Friday, October 30, 2020

trademark law continues as 500 pound gorilla in glue case

J-B Weld Company, LLC v. Gorilla Glue Co., --- F.3d ----, 2020 WL 6144561, No. 18-14975 (11th Cir. Oct. 20, 2020)

This case illustrates how much leeway trademark claims often get and how little false advertising claims do.

My daughter provided the best summary of my take on the trademark part of this dispute: if you can’t tell these two apart, you have no business working with powerful adhesives. But the court found the evidence of copying was so strong as to allow a jury to infer an intent to confuse. This triggered a concurrence emphasizing that intentional copying isn’t necessarily evidence of intent to confuse. But if intentional copying can always or usually reasonably allow an inference of intent to confuse, which itself can be assumed to succeed, then ordinary competitors will find it difficult to avoid a full jury trial, which is an anti-competitive result. (Side note: the court also remanded the state law dilution claim because dilution doesn’t require confusion and the court of appeals couldn’t tell if the district court fully understood that, given that it focused on how different the parties’ products looked, even though that’s also an excellent reason there’d be no blurring either.)

The parties compete in the adhesive market. J-B Weld makes a two-part epoxy adhesive. “J-B Weld Original’s epoxy resin paste also contains iron dust as a filler, purportedly to strengthen and support the adhesive when cured, which J-B Weld recognizes by referring to the product as a ‘steel reinforced epoxy.’” It describes its trade dress as:

(1) two squeezable tubes in a blister package, with the tubes angled inwardly to create a “V-shape;” (2) a black-bannered tube on the left side of the package and a red-bannered tube on the right side of the package; (3) black and white caps on each respective tube; (4) a clear “blister” style protective package that angles inward in the same manner as the tubes; (5) a background card with a width of five inches; (6) a “technical information box,” located in between the two tubes on the background card, including four lines of information separated by white lines; (7) colored banners stretching across the top and bottom portions of the background card; (8) the capitalized/emphasized word “WELD” inside the upper banner on the background card; (9) a list of potential uses for the product in the bottom-right corner of the background card

In 2017, Gorilla Glue introduced a two-tube adhesive under the brand name “GorillaWeld.” GorillaWeld’s adhesive differs from J-B Weld’s in that GorillaWeld uses methyl methacrylate chemistry (MMA), which, chemically, is not an epoxy-group polymer. GorillaWeld’s resin also does not contain any iron or steel. It’s still marketed as an “epoxy” adhesive and, on its packaging, as a “steel bond epoxy.”

Gorilla Glue recognized that it was entering the epoxy market to go head to head against J-B Weld. Its graphic designer stated: “The objective of this project was to go straight up against the top competitor (J-B Weld) and create packaging that mimics the competitor’s architecture. I was able to pull subtle elements into our package, but still keep the package looking tough and geared towards the Gorilla brand.”


The district court found confusion unlikely,  because the packages look so different, but the court of appeals thought it had resolved disputed questions of fact against J-B Weld on similarity, intent, and actual confusion.

Similarity:

Here, reasonable minds could disagree as to which of these features contributes most to the overall impression conveyed by the two marks. Where one consumer may think that the color scheme and Gorilla Glue logo are central to the trade dress’s impression, another consumer may believe that the particular placement and angling of the black-and-red labeled tubes, the identical location of product specifications such as hold strength and set and cure time, and the presence of “WELD” in large, bolded text comprised the primary impression of the two products’ packaging. With this amount of conflicting evidence as to the similarity of the two designs, it was error for the District Court to conclude that, as a matter of law, J-B Weld had not shown that the two products’ trade dress designs were similar.

Intent: Again, the district court erred by failing to make J-B Weld’s “best case.” Intent to confuse can be found based on circumstantial evidence, so a factfinder “may” infer “intent to derive a benefit from a competitor’s goodwill—and, accordingly, an intent to cause confusion—from evidence of intent to copy.” This is especially true if there are substantial similarities.

J-B Weld’s evidence included “communications from Gorilla Glue’s packaging design team that repeatedly referenced J-B Weld Original’s packaging and expressed a desire to use similar elements for GorillaWeld’s packaging.”  The team described certain GorillaWeld packaging options as “[c]lose to JB Weld brand” and aspiring to “go[ ] directly after [J-B Weld Original],” and the team stated their target market was consumers that had used the J-B Weld Original product in the last six months. One Gorilla Glue employee later called the GorillaWeld design a “knock off” of J-B Weld. [Note that GG apparently didn’t choose the closest options, but its consideration and rejection of them gets to weigh against it!]

The district court wrongly relied on the graphic designer’s statement, “I was able to pull subtle elements [of J-B Weld’s Dress] into our package, but still keep our package looking tough and geared towards the Gorilla brand.” This was error because there was evidence that Gorilla Glue intended to “mirror,” “copy,” and “knock off” J-B Weld Original’s trade dress, not simply “construct a worthy competitor.”

And “GorillaWeld was designed with the knowledge that it would be sold on shelves near its competitor in retail stores,” which is apparently evidence favoring likely confusion instead of easily allowing consumers to recognize big differences between them. “This evidence of Gorilla Glue’s intent to copy creates an inference that Gorilla Glue intended to capitalize on J-B Weld’s goodwill, and that evidence is probative of the likelihood of confusion issue.”

It was also improper to impute innocuous motives from the testimony of Gorilla Glue’s employees that the “V-shape” design of GorillaWeld’s packaging served purposes other than mirroring J-B Weld’s trade dress. It’s true that “intentional copying does not necessarily indicate a desire to capitalize on another’s goodwill,” but it can, so it had to weigh in J-B Weld’s favor for summary judgment purposes.

Actual confusion: “J-B Weld’s evidence indicated that other industry professionals, including a buyer at a retailer that carries J-B Weld Original, asked J-B Weld representatives whether J-B Weld ‘had anything to do with’ GorillaWeld, or if J-B Weld was making or supplying Gorilla Glue with ‘private Label Epoxy Twin Tubes’ pursuant to some sort of agreement.” The district court went with case law saying that questions about affiliation show lack of confusion, not confusion—they understand that the signals they’re receiving are at least ambiguous.

But this wasn’t the only reasonable inference from this evidence. It would also be reasonable to infer that “even if the industry professionals knew the two products were different, they were confused as to whether GorillaWeld was the product of a collaboration or other liaison between the two companies.” [Except they asked, rather than assuming—they knew they didn’t know the answer to that question based on what they’d seen. It’s not just that they differentiated the products, which I can do with Diet Coke versus Coke, it’s that they didn’t presume that they were joint productions based on the similarities.] Because affiliation confusion is actionable, this confusion could be legally significant. The question about whether there was a private label deal “leads to a reasonable inference that the person was confused because he or she believed that the similarities in packaging signified a business relationship or other agreement between the companies. Asking if one company ‘had anything to do with’ another company’s product would — or, at least, could — generate a similar inference.”

Plus, the district court failed to consider “any of the circumstantial factors that we have held are integral to determining how much weight should be assigned to any individual instance of actual confusion,” such as “the extent of the parties’ advertising, the length of time for which the allegedly infringing product has been advertised, or any other factor that might influence the likelihood that actual confusion would be reported.” Since the GorillaWeld product was introduced in 2017, and J-B Weld sued quickly thereafter, “in all likelihood the number of reported instances of actual confusion would be on the lower side, making each instance of reported confusion more probative.”

And finally, the district court “failed to appropriately discuss four of the seven applicable factors — the similarity of the products, the similarity of retail outlets and purchasers, the similarity of advertising media used, and the strength of the J-B Weld mark,” which was error. [Query: Pepsi and Coke are at least as similar in appearance—they even use only the same colors. Would it be error to dismiss a confusion claim by Coke against Pepsi based merely on dissimilarity because these factors (product similarity, marketing channels, and mark strength) favor Coke?] A court has to evaluate the weight given to the factors; though that weight varies case by case, it was insufficient to discuss the facts supporting, and weight due, only the three factors discussed above. It was particularly error to rely on the court’s own determination that the trade dress was only moderately strong because the jury could find otherwise given “J-B Weld’s presentation of evidence that J-B Weld Original’s dress is recognizable and has retained consistent features for decades.” [Even though neither of those things are actually evidence of a strong mark as opposed to a mark that works fine but is not particularly strong.]

False advertising: The district court did correctly grant summary judgment on the claim that GorillaWeld is falsely advertised as a “steel bond epoxy.” J-B Weld failed to show materiality of either “steel bond” or “epoxy.”

J-B Weld argued that “epoxy” was material because it refers to the chemical composition of an adhesive, which constitutes an “inherent quality or characteristic” of the product. “But the ‘inherent quality or characteristic’ formulation adopted by this Circuit does not replace the consumer-oriented nature of the materiality inquiry with a scientific one.” The mere fact that components or ingredients are often found to be “inherent qualities or characteristics” that are important to consumer purchasing decisions didn’t mean that they always are. [I sense a bit of tension with the “it’s a jury question” treatment of infringement above.]

