Star Wars mod wars: claims over a touted but unreleased mod have to go to trial

Mickelonis v. Aspyr Media, No. 8:23-cv-01220-MWC-ADS, 2025 WL 3050071 (C.D. Cal. Oct. 2, 2025)

Interesting video game related dispute: Aspyr develops video games, including by recreating and re-releasing historic games on modern platforms like Steam and Nintendo Switch. Aspyr has a longstanding relationship with Lucasfilm to release historic Star Wars games, including Knight of the Old Republic II: The Sith Lords (KOTOR II). Players adopt the personal of a Star Wars character and guide that player through a storyline.

Many games allow players to add their own content, including maps, designs, and other features. Gameplayers also release new, unofficial content, called “mods” or “downloadable content.” “The game studios that release these games are not the designers of these mods, and the mods often have gameplay or other issues.” Years after KOTOR II’s 2004 release on Xbox, a group of modders discovered previously unreleased code in the game itself and created the mod at issue here; the group included programmers, fans who supplied new voice-overs, and others. Aspyr characterized the mod as involving “a few new characters and an alternate ending,” while plaintiffs argued that the mod had “a significant amount of unreleased and unfinished content,” which the modders “unlock[ed], fill[ed] out, debug[ged], and complete[d] ... ,” including “expanded locations, new dialogue and voices, new character interactions, and even a new planet.”

Aspyr re-released KOTOR II for Steam, Nintendo Switch, Xbox, and others in 2017. When re-releasing KOTOR II for Steam, Aspyr negotiated with the developers of the Mod for them to release the Mod at the same time; the Mod would be free on Steam, just as it had been when the developers released it in the early 2000s. Aspyr also contacted the modders, who signed a formal release on behalf of the developer group, for free release on the Switch. The parties disagree on what happened next.

Aspyr’s Star Wars games historically cost between $9 and $15 to consumers. As for marketing,

 Many of KOTOR II’s users are drawn to the game because of Star Wars, rather than a general interest in video games. Accordingly, when marketing to those consumers, Defendant focused on emphasizing the Star Wars theme and the Lucasfilm logo. Other users were more focused on KOTOR II’s game type—a first-person, choose-your-own-adventure story, and the bulk of Defendant’s advertising focused on these users. That advertising included a YouTube video showing actual gameplay and describing the game’s story.

One of its YouTube videos had, in the final four seconds, an announcement reading “Coming Soon: Restored Content DLC.” Nintendo posted the same trailer on its e-shop for KOTOR II where consumers would purchase the game. Aspyr tweeted about the Mod and referred to it publicly multiple times. It released a version of KOTOR II for Nintendo Switch while the release of the Mod was still pending. And then, as the existence of this litigation signals, it didn’t release the Mod, apparently because Lucasfilm got cold feet/wanted releases from people who weren’t findable. During the attempt to reach agreement, a higher-up told people that “all marketing activity should be paused,” but the marketing team did not remove several ads, including the YouTube video announcing the release and various tweets.

Thus, in June 2023, Aspyr announced that it couldn’t release the Mod and offered a free game to maintain customer loyalty. It sold 160,000 copies of KOTOR II worldwide.

Plaintiffs provided evidence that some consumers were motivated by the Mod, e.g., “They knew no one would buy it without the [Mod]” and “Restored Content DLC? That’s really good, more than what I expected... Serious?! Even the current Xbox version doesn’t have it. I might need to buy it... If that’s true it’s a must buy to me,” and then “Fuck Aspyr for not offering us refunds and for straight up bait and switching us (which is illegal by the way)” and “Free game key. How about a refund guys. This was one of the key selling points of the port, a lot of people only bought it because they expected the [Mod].”

