Tuesday, April 25, 2023

hashtags are plausibly infringing; sales claims plausibly false based on P's own history of sales

Automated Pet Care Prods., LLC v. Purlife Brands, Inc., 2023 WL 3046592, No. 22-cv-04261-VC (N.D. Cal. Apr. 21, 2023)

In two opinions on the same day, the court dealt with various IP/false advertising claims brought by one litter box seller against another. The first considered various trademark claims, including claims based on use of a hashtag on social media, where we are apparently going through everything we went through with domain names and search terms/metatags, yay.

Plaintiff (dba Whisker) sued defendant (dba Smarty Pear), its competitor in the market for automated, self-cleaning litter boxes. “Whisker is the pioneer of this technology while Smarty Pear is the newcomer.”

Whisker’s flagship Litter-Robot consists of a rotating chamber that automatically sifts cat waste after each use into a waste drawer beneath the chamber, thus keeping the litter box perpetually clean and eliminating the need for manual scooping. It has registrations for the word marks “Litter-Robot,” “Litter-Robot 3,” “Litter-Robot 3 Connect,” and “Litter-Robot Pinch Detect.” Smarty Pear allegedly used confidential information to inject the market with a new—and virtually identical—automated litter box: the Leo’s Loo. Its social media posts featured photos of the Leo’s Loo products, but those posts were tagged, at least in part, with #litterrobot, #LitterRobot, and #litterrobot3.

Using the old “Internet troika,” the three most important factors were (1) the similarity of the marks, (2) the relatedness of the goods or services, and (3) the simultaneous use of the Web as a marketing channel, all of which weighed heavily in plaintiff’s favor.

Defendant claimed that plaintiff lacked valid rights over the phrase “Litter Robot” (that is, with a space instead of a hyphen) and the hashtag “#litterrobot,” given the previous refusal of registration for “Litter Robot” as merely descriptive; in subsequent applications, Whisker “disclaimed” exclusive rights to the “Litter Robot” word mark, “meaning it acknowledged that it lacks a valid trademark over those words.” The PTO also declined to register “#litterrobot” on the Principal Register, because adding a hashtag to an otherwise descriptive mark did not alone make the mark suggestive.

If Whisker were pursuing claims based on [“Litter Robot” and “#litterrobot”]—say, if it were arguing that those marks have attained secondary meaning since the time they were rejected—then Smarty Pear’s disclaimer arguments would have merit. Whisker’s recent disclaimers would constitute admissions that the marks are not yet protectable.

But Whisker is not advancing trademark infringement claims based on those disclaimed marks. It neither disputes that it has disclaimed them nor argues that they’ve attained secondary meaning. … The key question here is whether Smarty Pear’s hashtags are confusingly similar to the marks over which Whisker has rights; focusing on whether they are also similar to marks over which Whisker does not have rights is not helpful.

This is the classic problem of scope v. validity, which modern trademark doctrine generally resolves by promising to appropriately limit scope in the infringement analysis, though that promise is often unrealized. The court commented:

To be sure, there is something unintuitive about the idea that Smarty Pear could be held liable for using marks that are nearly identical to marks the Trademark Office has determined are not protected. … But there is a place in the analysis to account for this peculiarity: the first of the Sleekcraft factors, the “strength of the mark.” … The resemblance between the marks that the Trademark Office has determined are merely descriptive and those it has agreed to register suggests that Whisker’s marks—while valid—are weak.

But plaintiff also alleged “significant marketing efforts over the course of 22 years, widespread publicity and write-ups, and rave customer reviews ranging in the tens of thousands. These allegations suggest the marks have been strengthened over time.” Anyway, “weak mark[s] entitled to a restricted range of protection,” infringement may still be found where, as here, “the marks are quite similar, and the goods closely related.”

The real issue here isn’t validity or strength, but whether the hashtags functioned as comparative advertising, and here the court tilts heavily against defendant: “For one, Smarty Pear’s intent is transparent: Not only are the products themselves virtually identical, but the strategic use of the number three and the upper-case letters in its hashtags evinces an intent to capitalize on Whisker’s goodwill.” The court didn’t discuss whether the rest of the post contained anything equivalent to the labeling that the 9th Circuit has considered relevant for sponsored ads.

