in states that had adopted statutes and regulations “requiring NSF Standard 40 certification” for onsite wastewater systems, and was under threat of being excluded from the new standard for high-strength wastewater.

Lanham Act claims: Geomatrix alleged that NFS misrepresented its own services, e.g., marketing that “NSF provides a fair and open process for standards-setting;” falsely informing Geomatrix “that it abides by the Standards Development Process and Antitrust Guide;” “publishing an issue paper stating that Treatment and Dispersal Systems did not fit under NSF/ANSI Standard 40;” “[m]aking public statements that require NSF Standard 441 to incorporate all technologies and subsequently placing blame for the delay in the standard-setting process on Geomatrix.” Other defendants allegedly used their roles in the standard setting process “to disparage and preclude Geomatrix products from the market.”

Both types of claims flunked Lexmark’s proximate cause requirement, and the court commented that the claim against NSF also didn’t fall within the Lanham Act’s zone of interest; NSF was essentially a supplier of services and Geomatrix most analogous to a customer, who lacks Lanham Act standing. “Put simply, ‘it is impossible to trace a straight line’ from Defendants’ alleged conspiracy to disparage GeoMat by questioning their effectiveness and environmental impact (the illegal conduct) to Plaintiff’s inability to sell its GeoMat products in various states (the injury).” The actual cause of Geomatrix’s inability to sell its GeoMat products in an unspecified number of states was the “independent decision of each state’s environmental regulators not to approve the products for sale.”

State law claims failed for similar reasons, including Noerr-Pennington.


"Zestimates" are nonactionable opinion, but state law might govern alleged listing agent misrepresentation

Demetres v. Zillow, Inc., 2022 WL 4367597, No. 3:21cv00802 (JBA) (D. Conn. Sept. 21, 2022)

Demetres, a real estate salesperson/broker, alleged that Zillow violated the Lanham Act, the Sherman Act, and the Connecticut Unfair Trade Practices Act, and engaged in tortious interference with contractual relationships. The court dismissed some of the claims.

Demetres challenged Zillow’s use of Advertising Agents (real estate agents) and “Zestimates.” Zillow’s customers are real estate agents, and they allegedly pay Zillow “so they can be associated with properties [with] which they do not have a listing relationship ....” and “directly solicit [ ] prospective homebuyers [ ]via other agents’ exclusive listings.” This practice allegedly harms the listing agent and reroutes prospective homebuyers so they can’t reach the actual listing agents for properties that interest them. Agents found on Zillow allegedly have “a greater incentive to steer the buyer to a property other than the property that caused them to initiate the process in the first place.” And this allegedly increases the number of dual agency situations “without the careful disclosures normally required.”

As for Zestimates, these are Zillow’s “own, self-devised, internally-standardized opinion of the value of the particular property.” Zestimates allegedly competes for a “listing price that is developed through proper industry appraisal standards; and also through the listing agent’s actual, personal, intimate knowledge of the property in question and the neighborhood where it is situated.” Demetres alleged broken agreements with property sellers and buyers as a result of Zestimates.

Falsity: First, Zestimates weren’t plausibly alleged to be literally or impliedly false. The complaint didn’t identify specific advertising statements that would plausibly misrepresent what the Zestimates were, “or even a particular home estimate produced by the Zestimate tool that allegedly conflicts with the real market value.” The facts alleged didn’t establish falsifiability—only Zillow’s “opinion of the value of properties.” Demetres argued that consumers viewed a Zestimate as a factual statement of the home’s value due to Zillow’s popularity and influence in the housing market. But Demetres didn’t allege that the Zestimates were an incorrect estimate of the property’s value— “only that it was different from her own appraisal as the listing agent.”

However, Demetres did plausibly allege that using Advertising Agents on its site created a false impression that the agents who pay Zillow for access were the listing agents for a given property, misrepresenting Zillow’s relationship with listing agents and the Advertising Agents alike. “For example, when a consumer views a particular property it may be offered what appears to be a URL link to reach the listing agent, but when it is clicked on the consumer is again sent straight to a screen asking it to provide lead information to an Advertising Agent.” In short, “displaying an option for a customer to contact a listing agent, which does not in fact allow the customer to contact the listing agent, is a falsity actionable under the Lanham Act.”

But was that material? In the Second Circuit, that’s a question of whether it’s a misrepresentation of an “inherent quality or characteristic,” but it’s really just materiality.

The court thought that this wasn’t material, but conflated false advertising and false association (which was plausibly alleged). Zillow arguably presents itself as a resource to consumers when in fact, it is an advertising platform for agents, but that’s true of almost all websites. Dismissed. (This seems like a fixable problem with an amended complaint if it’s essentially bait and switch: consumers want help with that particular listing and don’t get it/get someone who may charge them more.)

