I write letters

To Alan Garber & John Manning:

As a member of the law faculty (and, not for nothing, a professor of the First Amendment), I am writing you to express my strong opposition to any "settlement" with the Trump Administration. Harvard has been a beacon for academic freedom, and that means that even if Harvard's administration believes that it is getting a "good" deal, any "deal" will be used to extort more concessions and destroy academic freedom elsewhere. This is not how the leading US university should behave.

Moreover, as every trade partner has seen—as Columbia University has seen—as the recission package passed by Congress despite promises to the contrary has shown--there are no "deals" with authoritarians of this stripe. This administration is both unwilling and unable to keep its word. Russ Vought and his ilk are not going to release money, and even if the money previously owed is released without a court order, there will be more demands and less money next time.

Instead, the administration's acts against George Mason's faculty suggests that individual professors are next, and our students are already at risk. Protecting Harvard requires protecting its faculty and students from government thought control. This cannot be accomplished merely by saying in a statement that the university has retained academic freedom, if it is accompanied by concessions to people who hate higher education and want to destroy it. If you sign an agreement with these people, will appointments and admissions be actually free to follow the pursuit of academic excellence according to the law on the books? Or will a threat hang over every decision? If you sign an agreement, will it still be likely that you'll wake up to find that we can't have international students any more until we do just one more thing to root out whatever they've decided is too "woke"?

I understand you must be under a huge amount of pressure. If the US does not retain its democratic institutions, let it be without your consent and with your resistance. If the US does survive as a democracy, we will all remember what side Harvard was on.

9th Circuit affirms class status based on materiality of claim in product name

Noohi v. Johnson & Johnson Consumer Inc., --- F.4th ----, 2025 WL 2089582, No. 23-55190 (9th Cir. Jul. 25, 2025)

J&J sells Neutrogena Oil-Free Face Moisturizer for Sensitive Skin. The district court certified a class in a consumer protection case brought by Noohi, who alleges that, despite the name, Neutrogena Oil-Free Face Moisturizer for Sensitive Skin contains oils and oil-based ingredients (ethylhexyl palmitate and soybean sterols). The court of appeals affirmed the certification.

Noohi’s expert Hickner, a professor of materials science and engineering, opined that, although “oil” lacks a standard scientific definition, the term generally refers to a “naturally-derived, chemically synthesized, or petrochemically-refined slippery ... substance” that is hydrophobic—meaning that it does not mix with water—and more viscous than water, but less dense. Dr. Hickner opined that, based on their chemical structures and physical properties, ethylhexyl palmitate and soybean sterols are oils with oil-like physical properties.

Her expert Roberts, an econometrics expert, described his proposed process for measuring class members’ damages by calculating the economic value to consumers of the “oil-free” statement: qualitative market research designed to uncover consumers’ understanding of and response to the “oil-free” label, plus quantitative surveying and market analysis to measure the economic value to consumers of the “oil-free” statement.

J&J contested the evidentiary value of both experts’ proposed testimony and submitted competing expert declarations for both.

First, the district court could properly accept the proposed damages model of Noohi’s economic expert. The Ninth Circuit has held that “class action plaintiffs may rely on a reliable though not-yet-executed damages model to demonstrate that damages are susceptible to common proof so long as the district court finds that the model is reliable and, if applied to the proposed class, will be able to calculate damages in a manner common to the class at trial.” The district court did not abuse its discretion in finding the proposed damages model fit Noohi’s theory of harm and was sufficient for purposes of class certification.

For measuring the price premium, Dr. Roberts proposed to show survey participants the product and ask at what prices they would find it “too inexpensive to be considered, a good value, expensive but still worth considering, and finally, too expensive to be considered.” Dr. Roberts would introduce information “challenging the ‘oil-free’ claim,” e.g. by telling participants that the ingredients contained extracts of soybean and palm oil. Then the survey would ask the price question again. He proposed to use regression analysis to determine the percent of the product’s overall price associated with the phrase “oil-free.” Courts have approved of similar “benefit-of-the-bargain” damages models in deceptive marketing cases under California law.

Dr. Roberts also proposed to measure “softer” kinds of harms consumers might experience, such as changes to “overall consumer satisfaction, brand loyalty, willingness to recommend [the Product], and repurchase intent.” He proposed questions about their attitudes towards and impressions of the product before and after the “exposure.” He would use “multivariate statistic[al]” analysis to quantify the changes in respondents’ perceptions of the Product. That would include damages beyond a price premium. But that didn’t make the problem unusable. The problem only comes when a model proposes to measure damages not associated with the plaintiffs’ theory of harm that can’t be separated from damages tied to the plaintiff’s theory. So all Roberts had to do to solve the problem was … not ask those questions.

J&J also argued that rather than comparing what consumers are willing to pay before and after they learn that the Product is not “oil-fee,” Roberts should compare “what consumers paid for ‘Neutrogena’s Oil-Free Face Moisturizer for Sensitive Skin’ and what they would have been willing to pay for ‘Neutrogena’s Face Moisturizer for Sensitive Skin,’ holding everything else about the product’s performance and packaging (other than the ‘oil-free’ claim) constant.” Dr. Roberts’ model, J&J argued, would improperly include the “emotional value” that consumers associate with learning that the “Product’s label contains a lie.”  But “California law does not prescribe any specific means of measuring a price premium for purposes of actual damages or restitution. In fact, ‘[c]lass wide damages calculations under the UCL, FAL, and CLRA are particularly forgiving.’” All that was required was “some reasonable basis of computation.”

“There is no talismanic means of measuring damages for deceptive marketing claims under California consumer protection law.” Conjoint analysis is ok, as is “contingent valuation analysis,” which is similar to Dr. Roberts’ proposed methodology in that it varies the features of a single product by presenting new information about the product and asks survey participants to “directly report what they are willing to pay for it.”

True, surveys might be badly done and inflate damages or fail to replicate purchase conditions. But Dr. Roberts recognized those risks in his deposition and rejected telling survey participants “you were lied to.” “Should Dr. Roberts’ execution of the survey fall short of that mark, [J&J] may explore that failure at summary judgment, in a renewed Daubert motion, or during cross-examination at trial.” At the class certification stage, the key inquiry was simply whether Noohi has “demonstrated the nexus between [her] legal theory ... and [her] damages model.” Whether the proposed calculation of the price premium would be accurate was a “merits inquir[y] unrelated to class certification.”

Second, materiality and reliance were susceptible to common proof. “Materiality, and therefore an inference of reliance, can be established by reference to an objective, reasonable consumer standard, and so in this case may be proven in a way common to the class.” It is for this reason that class actions asserting the usual California claims are generally “ideal for class certification.”

The presumption was rebuttable, but the district court didn’t abuse its discretion in finding the presumption to be unrebutted. “If the misrepresentation or omission is not material as to all class members, the issue of reliance ‘would vary from consumer to consumer’ and the class should not be certified.” Here, the district court also relied on the undisputed evidence of classwide exposure to the “oil-free” language prominently displayed on the front of the packaging. In determining material misleadingness under California law, “the primary evidence ... is the advertising itself.” The court was quite plaintiff-favorable here, as its understanding of California law required:

It is hard to imagine that consumers would purchase a product labeled “Oil-Free Moisture” without regard to whether the product was free from oil. If, somehow, the evidence later shows that a reasonable consumer would not have found the product’s name to be material to their purchase decision, “the failure of proof on the element of materiality would end the case for one and for all; no claim would remain in which individual reliance issues could potentially predominate.” 

Given the objective standard for materiality and the undisputed evidence of classwide exposure, Noohi is entitled to the inference that reliance can be shown via common proof.

J&J argued that “oil-free” might have multiple different interpretations: doesn’t contain oils, doesn’t contain ingredients derived from oils, or doesn’t perform in a way consumers consider “oily.” But J&J didn’t offer persuasive evidence of this variance, only Noohi’s testimony as to her motivations for purchasing and the expert report of a dermatologist as to the dermatologic uses of oil-free products. That didn’t show variance within the class.

Second, even if understanding of “oil-free” varies across the class, J&J didn’t explain why that would undermine the commonality of materiality based on a reasonable consumer standard, or rebut the inference of reliance. In cases reaching the opposite conclusion, “a sizable portion of the class either were not misled by the statements or would not have found the misrepresentations to be material had they known the truth.” As opposed to showing that “oil-free” didn’t affect the purchase decision, J&J’s evidence at most showed that it “affected the purchase decision of class members—and so was material—for different reasons.” J&J offered no evidence that “a consumer who thought ‘oil-free’ meant ‘without oils’ was any more or less likely to be affected in their purchase decision than someone who thought it meant ‘without oil derivatives’ or not tactilely ‘oily.’” Thus, J&J’s argument didn’t undermine the idea that materiality was susceptible to common proof:

The baseline inquiry is whether the statement was material to a reasonable person. An affirmative answer to that question gives rise to an inference of reliance. A showing that for some portion of a class that statement was not in fact material upsets that inference. But a showing that a statement was material to different class members in different ways does not.

In California, “a plaintiff need not establish at the class certification stage that class members share a uniform understanding of the contested term.”