While J-B Weld argued that “consumer[s] know[ ] that ‘epoxy’ is a specific and desirable category of adhesives,” it didn’t show that consumers would deem GorillaWeld’s MMA-based adhesive not to be an “epoxy.” It didn’t present “any evidence that consumers are so scrupulous about the chemicals in their adhesives.” Instead, the evidence that there was indicated that consumers probably deemed all two-part adhesives to be “epoxies” regardless of chemical composition. J-B Weld’s survey didn’t ask consumers whether or not they understood epoxy adhesive to have “a specific type of chemistry to it,” and its expert opined that consumers likely only care about whether the product sticks two surfaces together effectively. Gorilla Glue also pointed to evidence that MMA-chemistry based adhesives, such as GorillaWeld, “are frequently marketed, and categorized by retailers, as epoxies.”

Although J-B Weld was correct that retail purchasers or middlemen could be considered in assessing materiality, it didn’t manage to show a factual question as to them either.  The speculation that retailer demand for GorillaWeld increased in 2017 merely because GorillaWeld began including “epoxy” on its labeling couldn’t succceed without proof that it was the inclusion of “epoxy,” and not some other factor, that increased demand for the product.

J-B Weld argued that chemical epoxies and MMA chemistries have “different physical properties,” including “safety and odor differences.” “Maybe so. But J-B Weld has not made any showing that these differences would matter to a consumer.”

“Steel bond”: First, the court was skeptical that Gorilla Glue was really using “steel bond” to describe “a strong bond that works well on metal,” rather than “an adhesive that physically contains iron or steel as a reinforcing agent.” But even so, J-B Weld needed to show that the presence or absence of steel in GorillaWeld resin would be material to a consumer’s purchasing decision, and it didn’t. Its survey asked respondents to identify which of the products they believed contained steel, but didn’t ask about materiality. Internal Gorilla Glue documents showing that it very much wanted to make some reference to “steel” on the package (e.g., “play up on steel”) also didn’t matter. [Now this is definitely in tension with the treatment of intent in the trademark part of the case. Why isn’t it the most reasonable inference that Gorilla Glue, which presumably knows its customers better than the court does, knew what would likely influence them?]

Judge Carnes concurred, but wrote separately “to emphasize the distinction between ‘intentional copying’ and ‘intentional copying with intent to cause confusion.’” Unfortunately, despite celebrating fair competition involving copying, the concurrence doesn’t actually explain when summary judgment for a partial trade dress copier could be proper, making procompetitive copying a risky endeavor. Perhaps if your internal documents don’t say that you seek to “mirror” or be “close to” the competition, or call it a “knock off,” you can still be ok. The concurrence said that the majority doesn’t “alter the well-established rule that intentional copying does not — without more — permit an inference of copying with intent to confuse,” but instead found evidence of that “more” here. I wonder how many instances of copying will not involve people saying that they copied (sorry, “mirrored”), and how people are supposed to talk about their legitimate copying without generating the “more.” I also suspect that, despite all that, product design trade dress copying will continue to get more leeway than product packaging copying.

 

website traffic quality assessment isn't advertising, or defamatory as to site

Young Hollywood LLC v. White Ops, Inc., No. CV 20-03334 PA (RAOx), 2020 WL 6162795 (C.D. Cal. Aug. 6, 2020)

Plaintiff is a “publisher and distributor of exclusive, premium celebrity and lifestyle content.” Its revenue comes exclusively from advertising and licensing content. It worked with Telaria to sell ads and Prodege to advertise/drive traffic. Prodege is an online marketing company that uses “incentivized” or “rewarded” traffic in exchange for viewing ads in order to drive traffic to a client’s website.

Defendant White Ops is a “cybersecurity company that claims to provide fraud detection services.” It offers “MediaGuard pre-bid prevention,” which is a “ ‘pre-bid filter’ intended to prevent fraud before [a] publisher’s [like Plaintiff’s] advertising inventory is offered to advertisers for bidding.” The pre-bid filter “evaluates every request for a bid and blocks fraudulent website traffic - known as invalid traffic or IVT - from being seen or offered to advertisers.” White Ops then publishes a “ ‘taxonomy’ list that categorizes [what Defendant] considers to be IVT.” It allegedly maintains a domain blacklist, and distributes that to clients.

Telaria became a White Ops client, and then Prodege did. After that, White Ops allegedly “began classifying a significant portion of [Plaintiff’s] traffic as [invalid] and [began] blocking [Plaintiff’s] inventory from Telaria’s exchange.” Young Hollywood “learned Telaria was rejecting [65-70%] of [Plaintiff’s] advertising due to [Defendant’s] pre-bid filter,” meaning that [65-70%] of the advertising opportunities [Plaintiff] sought to sell were not being shown to advertisers.” Young Hollywood’s sites were also allegedly placed on the White Ops blacklist, and White Ops allegedly blocked 99% of its traffic, even though its algorithms couldn’t distinguish between “invalid traffic” and “incentivized” or “rewarded” traffic such as the traffic Prodege brought. Young Hollywood allegedly lost its main source of income as a result, and suffered harm to its reputation as a digital media provider.”

When Young Hollywood tried to fix the problem, White Ops allegedly “made it clear that becoming a client of [Defendant] is what it would take to resolve [Plaintiff’s] problem.” In 2020, the president/cofounder of White Ops allegedly acknowledged that its updated algorithm could not differentiate between incentivized traffic and IVT, which was likely the reason White Ops was flagging Young Hollywood’s inventory.” Although he allegedly promised a technical solution, none materialized.

White Ops allegedly falsely labeled Young Hollywood’s advertising space offerings as invalid in reports disseminated to all of its clients,” including divisions of AT&T and Verizon. Telaria allegedly “ended its over a decade long relationship with [Plaintiff] after it was unsuccessful in helping remove [Defendant’s] blocks,” causing a “direct loss of millions of dollars in advertising revenue.”

Young Hollywood sued for (1) defamation, (2) trade libel, (3) product disparagement, (4) unfair competition, (5) intentional interference with prospective economic advantage, (6) negligent interference with prospective economic advantage, and (7) negligence. The court granted a partial motion to dismiss.

Defamation: the statements at issue didn’t call into question Young Hollywood’s “honesty, integrity or competence,” as required for defamation.  The statements were about the quality of the traffic to its site, not about its site itself or even whether Young Hollywood knew about the supposed problems.

Lanham Act false advertising: The court wrongly applied a competition requirement as an element of whether the statements at issue were commercial advertising or promotion. But it’s harmless error because the court also pointed out that the alleged statements “were made to existing customers of Defendant, not to induce new customers to purchase Defendant’s goods or services.” Such “private communications to already existing customers of Defendant” weren’t advertising [though I note it could be if it served customer retention purposes; still, just listing Young Hollywood’s sites in itself isn’t obviously done to keep customers buying.

Thursday, October 29, 2020

descriptive fair use defeats counterfeiting claim (on PI motion)

Freelancer Int’l Pty Ltd. v. Upwork Global, Inc., 2020 WL 6271030, No. 20-cv-06132-SI (N.D. Cal. Oct. 23, 2020)

The parties compete in offering “software platforms matching freelancers with freelancing jobs.” Plaintiff Freelancer Tech has standard character mark registrations for FREELANCER for, inter alia, computer software for personal information management; computer software for accessing, browsing and searching online databases; computer software for identifying, locating, grouping, distributing, and managing data and links between computer servers and users connected to electronic communications networks; online retail store services featuring computer software; and online social networking services. (I have omitted some of the claimed goods/services.) The registrations are incontestable.

But Tech was also refused registration on descriptiveness grounds for “online business directories in the field of employment; providing a website allowing users to post messages offering or seeking job opportunities; providing online project management services for others for business purposes in the field of scheduling, accounting, business project management and business development, providing an on-line searchable database featuring classified ad listings and employment opportunities”, “Providing on-line electronic bulletin boards for transmission of messages among computer users concerning job opportunities”, and another list that was more clearly employment-related than the successful registrations.