Sherman Act: failed because it’s an antitrust claim (deficient market definition/conspiracy allegations/monopoly power allegations).

CUTPA: Covers both deceptiveness and unfairness. Unfairness under CUTPA requires consideration of

(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to consumers, [competitors or other businesspersons].

Can Zestimates be unfair if they are opinions? The court thought the answer was no. But the ad relationships with agents plausibly violated CUTPA by creating a false impression that they were the listing agents for a given property. And plaintiff alleged an ascertainable loss thereby.

Tortious interference was also plausibly alleged; “Plaintiff was not required to include proof at the motion to dismiss stage that actual contracts exist.”

disparagement of a non-market participant doesn't provide Lanham Act standing v. National Ass’n of Bds. of Pharm., No. 19-CV-7577 (KMK), 2022 WL 4368036 (S.D.N.Y. Sept. 20, 2022)

Plaintiff PCC sued NABP, a nonprofit whose membership consists of state/similar political unit boards of pharmacy (some other pharmacy associations/partnerships are also separate defendants), alleging violations of the Sherman Act and false advertising under the Lanham Act. NABP counterclaimed for violations of the Lanham Act and NY/DC false advertising laws. The court granted a motion to dismiss the counterclaims.

PCC “operates a website that is purportedly designed to allow U.S. consumers to search for and purchase drugs from PCC’s ‘accredited’ foreign pharmacies, which PCC claims are more affordable than drugs purchased from U.S. pharmacies.” NABP alleged that “PCC is engaged in the business of misleading consumers about the safety, legality, and pricing of unlawfully imported drugs from foreign ‘pharmacy’ affiliates that are subject to PCC’s ‘verification program’ ” and that “PCC directly and indirectly profits from misleading consumers and facilitating consumer purchases of these drugs from PCC’s affiliate suppliers.” Along with misleading consumers about the safety and legality of imported drugs, PCC allegedly disparaged NABP.

PCC repeatedly claimed that while the FDA has not legalized personal importation of foreign drugs, no consumer has ever been prosecuted for personal importation. NABP alleged that these statements encouraged consumers to “break the law by purchasing foreign pharmaceuticals via PCC’s website and the links PCC provides to its affiliate[ ] foreign drug suppliers.” NABP also alleged that PCC misled consumers by obfuscating the fact that “[e]ven a brand-name drug sold under the same name in multiple jurisdictions may differ,” including because “the drugs may use different inactive ingredients, different release mechanisms, or be manufactured in different facilities.” [Pause to note that TM claims would be much easier if material differences are alleged, but that would likely have to be case by case. Also would require arguing that different inactive ingredients/release mechanisms/place of manufacture are material, which might be a stretch, though I can imagine allergens might make a difference.]

NABP also alleged that PCC “hides that the ‘pharmacy’ websites it links to are not pharmacies at all” but actually intermediaries that merely dispense prescriptions from unidentified, third-party pharmacies. Also, many of the “pharmacies” listed on PCC’s website and “verified” or “accredited” by PCC allegedly use a misleading name or logo to deceive consumers into believing that the “pharmacy” is Canadian or Canada-based, when in reality, the “pharmacy” dispenses drugs from a number of other countries, such as India, Mauritius, and Turkey. Likewise, PCC allegedly affirmatively represents that all of the “pharmacies” listed on PCC’s website are “safe, trustworthy, and operating in compliance with Canadian or other regulatory requirements,” when this is often not the case, and endorses similar misrepresentations made by these “pharmacies” themselves via PCC’s accreditation process in which PCC guarantees that the marketing claims made by these “pharmacies” are “truthful and not misleading.”

Further, despite promising consumers that it is helping consumers find the lowest price for their prescription drugs, PCC allegedly steers consumers away from cheaper, generic drugs dispensed by U.S. pharmacies and toward more expensive and illegal foreign drug importation.

Disparagement: NABP alleged that “PCC has, through its and blog sites, maliciously and specifically attacked NABP” in an effort to “falsely undermine NABP’s reputation” via claims such as that “NABP bears responsibility for the opioid crisis or that NABP is responsible for pharmacy errors.” NABP alleged that PCC used such “false claims to drive consumers away from safe domestic pharmacies and towards riskier foreign pharmacies that PCC ‘verifies.’ ”

All this allegedly harmed NABP by forcing it to “divert resources from its core mission as a non-profit to respond to false, misleading, and scurrilous attacks from PCC,” to “respond to claims from consumers who have been misled by PCC, some of whom have reached out directly to NABP,” and “to devote a significant amount of staff and contractor time—dozens of in-person hours—and other resources to determining whether PCC itself violated NABP policies—and possibly state or federal law relating to the sale and dispensing of prescription drugs.”  