J&J also argued that it defeated the inference of reliance by showing that 30% of purchases were repeat purchases. (One thing that could be useful in a false advertising case would be to know whether that was a low percentage for a personal care product, or a high one.) “The existence of repeat purchasers does not defeat the inference of reliance. There is no indication that the repeat purchasers knew that the Product was not oil-free and purchased it anyway.” Plus, for reliance under California law, a misrepresentation need not be “the sole or even the decisive cause of the injury-producing conduct.”

court finds advertising injury insurance coverage in false association case despite consumer fraud and other exclusions

Illinois Casualty Co. v. Kladek, Inc., No. 22-3214 (DWF/DJF), 2025 WL 2071043 (D. Minn. Jul. 23, 2025)

ICC sought declaratory judgment that it didn’t have to defend (or indemnify) its insured in a Lanham Act false association lawsuit brought by models, and failed, at least as to defense.

In the underlying lawsuit, the models sued over a “Gentlemen’s Club” that used photos of them in social media ads. They alleged 43(a) false endorsement, unfair competition, and false advertising; right of publicity violations; negligence; violation of Minnesota’s Uniform Deceptive Trade Practices Act; and unjust enrichment.

ICC issued Kladek business liability coverage that included advertising injury and also issued an additional cyber protection endorsement. An arbitration panel concluded that the cyber protection endorsement created a duty to defend (but did not resolve the duty to indemnify), but the business liability coverage is broader and so still relevant.

Advertising injury covers, inter alia,

(4) Oral or written publication, in any manner, or material that slanders or libels a person or organization or disparages a person’s or organization’s good, products or services;

(5) The use of another’s advertising idea in your “advertisement”; or

(6) Infringing upon another’s copyright, trade dress or slogan in your “advertisement.”

But ICC contended that exclusions applied. Under Minnesota law, courts read policies in favor of finding coverage, construing words of inclusion broadly and words of exclusion narrowly.

First, ICC argued that it excluded coverage with the “law exclusion,” which covered liability “arising directly or indirectly out of any action or omission that violates or is alleged to violate … (12) Any federal, state, county, municipal or local consumer fraud protection law, regulation, ordinance, order, or directive barring fraud, unfair competition, and/or deceptive business practices.”

The court agreed with Kladek that the Lanham Act and MDTPA claims apply to various types of conduct, not all of which can be labeled “consumer fraud.” The exclusion does not apply to the statutory claims insofar as they do not implicate consumer fraud conduct:

Notably, the Models have not alleged that any “consumer” has been defrauded. Instead, the Models allege that they were wronged because their images were used without their authorization or compensation. These claims are not “consumer fraud” claims at their core, but rather commercial claims involving advertising injury.

“Because the core of the Models’ Lanham Act claim alleges an injury caused by the unauthorized use of their images without compensation by the Club, and not a consumer fraud claim, ICC has not demonstrated that the Law Exclusion applies to the Models’ Lanham Act claim.” Of course, injury to consumers is the method by which the harms of false advertising are inflicted, and courts have rejected models’ Lanham Act claims merely based on failure to pay, but that I suppose is a matter for the merits.

In a footnote, the court said that the duty to defend even one claim triggered the duty to defend in its entirety unless an additional exclusion applied, and that, in the alternative, ICC’s interpretation would render any insurance illusory. “[W]hen policy exclusions appear to be broader than the coverage, so as to ‘swallow up’ the coverage, rendering the insuring promise illusory, a court will avoid that unreasonable result.” The court found that logic compelling, “as it appears that the ICC’s broad interpretation of the policy exclusions would preclude coverage in most factual scenarios.”

Electronic chatroom exclusion: this excluded advertising injury “[a]rising out of any electronic chat room, bulletin board, or blog the insured hosts, owns, or over which any insured exercises control.” ICC argued that Facebook, Instagram, and Twitter, the platforms on which the models’ images were used, “all allow users to post or read messages and control or host their own bulletin boards” and therefore qualified for the exclusion. But the policy didn’t define “bulletin board” or “electronic chat room,” so the plain meanings of those terms applied. Chat rooms involve realtime communication, and a bulletin board is an “online communication system[ ] where one can share, request, or discuss information on just about any subject.” “In contrast, as commonly understood, Facebook, Instagram, and Twitter are social media platforms.” Kladek didn’t host, own, or exercise control over Facebook, Instagram, and Twitter, but rather used them to promote its business. “There is no evidence that it did so with any intention to generate any discussion among viewers. Indeed, the use of the Models’ images did not occur in a chat room, on a bulletin board, or on a blog.” The best description of where these images were was that they were on Kladek’s “social media accounts.”

ICC had one final try: its exclusion for “multimedia peril,” “the release or display of any ‘electronic media’ on your ‘internet’ site or ‘print media’ for which you are solely responsible, which directly results in any of the following”:

a. Any form of defamation or other tort related to the disparagement or harm to the reputation or character of any person or organization, including libel, slander, product disparagement, or trade libel;

b. Invasion, infringement or interference with an individual’s right of privacy including false light, intrusion upon seclusion, commercial misappropriation of name, person, or likeness, and public disclosure of private facts;

c. Plagiarism, piracy, or misappropriation of ideas under an implied contract ….

This exclusion applied unless the cyber endorsement applied—or maybe it did so if the cyber endorsement applied. “In essence, ICC appears to argue that because the ICC has a duty to defend claims under the Cyber Endorsement (as determined by the arbitration panel), all of the Models’ claims are now excluded from coverage under the Policy.” The court disagreed. The arbitration panel didn’t decide indemnification, or which claims in the underlying suit triggered the cyber endorsement duty to defend. Also, the cyber endorsement created several ambiguities, and was unclear on its relationship with the main liability policy. Basically, the endorsement was inconsistent about whether it amended or supplemented the main policy and stated that its coverage was “in addition to, and will not erode, the limits of insurance provided elsewhere under your Policy.” And the main form was written on a traditional “occurrence” basis, while the cyber endorsement was a claims made policy. Finally, “the wording of the Multimedia Exclusion is, itself, circular and facially contradictory” by excluding multimedia liability for advertising injury “except to the extent that coverage may be provided under the Cyber Endorsement.” The court found the language confusing, but one reading was that, once coverage exists under the cyber endorsement, it also exists under the basic liability policy. “Ambiguities are construed against the insurer and in favor of coverage.”

amicus in Prevagen v. FTC appeal

 Led by Truth in Advertising; I was happy to sign on.

alleged use of competitor's corporate "persona" didn't cause actionable confusion

SME Steel Contractors, Inc. v. Seismic Bracing Co., LLC, No. 2023-2426, 2025 WL 2057365 (Fed. Cir. Jul. 23, 2025)

Discussion of previous district court opinion here. Because a patent is involved, the appeal on all issues goes to the Federal Circuit, but the Federal Circuit is supposed to apply home circuit precedent to the non-patent claims. Once again we see the powerful discontinuity between TM and false advertising claims produced by the normal absence of any damage requirement in TM.

The parties compete in the design of buckling-restrained braces (BRB), which are structural devices that help buildings withstand seismic activity. SME sued Seismic for patent infringement, false advertising and false association under the Lanham Act, unfair competition and certain deceptive trade practices under Utah state law, and copyright infringement. Seismic secured summary judgment, which the court of appeals affirms. Patent discussion omitted.

The false advertising-related claims centered on representations made by Seismic in a Design Manual that it sent to prospective clients. Its 90 pages included the statements “Produce capacity of over 5000 BRBs per year” and “These patented methods have now been tested and qualified for use on projects in accordance with governing building codes (AISC 341).” The Design Manual further included a report from the University of Utah, testing five of Seismic’s BRBs and concluding that three of those BRBs satisfied AISC 341-10 requirements and two did not. SME argued that these statements were false and that Seismic used SME’s “persona,” including proprietary technical drawings and a similar logo, in the Design Manual. (It didn’t bring a conventional infringement claim.) SME further alleged that it lost business to Seismic because of these misrepresentations.

The copyright claims alleged that Seismic used several of SME’s copyrighted technical drawings of BRB designs in the Design Manual. The district court granted summary judgment to Seismic, concluding that SME had “not presented sufficient evidence of a causal connection” between the alleged copyright infringement and alleged profits; SME sought only disgorgement. (The court of appeals could have pulled a Davis v. Gap move and remanded to assess damages, but there doesn’t seem to be a licensing market here, making that much less attractive.)

Even if there was Lanham Act standing, there was no genuine issue of material fact on injury. No reasonable jury could find a causal connection between misrepresentations by Seismic and SME’s injuries. SME only showed that the Design Manual was sent to several potential customers and that Seismic successfully bid on projects that involved those customers while SME also (unsuccessfully) submitted competing bids on most of those projects. “SME Steel did not present any evidence that the Design Manual—let alone the handful of representations alleged to be misleading within this ninety-page document—played any role in SME Steel’s loss of bids.”

SME argued that it was entitled to a presumption of injury because the parties compete in a sparsely populated market. Under Tenth Circuit law, where “the plaintiff and defendant are the only two significant participants” in a two-player market, “injury may be presumed if the plaintiff shows the defendant made literally false statements or made statements that were literally true but were likely to mislead or confuse customers.” But the two key alleged misrepresentations weren’t shown to be literally false.