Meanwhile, defendants have a registration for UPWORK and provide two Upwork-branded mobile apps, as shown in Apple and Google’s app stores:

 


One app is meant for use by clients, titled “Upwork for Clients,” while the other app with a reversed color scheme is meant for use by freelancers, titled “Upwork for Freelancers.” The latter app has been downloaded nearly three million times since 2019. Plaintiffs didn’t object to use of the term “Upwork for Freelancers.” But, on devices, the display name listed beneath the app’s “Up” logo icon is “Freelancer” on iOS devices and “Freelancer-Upwork” on Android devices. Plaintiffs also objected to app notifications allegedly using the “Freelancer” mark. Comparison of the parties’ apps as they display on devices (iOS on left, Android on right):

 

The court denied a preliminary injunction on infringement and counterfeiting claims. And here we have an important application of the Ninth Circuit’s recent counterfeiting ruling: plaintiffs can’t bootstrap the counterfeiting allegations (same mark/same services aka double identity) into a finding of infringement without showing likely confusion. Arcona, Inc. v. Farmacy Beauty, Ltd. Liab. Co., No. 19-55586 (9th Cir. Oct. 1, 2020). [Note that doesn't completely answer the question of the descriptive fair use/counterfeiting issue because, as the court noted, descriptive fair use can be available even where there is confusion, but it also seems implausible that a descriptive fair use should be deemed counterfeit, which is why "use as a mark" is such a useful concept.]

So, confusion: The court focused on descriptive fair use, and only analyzed the "use as a mark" element. Plaintiffs argued that they were only challenging instances in which Upwork used “Freelancer” as a mark, but didn’t show that the challenged uses were uses as a mark. “To determine whether a term is being used as a mark, we look for indications that the term is being used to ‘associate it with a manufacturer.’ ” At least two factors are relevant: (1) “whether the term is used as a symbol to attract public attention, which can be demonstrated by the lettering, type style, size and visual placement and prominence of the challenged words”; and (2) “whether the allegedly infringing user undertook precautionary measures such as labeling or other devices designed to minimize the risk that the term will be understood in its trademark sense.”

The key arguments around use as a mark involved (1) defendants’ app display names: “Freelancer” on iOS devices and “Freelancer-Upwork” on Android devices; (2) when defendants’ app states “This is a Freelancer account” instead of for example “This is an Upwork account for freelancers”; and (3) when defendants’ software prompts the user that “ ‘Freelancer’ Would Like to Send You Notifications”; and (4) a document that encouraged freelancers on the Upwork app to migrate to Upwork’s new app meant for freelancers. Plaintiffs also argued that capitalization of Freelancer showed use as a mark.

The court disagreed. These were all “proper and descriptive uses of a common word distinguishing Upwork’s freelancer app from its client app.” Bold font and a capital letter were insufficient, “especially when Upwork’s distinctive lime green logo or coloring is placed directly alongside the various notifications.” Defendants never claimed Freelancer as a mark, used a stylized font for it, or used a TM symbol for it.

Separately, plaintiffs didn’t show irreparable harm. They estimated that “up to as many as 1,800 users per day or 56,000 users per month” were diverted, but didn’t convince the court that any diversion was based on app display names shown post-download, especially given the “distinctively different logos.” The court noted that “the disputed titles only become apparent after a user makes a conscious decision to download the apps,” and plaintiffs didn’t object to the app store displays. Nor would post-download notifications cause irreparable harm, since they occurred only after that same conscious decision.


Disparagement doesn't cause TM confusion (and a covid-related claim)

Dupart v. Roussell, 2020 WL 6308339, No. 20-1406 (E.D. La. Oct. 28, 2020)

Plaintiffs (Dupart and Harris) alleged that Roussell’s YouTube videos and Instagram posts discuss their personal lives and Dupart’s cosmetics brand, Kaleidoscope, which competes with Roussell’s Sip Cosmetics. Dupart alleged that she had rights in the Kaleidoscope logo and word marks, and Harris alleged rights in Da Brat/her social-media handle, @sosobrat.

Roussell allegedly posted a YouTube video claiming that plaintiffs are in a same-sex relationship, and later added negative comments that Kaleidoscope products are made with “canola oil,” are “laced with cayenne pepper,” are “Chinese concoctions,” and “brought Corona over [to the United States].”

Plaintiffs sued for trademark infringement and false advertising under the Lanham Act, as well as defamation and coordinate state law claims.

The court ruled that they failed to state a claim for trademark infringement. There were no plausible allegations that Roussell’s use of the marks caused likely confusion. “To the contrary, plaintiffs’ factual allegations suggest just the opposite—defendant uses plaintiffs’ marks in a manner that differentiates his products from plaintiffs’ marks, mostly by making negative comments about Kaleidoscope or Dupart and Harris personally.”

Harris didn’t state a false advertising/false designation of geographic origin claim, but Dupart did. The complaint didn’t allege that Harris provided any goods or services at all, or engaged in commercial activity (despite owning trademarks). [Assume she offers entertainment services and properly alleges this. Should the result differ?]

But Dupart had Lexmark standing because of the disparagement of Kaleidoscope products. Indeed, Dupart alleged that Roussell said: “So [Dupart is] basically saying that I used her to sell products...my response to that is, she’s one-hundred percent right. Let’s just get that off the table. I used her to sell products. I used her to sell products.”

Was Roussell engaged in commercial advertising or promotion? The court joins the overwhelming weight of authority that Lexmark modified the classic Gordon & Breach test, which has been adopted by the Fifth Circuit but not yet readdressed by that circuit post-Lexmark. Lexmark reasoned that “nothing in the statute’s text required a competitive relationship between plaintiffs and defendants,” and the statute doesn’t even use the word “competition” in 15 U.S.C. § 1125(a)(1)(B). And “it would be inconsistent with Lexmark’s holding to say that a class of plaintiffs—those who are not in competition with defendants—may bring suit for false advertising, yet those same plaintiffs could never prevail on their claims.”

The only circuit to hold otherwise merely pointed to the fact that Lexmark said it wasn’t expressing a view on the meaning of “commercial advertising or promotion.” Strauss v. Angie’s List, Inc., 951 F.3d 1263 (10th Cir. 2020). But [setting aside that the question of whether the threat letters in that case constituted advertising/promotion is very different than that addressed here], the reasoning of the case logically bears on the meaning of “commercial advertising or promotion.” McCarthy agrees that “[t]he Tenth Circuit misreads the Lexmark precedent....[T]he Supreme Court’s conclusion [in Lexmark was] that the Lanham Act provides a remedy to anyone, competitor or noncompetitor, with a commercial injury due to false advertising or false disparagement” J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 27:94 (5th ed. 2020).

Thus, the test asks whether Roussell’s conduct amounts to (1) commercial speech, (2) made for the purpose of influencing consumers to buy his goods or services, (3) disseminated sufficiently to the relevant purchasing public to constitute “advertising” or “promotion” within that industry. Each part was sufficiently alleged.

Commercial speech: Roussell allegedly admitted that the purpose of his negative comments was to sell his own Sip Cosmetic products. In an Instagram post attached to the complaint, Roussell states: “All in all today was successful! While there is a definite method to my madness and purpose to my petty it is paying off. Sip Cosmetics got 854 orders for $10,000 in sales since launch,” which allegedly related to his content about Dupart. Thus, his speech was plausibly economically motivated and plausibly part of “advertisement[s]”— “widespread communication through print or broadcast media,” here involving 81,500 followers on Instagram and 40,700 subscribers on YouTube, with over 716,089 views for the videos in which he mentions Dupart or the Kaleidoscope brand. Roussell allegedly encourages his viewers to purchase his own Sip Cosmetic products in the same videos. And he referred to specific products or services.

For the same reasons, the other elements of the test were met.

As for falsity: the complaint plausibly alleged literal falsity as to both “characteristics” and “geographic origin.” And in the Fifth Circuit, literally false statements are presumed both deceptive and material.

Monday, October 19, 2020

robust TX anti-SLAPP law protects critic despite arguments that she was partly competing

ADB Interest, LLC v. Wallace, 606 S.W.3d 413 (Tex. Ct. App. 2020)

This is an anti-SLAPP case about statements by a disgruntled customer/alleged competitor.

Black, the managing member of ADB, invented the FasciaBlaster, which is marketed by ADB. The user is supposed to roll the product vigorously over his or her body. ADB claimed benefits for pain reduction, flexibility, joint function, circulation, muscle definition and performance, nerve activity, posture, and enhanced beauty, “including the virtual elimination of cellulite.” The product allegedly works by “opening the fascia,” which is a layer of tissue that encloses muscles and organs.

Blac published a book that is “an instructional guide to ‘FasciaBlasting’ ” that identifies numerous risks associated with using the FasciaBlaster, including to people with any history of deep vein thrombosis or a blood clot (“the consequences could be deadly”), or people with a “severe connective tissue problem such as fibromyalgia, Ehlers-Danlos Syndrome, or any issues that makes skin sensitive.” The book lists other symptoms including "changes in menstrual cycles, spotting, swelling, strange-colored bruises, hot skin, flu-like symptoms, and in some extreme cases, vomiting.... This is not an all-inclusive list, and to be honest, the product is fairly new and every day someone experiences something new.... Please check with your doctor for any issues that set off alarm bells." The FasciaBlaster website also had similar (and some additional) warnings.

