Thursday, December 08, 2022

ct orders injunctive relief against misleading rewording of geographical origin claim

Republic Technologies (NA), LLC v. BBK Tobacco & Foods, LLP, 2022 WL 17477602,  No. 16 C 03401 (N.D. Ill. Dec. 6, 2022)

A jury found that BBK aka HBI engaged in unfair competition and violated the Illinois Uniform Deceptive Trade Practices Act (IUDTPA) in its packaging and promotional activities for its tobacco rolling paper products. Republic sought a permanent injunction against various public statements; the court mostly granted its request.

At trial, Republic alleged that HBI engaged in false advertising under the Lanham Act, unfair competition, and violations of the IUDTPA. HBI counterclaimed that Republic infringed its copyrights and trade dress. The jury found for HBI on one of HBI’s copyright infringement claims and one of its trade dress claims, and awarded HBI $979,620 in lost profits and $40,000 in statutory damages. It also rejected the Lanham Act false advertising claim, but found unfair competition and IUDTPA violations by HBI. “Because the jury was instructed not to consider the question of damages as to the unfair competition and IUDTPA claims (and plaintiffs cannot seek monetary damages under that statute, Republic was not awarded any monetary damages.”

Republic sought a permanent injunction, disgorgement of profits, and attorneys’ fees, but this opinion concerns only the injunctive relief. Republic satisfied the general requirements: success on the merits, irreparable harm, equities favoring it, and public interest against false advertising.

HBI represented that it had stopped making or would stop making a number of the challenged statements, including that HBI’s RAW “Organic Hemp” papers are the “World’s Only” or “World’s First” organic hemp rolling papers; that HBI contributes its funds or sales to a charitable entity called the “RAW Foundation;” that HBI’s RAW rolling papers are “100% wind powered;” and that HBI or its principal invented rolling paper pre-rolled cones. [The list is longer and varied enough that it starts to look like a habit.]

The jury didn’t make specific findings about which statements it based its verdict on, so the court relied on the evidence at trial. “Republic is likely to be harmed in the future absent an injunction because the Court finds that HBI’s untruthful or at least misleading statements are likely to cause consumers to choose HBI’s products over Republic’s products on the basis of those statements (for example, that a portion of HBI’s profits are donated to a non-existent charitable foundation, or that HBI’s papers are made in a historical town by craftsmen).”

The remaining contested assertions involved HBI’s statements that its products were “made in Alcoy, Spain, the birthplace of rolling paper.” Republic presented evidence that HBI’s paper is not actually made in Alcoy, Spain, but is bulk-produced in France, then converted into booklets in the village of Benimarfull, Spain.

HBI still wanted to refer to Alcoy by adding a period in the middle of its claims: “Made in Spain. Alcoy, the birthplace of rolling paper,” and “With genuine RAW® paper from Spain. Alcoy, the birthplace of rolling paper.”

The court first rejected HBI’s argument that Benimarfull was part of the “Alcoy region.” Even if it were (which was not shown), the paper is made in France, not Spain. And the advertising implies that the paper is made in Alcoy. Moreover, past advertising specifically mentioned the “city of Alcoy.” “In short, HBI’s advertising activities were a clear effort to take advantage of the city of Alcoy’s history in the production of tobacco rolling papers, without HBI actually making its own paper there.”

Thus, while accepting some proposed edits to the injunction, the court declined to include language allowing HBI to “refer” to “existence of the Alcoy region of Spain or the fact that the town of Benimarfull is located in the region referred to as Alcoy and part of the judicial district named Alcoy.”

As the court explained, “it is not so much that the description of Alcoy as the ‘birthplace of rolling paper’ is problematic—it is its placement directly after the statement that the rolling paper is made in Spain.” HBI’s new language, “Made in Spain. Alcoy, the birthplace of rolling paper,” “merely switches two words and adds a period” and “does not change the plain intent and import of the statement, that the paper is made in the city of Alcoy, Spain.” This was still misleading (and silly unless making the connection to Alcoy was the purpose).

HBI also asked to add language making clear that, though it agrees to discontinue the listed statements in its promotions, packaging, and advertising, it does not consent that those statements were or are false. Falsity isn’t an element of an IUDTPA or unfair competition violation as long as HBI engaged in conduct which “creates a likelihood of confusion or misunderstanding.” Given that there were multiple challenged statements and the jury didn’t specify, and that HBI agreed to discontinue most of them, the court granted this request.

However, the court didn’t remove “implies or suggests” from the requirement that HBI “permanently refrain from making any statement or communication, or engaging in any promotion or advertising activity that states, implies, or suggests [the listed language].” HBI argued that this language fails to “describe in reasonable detail ... the act or acts restrained or required,” as required by the Federal Rules of Civil Procedure, provides too much room for interpretation, and would invite future motion practice.

Republic countered that removal would open the door for HBI to continue making misleading statements in principle by using slightly different language, like “changing a punctuation mark here or a preposition there.” E.g., though HBI would be enjoined from specifically stating that its papers are “made with natural hemp gum,” it could still say that its “gum is made from natural hemp.” Under the circumstances— “HBI’s addition of a period to a misleading statement” in “an obvious attempt to continue implying that its rolling paper is made in Alcoy, something which is not true”—as well as an instance in which HBI’s principal defied a court order by posting online about the case during the trial, the court found “a proclivity to attempt to evade court orders.”  Courts “have affirmed broadly-worded injunctions against parties that have demonstrated a tendency to evade or violate court orders.”

In addition, the court preserved the language “HBI further agrees that all advertising or promotional statements … shall either clearly constitute permissible opinion (e.g., that something is ‘great tasting’) or be factual statements for which HBI maintains tangible, objective, verification.” This was a fair statement of the law and one that HBI itself previously promised, but it argued that this sentence was only meant to be a “general aspirational statement.” Still, “it should not be objectionable to agree to follow the law.”

HBI also sought relief from notifying its customers of the order. HBI’s customers couldn’t be enjoined because they were not shown to be in any sort of privity with HBI or act “in active concert or participation with” HBI. Thus, “providing notice of the injunction to these third parties could actually further expose them to liability” and the court did not require it. [What happens when Republic publicizes it? Also, Republic’s point that liability is usually strict seems well-taken, though there is definitely a strain of Lanham Act cases, which IUDTPA might follow, saying that retailers aren’t liable if they don’t repeat the claims on the products they sell.]

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