“Produce capacity of over 5000 BRBs per year” on its face refers to future capacity. SME argued that this was false because Seismic Bracing uses third-party fabrication shops and did not have such a manufacturing capacity itself. But “produce” can have multiple definitions and may be defined as “to make available for public exhibition or dissemination: such as ... to oversee the making of.” Thus the claim was “ambiguous, precluding literal falsity.”

What about the “tested and qualified” claim given that two of Seismic’s five tested BRBs failed testing? Again, the statement that Seismic’s “patented methods have now been tested and qualified for use on projects in accordance with governing building codes (AISC 341)” was ambiguous, “as the statement could have referred to the BRBs that satisfied the testing requirements, not all of Seismic’s BRBs.”

What about using intent to deceive to presume deception and thus injury? Some Circuits have said so, but, even assuming that the Tenth Circuit would agree, no reasonable jury could conclude that Seismic acted with intent to deceive. Mere awareness of what factors a potential customer might consider important in buying a BRB did not create a genuine dispute.

False association: The district court analysis here was deeply confused. The Federal Circuit noted that “it is not clear what the basis for SME Steel’s false association claim is. SME Steel concedes that ‘this case does not involve a mark,’ but instead, it appears to contend that it has a particular corporate persona, akin to an individual celebrity, and Seismic Bracing appropriated that persona in its Design Manual.” Nonetheless, the Federal Circuit proceeded to affirm the district court’s likely confusion analysis rather than just saying no. It didn’t mention the weirdest parts of that analysis flowing from the conceptual mismatch, just holding that, “[g]iven the admitted care that customers will exercise in reviewing materials related to the bids and selecting BRBs, as well as the absence of evidence of actual confusion, we agree that no reasonable jury could conclude that there was a likelihood of confusion.”

Copyright: SME didn’t show a causal connection between the alleged infringement and any subsequent purchases of Seismic’s BRBs. To show indirect profits, the copyright holder bears “the initial burden to show a nexus between [the alleged] infringement and making of a profit,” and [t]hat showing must go beyond speculation.” That didn’t happen.

no initial interest confusion from a deactivated product page that lists zero results

Alsa Refinish LLC v. The Home Depot, Inc., 2025 WL 2014281, No. 2:23-cv-09965-SVW (C.D. Cal. Mar. 18, 2025)

Previous discussion of related case by same plaintiff. The Home Depot “sells home improvement products, including a wide assortment of paints and paint products, at brick-and-motor locations and through its website.” It sells products, including paint, from third parties.  

Alsa also sells paint and claimed to own trademarks in “Alsa,” “Alsa Chrome Paint,” “Alsa Easy Chrome,” “Easy Chrome,” and “Alsa Refinish.” Between 2013 and 2019, Alsa sold its products on Home Depot website as a third-party vendor, authorizing Home Depot to use its marks on the “landing pages” for Alsa’s products. When the relationship ended, Home Depot deactivated all the landing pages for Alsa’s products. Thus, a search on HomeDepot.com for “Alsa Easy Chrome” wouldn’t return any products. But, for at least some time, someone using Google or a similar third-party search engine who searched for “Home Depot” plus the name of one of Alsa’s products, would get a result that included the inactive landing pages. Clicking on those links would show results like this:

Screenshot showing zero results for Alsa on Home Depot's site

Alsa alleged that it “never intended to sell products through Defendant’s website or stores” and that it “believes that Defendant has never sold Plaintiff’s products on Defendant’s websites or stores.”

The court initially denied Home Depot’s motion to dismiss because, “taking Plaintiff’s allegation that it never had a vendor relationship with Defendant as true, Defendant’s use of Plaintiff’s mark in inactive product pages could confuse consumers into thinking Defendant and Plaintiff had a past affiliation.” (Why would that be actionable? Why would that cause harm sufficient to trigger Article III standing? Ugh.)

Now, on summary judgment, the court found confusion unlikely. Sleekcraft isn’t well suited for internet search results; this isn’t exactly a pure internet search case, but it’s closer to that than to the Sleekcraft inquiry into “whether two competing brands’ marks are sufficiently similar to cause consumer confusion.” Thus, the court used the two-factor test outlined in Multi Time Machine v. Amazon, which asks courts to consider: “(1) Who is the relevant consumer; and (2) What would he reasonably believe based on what he saw on the screen?”

The relevant reasonable consumer in this case is “a reasonably prudent consumer accustomed to shopping online” who is of moderate sophistication. This factor “weighs against a likelihood of confusion, but only slightly.”

For (2):

A reasonable consumer viewing Defendant’s inactive product landing pages would believe that Defendant does not sell Plaintiff’s products. That is, after all, exactly what the webpage says: “Sony, there are no products available online or in your local store.” This is not confusing or deceptive, as it is true. Defendant no longer sells Plaintiff’s products.

There were some context clues that “may” lead consumers to believe that Home Depot sold Alsa products in the past: (1) an option to refine search results to include “Alsa Refinish,” because “[s]tores like Defendant typically do not provide an option to refine search results by a given brand unless they actually sell products from that brand,” and (2) “that there even is a product page for Plaintiff’s products, albeit inactive, suggests that Defendant at one point sold those products.” The court relied on (2) to deny the motion to dismiss. (I note that, among other things, this is really more of a false advertising theory, since it’s clear that they don’t sell Alsa products now, which is why the truth of the past relationship matters.) However, the summary judgment record was uncontested: Alsa did sell products with Home Depot for six years.

Also, Alsa had no evidence of actual confusion. “Plaintiff supplies several posts from online forums for vehicle enthusiasts discussing whether Plaintiff’s products were available on Defendant’s website. But these posts were made during the Vendor Period, when Defendant had Plaintiff’s permission to use the Alsa Marks on its website.”

And there was no initial interest confusion:

Here, it may certainly be the case that, after reaching the inactive landing product pages, consumers move on from that page to Home Depot’s website overall, where they may purchase competing products. But at most this is evidence of diversion, not confusion. There is no reason to think that consumers would be confused as to the source of any of the goods on Defendant’s webpage, as each product on Defendant’s page is clearly labeled.

Because the false allegation that Alsa never sold on Home Depot was the only reason that the court denied the motion to dismiss, the court ordered its lawyers to show cause why they didn’t violate Rule 11.

XL BBL and Petite BBL are generic for what you think they're generic for

Andre P. Marshall, M.D. Inc. v. Squlpt Management, LLC, 2025 WL 2025000, No. 2:24-cv-01784-SB-AS (C.D. Cal. Jul. 14, 2025)

The interesting false advertising component of this case doesn’t get resolved on summary judgment, but we do get a finding that XL BBL and Petite BBL are generic terms for Brazilian butt lifts,” cosmetic surgical procedures that enhance the size and shape of the buttocks by transferring fat from other areas of the body, as applied to procedures that move more or less fat than average. Defendants (SML) had a registered trademark for “XL BBL” for medical procedures and applications for “Petite BBL” published for opposition (plaintiff APM opposed). APM sought cancellation of the XL registration and rejection of the Petite applications (now ok in the 9^th Circuit) and also asserted false advertising claims; defendants counterclaimed for infringement.

Defendants claimed first use of Petite BBL in September 2020 and XL BBL in February 2021. The parties offer cosmetic surgery services in the Los Angeles area. APM began using the term Petite BBL on Instagram in June 2019, before SML applied to register it as a mark. After the USPTO approved the Petite BBL mark for publication, one defendant, “mistakenly believing the mark had been registered,” sent cease and desist messages to APM’s owner requesting that APM stop using “Petite BBL.” This suit followed.

The false advertising allegations were that defendants digitally altered before-and-after photographs of patients in a way that misleads consumers. Initially, defendants only produced one photo in discovery, arguing that they hadn’t edited any others; later, after the court said that wasn’t good enough, they produced over 86,000, in no particular order/unconnected with any ads; this also wasn’t good enough. Plaintiffs got fees connected to this dispute.

Standing as to the XL BBL term: APM didn’t use it in its business, so did the registration cause it to suffer an injury in fact? “In declaratory judgment actions involving trademark infringement, a plaintiff has standing if it demonstrates ‘a real and reasonable apprehension that [it] will be subject to liability if [it] continues with [its] course of conduct.’” APM’s owner offered a declaration that he had intended to and was ready to use the XL BBL mark before the complaint was filed but “held back from using the term out of fear of litigation.” This fear was reasonable given that SML (1) sent text messages to APM requesting that it remove “Petite BBL” from its Instagram posts; and (2) reported APM’s alleged infringement of the Petite BBL mark to Instagram and requested that the account be permanently removed. “It is not unreasonable to assume that using the ‘XL BBL’ mark would have prompted a similar response—or even a stronger one, since SML had a registration for XL BBL, unlike for Petite BBL.”

Merits: SML argued that the terms were suggestive. They were not. A generic mark answers the question “What are you?” whereas a distinctive, protectable mark answers the questions, “Who are you?” “Where do you come from?” and “Who vouches for you?”