The FasciaBlaster has fans and detractors, including in private FB groups; defendant Wallace “is only one of many people claiming on social media that the FasciaBlaster causes serious, adverse side effects.”

Wallace “owns a spa in Corpus Christi, Texas that provides a variety of skin care services to its clients, including massages.” She bought several FasciaBlasters for personal use also used the FasciaBlaster on one or more of her clients as part of her rendition of skin care services. She initially recommended the FasciaBlaster to her friends, family, and clients, but changed her mind, as announced on FB:

After my own experience and after seeing results from doctors and specialist[s] [and] [c]ompleting tests and extensive blood work, the tests are showing that extended use of these products can cause a chain reaction in the body that starts with inflammation. That inflammation leads to raised cortisol levels in the body. That raised cortisol causes eventual thyroid dysfunction, hormone imbalance, increased estrogen, extreme detox, and cellular shutdown in your body. [etc.]

… So any endorsements I gave this product in the past I sincerely apologize for without knowing the long term or adverse effects it may be causing people. As it has caused these adverse effects in myself by using it long term[,] I HAVE to warn anyone who is using it [o]r anyone who might be thinking of using it for esthetic reasons to use EXTREME caution.

She became a frequent critical poster on FasciaBlaster-related websites and Facebook groups. She attributed her fibromyalgia diagnosis, other problems, and two miscarriages on her use of the FasciaBlaster (the last because of high cortisol levels).

In response, ADB/Black’s social media/cybersecurity firm publicly named Wallace as one of the “professional trollers” who had written “bad reviews” on Black’s page and were making “false claims and [using] fake profiles.” Its employee also urged these Facebook pages to block the named individuals. Black also left a voicemail for a critic stating, inter alia, “I will prosecute you if this continues.” Two months before Wallace posted her allegedly defamatory and disparaging statements on FB, their attorney contacted another critic, stating that “while the company recognizes that consumers have First Amendment rights and other consumer rights provided by the Federal Trade Commission (FTC), those rights are limited by the company’s rights to not be defamed through slander or libelous actions that include actual malice or negligence regarding the truth of the statement.” The company also posted on its FB group that “While we welcome the opportunity to hear from people who feel they have experienced negative effects from using the FasciaBlaster device, we also need our audience to be aware that knowingly making false or fraudulent injury or defect claims is illegal and may subject you to criminal and civil liability.”

Black and ADB then sued Wallace for business disparagement, defamation and defamation per se, invasion of privacy, intentional infliction of emotional distress, and violations of the Lanham Act. Within days of filing suit, the company sent messages to other participants in the FB groups pointing to the lawsuit.

Side note: the FDA investigated ADB and the FasciaBlaster after it became aware of “over 70 [Medical Device Reporting (MDR) ] reportable complaints and 04 consumer complaints, filed in the last 12 months (June 2016-June 2017), alleging injury due to your Class I medical device, FasciaBlaster.” The FDA’s report revealed failures to create procedures for reviewing and evaluating complaints, despite several specific complaints of serious bodily injury allegedly caused by the device. Although ADB’s attorney initially told the FDA inspector that it had evidence of internal investigations—supposedly represented by pdf attachments to a spreadsheet ADB provided to the FDA—when the inspector asked for a sample of the attachments, “[i]t was later determined that these files (investigation results) did not exist.” The court doesn't explicitly connect this to the legal analysis, but it seems relevant.

Wallace moved to dismiss the claims based on the Texas anti-SLAPP law (the Texas Citizens Participation Act); the trial court granted the motion and awarded Wallace attorney’s fees and imposed sanctions against ADB and Black. Under the TCPA, if the trial court grants a motion to dismiss, it must award costs, reasonable attorney’s fees, and other expenses of defending against the action “as justice and equity may require.” The trial court must sanction the plaintiff in an amount “sufficient to deter the party who brought the legal action from bringing similar actions.”

First, ADB/Black argued that the commercial speech exemption applied to their claims. Not so. The TCPA does not apply:

to a legal action brought against a person primarily engaged in the business of selling or leasing goods or services, if the statement or conduct arises out of the sale or lease of goods, services, or an insurance product, insurance services, or a commercial transaction in which the intended audience is an actual or potential buyer or customer.

The Texas Supreme Court explained that “[c]onstruing the TCPA liberally means construing its exemptions narrowly,” in part because of “the legislature’s clear instruction to construe the TCPA liberally to protect citizens’ rights to participate in government.” It was plaintiffs’ burden to show that the exemption applied. It does when:

(1) the defendant was primarily engaged in the business of selling or leasing goods [or services], (2) the defendant made the statement or engaged in the conduct on which the claim is based in the defendant’s capacity as a seller or lessor of those goods or services, (3) the statement or conduct at issue arose out of a commercial transaction involving the kind of goods or services the defendant provides, and (4) the intended audience of the statement or conduct were actual or potential customers of the defendant for the kind of goods or services the defendant provides.

The exemption does not apply when a defendant “speaks of other goods or services in the marketplace,” i.e., goods or services that the speaker does not sell or lease.

The record showed that Wallace’s statements were primarily aimed at two overlapping but nonidentical audiences: ADB’s and Wallace’s actual or potential customers—Wallace didn’t provide services outside of a limited geographic area, but posted to reach everyone. To the extent that her statements were directed at her clients, they could be subject to exemption from the TCPA if the other requirements were met. But they weren’t. Under the circumstances, her statements about ADB’s product “cannot reasonably be considered statements about the services that Wallace provides.” Even though she directed readers to her business FB page to read her statements about the FasciaBlaster and mentioned that she provides skincare services in some of her posts, “it is not reasonable to infer from the record that Wallace was intending to promote her services or enhance her business by making the allegedly defamatory and disparaging statements about FasciaBlaster.”  There was “no evidence of a commercial purpose or motive behind Wallace’s posts.”

Given this, ADB/Black had to show, by “clear and specific evidence,” a prima facie case on their causes of action. The TCPA doesn’t “require direct evidence of each essential element of the underlying claim to avoid dismissal.” For example, pleadings and evidence that establish “the facts of when, where, and what was said, the defamatory nature of the statements, and how they damaged the plaintiff should be sufficient to resist a TCPA motion to dismiss.”

Defamation: Note that in Texas, corporations can bring defamation claims, since “corporations, like people, have reputations and may recover for harm inflicted on them.” Plaintiffs conceded that they were limited-purpose public figures here.

Actual malice requires knowledge of falsity or reckless disregard for truth. The Texas Supreme Court has held: “A failure to investigate fully is not evidence of actual malice; a purposeful avoidance of the truth is.” Also: “[A]ctual malice in defamation is a term of art that does not include ill will, evil motive, or spite”; none of that is enough because “the constitutional focus is on the defendant’s attitude toward the truth, not his attitude toward the plaintiff.”

ADB/Black argued that they submitted the only medical evidence in the record, allegedly establishing that there is no biological mechanism by which the FasciaBlaster could have caused Wallace’s medical issues, and thus the only rational inference from this evidence is that no medical professional would have told Wallace that the FasciaBlaster caused her to have two miscarriages and led to the onset of lupus and fibromyalgia. Therefore, they continued, one could rationally infer that Wallace knew that her statements were false. This wasn’t enough to infer that Wallace knew of the falsity or acted with reckless disregard for the truth. There was no “established body of scientific or medical evidence” about the FasciaBlaster for Wallace to ignore or proceed in reckless disregard of. ADB’s proof was an affidavit not available until after the litigation began; it, and the research it recorded, had not yet occurred when Wallace spoke.

ADB/Black argued that it was reckless disregard for the truth for Wallace to make statements about the source of her symptoms “based on self-administered tests she is not qualified to perform,” and that it was obviously dubious to blame “a simple massage tool.” Again, this wasn’t a case involving “a wealth of scientific literature that is widely available to the medical community, much less the general public.” Indeed, when Wallace made her allegedly defamatory statements, “there were no scientific studies addressing whether there was a link between FasciaBlasting and any of Wallace’s illnesses or symptoms.” It hadn’t been reviewed or tested by any physician [and one thus has to wonder about whether those disease claims are ok with the FDA], and based on the statements in ADB’s terms and conditions, they “had no intention at that time to subject their product to meaningful scientific or medical review.” An understandable misinterpretation of ambiguous facts does not show actual malice, even if Wallace was mad at Black.

Nor are Wallace’s claims  “inherently improbable” “considering the fact that ADB acknowledges that the FasciaBlaster’s effects are more than skin deep.” ADB’s own warnings reinforced that impression; indeed, “Wallace did what Black advised her book readers to do if they experienced any alarming symptoms while using the FasciaBlaster—consult a physician.” No actual malice, no defamation.