Under Lexmark, NABP failed to allege a cognizable Lanham Act injury. Injury to NABP couldn’t be presumed because NABP specifically alleged that PCC and NABP are not competitors, nor did it allege that PCC made any statements directly comparing a specific service of PCC’s to a specific service of NABP’s. Fundamentally, NABP failed to allege that it was a market participant, “which fatally undermines any claim of injury proximately caused by PCC’s conduct.” “NABP does not allege that it markets a particular product or service or that it is a participant in the market for pharmacy accreditation or verification such that PCC could have plausibly caused NABP to suffer any ‘injury to a commercial interest in reputation or sales.’” As a result, NABP couldn’t allege that PCC’s “deception of consumers cause[d] them to withhold trade” from NABP, as required to allege injury under the Lanham Act.

The counterclaim allegations could potentially state a claim for injury on behalf of a “safe domestic pharmacy,” but not behalf of NABP, which is not itself a pharmacy. Even if it alleged that it received a cut of domestic pharmacy sales, that wouldn’t be required direct injury.

What about the disparagement campaign? “[A]n allegation of ‘reputational harm’ on its own is not sufficient to state a claim for injury under the Lanham Act; rather, ‘a plaintiff must allege an injury to a commercial interest in reputation or sales.’” There were no allegations that reputational injury caused consumers to “withhold trade” from NABP.

Alleged diversion of resources from its mission was relevant to Article III standing, but not Lanham Act standing.

NY GBL §§ 349 and 350:  Same problem. Under those laws, a plaintiff may not recover for an “indirect” or “derivative” injury; that is, “when the loss arises solely as a result of injuries sustained by another party.”  Its resource diversion allegations were “ultimately dependent on an alleged injury to consumers.” Also, as a non-market participant, “the only purpose of expending resources to counter PCC’s attacks on NABP’s integrity and credibility is to protect NABP’s reputation with consumers and other industry actors so that NABP can better protect consumers from harm in the future.”

D.C. Consumer Protection Procedures Act Claim: Covers only “consumer goods and services that are purchased or received in the District of Columbia.” NABP failed to allege a sufficient nexus between PCC’s alleged conduct and the District of Columbia. NABP is organized under the laws of Kentucky with its principal place of business in Illinois, and PCC is a limited liability company organized under the laws of New York and with its principal place of business in New York. It wasn’t enough that there were consumers in DC and also the board of pharmacy of DC was a NABP member. “NABP’s bare allegations that one of its member-organizations is located in the District of Columbia and that it has brought this Action on behalf of consumers who reside in the District of Columbia, who may have accessed PCC’s website, are textbook ‘naked assertions devoid of further factual enhancement.’” Thus, even though DC allows nonprofits to represent consumers, NABP didn’t sufficiently allege that a consumer within the District of Columbia actually “purchased or received” a good or service from PCC, as required by the law.

Friday, September 23, 2022

"white chips" plausibly misleading about chocolate content, Cal. court rules

Salazar v. Target Corp., 2022 WL 4298521, --- Cal.Rptr.3d ----, 2022 WL 4298521, No. E076001 (Ct. App. Sept. 19, 2022)

First of two white chocolate cases; unlike federal courts (and the court below), the court of appeals says that consumers were plausibly misled about whether Target’s White Baking Morsels contained white chocolate. The court of appeals found that a key fact was that the White Baking Morsels’ price tag describes them as “WHT CHOCO,” which could lead a reasonable consumer to reasonably believe that they contain white chocolate.


shelf, kind of unreadable

white baking morsels package

Salazar thought the White Baking Morsels contain white chocolate because (1) their label describes them as “white,” (2) their price tag says, ‘ “MP WHT CHOCO,’ ” (3) their label depicts the product, which look like white chocolate chips, and (4) the product is sold next to other chocolate products.

He brought the usual statutory claims. He also alleged that the results of a survey show that 88 percent of consumers are deceived by the White Baking Morsels’ advertising and incorrectly believe they contain white chocolate.

The court of appeals did reject his website allegations (that Target falsely advertises on its website that the “ ‘chocolate type’ ” of White Baking Morsels is “ ‘white chocolate,’ ” and places the product in the “ ‘Baking Chocolate & Cocoa’ ” category) because he didn’t see and therefore didn’t rely on the website.

By its plain terms, “WHT CHOCO” suggests precisely what Salazar alleges: that the White Baking Morsels contain white chocolate. At a minimum, a reasonable consumer could be confused about whether the morsels are made with white chocolate given the price tag’s description of the morsels as “WHT CHOCO” and the fact that the product’s label does not clearly state whether they contain white chocolate.

More significantly, “[e]ven without the price tag, a reasonable consumer could be misled by the White Baking Morsels’ label into believing that they contain white chocolate. A reasonable consumer might know there are white chocolate chips used for baking while not knowing that white-colored baking chips that do not contain white chocolate exist.”