Registration is “prima facie evidence of the mark’s validity and entitles the registrant to a strong presumption that the mark is protectable.” APM met its burden of showing genericity of XL BBL, while SML didn’t prove that the unregistered Petite BBL mark was protectable.

Starting with BBL, that term on its own was “undisputedly generic” and indeed disclaimed by SML. “The only question is whether the use of Petite and XL—common size descriptors—before BBL render the entire descriptions nongeneric. APM has submitted extensive evidence, both predating and postdating SML’s application, that the size descriptors do not have this effect.” The court noted that, when a term is “born generic,” evidence from any time period may be relevant, but even if evidence from after APM entered the market wasn’t relevant, APM would still prevail.

The evidence included third party doctors describing their uses, demonstrating “that consumers, medical professionals, and Defendants themselves use Petite and XL BBL generically to describe the amount of fat transferred.” Defendants’ own generic use showed that the terms weren’t suggestive; they described Petite BBL as appropriate for women with a “smaller frame” and a “20–33 BMI” and XL BBL as appropriate for women with a “medium or full-figured frame” and a “28–35 BMI.” “Indeed, it takes no imagination to understand that ‘Petite’ and ‘XL’ refer to the size of the fat transfer in a BBL procedure.”

Defendants’ only rebuttal evidence was “conclusory testimony” that the terms were suggestive.

Even if the terms were descriptive, there wasn’t a fact issue on secondary meaning. There was no consumer testimony (direct evidence). Defendants’ evidence was that they spent $2.5 million in advertising Petite BBLs and received $16.7 million in revenue for Petite BBLs and $4.6 million in revenue for XL BBLs. That didn’t create a genuine factual dispute. “Merely citing to advertising expenditures over a period of a few years—without providing any detail about the marketing efforts or any evidence of whether they created an association between the marks and their services—proves little. The same is true for sales revenues.” No reasonable juror could find protectability.

False advertising:  APM alleged that defendants altered the “after” photographs by removing scarring from the surgical incision points and airbrushing cellulite and stretchmarks. APM sought only injunctive relief. But it didn’t explain which specific ads had false alterations. Collective treatment of the ads, under the circumstances, wasn’t appropriate. E.g., “some of the before-and-after advertisements, for example, specifically address scarring, while others do not.” So there’d be a trial.

 

AI voice cloning opinion narrows claims to ROP, rejecting TM and (most) copyright theories

Lehrman v. Lovo, Inc., --- F.Supp.3d ----, 2025 WL 1902547, 24-CV-3770 (JPO) (S.D.N.Y. Jul. 10, 2025)

Plaintiffs alleged that Lovo misled them about its use of their voices, using AI to synthesize and sell unauthorized “clones” of their voices. They sued for violations of New York civil rights and consumer protection laws, the Lanham Act, and the Copyright Act, along with common-law contract, fraud, conversion, unjust enrichment, and unfair competition claims. Lovo was partially successful on its motion to dismiss, but had to deal with the NY ROP claims, as well as consumer protection and breach of contract claims. I might not agree with every detail of the extensive opinion, but this is a useful map of the issues. It’s also a reminder of the hazards of not contracting properly with people you don’t employ.

Plaintiffs Lehrman and Sage are voice-over actors. Lovo “sells a text-to-speech subscription service that allows its clients to generate voice-over narrations at a fraction of the cost of the traditional model.” It claims that its software, Genny, was “created using ‘1000s of voices.’ ” Genny is allegedly capable of creating a voice “clone,” which “refers to a virtual copy of a real person’s voice.” It advertised its voice cloning service by emphasizing how similar its cloned voices are to the originals from which they are derived. In one marketing video, Lovo stated, “you will hear five speakers whose voices have been cloned to near perfection. Their tone, accent, and even mannerisms are fully learned by our AI voice system.” One of Lovo’s co-founders described a cloned voice as a replacement for “a real human voice,” allowing users of Lovo’s platform to “make that voice say anything that you want, even if that person has never actually said that before in their life.”

Lovo advertises the commercial use of its platform to “Save $$ and time on voiceovers.” Allegedly, “Lovo represents to its customers that Lovo is granting full commercial rights for all content generated using its platform to users who subscribe to any of its paid plans,” which cover “any monetized, business-related uses such as videos, audio books, advertising, promotion, web page blogging, [and] product integration.”

Lovo originally solicited Lehrman and Sage for the projects relevant to this action on an online marketplace for freelance services called Fiverr. A Lovo employee allegedly contacted Lehrman and hired him to “provide voice recordings for ‘research purposes,’” assuring him that the company would use the recordings for “research purposes only,” and that such research would be only “internal” and “academic” in nature. Lehrman wrote back, asking for a “guarantee that these scripts will not be used for anything other than your specific research project,” to which the employee replied: “The scripts will not be used for anything else ....” The employee further confirmed that the script would not be “repurposed and used in a different order.” He was paid $1,200 for his work.

Similarly, Sage asked what the proposed recordings would be used for, and the Lovo rep (a principal) replied: “These are test scripts for radio ads. They will not be disclosed externally, and will only be consumed internally, so will not require rights of any sort.” Sage asked him to to confirm that the recordings would not be used “in broadcast,” and he again repeated the previous statement. Lovo paid Sage $400 for her work.

Both of them ultimately (after filing suit) registered their scripted performances with the Copyright Office.

Plaintiffs allegedly first learned that their voices had been used in unanticipated ways when they listened to an episode of the Deadline Strike Talk podcast narrated in part by an artificial voice produced by Lovo’s software. They alleged that the voice used in the podcast was “identical to Mr. Lehrman’s voice.” Allegedly, “[n]umerous people who heard the podcast,” including “friends” and “professional colleagues” “told Mr. Lehrman or Ms. Sage” that the “voice on the podcast was virtually identical to Mr. Lehrman’s voice,” and that “the cloned voice would undoubtedly be mistaken for Mr. Lehrman’s actual voice.” They also alleged, with declaration support, that professionals “experience[d] [in] discerning and conveying small differences in voice tone, quality, timbre, and delivery” believe that “Lovo’s cloned voice is a replica of Mr. Lehrman’s real voice.” Lehrman allegedly found that Lovo “had been marketing [the clone of his voice] as part of its subscription service under the stage name ‘Kyle Snow.’ ” The Kyle Snow voice was also in advertisements on Lovo’s website and YouTube. For example, Lovo allegedly advertised the Kyle Snow voice as “an ideal male voice generator ... for all kinds of content” due to his “upbeat tone and slightly faster talking speed.”

Sage also allegedly discovered that Lovo had created a clone of her voice named “Sally Coleman” that was available to Lovo’s subscribers. This was allegedly marketed using “side-by-side” comparisons of Sage’s original audio recordings—the ones she provided via Fiverr—and the “cloned version of her voice,” including in an investor pitch that was posted on YouTube. 

Plaintiffs brought individual claims and also sought to represent a voice actor class and a consumer class of consumers who bought the Lovo software and used the voices.

Breach of contract: Sufficiently pled.

Lanham Act false association: Failed for want of a mark that was used as a mark. Plaintiffs didn’t argue that they could bring §43(a)(1)(A) claims without a valid mark. Persona can be a “mark”—even for a noncelebrity. But celebrity endorsement cases have involved “the unauthorized use of a celebrity’s likeness on merchandise, implying that the celebrity approves of the merchandise or is affiliated with the seller,” or “the explicit use of a celebrity’s likeness in advertising or to promote goods or services.”

Plaintiffs alleged that “they are well-known and sought-after voice actors whose voices are their recognizable calling cards,” which was enough at this stage to make the use of their voices capable of causing consumer confusion. The problem was that the allegations didn’t suggest trademark use. “Because marks can take essentially any form, courts must therefore be careful to ensure that they receive protection only when used as contemplated by the statute—that is, as marks.” The court found celebrity endorsement cases to be an “uneas[y]” fit with this principle, “as celebrities’ personas are also their products,” though at least for advertising cases the service of endorsement seems like the trademark use. Citing Jennifer Rothman, the court emphasized that “personal marks” are treated differently from other marks—they’re harder to register, and the law “is highly skeptical of efforts to restrict individuals from using their own identities in trade” and doesn’t allow “transfer attributes of one’s identity—such as personal skill as an artisan—when one transfers trademark rights in one’s name or likeness.” [My own view is that the latter point isn’t really relevant—it’s just not possible to do that; maybe that means that many name transfers are transfers in gross and should fail, but that is straying pretty far from our concerns here.]

The key issue here was that this wasn’t a celebrity endorsement case: the voices were themselves the products/services being sold. “Plaintiffs here use their voices in ways that are clearly separable from their identities and personalities. Their clients pay them to produce recordings of themselves narrating scripts, which the clients then own and use to produce content, as authorized by their contracts with Plaintiffs.” Thus, their voices “serve dual functions as both ‘one of the most palpable ways identity is manifested,’ and as ordinary services in the voice-over market.” Thus, even as to the alleged false endorsement or “business affiliation” confusion, plaintiffs’ voices were “protectable only to the extent that they function primarily as source identifiers rather than as products themselves.” The court analogized to trade dress product design claims, which are difficult because trademark terminology “is unsuited for application to the product itself.”