Business disparagement: Although the Restatement isn’t sure this is constitutional, malice in Texas business disparagement differs from defamation malice because it can be proved by demonstrating “ill will, evil motive, gross indifference, or reckless disregard, of the rights of others.” Here the key problem was special damages. ADB argued that in at least two instances in the record, women stated that they were going to return their products in response to Wallace’s posts (e.g., “I watched your videos and heard your story and it convinced me to send mine back and not let this thing ever touch my body because of what you are going through.”), along with other instances in which women promised to quit using the products they’d already purchased. Black also averred that this all the coincided with a decline in ADB’s sales.

However, neither the video that attracted these comments nor a transcript was in the record, so we don’t know what specific statements Wallace made, much less if any of these statements were defamatory or disparaging. Nor was there any other record showing of economic damage from returned or lost sales. Likewise, there was no specicfic evidence that the avowed no-longer-users would otherwise have purchased related specialty massage creams and ointments from ADB. As for the general sales decline, it was clear that Wallace’s statements “were not made in a vacuum,” and no specific evidence supported the inference that her posts were solely, or even principally, responsible for decreased sales.

Lanham Act: Not commercial advertising or promotion, given the mismatch between ADB’s business and Wallace’s.

The court also upheld the award of attorneys’ fees and $125,000 in sanctions under the TCPA. “Although the award of sanctions is mandatory, the trial court has broad discretion with respect to the amount of sanctions awarded.” Relevant factors include: (1) the plaintiff’s annual net profits; (2) the amount of attorney’s fees incurred; (3) the plaintiff’s history of filing similar suits; and (4) any aggravating misconduct, among other factors.

Wallace argued for a large sanctions award “because both parties were self-described millionaires who have taken aggressive responses to quiet their online critics,” including advertising the lawsuit against Wallace.  Along with the measures described above, ADB subsequently sued at least two other critics who posted negative comments about the FasciaBlaster on the same Facebook group that Wallace used. ADB sought between $2,000,000 and $5,000,000, plus injunctive relief requiring both women to “remove disparaging and defamatory comments,” though it ultimately dismissed those suits.

ADB/Black argued that no deterrence was necessary because Black was not party to either of these suits, Wallace didn’t prove that ADB’s other lawsuits were unsound; and it non-suited its claims anyway, making sanctions unnecessary. It also argued that, unlike Wallace, the other two “voluntarily participated in ADB-sponsored studies, signed contracts that included non-disclosure agreements, and then breached those agreements by publicly complaining about ADB’s products.” [Query: were these contract provisions federally illegal under the Consumer Review Fairness Act?]

But even disregarding those lawsuits, the other evidence of “a deliberate plan to discredit and quiet their detractors, prevent or remove negative reviews of ADB’s products, and threaten those who made negative comments” sufficed to avoid any abuse of discretion.

lack of irreparable harm dooms injunction against false advertising of drug disposal product

In re C2R Global Manufacturing, Inc., No. 18-30182-beh, 2020 WL 5941330 (E.D. Wisc. Bkcy Oct. 6, 2020)

Verde sought a preliminary injunction against C2R, its direct competitor in the drug disposal market, from engaging in false and misleading advertising in violation of the Lanham Act, and an order requiring corrective advertising. Despite likely success on the merits, lack of irreparable injury precluded an injunction. The court applied eBay, as it predicted the Seventh Circuit would, and also relied on Verde’s delay.

Verde sued C2R in March 2018 for false advertising and patent infringement; a few months later, C2R filed for Chapter 11 protection, and Verde timely filed a nearly $7 million proof of claim. After a Markman hearing and decision, the parties settled their patent claims. In February 2020, Verde sought both preliminary and permanent injunctive relief; the court considers only the former.

The technical details are complex, but the core of the claim is that C2R falsely advertised how much drug content its products could render inert. Although it removed specific pill number claims from its website, at the time of the motion it still included the statement that its containers could be filled until contents are two inches from the cap, which was allegedly false. C2R based its claims on various analogies/evidence about the product components/similar competitors; Verde’s tests of C2R’s product yielded at most a 30% adsorption rate, and its experts persuasively critiqued the assumptions on which C2R's claims relied.

After Verde sued, C2R commissioned independent testing that found that the Rx Destroyer deactivated 90-99% of the pills in his experiments. Among other criticisms, however, Verde’s expert critiqued the testing methodology, which included filtering out material that included drug residue (paste), which (Verde’s expert argued) improperly altered the drug deactivation conclusion, and critiqued C2R’s expert’s technique of constant agitation, which was both not realistic and not consistent with the product use instructions.

Verde argued that, based on the testimony of its Chairman and CEO, “if unused drugs are tossed in the trash, they risk being inadvertently diverted by neighbors, children or pets,” and that the “toilet flushing of drugs is now also discouraged, owing to environmental contamination risk to the nation’s watershed.” He asserted that customers purchase C2R’s product over Verde’s because the Rx Destroyer cost-per-pill appears lower due to C2R’s capacity representations compared to its price point. In addition, he opined that “when C2R advertises a product using activated carbon that does not work as represented, that casts doubt on all products using activated carbon.”

C2R, by contrast, argued that Verde wasn’t its primary competitor, though it acknowledged that the fact that Rx Destroyer has a larger capacity is a competitive advantage over Verde, or over anything else on the market. C2R has advertised Rx Destroyer as being more affordable on a cost-per-pill basis. The parties also submitted dueling declarations about whether the damages were merely financial and not irreparable. C2R’s expert, for example, found no meaningful customer overlap, “noting that Verde does not offer product data sheets that are required by many hospitals, and thus cannot sell to those entities, while C2R does provide such data sheets and has such hospitals as customers.” Plus, he indicated that “Verde has enjoyed faster growth and higher annual revenues than C2R during the relevant time period,” suggesting lack of harm.

Verde’s expert disagreed that financial evidence enabling partial quantification of the damages was the same as an adequate remedy at law. [Can a company in bankruptcy be assumed to be able to provide an adequate remedy at law?] Verde identified twenty-five customers to which both Verde and C2R sell. And Verde’s growth could have been greater: the entire market for drug disposal products offered by these parties “dramatically increased during the 2015-2019 period.”

On the merits, when advertising explicitly or implicitly represents that tests prove the claim, a plaintiff can prevail by showing that the tests did not establish the proposition for which they were cited. Even if there is no industry standard test for deactivation capacity, “when advertisements purport to rely on testing, the presence or absence of a government certified test is not relevant.” Predicting capacity for drug disposal products may be challenging, “that does not absolve the manufacturer—here, C2R—from fashioning truthful advertising statements, even if on relatively short notice.” Verde showed likely success on the merits.

Irreparable harm: First, no presumption applies; the Seventh Circuit has yet to say so in the Lanham Act context but likely would apply eBay, given that it has already done so in copyright cases. “But certainly, all of the cases cited above recognize the particular difficulty in assessing harm when a competitor engages in false advertising.”

Verde argued: (1) the parties compete directly; (2) effectiveness and cost are two of the most important factors in a purchase decision; and (3) the false representations were “critical” to effectiveness and cost. However, the Chair/CEO’s testimony didn’t identify specific facts such as survey data or sales reports to show lost sales, and if his opinions were based on statements made to him by customers, those statements would be inadmissible hearsay. “Courts in this circuit consistently have rejected vague summaries of hearsay statements by unidentified consumers.”  His testimony didn’t meet the requirements of Rule 701 for non-expert testimony.

The fact that the parties compete didn’t prove harm. This wasn’t express comparative advertising, and the record didn’t show a two-party market. Trademark cases are different because confusion about source can show irreparable harm because of lost control over reputation; harm to reputation is inherently intangible/impossible to quantify. [Sigh.]

Verde’s expert couldn’t help because he didn’t provide alternative evidence of harm, just criticized C2R’s expert. It wasn’t enough to infer that any customers who knew of both companies would purchase more from Verde absent C2R’s advertising.

Separately, delay proved lack of irreparable harm. The pertinent measurement is from the time the plaintiff discovers the trademark infringement (or false advertising) until the injunctive relief motion is filed, or from the time plaintiff first sent its cease-and-desist letter until filing its motion. “Here, that time frame would be June 2014 to January 2020, or 67 months.” Verde argued that, while it had experimental evidence undermining C2R’s capacity claims prior to filing suit, it had not yet conducted any discovery, and it moved promptly but prudently only after completing that discovery. Verde also argued that “it was not in a position at the time of its earlier testing to expend significant funds on legal fees in pursuit of litigation.”