Other cases relying on the dictionary definition of “white” were not persuasive; context can change meaning, so “white” “can sometimes describe the quality of the food, not just its color.” The packaging as a whole also contained “a picture of what appears to be a white-colored chocolate chip,” and Salazar also alleged that Target’s placement of the chips near other real-chocolate-containing chips was misleading.

Although there were no explicitly false representations about white chocolate, literally true statements “ ‘ “couched in such a manner that [are] likely to mislead or deceive the consumer ... [are] actionable.” ’ ” Indeed, “[d]eceptive advertisements often intentionally use ambiguity to mislead consumers while maintaining some level of deniability about the intended meaning.” California law doesn’t require reasonable consumers “ ‘to look beyond misleading representations on the front of [a product] to discover the truth from the ingredient list in small print on the [back of a product]’.... ‘The ingredient list must confirm the expectations raised on the front [of the product], not contradict them.’” Given that the ingredient list conflicted with the price tag’s “WHT CHOCO,” Salazar’s claims were plausible.

Salazar v. Walmart, Inc., 2022 WL 4299338, -- Cal. Reptr. 3d ---, No. E076006 (Ct. App. Sept. 19, 2022)

Same thing for Walmart. This time there is no “WHT CHOCO” price tag but the result is still the same, given the other contextual factors (the “white” in the product’s name, the label’s depiction of the product, and the fact that it is sold near other chocolate products) plus Salazar’s survey.

worse quality picture but you get the idea

recyclable doesn't mean likely to be recycled, court holds

Curtis v. 7-Eleven, Inc., No. 1:21-cv-06079 (N.D. Ill. Sept. 13, 2022)

Curtis sued over “recyclable” claims on 7-Eleven products; the court rejects theories based on the fact that most “recyclable” plastic isn’t recycled, but accepts theories based on claims that it wasn’t even recyclable for lack of appropriate marking of what kind of plastic it was (designations known as RIC labels that “give recycling facilities the necessary information to sort the products”).

"recyclable" bags

recyclable cups

"recyclable" foam plates

"recyclable" red cups

The court was broadly skeptical of the claims—though the “recyclable” label wasn’t “hard to spot,” the court wondered if 7-Eleven consumers “bothered to look at the packaging at all” when buying red party cups. But Curtis alleged that she read it and cared, which sufficed “for now.”

She allegedly “reasonably understood that the products would actually be recycled if she placed them for recycling with her municipal recycling service.” But they weren’t.

The court thought that the lack of actual recycling was “extrinsic” to the product—not the product’s fault (despite false advertising’s strict liability)—while the lack of RIC designations was “intrinsic.”

There’s also a label on the back of the package: “CHECK YOUR LOCAL MUNICIPALITY FOR RECYCLING GUIDELINES.” Curtis argued that this made things worse, by suggesting that this would work.

The court adopted the majority approach to class standing: “a plaintiff may have standing to assert claims on behalf of class members based on products he or she did not purchase as long as the products and alleged misrepresentations about a purchased product are substantially similar.” 1 McLaughlin on Class Actions § 4:28 (18th ed. 2021) (citations omitted). That factual, contextual inquiry could be carried out later.

She lacked standing to seek injunctive relief, though.

Since “recyclable” was literally true, the claims based on the absence of actual recycling/practical unrecyclability weren’t plausible. What about deceptiveness even absent literal falsity? “Recyclable” “is not a promise about the state of the recycling industry. It is not a prediction of what is likely to happen after a product hits the recycling bin.” “Recyclable” does not mean “destined for inevitable recycling.” And it does not mean “likely to be recycled.” How does the court know what consumers think? It doesn’t; the court just thinks it’s not reasonable for consumers to construe “recyclable” to mean “will be recycled if you put it in a recycling receptacle.” The court reasoned that, if you buy a bottle of water marked “recyclable” in Chicago, where there is recycling, and take it hundreds of miles away where there is not, nothing about the bottle changed, so it would be wrong to say that “recyclable” became untrue. “True, maybe consumers have unreasonable expectations about how often products are recycled. But that’s not on 7-Eleven.” Um. If these beliefs are widely held, why are they unreasonable? What is reasonable or ordinary about the hypothetical in which Chicago consumers travel hundreds of miles into recycling deserts?

The court was concerned that a different holding would have “sweeping” implications because so little plastic recycling is being done. But isn’t that kind of important for consumers who want to participate in recycling to know? The court: “[I]t is hard to see why a manufacturer should be on the hook for deception when the consumer brings misinformation or unrealistic expectations into the picture.” What is unrealistic about believing that a package that says “recyclable” means something meaningful by it?

The court’s other “-able” analogies include things like “drinkable” and “drivable”—terms used in fairly different contexts than advertising. If a package said its contents were “drinkable” I definitely wouldn’t think “well, it’s drinkable, but I’m unlikely to be able to drink it.” Other common “able” advertising words have no obvious gap between “it’s possible to do X” and “you will be able to do X”: returnable, refundable, redeemable, transferable. Where the consumer might not be able to return, get a refund, redeem, or transfer, we expect those limits to be disclosed in the ad!