Plaintiffs failed to show that their voices were protectable marks. They didn’t plead secondary meaning or the relevant factors except for “a few conclusory references to the recognizability of their voices” and the fact that “Plaintiffs’ work has been sought out by large companies.” Regardless, “Plaintiffs have not alleged that their voices are primarily significant as brands rather than as services to which brands might be attached.” As the court noted, “even extremely famous celebrities are barred from asserting Section 43(a)(1) claims based on the use of their likenesses as products rather than as source-identifying marks.” Product use was descriptive use, not trademark use. An alternate rule would threaten a new voice actor “whose voice happens to sound highly similar to either Lehrman’s or Sage’s,” especially given that identicality isn’t required for likely confusion. The court also pointed out that unregistered trademark rights can be assigned, with “unsettling” consequences for voices:

To allow any artist, actor, or other creative tradesperson to sue their doppelgangers for trademark infringement, as Plaintiffs’ theory would allow, would “create[e] a cause of action for, in effect, plagiarism,” and would be incompatible with the careful ways that courts have circumscribed the Lanham Act to avoid unduly burdening competition and free expression. [Citing Dastar.]

Lookalike cases involving ads involve “appropriating the identity and the goodwill of the famous plaintiffs—that is, pretending to be Woody Allen—rather than merely engaging in the same trade while happening to look like the famous plaintiffs.” And, the court noted, Allen’s cases involved use of identity in ads, not his lookalike’s presence as part of a good or service. “To allow Plaintiffs to protect the downstream uses of their voices merely because Plaintiffs originated them would disrupt the ‘carefully crafted bargain’ struck by patent and copyright law and ‘misuse’ the Lanham Act to ‘to reward [artisans] for their innovating in creating a particular [work or] device.’”

What we’re seeing, post-JDI, is the further development of a “use as a mark” doctrine to cabin trademark’s nearly unchecked expansion, unfortunately mostly without discussion of the relevant considerations and how they relate to the purposes of trademark law. That’s present here, yay! It would be great for more courts to admit that this not an entirely empirical assessment, or at least it’s only empirical at the categorical level. (See also the pre-JDI Louboutin v. YSL case, the standout entry in the “ipse dixit use as a mark” cases.) In addition, JDI’s language about how even partial TM use is bad is, as has always been apparent, complete nonsense (in the absence of a materiality requirement).

False advertising: Two theories here. First, plaintiffs alleged that marketing their voices under the names “Kyle Snow” and “Sally Coleman” was literally false. The court disagreed: “Plaintiffs point to numerous examples of Lovo marketing the voices as what they truly are—synthetic ‘clones’ of real actors’ voices.” Also, Lovo falsely allegedly stated that the cloned voices “came with all commercial rights.” But even if that’s true, “such misrepresentations do not concern ‘the nature, characteristics, qualities, or geographic origin’ of Plaintiffs’ cloned voices.” (Dastar.)

Second, plaintiffs alleged that Lovo “confus[ed] potential customers ... as to [Plaintiffs’] affiliation with Lovo and the ability to use the Lovo service in place of traditional access to these actors,” and that Lovo “misrepresent[ed] that [Plaintiffs] have partnered with Lovo.” Those were not actionable as false advertising; they were repeats of the false affiliation claim, and “Plaintiffs cannot avoid the requirement of a protectable mark by ‘disguis[ing] a § 43(a)(1)(A) trademark infringement and unfair competition claim as a false advertising § 43(a)(1)(B) claim.’”

In addition, plaintiffs failed to identify any false implication or consumer confusion from Lovo’s advertising, “as opposed to being confused by the similarity of the synthetic voices to Plaintiffs’ voices when heard in the wild. In fact, Plaintiffs actually allege that Lovo’s advertising was clear on the lack of connection between Plaintiffs and Lovo’s voice clones.”

Even if Lovo made misrepresentations, plaintiffs didn’t plead actual injury. Where “the defendant and plaintiffs are competitors in the same market,” materiality and injury usually blend together, but plaintiffs didn’t allege that their losses were related to actionable false claims in Lovo’s advertising. Instead, their losses were allegedly due to the existence of Lovo’s product: “Put differently, Lovo’s services are more desirable to some customers because they are cheaper and more accessible. While Plaintiffs might have a different cause of action for such competitive harm, it does not sound in Lanham Act false advertising.”

Copyright: Four claims, only one of which goes forward. The court approved of the sequence (1) complaint filed without any copyright claims, (2) registration secured, (3) complaint amended to add copyright claims as consistent with Fourth Estate, and I think I agree, since (1) was far from a sham complaint. The discovery rule applied for statute of limitations purposes,

Contractual defenses couldn’t be resolved on a motion to dismiss, even without taking into consideration the chat messages exchanged by the parties. Turns out, Fiverr’s TOS provide special rules for “Voice Over Gigs” “that are inconsistent with a transfer of unrestricted copyrights.” Despite a general work for hire clause, the TOS stated that buyers of voice-over recordings are only “purchasing basic rights, ... allowing them to use the work forever and for any purpose except for commercials, radio, television and internet commercial spots.” Buyers need to purchase higher-tier packages of either “Commercial Rights,” in order to “promote a product and/or service,” or “Full Broadcast Rights,” in order to use the recordings “in radio, television and internet commercials.” Lovo didn’t do that.

First, Sage successfully pled a direct infringement claim based on Lovo’s use of her actual voice recording in an investor presentation, pitches to investors, at a conference, and in Lovo’s external marketing materials. (Although this is for later, the fair use defense for comparative advertising is a distinct subset of copyright fair use cases where defendants generally win. How else are they supposed to substantiate their claim of being as good as a human?)

Both plaintiffs alleged direct infringement based on Lovo’s use of their recordings to train the Genny AI model. These claims failed “for lack of adequate explanation in the complaint.” They didn’t explain “what training is or how it works, even at a very high level of generality. The Court therefore cannot ascertain or reasonably infer which exclusive rights Lovo allegedly infringed, or how.” But amendment was possible, including using information-and-belief pleading. (On the other hand, it might be hard to plead what was outside the scope of the license, even as modified by the chats.)

Copyright infringement by the AI outputs: Here there was really no hope. Sound recording copyright only covers exact duplication of the fixed sounds, which was not alleged here as even a possibility for Genny. And we know that a voice isn’t copyrightable, since that’s what gives them their valid ROP claims.

Contributory infringement: based on AI outputs, therefore failed.

NY ROP: Although NY’s ROP is narrower than other states’, and only covers uses in, essentially, advertising, there was enough here to proceed. (Query how much of plaintiffs’ damage comes from the advertising and not the underlying product; also, later on the incidental use defense—advertising for a product that does not itself violate the ROP is protected where the advertising actually relates to the product—may come into play.)

The statute of limitations is one year, but the republication exception can restart the limitations period, and applied here. But are digital replicas even covered? Lovo argued that NY’s 2021 statutory protection for digital replicas of deceased persons meant that expressio unius applied to exclude that from the main ROP. But that reasoning ignored context. “Just before the amendment was proposed, New York courts held that digital replicas of living persons—at least ones with a visual component—were already covered by the law. There is no indication in the text of Sections 50 and 50-f, or in the legislative history, that the amendment was intended to overturn this precedent, nor to exclude the possibility of a similar holding with respect to audio-only voice clones.” The same could be true of voice. “If anything, the Court views ‘voice’ as having a broader scope than a term like ‘picture,’ because it cannot plausibly be read to refer to any particular form of media or representative device. While Section 51’s statutory ROP “is to be narrowly read” in light of its legislative history, it is nonetheless “not to be obeyed grudgingly by construing it narrowly and treating it as though it did not exist for any purpose other than that embraced within the strict construction of its words.”

As to the substance, plaintiffs sufficiently alleged recognizability and Lovo itself allegedly represented that its creations are “practically indistinguishable from the ‘real’ voice.” While “New York courts have consistently dismissed Section 51 claims based on the use of a fictitious name, even if the depiction at issue evokes some characteristics of the person or the person is identifiable by reference to external sources,” “those cases all involve a fictional character sharing certain discrete attributes or traits with a Section 51 plaintiff, not the use of the plaintiff’s portrait or voice.” “Lovo cannot escape liability merely because it appended fictitious names to those appropriated voices. To hold otherwise would carve out a massive, judicially created loophole in the statute with no textual or doctrinal basis.”

Plaintiffs also adequately alleged use in both advertising and trade. “Advertising purposes has been defined as use in, or as part of, an advertisement or solicitation for patronage of a particular product or service, and trade purposes involves use which would draw trade to the firm,” although the statute doesn’t reach newsworthy uses or matters of public interest. Lovo didn’t raise a First Amendment, newsworthiness, or public interest defense.

The court is a little wobbly on whether the underlying product itself counts as “trade” purposes, though my reading of the NY cases is that it can’t (emphasis added to last sentence):

Whether or not the solicitation of investors itself counts as an “advertisement,” the function of the “investor presentation, which was later posted publicly online, is plausibly understood as promoting Lovo’s underlying product. The same goes for the use of Lehrman’s voice in tutorials and promotional articles posted online. Moreover, even if the voices were not used in formal advertisements or solicitations, they were clearly used for commercial purposes, and to draw trade to the firm. It is plausible to infer that, by illustrating the value of the product and helping show prospective customers how to use it, Lovo used its publicly posted tutorials to increase the appeal of its software, acquire subscribers, and retain subscribers it already had. Plaintiffs allege even that Lehrman’s cloned voice was Lovo’s default product and one of its self-described “best” voices.