But this delay was “longer than prudence can bear.” Verde had test results for years. “[T]he span of time during which Verde at least possessed test results discrediting C2R’s website statements is far beyond any duration accepted by courts as reasonable and could well have allowed C2R to relax its defenses and continue its advertising expenditures.” Its reference to the costs of litigation was “an internal cost-benefit assessment Verde made, and when weighed against the amount of time between the first testing in 2014 and the motion in 2020, does not justify the substantial delay in seeking a preliminary injunction.”

Belt and suspenders: It hadn’t been shown that Verde lacked an adequate remedy at law [which I still wonder about—C2R is in bankruptcy!]. Also, harm to the environment or public safety “is not of a degree warranting a preliminary injunction.” Indeed, official websites say that putting unused medications in the trash is not ideal but don’t definitely nix it, mitigating the public interest at this stage.

omitting "all" or "every" can avoid literal falsity of general claim

SkyHawke Technologies, LLC v. GolfzonDeca, Inc., No. SACV 19-1692-GW-PLAx, 2020 WL 6115095 (C.D. Cal. Aug. 3, 2020)

A limited preliminary injunction turning on the difference between literal falsity and implicit falsity: claims that human beings walked each golf course at issue to chart it were literally false, but more general claims of human walking were not.

Plaintiffs sought to stop defendants from advertising that their GolfBuddy products use information “based on walking courses” and that therefore they are the “most accurate.” Defendants contented (in patent litigation) that “[DECA System, the entity responsible for the maps,] primarily uses publicly available Google Earth map data as the course for the geographical data used to create its course data.... in some instances [Deca] may hire a third party contractor to manually survey the course.” Defendants conceded that Deca does not walk every course.

However, most of the statements plaintiffs challenge weren’t literally false. E.g., “GolfBuddy specializes purely in the manufacture of golf distance measuring devices and walks golf courses to create ground-verified accurate maps, which increases the supreme accuracy of their GPS devices over competitors who simply use satellite imagery”; “GolfBuddy … used teams of expert mappers to walk courses and create ground-verified data maps that give precision accuracy and they promise precision accuracy for over 36,000 courses”; “GolfBuddy is … the only company that focuses 100% on golf, maps courses on foot for added accuracy, and provides completely fee-free access to its extensive worldwide database of courses.” [I do wonder what a survey would show about this and what a non-leading way to ask about it would be—this might well be a case where consumers are left with an impression of fully walked courses but prodding them to think about the statement would lead them to realize the ambiguity.] Plaintiffs didn’t convince the court that the necessary implication was that defendants walk every course.

In addition, “ground-verified accurate maps,” “precision accuracy,” and “added accuracy” were puffery.

However, one statement by a GolfBuddy marketing coordinator was literally false: “So GolfBuddy, our motto is Accuracy Matters. And the reason we say that is because every single course that’s in our database out of the 48,000 are walked by foot. So that means we send mappers to that course and they walk every single hole by foot with our own GPS devices.”

The court applied a presumption of irreparable harm to literal falsity, even without an explicit comparison. “[G]iven the small market for golf rangefinder devices, the obvious falsity, and the very narrow scope of the proposed injunction, the Court finds that ‘traditional principles of equity’ warrant a finding of irreparable harm.” The remaining factors also supported a preliminary injunction precluding defendants from claiming that they walk every course in their map library “(until they do walk every course).”

funny survey typo doesn't invalidate confusion survey

Pinder v. 4716 Inc., 2020 WL 6081498, No. CV-18-02503-RCC (D. Ariz. Oct. 15, 2020)

This strip club right of publicity-etc. case is mostly as plaintiff-favorable as others coming out of Arizona. The notable thing: the court says the survey here is fine, despite various criticisms leveled in similar cases, and despite a possibly significant spelling error: “The question asked the participant to indicate his or her strangest impression about the advertisements, when it should have asked for the participant’s strongest impression” (emphasis added). This was merely a challenge to “technical inadequacies,” not to admissibility.

Friday, October 16, 2020

strip club photo litigation: a genre with rulings on false advertising and surveys

Skinner v. Tuscan Inc., No. CV-18-00319-TUC-RCC, 2020 WL 5946898 (D. Ariz. Oct. 7, 2020)

There’s a small cottage industry of right of publicity etc. claims against strip clubs and adjacent businesses, rivalling the timeshare rescue litigation industry; someone could do a public service by tracking these down. Defendant (Ten) used “risqué photos of Plaintiffs” to advertise its strip club. Plaintiffs brought claims for right of publicity/misappropriation of likeness and false light/invasion of privacy, as well as Lanham Act false advertising/false association/endorsement claims. As is becoming standard, plaintiffs do pretty well in the analysis.

Arizona false light/invasion of privacy: One-year statute of limitations; publication starts it running and continued posting online is not a “continuing wrong.” For photos published within that period, there were genuine issues of material fact on whether “the false light in which the plaintiff was placed would be highly offensive to a reasonable person in the plaintiff’s position.”

Ten argued that the ads made no false statements, but implications count and “[a] fact finder could decide that Plaintiffs’ images and the corresponding text in the advertisements falsely suggest the Plaintiffs were somehow affiliated with, promoted, or employees at Defendant’s strip club.” . Ten further argued that the underlying photos were already risqué, but “simply because a woman has modeled in risqué clothing (or even previously worked at a strip club) does not mean a reasonable person in a similar position could not be offended by the suggestion that the person is an exotic dancer at the defendant’s strip club.… Moreover, Plaintiffs’ have declared that the stripper lifestyle is disreputable and being impermissibly associated with such is offensive.”  However, a fact finder could also determine that any misrepresentation was minor and not actionable.

False light for a public figure also requires actual malice (knowledge of falsity or reckless disregard of the truth). This was a factual issue, though the court didn’t make clear exactly what Ten had to know/recklessly disregard: logically, it should be that Ten had to know or recklessly disregard the false implication of connection. Unfortunately, the court—possibly invited by the parties—focused on what Ten knew about the permission status of the photos, which is not the same thing, and cited a case holding that “failing to investigate the origin of models’ photos used in advertising and permission to use raised a genuine issue of fact as to actual malice.”

Arizona common law right of publicity: The right of publicity is rooted in property, not privacy, and thus subject to a two-year statute of limitations. (The court didn’t resolve whether the continuing wrong doctrine applied.) There were no genuine material disputes and plaintiffs were entitled to summary judgment: Ten received an advantage for uses of their photos, and failure to pay them for the use was cognizable harm.

Lanham Act false advertising: Plaintiffs don’t fall within the zone of interests for false advertising. While lost income from a missed photo shoot could be a financial injury, the alleged false advertising wasn’t harmful to their ability to compete.  “Not being hired by Defendant is not equivalent to not being able to compete with Defendant.” Direct competition isn’t required, but a bare assertion of overlapping commercial interests wasn’t enough under Lexmark. “Moreover, Plaintiffs make no allegations that their ability to obtain modeling jobs has been affected by the false advertisement.” Even if they were embarrassed from being wrongly affiliated with Ten’s, “they have produced no evidence that this association has damaged their reputation or their ability to compete in any fashion. Without direct competition or comparative advertising, Plaintiffs must show actual injury from the Defendant’s deception and have failed to do so.”

Likewise, even if plaintiffs were in the zone of interests for false advertising, they didn’t show causation. The only alleged injury, the loss of photoshoot income, “was neither caused by consumers withholding money, nor was it a result of consumer deception; the injury resulted from Defendant’s failure to pay for the photos. Defendant was not deceived by its own misleading advertising, and no consumer was hoodwinked into not paying Plaintiffs but instead giving Defendant his or her money.”

False association: material issues existed on likely confusion, despite the above analysis (which also implies lack of proximate causation of harm from false association). The court emphasizes the I-thought-deprecated “internet troika” of mark similarity, product/service relatedness, and marketing channels. The court equated copying photos to similarity of marks, implicitly holding that any image of the plaintiff is their “mark” (consistent with its idea that “recognizability is a measure of the strength of Plaintiffs’ mark, not the similarity”). The court enhanced the effect of its rounding-up in favor of plaintiffs by quoting prior language: “When the alleged infringer knowingly adopts a mark similar to another’s, reviewing courts presume that the defendant can accomplish his purpose: that is, that the public will be deceived.” But that logic depends on the alleged infringer knowing that there was a mark as opposed to a generic image of a pretty girl. On the intent factor specifically, though, it found that there was a factual issue of whether Ten was just looking for pictures of attractive women or intending to imply endorsement.

Relatedness of goods tipped “slightly” in Ten’s favor; they both use social media, but then so does everyone. There was also not enough evidence on consumers’ degree of care. There was a genuine issue of fact as to whether the plaintiffs “are recognizable to members of the community for which Defendant’s advertising is focused.” Plaintiffs submitted a survey “indicating a small percentage of those surveyed felt they recognized Plaintiffs” and of strong social media findings; Ten didn’t have its own survey, though it identified evidence that plaintiffs’ current recognizability is questionable.