In a footnote, the court asks: “If a consumer has an inaccurate understanding or an unrealistic expectation about the likelihood of recycling, is that person still a reasonable consumer?” This question should not be left to a footnote or left answered only implicitly; it is the central question. And neither the history of consumer protection law nor the meaning of “misleading” suggest that the answer is “if you don’t understand exactly how the world works in every detail, too bad for you.”

Ultimately, “[m]aybe the average consumer expects that ‘recyclable’ products will be recycled. But that’s not what that word means. Expectations are one thing; representations are another.” Note the absence of any discussion of misleadingness: only explicit falsity apparently counts as long as “7-Eleven did not create the unreasonable expectations through misrepresentations.”

After all this, the court insists that it’s applying the reasonable consumer standard, and says that consumers aren’t expected “to parse packaging like lawyers.” Even though “consumer-protection laws must meet consumers where they are,” “there are limits on the pliability of words.” But what are those limits? Apparently, they are not created by reasonable consumers’ beliefs. At some point, words can’t be stretched “so far.” [Puffery/falsifiability should do that work, though: does the claim communicate a specific message to reasonable consumers? Adding some extra element beyond that just makes the law unpredictable and leaves consumers exposed to deception.]

The complaint also relied on the FTC’s Green Guides, which do tell sellers to take into account whether recycling facilities are actually available, though they don’t purport to bar the sale of recyclable-labeled products in areas where they aren’t as long as facilities are available in most areas. They also suggest additional labeling where availability is patchy. But the court didn’t find the Green Guides very “useful” “when evaluating the views of a reasonable consumer at a convenience store. Your average consumer at 7-Eleven probably doesn’t have the FTC’s policy statements at his or her fingertips when picking up a bag of foam plates for the backyard BBQ.”

[But the FTC’s approach, unlike the court’s, is based on empirical research about what consumers actually think when they see “recyclable.”]

Claims based on the lack of RIC designations survived, though, because they were consistent with lack of recyclability: without the markings, the products can’t be recycled. Thus, Illinois Consumer Fraud Act, warranty, and unjust enrichment claims survived only as to the RIC-based allegations.

Monday, September 19, 2022

A little more than kin and less than kind: KIND bar "All Natural" class action fails

In re Kind LLC “Healthy and All Natural” Litig., 2022 WL 4125065, 15-MD-2645 (NRB), 15-MC-2645 (NRB) (S.D.N.Y. Sept. 9, 2022)

Plaintiffs alleged that KIND products displaying an “All Natural/Non GMO” label were deceptive or misleading. Previously, the court allowed NY, Florida, and California classes to proceed. But, because they abandoned any claims based on the non-GMO part, the court found that they lacked a viable claim that “All Natural” was misleading and decertified the classes.

In 2015, FDA issued a warning letter to Kind about its “healthy and tasty” claims, stating that the language was an “implied nutrient content claim” and that certain KIND products did not meet the FDA’s saturated fat content requirements necessary to describe food as “healthy.” “In response, KIND argued that many universally recognized healthy foods such as almonds, avocados, or salmon contain saturated-fat levels exceeding [FDA’s] limits.” 

All Natural/Non GMO label, L, and revised Non GMO only label

The resulting lawsuit was paused because the FDA pretended that it might actually do something about “natural” represenations. It didn’t, so eventually the case was unpaused. Other developments “sharply contracted” the scope of the claims to the “All Natural” claim on three product lines.

For all the claims, an objective reasonable consumer standard applied. The court adopted a relatively new proposition—imported from the Lanham Act and not traditionally part of consumer protection cases—that “[t]o satisfy the reasonable consumer standard, a plaintiff must adduce extrinsic evidence—ordinarily in the form of a survey—to show how reasonable consumers interpret the challenged claims.” Thus, the claims required evidence showing a reasonable consumer’s understanding of “All Natural” plus evidence that the Kind products fell outside that understanding. Plaintiffs failed at both points.

The earlier definition used in the case was heavily dependent on now-abandoned “Non GMO” claims. “Non GMO” might give context to the “All Natural” right in front of it on the label, but now there’s no falsity claim about that. Without the GMO context, the court found that there was no objective definition of “all natural.” FDA has some guidance, but its application would depend here on what a consumer would expect to be in the food, which is precisely what’s at issue. Plaintiffs’ own statements offered a variety of understandings, which if not inconsistent were not all coextensive: “that is, a product can meet the criteria in the FDA guidance that it does not contain unexpected artificial ingredients without meeting the criteria in the dictionary definition proffered by plaintiffs that it is ‘existing in or caused by nature; not made or caused by humankind,’” and so on. “Given this diversity of views, none of these definitions supplies, or purports to be, a reasonable consumer’s definition of ‘All Natural.’” [Note: That’s not logically true: each could be a reasonable consumer’s definition, but reasonable consumers could be all over the map. For completeness, it would be useful to ask whether, given all these definitions, Kind didn’t qualify according to a substantial number/percentage of reasonable consumers.]