NY GBL: Partially survives, raising an interesting Dastar preemption issue. Section 349 prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service” and Section 350 prohibits “[f]alse advertising in the conduct of any business, trade or commerce or in the furnishing of any service.”  “To successfully assert a claim under either section, ‘a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice.’ ”

Mostly, plaintiffs failed to identify material misrepresentations to the public; they couldn’t rely on misrepresentations to them because they were not acting as consumers in those transactions, and Sections 349 and 350 do not reach such “narrow, private dispute[s].”

However, plaintiffs adequately alleged that Lovo materially misrepresented the scope of the “commercial rights” that it promised to provide to its subscribers, thereby making its offerings appear more attractive. Lovo’s consumers thus “purchased ... [but] did not receive a product with the full value with unlimited usage rights, which would have been a product with legitimately acquired and/or created voices.” Sections 349 and 350 aren’t limited to “nature, characteristics, qualities, or geographic origin.”

Note: While statutory interpretation got us Dastar, if it’s true that extending the Lanham Act to licensing claims would cause a conflict with copyright law, it’s equally true that extending state law to licensing claims would cause a conflict with copyright law, creating conflict preemption. Cf. Jackson v. Roberts (finding preemption of a ROP claim). But the court says that plaintiffs “could not bring a similar GBL claim based on alleged misrepresentations about a copyright license, as such a claim would be preempted by the Copyright Act.” I am not sure about the difference between advertising “commercial rights” or “unrestricted use” and advertising “properly licensed,” but ok.

“Lovo promised its subscribers that they could use Lovo’s voice clones without legal restrictions. While Lovo was correct with respect to federal copyright and trademark law, it was incorrect with respect to New York law. Lovo’s consumers could, like Lovo itself, be liable under Sections 50 and 51 of the NYCRL.” [Again, the language here is open, but I would argue that the only liability for customers would have to be for their own uses in advertising/trade.]

Lovo’s conduct with respect to its subscribers was “consumer oriented” in that it was “directed to consumers” and had “a broader impact on consumers at large.” Although the mere unauthorized use of the plaintiffs’ images would not be “ ‘consumer-oriented in the sense that it potentially affects similarly situated consumers,” reselling the voices to third-party consumers for downstream use by those consumers was relevantly different.

And plaintiffs adequately alleged that they suffered injury from Lovo’s misrepresentations in the form of diverted customers and lost sales. “While it is true that Lovo offered its voice clones at lower prices than the services of traditional voice actors, Lovo was able to poach Plaintiffs’ customers only because it purported to offer products that its subscribers could legally use—that is, because it engaged in misrepresentations made unlawful by Sections 349 and 350.”

Fraud claims failed because (1) plaintiffs didn’t adequately plead damages; although they alleged customer diversion/harm to brand value, they didn’t quantify the “true value of the recordings they sold to Lovo, as opposed to what Lovo paid,” which is the measure of fraud damages in NY, and (2) their fraud claims merely restated their breach of contract claims, which isn’t ok in NY “when the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract.”

Unjust enrichment, conversion, and common law unfair competition claims were preempted by the New York Civil Rights law, which preempts “all common law claims based on unauthorized use of name, image, or personality, including unjust enrichment claims.” Relatedly, unfair competition is like the failed Lanham Act claims (except also requires bad faith), and there were no facts alleged “supporting an inference that Lovo acted with the intent of generating confusion or coopting Plaintiffs’ reputations (as opposed to the desirable characteristics of their voices).”

 

 

 

Amicus brief on CMI removal in Doe v. Github

 With Jennifer Urban, Erik Stallman, and Pam Samuelson, I'm happy to have worked on this amicus brief discussing the text, history, and structure of 1202.

even if it's not a security, a stablecoin can trigger false advertising claims

Donovan v. GMO-Z.com Trust Company, Inc., --- F.Supp.3d ----, 2025 WL 522503, No. 23 Civ. 8431 (AT) (S.D.N.Y. Feb. 17, 2025)

Plaintiffs sued GMO Trust, alleging that it violated federal securities laws and NY state consumer protection laws in connection with the “offer” of a digital asset known as “GYEN,” sold as a “stablecoin.” The court found that GYEN wasn’t a security, but allowed the NY and California claims to proceed.  (Claims against Coinbase have been sent to arbitration.)

GMO Trust touted GYEN as a fiat-collateralized stablecoin—that is, one unit of the stablecoin is backed by one unit of fiat currency, here the Japanese yen. GMO Trust retains for itself any interest generated by the bank accounts where it deposits customer collateral, and it may receive monetary benefits from third-party exchanges as consideration for agreeing to list GYEN on their platforms.

Its Whitepaper on its website touted GYEN as “a global currency solution” that can “virtually eliminate [the] volatility” associated with traditional digital assets such as Bitcoin “while still benefitting from the advantages of digital assets, such as high transaction speeds matched with low costs.” GMO Trust advertised and linked to various “partner” exchanges, including Binance and Coinbase. It allegedly consistently maintained in its promotional materials that purchasers could “always redeem 1 GYEN for 1 JPY ... directly with GMO Trust” and on any third-party exchanges that listed the digital asset.

GYEN launched in March 2021, and there was a lot of price movement. Plaintiffs bought at elevated prices and lost 90% or even 99% of their purchase prices as the price of GYEN returned to its yen peg. For example, “GYEN purchasers whose orders on Binance took time to fill, or who mistakenly bought GYEN when the price on Binance was untethered from the value of JPY, lost as much as 99 percent of their purchase value within hours.” Some of this occurred when exchanges were restricting the ability of customers to trade GYEN in order to deal with rapid fluctuations.

Whether GYEN was a “security” is outside my wheelhouse, so I’ll just report the court’s top-line conclusion: no (specific to the stablecoin context).

However, it was reasonably likely that there would still be CAFA jurisdiction over the state law claims, to which the court turned:

Plaintiffs allege that GMO Trust targeted consumers with statements and advertisements representing that GYEN would always remain pegged to the value of a historically stable fiat currency; omitted the risk that the asset’s value could become untethered from JPY on certain of GMO Trust’s “partner” platforms; and continued to make such representations and omissions even after the price of GYEN on Binance temporarily untethered from the value of JPY in May 2021. Indeed, Plaintiffs allege that GMO Trust not only omitted the risk that the price of GYEN could become untethered on third-party platforms, but it affirmatively stated that consumers would “always” be able to purchase GYEN at a one-to-one value with JPY on GMO Trust’s “partner” exchanges.

They also sufficiently alleged that these statements were objectively misleading, deceptive, and false because the value of GYEN in fact could—and allegedly did—become untethered from the value of JPY on third-party exchanges, and fluctuated over 200% against the dollar in one period. “Given that GMO Trust held GYEN out to consumers as a ‘stable’ counterweight to the extreme volatility of the digital asset market, and held itself out as a regulated and licensed entity offering a product backed by fiat currency held in FDIC-insured U.S. bank accounts and monitored by independent auditors, a reasonable consumer, acting reasonably in the circumstances, could have been misled or deceived by GMO Trust’s statements, acts, practices, omissions, and advertisements.”

As to California law, the court declined to require plaintiffs to meet Rule 9(b)’s heightened pleading standard, because the UCL’s “fraud” prong is not the same as common law fraud—it has lower standards. Unfairness claims also survived.

California's Made in the USA safe harbors aren't preempted by federal law

McCoy v. McCormick & Co., 2025 WL 1918546, No. 1:25-cv-00231-JLT-SAB (E.D. Cal. Jul. 11, 2025) (R&R)

McCoy alleged that French’s mustard bottles were falsely advertised with the claim “Crafted and Bottled in Springfield, MO, USA,” appearing at times with “American flavor in a bottle,” because the product contains foreign-made components. The magistrate recommended granting the motion with leave to amend. Interesting dive into the “Made in the USA” waters.

Specifically, McCoy alleged that the primary substantive ingredient is mustard seed, which is sourced primarily, if not exclusively, from Canada. Some varieties, including French’s Yellow Mustard, allegedly contain turmeric, another imported ingredient.

McCormick argued that California’s statutory safe harbors for “Made in the U.S.A.” protected it against McCoy’s California claims (including state law claims). McCoy argued that California’s safe harbor provisions are preempted by federal law—a conclusion rejected by the court. But he also argued that he alleged that a substantial portion of McCormick’s products exceeded California’s safe harbor levels.

The FTCA provides:

To the extent any person introduces, delivers for introduction, sells, advertises, or offers for sale in commerce a product with a ‘Made in the U.S.A.’ or ‘Made in America’ label, or the equivalent thereof, in order to represent that such product was in whole or substantial part of domestic origin, such label shall be consistent with decisions and orders of the Federal Trade Commission issued pursuant to section 45 of this title.