Plaintiffs submitted a survey “indicating that approximately 66 percent of interviewees believed that Plaintiffs would likely participate in the strip club activities at Ten’s, 65 percent thought Plaintiffs were in some way affiliated with Ten’s, and 87 percent felt that it was very or somewhat likely that the Plaintiffs were representative of those employees that performed at Ten’s.” But a fact finder could agree with Ten’s criticisms of the survey methods and the clarity of the questions.

Given the existence of many similar cases, Ten sought to have nonmutual defensive collateral estoppel apply to some of the plaintiffs who’d lost similar Lanham Act/right of publicity claims against other defendants. The court declined to do so; it wasn’t bound by the prior cases’ holdings on surveys/strength of the mark, and the survey expert’s testimony has been allowed in some cases albeit excluded in others. And one case involving a cowboy bar wasn’t as offensive a use.

Skinner v. Tuscan, Inc., 2020 WL 5946897, No. CV-18-00319-TUC-RCC (D. Ariz. Oct. 7, 2020)

This opinion refuses to exclude three experts: two of plaintiffs’ (survey and damages) and one of defendant’s (damages).

Plaintiffs’ survey expert, Buncher, used 600 respondents in two groups; “selected” participants, “half of whom were men, resided within a certain radius of Ten’s and had attended strip clubs in the previous two years.” As noted above, the survey found a high degree of confusion over affiliation/sponsorship. Around 15% of participants believed they recognized the plaintiffs (which is still not the same thing as having a trademark, as the Tiger Woods case made clear). The court found that numerous criticisms of the survey went to weight rather than admissibility: The lack of a control group wasn’t fatal, nor was alleged distorting effects of the questions, nor was the absence of a don’t know option/anti-guessing instruction, nor was the mismatch between respondents and Ten’s clientele. Ten noted that Buncher’s survey evidence had been excluded in other similar cases.

Lack of a control group: Buncher testified that “the survey was a communications study designed to evaluate what messages Defendant’s advertisements communicated to the audience. Unlike a causal study, he claims, communications studies do not require a control group.” [Um. All Lanham Act surveys, so defined, would be “communications studies.” Plus, Lanham Act claims are causal claims: the ads caused confusion of a relevant sort. This is just bad reasoning.] Instead, he used a control question that excluded plaintiffs’ images from the ads and asked respondents how the exclusion affected the perception of the ad. This, he claimed, was “consistent with the logic of the Diamond research standard.” [I can hear Prof. Diamond exclaiming in horror from here. Ten is right that this is not a control question; it is instead a biased comparison drawing attention to the absence of a photo that will predictably elicit “oh, the ad is worse without a picture,” and it fails to test whether the difference is from the absence of a picture versus the absence of a picture of plaintiffs, the only relevant legal question. Even a control question that asked about a different ad with a picture of a non-plaintiff would have done better at measuring reactions to the presence of the plaintiffs—which, one might infer, is why Buncher didn’t use a real control.]

Anyway, objections based on an expert’s “methodology [and] survey design ... go to the weight of the survey rather than its admissibility.”  [I teach my students that, while this is often true, a bad enough survey can just be excluded, especially if there are also problems with the respondent selection; I would have put this one in that category, but the court finds each of these decisions to be just fine and so it doesn’t.]

As for the no response/no opinion issue, Buncher testified that the literature supported the conclusion that “permitting these non-responses would actually increase the amount of guessing.” This is the only decent defense of the survey in the bunch; it seems to be a legitimately contested issue.

Ten also pointed out that the survey was flawed “because participants were not given the opportunity to specify Plaintiffs’ true names and could not express uncertainty. Because of this, Defendant claims, no Plaintiff has been truly identified and the survey results cannot measure identifiability.” But the court disagreed because “it is possible to recognize a person without recalling their name. In fact, as the undersigned is learning all too well, with age this occurs more and more frequently.” That went to weight, anyway, as did criticisms of the ambiguity of the survey, e.g. asking “whether the participants felt the Plaintiff enjoyed the lifestyle portrayed by the strip club or participated in Ten’s events.” “ ‘[T]echnical inadequacies’ in a survey, ‘including the format of the questions or the manner in which it was taken, bear on the weight of the evidence, not its admissibility.’ ” [Note: wording is not format or manner.]

Sample: Buncher testified that the survey used 50% women in order to isolate gender to determine whether the message portrayed in the ads differed by sex. “As Defendant did not provide a clientele list to Plaintiffs, it is difficult to say how a more accurate representative sample of Ten’s clientele could be obtained.” Good enough.

Ultimately, Buncher indicated that he created the survey to conform “with the generally accepted standards and procedures in the fielding of surveys set forth by the American Marketing Association, Marketing Research Association, CASRO and ESOMAR” and “[t]he survey was designed to meet the criteria for survey trustworthiness detailed in the Federal Judicial Center’s Manual for Complex Litigation, Fourth.” Plaintiffs showed by a preponderance of the evidence that he used acceptable methods.

The survey was also relevant despite its failure to make respondents identify the plaintiffs. As for prior exclusions of his evidence, “[w]hile the Second Circuit may exclude survey evidence upon a finding that the methodology is lacking, in this circuit questionable methodology goes to the weight, not the admissibility.” And Buncher’s evidence has “been unilaterally permitted in the District of Arizona in similar cases.” [Uniformly?]

Plaintiffs’ damage expert Chamberlin estimated actual damages at an aggregate amount of $435,000. He first calculated each plaintiff’s day rate—how much they would have been paid to produce the photographs used by Ten’s under a hypothetical negotiated contract—and then multiplied the day rate by the number of Ten’s distinct uses of each photograph. [I really don’t understand how that could be a credible methodology. The day rate is about how long it takes the plaintiff to pose for the photo; the number of uses by the defendant is completely independent of that, even though it could plausibly be the basis for a different damages calculation. It’s like multiplying lost work days from an injury by the cost of treating that injury.]  

It was ok to use each plaintiff’s most lucrative contract to estimate the day rates based on his testimony that models get different rates based on the product they’re promoting. More troublingly, it was ok to use an image multiplier even though none of the disclosed modeling contracts use the kind of “usage multiplier” for distinct usages like advertisements, branding, and social media; rather, Defendant states, the contracts reflect a flat rate per job. Plaintiffs [though it seems not Chamberlin himself] argued that “any modeling agent would consider [various different uses] when negotiating a modeling contract.” [OK, but then wouldn’t the contract be use-based rather than day rate-based? That is, the testimony above indicates that the day rate itself would change based on the use. Are multipliers standard in the industry? If Ten is correct that they weren’t used in any of the contracts on which Chamberlin based his opinion, that seems like a problem.]

But “a party’s disagreement with the sources upon which the expert bases his or her conclusions goes to weight of the evidence and not admissibility,” so his choice of high-value contracts didn’t itself render his testimony unreliable. [I wish the court would have addressed the criticism of “multiply day rate by number of uses” specifically. I just … don’t get it.] The fact that other courts have accepted the same criticisms wasn’t dispositive because the Second Circuit, where those courts were, does things differently than the District of Arizona.

Defednant’s expert Einhorn also got in. He calculated the day rate (including a 50% premium for similar risqué photo shoots) and divided it by the number of images likely to be produced in a one-day photo shoot. He subtracted a 20% modeling agent fee and multiplied the final amount by the number of uses of the photograph. He concluded that the total actual damages ranged from $1,990 to $3,980 per plaintiff. Even though he lacked experience with the modeling industry specifically, his professional experience as a forensic economist and as an expert witness in cases involving “intellectual property, media, entertainment, technology, trademarks, publicity rights, and product design” was sufficient. Even though he relied on other models’ modeling contracts, and used an internet search of the phrase “working day rate, models” to support his day rate calculations, among other criticisms, that went only to weight and not admissibility.

AUWCL Booking.com debate

David Bernstein, Debevoise & Plimpton: we don’t give controlling authority to dictionary meaning or previous generic use. We consider one thing only: consumer perceptions of the term now as generic or brand name. In the past, courts and scholars have said that a generic term can never be brought back from the dead, but there’s no support in history, Lanham Act, or sound public policy, and Booking.com rejects that.  A TM need not be born, grow old, and be extinguished. Goodyear case itself proves this point. In 1888, Goodyear was considered generic for a process for making rubber. Today, it’s a wellknown trademark for rubber tires, and registered since 1948. That’s good! If consumers grow to perceive a term primarily as a brand name, it should be protected as a mark.

Protection v. enforcement: even if protected as a TM, the scope may be limited. There are numerous limits that prevent anticompetitive enforcement, which is true for formerly generic terms too. Descriptive fair use defense; crowded field doctrine narrowing scope of protection. Injunctions can’t be issued w/o likely confusion. Ds will have strong argument if they’re using other designs, words, or logos. Law, history, and sound TM policy support using consumers’ current perception of a term as a brand name supports TM protection.