Nor did plaintiffs’ survey report provide a way to define a reasonable consumer’s understanding of “All Natural,” because the court excluded it.

The survey presented individuals with “a mock-up of a product, that, in many respects, resembled the packaging of a KIND bar.”

Note the omission of the non-GMO representation.

Then it asked them about whether they agreed, disagreed, or didn’t know/weren’t sure about whether “All Natural” products would contain “artificial or synthetic ingredients.” The survey found that 86.4% of consumers said no.

The survey also asked consumers to select one of the following options regarding their expectations of an “All Natural” product: (1) that it is not “made using these chemicals: Phosphoric Acid, Hexane, Potassium Hydroxide, Ascorbic Acid”; (2) that it “is made using these chemicals: Phosphoric Acid, Hexane, Potassium Hydroxide, Ascorbic Acid”; or (3) that they were “Not sure/No expectation.” The court really didn’t like this question, considering it misleading (e.g., Vitamin C is another name for ascorbic acid; some of the chemicals aren’t in Kind bars) and found that the surveyor’s “decision to blindly include items listed by plaintiff’s counsel in the complaint, without any investigation or consideration of the appropriateness of those items, only underscores his survey’s lack of reliability.”

The court found the survey inadmissible because it was biased and leading.  The first question asked only about one potential definition and only allowed participants to select whether they agreed, disagreed, or didn’t have an expectation. There was no contrast with other possible meanings, and there were no open-ended questions. At deposition, he said he was “test[ing]” the plaintiffs’ theory of liability, but the court interpreted his answers as showing that his questions were designed to support that theory. Relatedly, he chose to display the “All Natural” claim in isolation, rather than as part of the “All Natural/Non GMO” statement, as it always appeared on KIND labels, out of concern that the two “would interact.” This made his survey less relevant.

Likewise, his second question listed “chemicals” drawn from plaintiffs’ complaint, “without personally reaching any understanding of what those ‘chemicals’ were, or whether they were ingredients that cannot be considered ‘All Natural.’” [If the court had liked the theory better, he probably would have been able to rely on other experts/facts provided by the client for these points.] The word “chemicals” was leading, given “the common-sense intuition that, when prompted by the word ‘chemicals,’ consumers’ consideration of the listed substances described as chemicals is tainted by the connotation that ‘chemicals’ carries.” The failure of the survey to define the terms and including Vitamin C under the name “ascorbic acid” to parallel “phosphoric acid” was “a clear attempt to manipulate consumers into selecting the answer that plaintiffs preferred.”

Even without the leading questions, the court concluded that the survey profided “no useful information” about how a reasonable consumer understands “All Natural.” The survey didn’t define “artificial” or “synthetic,” or what it means for a product to “contain” or be “made with” those ingredients. So, for example, the survey required further inquiries:

• What processing, if any, does a reasonable consumer believe can occur to an ingredient or product before that ingredient or product is considered artificial or synthetic?

• Are ingredients that do occur naturally, such as Vitamin A or C, but potentially manmade in the specific form that appears in KIND products, artificial or synthetic?

• Are trace or residual amounts of chemicals that were used in processing ingredients in KIND bars enough to cause the KIND products to contain “artificial or synthetic ingredients”?

Here, the answers to those questions were “central” to plaintiffs’ theory of falsity. But the survey left a factfinder guessing at them.

Plaintiffs argued that they didn’t need “a universally accepted definition of ‘All Natural’ ” as long as they showed that a reasonable consumer would interpret the claim to mean that the product didn’t contain those specific artificial and synthetic ingredients. But they didn’t show that; all they showed was that, “when provided with the definition of ‘All Natural’ that plaintiffs’ counsel constructed for this litigation,” respondents would click a check box saying that they agree to it. That wasn’t enough to show that reasonable consumers would be deceived when they saw the label.

Contra the FTC’s position on claims like “environmentally friendly,” the court further held: “Nor can defendant be held responsible for a host of possible, even if potentially reasonable, consumer beliefs about the meaning of ‘All Natural.’ Such multiplicity distorts the reasonable consumer standard.”

Without expert testimony, plaintiffs failed to show how a reasonable consumer would understand “All Natural” on Kind products. Internal KIND documents, statements of KIND’s founder, and a survey referenced in the FDA’s solicitation of comments regarding the “All Natural” claim were insufficient substitutes. The internal statements “just represent the views of KIND employees or internal KIND survey data,” not reasonable consumers’ beliefs. [I don’t understand why the internal survey data aren’t about consumer beliefs.] And the FDA noted that “consumers regard many uses of this term as non-informative.”