The FTC’s resulting Rule states:

[I]t is an unfair or deceptive act or practice...to label any product as Made in the United States6 unless the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.

16 C.F.R. § 323.2 (emphasis added).

California law also makes it unlawful to sell products as “Made in U.S.A.,” or other similar words, if the product or “any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” However, under California law, a product may be lawfully labeled as “Made in the U.S.A.” if no more than five percent of the final wholesale value of the manufactured product is obtained from outside the United States, or if no more than ten percent of the of the final wholesale value of the manufactured product is obtained from outside the United States and the manufacturer shows that it can neither produce the foreign article, unit, or part within the United States nor obtain the foreign article, unit, or part of the merchandise from a domestic source.

The FTC’s Rule provides that “this part shall not be construed as superseding, altering, or affecting any other State statute...relating to country-of-origin labeling requirements, except to the extent that such statute...is inconsistent with the provisions of this part, and then only to the extent of the inconsistency.” There is clearly not field preemption, and the judge was not persuaded that California’s safe harbor provisions were inconsistent with the FTC’s “all or virtually all” standard. The disjunctive standard of “all or virtually all” “necessarily means the FTC contemplates that a small amount of foreign content may be present to lawfully label a product as Made in the U.S.A.” The FTC has expressly declined to adopt a definition of “all or virtually all” because “adding further specificity also increases the risk the rule would chill certain non-deceptive claims.” Instead, it says that its rule requires a “de minimis, or negligible, amount of foreign content.” There was certainly no rule that a product containing foreign materials that make up less than 90-95% of a product’s wholesale value qualifies as more than a “de minimis, or negligible, amount of foreign content.” The legislative notes for the state safe harbor specifically referenced the FTC’s Rule, and the FTC, while it declined to adopt percentage thresholds because the “ ‘all or virtually all’ standard is better tailored to prevent unqualified U.S.-origin claims that will mislead consumers in making purchasing decisions,” it didn’t suggest that California’s safe harbors were, in every instance, inconsistent with the “all or virtually all” standard. Nor was it inherently inconsistent with the FTC Rule to rely on “final wholesale value,” since the FTC considered that one of the often-relevant factors in determining whether foreign content was de minimis.

Thus, there was neither express nor conflict preemption. And McCoy failed to plead facts showing that his claims weren’t barred by the safe harbor provisions, but the magistrate judge recommended that he should get a chance to fix that. It wasn’t enough that mustard seed was the third ingredient by weight, since that didn’t show final wholesale value in a product with six or more ingredients.

 

New book chapter on advertising, TM, and antitrust

Misleading advertising as a matter of unfair competition law 

Graeme B Dinwoodie and Ansgar Ohly (eds), Research Handbook on Unfair Competition and Passing Off (Edward Elgar, forthcoming 2026)

Abstract

The prohibition of false and misleading advertising should be the prototypical example of unfair competition law. False and misleading advertising, after all, is generally held to be unequivocally bad, even if punishing every instance would be more costly than it’s worth. But most of modern unfair competition law, at least in the United States, is focused on different things—more in the realm of trademark law (and sometimes antitrust), and I think to its detriment. As trademark’s scope has ballooned, and as the law has tolerated more and more monopoly power, it has also tolerated more and more false advertising. A rebalancing towards false advertising could strengthen the field of unfair competition as a whole.

P&G's brand extension ZzzQuil must face lawsuit alleging falsity of its "Non-Habit Forming" claim

Sneed v. Procter & Gamble Company, --- F.Supp.3d ----, 2025 WL 1017933, No. 23-cv-05443-JST (N.D. Cal. Apr. 4, 2025)

This case is about a product I recently noticed, “Nighttime Sleep Aid” products containing diphenhydramine hydrochloride as ZzzQuil. Sneed alleged that the “Non-Habit Forming” claim on the product was misleading, as diphenhydramine is in fact habit-forming/not different from other sleep aids.

The court rejected P&G’s preemption arguments, some of which were already rejected in an earlier opinion. Briefly, that opinion looked at a FDA tentative final monograph finding “little to no pharmacologic potential for abuse of the ingredients in OTC nighttime sleep-aids,” and that “antihistamines like diphenhydramine ‘have generally been regarded as having low abuse potential and no ability to create dependency.’” But the same monograph specifically concluded that “[t]he term ‘non-habit-forming’ is misleading, undesirable and probably false because it is very hard to prove that any product with psychotropic activity can be non-habit forming; but more importantly, there is an insinuation that other OTC sleep-aid products obviously are habit-forming.” Thus there was no preemption.

Here P&G also pointed to two FDA approval letters where the FDA approved for marketing two cough syrups containing diphenhydramine and their corresponding labels describing the products as “non-habit forming.” But those were cough medicines for temporary use, with less diphenhydramine present per dose, and a sleep aid would foreseeably be used more regularly than cough medicine. That label wasn’t “materially identical” to the one at bar. Nor did the FDA approval for “non-habit forming” cough-medicine labels showed that it must have “reversed its tentative view [on diphenhydramine being potentially habit forming] as it evaluated additional studies.” Fundamentally, the court wasn’t convinced that the claim here would challenge an approved label. There’s no federally approved label for ZzzQuil as to the challenged statements, and “circumstantial evidence surrounding the approval of a different drug with a different dosage—even if containing the same main ingredient—does not pose the risk of conflicting factual determinations about whether ZzzQuil specifically is habit forming.”

The court had previously found that Sneed failed to sufficiently allege that the product actually could be habit-forming; the amended complaint remedied that deficiency by adding citations to “a variety of scientific studies and articles,” including (1) a declaration that discussed clinical case reports; (2) a 2008 study where the researchers detected “a cocaine-like pattern of stimulation of [dopamine] transmission” in rats after the rats were provided with intravenous doses of diphenhydramine;1 (3) a 2002 study finding that individuals rapidly developed tolerance to the sedative effects of diphenhydramine when administered a 50 mg dose twice a day; and (4) a 2021 study reporting a 63% increase in intentional diphenhydramine exposures from 2005 to 2016, including a 230% rise in misuse among adults aged 55 and older.

P&G said that the sources (1) do not focus on diphenhydramine specifically, (2) are based on anecdotes, (3) involve the significant abuse of diphenhydramine rather than the use of the drug as directed, or (4) involve studies that expose test subjects to diphenhydramine at levels exceeding 50 mg per day. But none of that was enough to make the claim implausible given the evidence alleged. As another court wrote: “[t]he cited studies reference at least [the diphenhydramine] identified in the complaint and purport to document their [tendency for misuse and potential habit formation]. Discovery may expose that those studies contain vital flaws, but it is enough for now that the studies do not plainly refute the allegations in the complaint.”

GIs can be indications of quality for purposes of applying failure-to-conform exclusion to advertising injury insurance policy

Allied World Nat’l Assur. Co. v. NHC, Inc., 2025 WL 1852789, No. 22-00469 MWJS-WRP (D. Haw. Jul. 3, 2025)

Nice to see good old-fashioned legal reasoning in these times.

In the underlying lawsuit, class plaintiffs alleged that MNS falsely advertised coffee products labeled as “Kona” that contained little to nothing of the real thing, thus capturing a price premium. MNS ultimately settled the lawsuit for $12 million and sought indemnification from its umbrella insurers. Interpreting the relevant policy’s advertising injury coverage, the court found that an exclusion barred coverage and granted summary judgment for the insurers.

The underlying lawsuit asserted Lanham Act violations. MNS and other named retailers sought the dismissal of the Lanham Act false advertising claim against them to the extent they had acted purely in their role as retailers. The court granted that motion, reasoning that a false advertising claim requires “a false statement of fact by the defendant in a commercial advertisement about its own or another’s product.” Although the court recognized that “[t]here is limited case law on this subject” and that “the Ninth Circuit has not weighed in on this issue,” it concluded that retailers are not liable for false advertising under the Lanham Act “because they do not make a false statement simply b[y] displaying or selling a product that was falsely labeled by another.” However, it cautioned that “[i]f, for example, a retailer controls or participates in the creation of the offending label or creates additional marketing materials for a product that amplify the manufacturer’s misrepresentations, imposition of liability for false advertising may be appropriate.”

As the case headed for trial, other defendants settled and MNS’s supplier filed for bankruptcy. Plaintiffs alleged that MNS was an active partner with that supplier: “MNS regularly collaborated with Mulvadi in developing marketing materials for Mulvadi coffee ... Mulvadi advertising commonly featured MNS’s logo and slogan ... [And] MNS’s 30(b)(6) deponent agreed that the company’s internal emails ‘demonstrat[ed] MNS’s involvement with Mulvadi and Mulvadi promotion.’ ” Then they settled.

The settled claims were defined as “any and all actions, claims, demands, rights, suits, or causes of action, whether asserted or not asserted, that arise from or relate to the allegations made or conduct described in” the last operative underlying complaint, “including but not limited to allegations related to the labeling, packaging, advertising, promotion, branding, marketing, manufacturing, design, formulation, distribution or sale of coffee labeled as ‘Kona,’ regardless of the statute, regulation, common law legal theory, or other legal basis on which the allegations may be asserted.”