Mark McKenna, Notre Dame Law: Consumer understanding makes sense, but consumer understanding as measured by survey should not always determine this. Genericness has never been solely empirical assessment of consumer understanding. It has always included scope. Because the domain name system already provides exclusivity, the value of a TM registration for a generic.com is primarily in enforcement against nonidentical variations. It’s fair to be skeptical that any party that litigates all the way to the SCt is doing so to acquire razor thin rights. More importantly, the rule applies to all other generic.com and all other arguably generic terms.

Experience teachers that we can expect registrations overenforced, such as Freecycle.org which got a registration for Freecycle.org despite freecycle being generic. Enforced against FB groups using only “freecycle.” The promise of limits does not materialize, and it’s worse in C&D situations where they wave registrations around.

Good reason to worry that the claimed association w/a particular term is from market exclusivity (patent, or de facto exclusivity generated by the domain name system). Courts will not be able to tell the difference b/t TM meaning and de facto secondary meaning. 33% of respondents said that washingmachine.com was a brand name after being taught the difference and passing non-.com comprehension tests.

Given these risks of error and overenforcement, the game is not worth the candle, especially since narrow unfair competition remedies would remain available for true abuse of booking.com, e.g. in phishing emails.

Jake Linford, Florida University College of Law: Genericity depends on meaning to consumers; an unyielding legal rule that disregards consumer perception. A word is the skin of living thought, and can vary a lot according to time in which it’s used. A narrow word can broaden to cover a category. A word that identifies a category can become more specific. Consumers change—firms can’t force and courts shouldn’t ignore changes in TM meaning.  De facto secondary meaning courts are more comfortable with dictionaries; surveys are better than that 17th century technology. Better tools to show how consumers use marks. Courts shouldn’t refuse to consider evidence from consumer surveys even if dictionaries suggest that the term was once generic.

In the same survey, eTrade was recognized by 2/3 of consumers and should have been allowed even accepting all survey criticisms. Anyway, now we can do better surveysh

Rebecca Tushnet: The key here is whether the game is worth the candle: what is the marginal impact of allowing generic words plus generic tlds when the claimed TM meaning comes from consumer perception of the combined generic terms.

Bond-OST: cheese not known in this country.  If you asked consumers what it means, they’d choose brand name over generic. But that’s not what it means and a survey should not be used to call it a TM. That happens a lot in an internationalizing economy.

TM claimants are not victims of happenstance; they are actors, and often the most intentional actors in this space, and their acts can hurt competitors and competition as well as consumers. This means two things: (1)  risks of overenforcement, (2) the keys to the prison of meaning shift are in their hands. They don’t need to narrow generics and should not be given incentives to try to shift language in this way. (Notably, Jake doesn’t claim that “booking” has narrowed in meaning or that .com has narrowed in meaning.)

A rule allowing resurrection of generic terms is risky to competition. Ale House: constantly suing other Ale Houses arguing that it has nongeneric meaning. It loses those cases under current doctrine but, according to David & Jake, shouldn’t without getting an [expensive] opportunity to introduce new evidence with each new lawsuit.

Think about scope when you think about validity, as we do in other areas like functionality: because .com will be ignored in an infringement inquiry, it should also be ignored for validity.

The defenses aren’t adequate. Summary judgment is often disfavored in confusion cases, making them expensive. For example, putting a generic term in one’s domain name is likely to be pretty risky for descriptive fair use, given “otherwise than as a mark.”

Consumer recognition is not itself trademark meaning. De facto secondary meaning is a doctrine with a purpose that should still guide us: The Supreme Court recognized that people correctly understood that for a long time all shredded wheat came from Nabisco. That expectation should not be translatable into TM. Even assuming Booking.com is different because of the absence of a patent monopoly, the available tools for identifying trademark meaning won’t be able to reliably tell us whether we’re dealing with expectations around exclusivity, mere recognition, or the kind of trademark meaning that can justify preventing other uses of a term.

Christine Haight Farley, AUWCL: themes: (1) is this about protection or scope; (2) risks of error; (3) tools available to find consumer perception.

Bernstein: This is all about scope. Just b/c it’s hard or some risk of chilling, that’s not enough: we protect descriptive terms all the time, and the exact same issues arise. As a practical matter, there’s likely to be some chilling, but fair use, crowded field doctrine, and increasing willingness to award attorneys’ fees will be among the different tools that will help prevent anticompetitive conduct. There are real issues w/surveys. If people have never heard of the cheese, we need to know only the opinion of people who have heard of the thing—67% of the washingmachine.com people knew that it was generic. We also disregarded the answers of the 33% of those who got wm.com wrong; even still, the vast majority recognized booking.com. The “voice of the consumer” is another way of assessing consumer perception—how is media using it? How are consumers using it? Finally, unfair competition remedies don’t do the trick. There are times when you need a TM. You can’t bring a UDRP action based on unfair competition, or takedowns, or customs recordation. Perfect example: cars.com suffered a problem where a retail used car company had a big lot with a sign called cars.com and they weren’t affiliated at all with cars.com.

Linford: disclaimer requirement is no remedy at all. Disclaimers may push consumers in precisely the wrong direction—it doesn’t give much relief to mark owners. There is some point to thinking about scope itself. The better place to address that is in the scope stage at litigation and not try to force that at validity.

Mark McKenna: It’s never been true that unfair competition is limited to disclaimers. The Kellogg court looks at size, prominence, font; we can’t say there’s some recent trend on disclaimers b/c there’s no recent trend of using unfair competition as a distinct body of law at all. This was a missed opportunity.

Disagree w/David that we should take solace in wm.com. Those 33% were people who had already been told the difference and passed the screener test—they just can’t do this task. It’s one thing to take them out of the survey but those people don’t leave the marketplace; it’s still an inaccurate view of what’s going on in the world. The surveys aren’t telling us about the world!

Farley: you interpret the 33% as people not understanding, but maybe they’re reacting to the compound, making them more likely to interpret it as a brand.

McKenna: and that turns out to be true even for people who have already been trained, including on .coms: they can’t reliably distinguish between things that are de facto secondary meaning and things that are trademark meaning. Yes, it is about scope. Debevoise gets to represent the big owners, not the small businesses that just have to fold.

RT: This is as David says a marginal effect, but it’s a marginal worsening not a marginal improvement. One possibility: more focus on TM function as such rather than just non generic capacity.

For cars.com, I don’t see why unfair competition would have failed there, it’s neither customs nor UDRP. The UDRP would also accept a registration of URL+design, which Booking.com initially tried.

The real question is what happens in new industries or new forms of advertising. It's not surprising that freecycle, a newly invented generic, is one place that problems have developed.

Linford: functionality ignores secondary meaning; the reason is that a functional feature is fixed in ways that language is not and we can safely draw a line b/t functional product features and genericness. [I wish I had said something about this, because it strikes me as plainly wrong (or alternatively, design is a language!).]

Bernstein: there is a difference b/t a suvey that looks at genericism and one that looks at secondary meaning. A secondary meaning study says “is there one thing called American Airlines or is there more than one thing called American Airlines?”  But he wants to emphasize that surveys aren’t the be-all and end-all. There are problems w/surveys & understanding. “Voice of the consumer” is something we’ll see more of. We did in Booking.com have a linguist who talked about actual use, but the survey got a disproportionate amount of attention in argument. Would also support an anti-SLAPP rule for bad claims.

McKenna: that would be welcome, but for a court to find baselessness, the court has to find the claim baseless. If it’s the case that it’s always a question of consumer understanding, and that’s never fixed in time, it’s much harder to find that without a bunch of evidence which itself will be evidence of not-baselessness.

RT: production v. recognition: really huge difference in some cases, including genericity-relevant situations. In the classic Teflon case, one survey found that most consumers could not come up with a name for the pans other than “Teflon,” which sounds like it’s generic. But when you told them “nonstick,” they understood it immediately. So I’m concerned that “voice of the consumer” evidence may mistake production alone for the full scope of consumer understanding of what terms mean.

Bernstein: after Brunetti & Tam, there was already a lot of concern over failure to function, and Booking.com may accelerate that pattern at the PTO. We’ve seen more failure to function/ornamentality refusals and that makes sense.

McKenna: agree descriptively. Jury is out whether that’s good b/c it’s really undertheorized, I know it when I see it. That’s b/c we’ve subsumed so much of the work of identifying what a TM is into distinctiveness (that’s a long term consequence of folding unfair competition into TM). Having done that we’ve now realized that the Abercrombie spectrum doesn’t quite match what we think TMs are.

Linford: Q of whether they’ll submit surveys to the PTO or wait for an appeal to the district court.