Plaintiffs submitted expert reports indicating that economic damages could be readily determined and that the Mod was likely material. Aspyr provided countervailing expert reports contesting these points. Hal Poret surveyed over 300 individuals who played KOTOR II for Nintendo Switch and found that 96.3% of respondents stated that they were satisfied with the overall purchase, while 1.7% said that they were dissatisfied, and that “[w]hen asked for all the reasons that come to mind for why respondents were satisfied or dissatisfied with their purchase of the game, 0.7% of respondents (2 out of 300) mentioned anything having to do with restored DLC.” Asking people about satisfaction with something they’ve paid for runs into significant problems of post-purchase rationalization; plaintiffs’ expert also argued that the survey “suffer[ed] from a severe validity issue, that is, it failed to measure what is supposed to measure—material impact of the ‘deceptive’ and ‘false’ advertising message about the Restored Content DLC upon relevant consumer’s intention to purchase KOTOR II,” with “an invalid measurement of materiality, an incorrect definition of universe and a major leading question.”

Although the court denied class certification under the laws of a number of states, the case continued.  

The court declined to grant Aspyr summary judgment on materiality, since a reasonable jury could reject Poret’s study. Aspyr argued that the plaintiffs were a weird, small segment of the buying public, not reasonable consumers, but plaintiffs’ own testimony plus the online comments would let a reasonable jury decide otherwise. The court noted that, “[i]n determining whether a statement is materially misleading under California law, the primary evidence ... is the advertising itself.” “Given that the last image that anyone viewing the announcement YouTube video saw were the words ‘Coming Soon: Restored Content DLC,’ and that [redacted] [ed. note: argh!], a reasonable jury viewing the advertisement could also find materiality based on its contents.” Although “materiality depends on the perspective of the consumer, not the perspective of the defendant,” the advertising itself was evidence.

Standing: Aspyr argued that, because the plaintiffs couldn’t prove that the Mod had any economic value, they lacked standing. Again, this was a contested material issue.

Injunctive relief: Aspyr argued that it had ceased marketing the Mod, but plaintiffs pointed to persisting online traces claiming that the DLC was “coming soon” on “affiliate platforms that it controls, including IGN and Gamespot.” The evidence that Aspyr controlled these sources was “limited,” but Aspyr provided no counterevidence and thus couldn’t get summary judgment.

Aspyr then argued that it lacked the requisite knowledge until March 2023, when Lucasfilm told it that Lucasfilm wouldn’t approve the release. It argued that the laws of California, Oregon, South Carolina, and Colorado required knowledge of the deception, or at least negligence (for California). For claims seeking injunctive relief under the California UCL, the court found knowledge unnecessary, while the CLRA does require knowledge (for damages). There was a genuine dispute of material fact about Aspyr’s knowledge. There was evidence that, when it started advertising, Aspyr lacked approval, and “Coming Soon” could confuse the public into believing that the game would certainly have a DLC, “when there remained a distinct possibility that the DLC would never receive approval.” A reasonable jury could conclude that the ad was knowingly false.

Oregon: “[D]efendant[’s] representations violated the [Oregon] UTPA only if, at the time that they were made, defendant[ ] knew or should have known that [its] services did not have the qualities defendant[ ] represented them to have.” There was also a genuine dispute here.

South Carolina:  The plaintiff from this state alleged that he bought the game before it was available for purchase, so the claim failed regardless of the legal standard around knowledge.

Colorado: “[a] CCPA claim will only lie if the plaintiff can show the defendant knowingly engaged in a deceptive trade practice.” Thus, Colorado’s consumer protection law “provides an absolute defense to a misrepresentation caused by negligence or honest mistake,” meaning that liability “is dependent upon knowledge or intent existing at the time of the advertising conduct and the remediable damage that results from that conduct.” Still, there was a genuine dispute of material fact.

Reliance: Plaintiffs’ declarations that they saw the marketing materials sufficed to create a genuine dispute of material fact.

Texas: Plaintiffs failed to give the required notice under Texas consumer protection law before suing.

The court also denied plaintiffs’ motion for partial summary judgment on falsity. “Viewing the evidence in the light most favorable to Defendant, Plaintiffs have not offered sufficient evidence to show that they were reasonable consumers rather than consumers with specialized knowledge.” And they didn’t satisfy their burden to prove that the statements were false when made; a reasonable jury could find that “Coming Soon” wasn’t false “based on the progress that had already been made in obtaining approvals to release the DLC, including its receipt of approval from the ‘Mod leaders.’”