Ultimately, Allied World alleged that it had no defense or indemnity coverage obligation under its policies because the settlement liability did not arise out of the “use of another’s advertising idea in [MNS’s] Advertisement” or “infringement upon another’s copyright, trade dress or slogan in [MNS’s] Advertisement.” In addition, it invoked the exclusion for advertising injury arising “out of the failure of goods, products or services to conform with any statement of quality or performance made in [MNS’s] Advertisement.”

The insured bears the burden of establishing that the coverage provisions apply, while the insurer bears the burden of establishing that an exclusion applies. Hawai‘i state law governed. Insurance policies “must be construed liberally in favor of the insured and [any] ambiguities [must be] resolved against the insurer.”

The settlement constituted a legal obligation, and it plainly covered the Lanham Act false advertising claims. Indemnification does not require a finding of liability or a finding that there would have been liability. “If insurance coverage in the settlement context were to turn on a prediction about whether a defendant would have been held liable if a case had gone to trial, the very uncertainty of that prediction—which is presumably one of the factors that would otherwise induce parties to settle—would encourage them instead to trudge on with the litigation.” True, the Hawai‘i Supreme Court’s has stated that an insurer’s indemnity obligation “depends upon the true state of facts surrounding the loss or injury.” But that case did not involve a settlement. “And in cases that do not involve settlements, it makes logical sense to say that an insurance company must defend the insured if there is a possibility of covered liability, but that it need only indemnify the insured if there actually is covered liability.” Settlements are different— “it is no longer a question of possible or potential liability.” Thus, to determine whether the legal liability created by settlement “flows from a covered claim, a court must inquire not into what has been or would have been resolved on the merits, but what claims the settlement has legitimately and reasonably been designed to cover.”

That doesn’t mean that insureds can insert frivolous or legally barred claims into a settlement just to get coverage; the court predicted that state law would agree that “an insurance company has the right to present evidence that some or all of a total settlement amount should be allocated to the settlement value of non-covered claims.” But there was no such argument here.

Allied World did argue that there was no possible liability for ad-related Lanham Act claims as a matter of law. But it didn’t show that the advertising-related Lanham Act claims were frivolous or meritless. The underlying plaintiffs made clear in their motion for summary judgment that their view of the evidence was that MNS did not merely act as a retailer, but also participated actively in its supplier’s advertising and marketing efforts. Moreover, the retailer-only liability claims were still appealable at the time of settlement, and the court acknowledged that there was no binding circuit precedent on the issue. Finally, joint and several liability for advertising conduct was still on the table at the time of settlement.

The court turned to the relevant part of the “Advertising Injury” provision, which defined it as an “injury arising out of your business ... arising out of one or more of the following offenses”: (i) “the use of another’s advertising idea in your Advertisement,” or (ii) “infringement upon another’s copyright, trade dress or slogan in your Advertisement.” The policies further define “Advertisement” as “a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters,” including any “material placed on the internet or on similar electronic means of communication.” But “only that part of a web-site that is about your goods, products or services for the purposes of attracting customers or supporters is considered an Advertisement.”

The court rejected Allied World’s claim that the phrase “another’s advertising idea” should be understood narrowly as a “process or invention used to market one’s goods.” “[N]o reasonable layperson would anticipate such a stingy construction of the phrase. Instead, an “advertising idea” is better understood as, and construed in favor of the insured as being, “any idea or concept related to the promotion of a product to the public.” This is similar to the California interpretation of the term as covering the “manner or means” of advertising goods and services.

Allied World also argued that the word “another’s” in the phrase “another’s advertising idea” means that the injury must arise from the use of an “advertising idea” that another person owns or in which they hold a proprietary interest of some sort. But the Kona farmers, it argued, did not hold any legal property right in that term.

But nothing in the language of Allied World’s policies requires that the Kona farmers have the exclusive legal right to use an advertising idea. Indeed, nothing in the language of the policies requires them to have any legal right or property ownership at all in the advertising idea. The possessive term in the phrase “another’s advertising idea” is readily understood to refer to the factual question of whether another person uses something, rather than the legal question of whether they own it. …That broader meaning accords with how language is ordinarily used. For example, when trying to find a place to sit in a coffee shop, one might ask “is this your seat?” When doing so, one is not literally asking if that other person owns the seat. … In a similar vein, one would naturally say that Kona farmers—who advertise their coffee as “Kona” precisely to signal the high quality and special characteristics of their product—have hit on “Kona” as their advertising idea. They use it, and it is theirs in that significant sense. And it is theirs even though they have no property right in it.

While “some concepts are simply too common or too widely used to be considered anyone’s advertising idea,” this was not one of them.

Allied World also argued that the injury from the use of another’s advertising idea must come from that idea’s use in “your”—the insured’s—“Advertisement,” and that the underlying lawsuit plaintiffs did not challenge any of MNS’s own advertisements. But the underlying plaintiffs argued that the ads at issue were legally attributable to MNS.

The court did agree that “Kona” was not a “slogan,” as relevant to the separate definition of “Advertising Injury” as also covering injury from infringement on a copyright, trade dress, or slogan. The court agrees that “Kona” is not a “slogan,” that is, a “distinctive cry, phrase, or motto of any party, group, manufacturer, or person; catchword or catch phrase.” “Whether labeling products as ‘Kona’ might qualify as trade dress is a more difficult question.” But it didn’t matter because initial coverage was already established.

What about the exclusions? There, MNS faltered. The failure-to-conform exclusion provided that Allied World’s policy “does not provide coverage” for any “Advertising Injury ... arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your Advertisement.” Although “exclusionary clauses are interpreted narrowly against the insurer,” Allied World would meet even a heightened standard for applying the exclusion.

When MNS settled claims that alleged MNS was making statements about the quality of their coffee products when they labeled those products as “Kona,” those claims amounted to a statement of quality for purposes of the policy. The underlying lawsuit plainly alleged that Kona coffee has a “distinctive flavor and aroma” resulting from its cultivation in the “volcanic soil, the elevation, and the humidity” of the Kona District of Hawai‘i island; that “Kona coffee is one of the rarest and most prized coffees in the world” and that a vendor of same is “tell[ing] consumers that the coffee has a distinctive flavor profile, and that the beans are of the highest quality.” By selling commodity coffee that did not contain much, if any, genuine Kona coffee, MNS allegedly sold a product that failed to conform with that statement of quality. The underlying complaint alleged that defendants damaged the goodwill and reputation of Kona coffee precisely because a “consumer who tries that inferior product, thinking it is Kona coffee, will conclude that Kona coffee is not worth a premium price” and “will be unwilling to pay a premium price for Kona in the future.” The alleged injury to the Kona coffee farmers “flowed directly and unambiguously from the alleged failure of MNS’s coffee products to conform with the quality expected of Kona coffee.”

MNS argued that “Kona” was merely a statement about the origin or source of the product, rather than a statement of quality. But the cited out-of-circuit district court decisions simply found, “in their own unique circumstances, that statements of source were predominantly about the provenance of products, rather than their quality.” (Citing cases about Native American origin claims and reasoning that “similar logic could be said to apply whenever a product is labeled as ‘Buy American’ or ‘Buy Local.’”) Although previously the court followed the logic of GIs, now it says: “When vendors label a wine as ‘Burgundy,’ they are not seeking to avail themselves of the peculiar interest of customers in supporting a region in central France; they mean to say to the customer that the wine will possess the features of a high-quality, and therefore more expensive, strain of the product.” [I often talk in class about casual empiricism in judicial reasoning; this is a good example.]

The underlying lawsuit didn’t just allege sales diversion, or that customers had a peculiar interest in paying premium prices to support Kona farmers. “Its allegations were that ‘Kona’ bespoke high quality, and by selling a product that failed to meet that standard of quality, MNS … undermined the premium market for Kona coffee by unfairly leading consumers to conclude that genuine Kona coffee did not meet the quality standard. Allegations of this nature are not predominantly about the source of a product; they are about the statement of quality that a vendor makes when it calls its coffee ‘Kona.’” [They are both?]

Nor need a statement use “express” representations about quality or performance to be excluded. “While the court recognizes that exclusions must be construed narrowly, it cannot adopt a construction at war with the language of the exclusion. And nothing in the language of the failure-to-conform exclusion would support an artificial ‘magic words’ approach.”

MNS argued that the underlying plaintiffs’ alleged injuries would exist regardless of the coffee’s quality; at least some of that is true because of the alleged driving down of prices for Kona-labeled coffee, but the court concluded otherwise. “If MNS … had sold coffee that conformed to the quality standards of Kona coffee—which, according to the allegations in the [underlying] lawsuit, they could only have done by selling the real thing—there would have been no injury at all.” Even if, at trial, the underlying plaintiffs wouldn’t have been able to prove the higher quality of Kona coffee, MNS did not identify anything in the record of the underlying lawsuit indicating that the plaintiffs there had abandoned or lacked the ability to prove their allegations about the superior quality of Kona coffee. Indeed, two expert reports in the underlying lawsuit “affirm[ed] that the use of the term ‘Kona’ reflected a statement of quality.” One specifically opined “on how the geographical location of production of a product ... is intended to signal quality,” and further noted that the Kona coffee “has historically carried a reputation for high quality.”