Even if the survey did establish a reasonable consumer’s understanding, the plaintiffs failed to develop evidence that any KIND product claiming to be “All Natural” contained “artificial or synthetic” ingredients or any of the chemicals the survey listed, due to deficiencies in that area of proof. To the extent that three ingredients were lab-made—Vitamin E acetate; ascorbic acid (Vitamin C); and Vitamin A acetate—they were only present in a bar that displays prominetly on the front of the packaging that it is a KIND bar “plus” “50% DV Antioxidants,” namely, “Vitamins A, C, and E.” “As such, no reasonable consumer could have been deceived by the addition of added vitamins…. No reasonable consumer could believe that they would receive 50% of their daily value of vitamins from a single bar without an artificial or synthetic vitamin being added to the product.”

Antioxidant bar

Given all this, the court also decertified the class.

Tuesday, September 13, 2022

"unfair trade practices" insurance exclusion covers antitrust, not consumer protection

G-New, Inc. DBA Godiva Chocolatier, Inc. v. Endurance Am. Ins. Co., C.A. No. N21C-10-100 MMJ CCLD, 2022 WL 4128608 (Del. Super. Ct. Sept. 12, 2022)

An insurance coverage case about a false advertising claim that doesn’t turn on “advertising injury”! Godiva had insurance from defendants when it was accused of misleading consumers with the “Belgium 1926” label on its products. The settlement, still pending final approval, in the underlying case obligated Godiva to pay: (i) a maximum of $15 million in monetary relief; (ii) a maximum of $5 million in attorneys’ fees; (iii) all settlement notice and administration costs; and (iv) up to $10,000 in class representative service awards. The insurers refused Godiva’s demand to cover the claim.

Other matters appear, but of most relevance: an exclusion for civil money penalties imposed for “knowing or willful” conduct did not apply in the absence of “evidence or admission that the violation of law was knowing or willful.” “[T]he Settlement Agreement is a covered loss within the meaning of the term ‘Loss’ as explicitly defined to include settlements in the Policy.”

There was also an exclusion covering claims “based upon, arising out of or attributable to an actual or alleged violation of the Sherman Anti-Trust Act, the Clayton Act or the Federal Trade Commission Act, as amended, or any other federal, state, local, common or foreign laws involving anti-trust, monopoly, price fixing, price discrimination, predatory pricing, restraint of trade, unfair trade practices or tortious interference with another’s actual or prospective business or contractual relationships or opportunities.”

Did the undefined term “unfair trade practices” include consumer protection and false advertising? No. “Generally, consumer protection involves violations of statutes, regulations, and common law standards. The Endurance Policy does not explicitly exclude consumer protection actions from coverage.” Other than the ambiguous term “unfair trade practices,” the rest of the terms in the exclusion were antitrust-based. “The Court questions whether unfair trade practices are the equivalent of consumer fraud. Defendant insurers have presented no authority demonstrating that these terms are interchangeable or legally equivalent.” Nor did the settlement specifically say that it provided monetary relief for “unfair trade practices,” though it was possible that some of the settlement could be covered.

A similar result occurred with an exclusion for “fines or penalties imposed by law, other than civil money penalties expressly referenced in the definition of Loss above....” Godiva argued that the settlement amount constituted restitution for the alleged price premium paid for Belgian chocolate, not a penalty; the court again found that at least some of the settlement could be covered.

Monday, September 12, 2022

Amicus brief in Washington v. TVI (Value Village)

I joined an amicus brief in this case, being heard by the state supreme court, with Truth in Advertising, Inc., and the UC Berkeley Center for Consumer Law & Economic Justice. We argue that the court of appeals misapplied First Amendment doctrine to hold that misleading claims that a for-profit company’s sales went to charity were “inextricably intertwined” with charitable endeavors and thus protected by the First Amendment.

Warzone is artistically relevant/not explicitly misleading for wargames

Activision Publishing, Inc. v., LLC, 2022 WL 4117035, No. 2:21-cv-03073-FLA (JCx) (C.D. Cal. Aug. 15, 2022)

Applying Gordon v. Drape, in response to Activision’s request for a declaratory judgment, the court finds that Activision’s use of “Warzone” in connection with Call of Duty is protected by the First Amendment despite the gaming .com’s reverse confusion claims.

In 2020, Activision released a stand-alone multiplayer game, Call of Duty: Warzone, “a first-person shooter game that features a large computer-generated battlefield, or warzone, that accommodates up to 150 payers, and sometimes 200 players, at one time.” Meanwhile, Warzone is a free-to-play, turn- and strategy-based game available on since 2017 (through the browser, not a console). “Players shift numbers, which represent armies, across a map of the world to take control of countries or territories” and the marketing pitch is “Better than Hasbro’s RISK game.”