Likely expansion also favored plaintiff. And plaintiff alleged actual confusion: “when Smarty Pear offered consumers free accessories to incentivize reviews of the Leo’s Loo, several consumers emailed Whisker’s customer support to claim their accessories, such that Whisker’s product specialists had to explain that the Leo’s Loo was not Whisker’s product.” And purchaser care was hard to assess: “These automated litter boxes aren’t exactly cars costing tens of thousands of dollars, but they’re not insubstantial purchases either. They sell for nearly $500 each. Most consumers would pause to reflect before spending that much on a product.”

Motion to dismiss denied as to trademark infringement, false designation of origin, and unfair competition claims based on the use of Smarty Pear’s hashtags.

Automated Pet Care Prods., LLC v. Purlife Brands, Inc., 2023 WL 3049106, No. 22-cv-04261-VC (N.D. Cal. Apr. 21, 2023)

After dismissing patent claims because infringement wasn’t plausibly pled, the court declined to dismiss some false advertising claims.  Statements like “[w]e’ve packed the Leo’s Loo with features that make it one of the most convenient self-cleaning litter boxes available” and “[w]e designed Leo’s Loo with kitty safety in mind ... so our feline friends are always safe when they step inside” were classic, non-actionable puffery. The allegation that these statements were likely to mislead consumers into believing that the product is made in California when it is allegedly manufactured in China was “strained and unconvincing.”

It was also puffery to label the Leo’s Loo Too as “the smartest self-cleaning litter box.” Standing alone, that descriptor is classic puffery. Plaintiff argued that, in context, the statement is actionable because the video then goes on to identify several specific features, falsely implying that competitor products lack those features.

If anything, the context here reinforces the conclusion that the statement is not actionable. Immediately below the video is a bold header that reads “Features You’ll Love,” followed by a second line of text which—in reference to the features listed immediately below it—describes the Leo’s Loo Too as “one of the most advanced ... self-cleaning litter boxes available.” And of the four features highlighted ever so briefly in the video itself, two are the most basic functions of any automated litter box: the Leo’s Loo Too “detects when kitties visit” and “cleans after they leave.” Under these circumstances, no reasonable consumer could believe the video implies that no other automated litter box can boast the identified features.

However, plaintiff adequately alleged false advertising based on defendant’s claim that the Leo’s Loo Too is the “First-Ever App-Connected Self-Cleaning Litter Box with Alexa and Google Voice Controls.” Plaintiff alleged that its own product, released years earlier, had its own smart app and can support Alexa and Google Voice, and that another Chinese product that defendant allegedly knocked off featured this built-in functionality long before the Leo’s Loo Too did.

Likewise, plaintiff plausibly alleged false advertising that “[o]ver half a million cats and their owners have made the transition to a litter-free life with Pear Family.” “This statement—conveying to consumers that Smarty Pear has sold over 500,000 of its Leo’s Loo and/or Leo’s Loo Too products—is a quantifiable claim capable of being proven false.”

Here’s the interesting bit: falsity was plausible because plaintiff, which has been in business for over 22 years, has had 700,000 sales in that time. “It thus seems implausible that Smarty Pear could have sold over 500,000 of its products in the one to two years it has been in the market. Moreover, such a representation is material to consumers and likely to induce reliance because it inspires confidence in the product.”

And the statement that defendant’s product’s UV rays are 99.9% effective at eliminating viruses and bacteria was also plausibly false advertising. Plaintiff alleged the existence of FDA guidance advising that UV rays are not effective at eliminating viruses or bacteria when they are “covered by dust or soil, embedded in porous surface or on the underside of a surface.” “Because bacteria or viruses within the Leo’s Loo Too are likely to be buried in litter, Whisker has adequately alleged that Smarty Pear’s boast of 99.9% effectiveness is false. And the complaint adequately alleges that such a representation is material and likely to induce consumer reliance given the premium placed on odor reduction in the market for litter boxes.”

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