Activision sought to register trademarks for WARZONE and CALL OF DUTY WARZONE, which opposed. Eventually, this declaratory judgment/counterclaims for trademark-related claims resulted.

Although this is a title-v-title case, Rogers applies to it in the Ninth Circuit, and CODWZ is clearly an expressive work. Just as clearly, “Warzone” had artistic relevance to the game, even if Activision could have chosen other names—lack of alternatives isn’t part of the artistic relevance test, nor is reference to the trademark owner.

But “explicitly misleads” has been distorted in the Ninth Circuit, essentially to handle title-v-title conflicts, which seems like it could have been bad for Activision. As the court explained, the cases say that, ordinarily, “the mere use of a trademark alone cannot suffice to make such use explicitly misleading,” but this principle “does not extend to instances in which consumers would expect the use of a mark alone to identify the source.” How do you know what consumers would expect on a motion to dismiss? Good question! In addition, “identical usage could reflect the type of ‘explicitly misleading description’ of source that Rogers condemns.” But misleadingness is “generally [not a problem] when the mark is used as only one component of a junior user’s larger expressive creation.”

Activision argued that “Warzone” couldn’t be explicitly misleading because it is a common English word with general meaning independent of’s game, and that its marketing made clear that CODWZ was part of the broader Call of Duty franchise. rejoined that Activision’s use of “Warzone” was explicitly misleading because consumers searching for its video game are diverted to Activision’s game, and that it sufficiently alleged confusion, which proved explicit misleadingness.

The court disagreed with Confusing consumers is not the same thing as explicitly misleading them, which requires “an explicit indication, overt claim, or explicit misstatement that caused such consumer confusion.” Now the magic happens, and I invite you to identify the difference between this case and Gordon: alleges Activision uses an identical mark to offer similar goods and services, saturating the market and overwhelming, resulting in actual consumer confusion. However, nothing in the allegations plausibly suggest that Activision’s use of the term “Warzone” is explicitly misleading.

Also, Rogers can be applied both to reverse confusion and on a motion to dismiss.

Rogers also barred California claims. Given this result, the court had no authority to decide whether Activision’s pending applications should proceed to registration.

Query: Since Rogers applies to game titles, what rights if any should Activision’s registrations, if issued, confer on it?

Friday, September 02, 2022

court rejects illegal lottery and CLRA claims against Coinbase Dogecoin sweepstakes

Suski v. Marden-Kane, Inc., 2022 WL 3974259, No. 21-cv-04539-SK (N.D. Cal. Aug. 31, 2022)

This is a lawsuit arising from Coinbase’s $1.2 million Dogecoin (DOGE) sweepstakes in June 2021. The court dismisses some of the claims despite rejecting arbitration and deeming the class waiver in the contest rules unconscionable. In essence, plaintiffs alleged that the sweepstakes was misleading about whether buying/trading was required to enter, and asserted claims based on California Penal Codes §§ 319 and 320 regarding unlawful lotteries as well as UCL, FAL, and CLRA claims.

Lottery claims: It was not enough to allege that plaintiffs individually and reasonable consumers generally didn’t understand that free entry to the contest was available. Even allegations that defendants “objectively conceal[ed] from those consumers and from the public at large that the consumers [could] obtain free chances to win” were insufficient. “Because California penal statutes are construed strictly and because no California court has held that being unaware of the free method of entry is sufficient to demonstrate the required consideration, the Court finds that Plaintiffs have not and cannot allege a violation of California Penal Code § 320.”

CLRA: Failed because the CLRA covers only goods and services, which are defined, respectively, for CLRA purposes as “tangible chattels bought or leased for use primarily for personal, family, or household purposes,” and “work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods.”

The California Supreme Court previously held that the CLRA’s protections do not extend to the sale of life insurance. Life insurance contracts are not “tangible chattels.” Helping consumers select insurance policies, assisting policyholders to maintain their policies, and processing claims were “ancillary services” that weren’t covered; to do so “would defeat the apparent legislative intent in limiting the definition of ‘goods’ to include only ‘tangible chattels.’ ” Subsequent courts applying California law reasoned similarly with respect to mortgage loans or the ancillary services connected with servicing home loans.

Cryptocurrency is “an intangible good outside the purview of the CLRA.” Facilitating trading in cryptocurrency was not a standalone “service” even if Coinbase doesn’t also buy or sell cryptocurrency; it was still “ancillary” in the relevant sense.

Thursday, September 01, 2022

Amicus brief in Martinez v. ZoomInfo

 With Mark Lemley, available here. It argues that strict scrutiny applies to right of publicity claims against noncommercial speech, and that it does not violate the right of publicity to advertise the existence of a work of information that involves no invasion of privacy, invasive data collection, or defamation.