Reading list: consumer protection and the industries who regularly sue their regulators

Nicholas R. Parrillo, Administrative Law as a Choice of Business Strategy: Comparing the Industries Who Have Routinely Sued Their Regulators with the Industries Who Rarely Have

George Washington Law Review, Vol. 93, No. 5, pp. 1031-1195 (2025) 

Abstract:

For some large and powerful industries, it has long been normal and even routine for businesses to sue their federal regulator. For other large and powerful industries, it has been rare for the last twenty-five to forty years or more. This variation is enormous yet almost entirely unknown to the literature on administrative law.

This Article documents and analyzes this variation in one type of federal regulation: public health and safety. For every major federal health-and-safety regulator, I search dockets to identify every judicial challenge to the agency’s actions brought by the agency’s principal regulated industry—whether by individual companies therein or by trade associations—during the period from 2013 to 2021 and, for several of the agency-industry pairings, for additional time periods extending as far back as the 1980s and as recent as 2024. The pairings covered are the following: the Food Safety and Inspection Service at the U.S. Department of Agriculture and meat and poultry processors; the Food and Drug Administration and drugmakers; the National Highway Traffic Safety Administration and automakers; the Federal Aviation Administration and airlines; the Consumer Product Safety Commission and children’s product companies; the Nuclear Regulatory Commission and nuclear plant operators; the Occupational Safety and Health Administration and employers generally; the Mine Safety and Health Administration and coal mines; the Environmental Protection Agency and power companies; the Federal Motor Carrier Safety Administration and for-hire trucking companies; and the Centers for Medicare and Medicaid Services and hospitals and nursing homes. For each pairing, I use the data on judicial challenges as the starting point for a qualitative discussion of how big or small a role litigation plays in agency-industry interaction.

I find that industry judicial challenges tend to be few and marginal when two conditions are met. The first condition is that companies in the industry have a thick relationship with the regulator—that is, each company knows the regulator will be making repeat decisions impacting its business into the indefinite future, so each company has a stake in winning the agency’s trust and goodwill. The second condition is that, with regard to the agency action at issue, industry economic interests are aligned with the mission of the regulator. This is especially the case for agency action that has the official purpose of protecting the health and safety of the industry’s own consumers, as opposed to protecting industry workers or victims of externalities of industry conduct. In protection of consumer health and safety, the industry and the regulator are more likely to view each other as on the “same team,” and industry tends to (1) see the regulator as a source of credible guarantees that help attract business, (2) fear the “bad look” with consumers that conflict with the regulator could cause, and (3) seek influence and leverage over the agency by less open and adversary means than litigation. 

claims about game provider's bot use in "fair" and "skill-based" games must go to trial

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2025 WL 3012836, 24cv1646(DLC) (S.D.N.Y. Oct. 27, 2025)

Most recent previous opinion discussed here. Skillz sued its competitor in the “real-money skill-based mobile gaming” market for violating the Lanham Act and NY GBL § 349 by stating or implying that its games pit human players against each other when in fact Papaya employed bots against human players. Here, the court denies summary judgment to Papaya.

“In RMSB games, players are matched by the platform with other users on games created by third parties and compete to win cash prizes or for game rewards.” Skillz most commonly offers head-to-head competition between two players, while Papaya offers multi-player tournaments with larger cash prizes. In various ads, Papaya has described its games as “fair” and “skill-based,” represented that Papaya has “no vested interest” in and does not “profit” from who wins or loses its tournaments, and refers to “players” “over the age of 18,” “individuals,” and “winners” as the users on its platform. Its video ads showed images of humans playing games, and claimed that its games “are directly determined by your level of skill” and that Papaya will “match [you] against players with similar skills.”

It was undisputed that Papaya used bots in its games from 2019 until at least November 2023. Its liquidity bots filled in user slots to ensure that a tournament “won’t stay open for too long” as it awaits players. Its tailored bots were used to create “a predetermined outcome” where Papaya “want[s] the player to finish at some predefined rank,” which requires “control[ling] the scores of the rest of the players.” All players in a tailored-instance outside the ‘receiving’ player” are bots. “Papaya customers inquired between 2021 and 2023 whether they were playing against other human beings or against a computer or a bot. Papaya’s responses generally emphasized that it matched players with similar skill levels and assured the complaining customers over 200 times that ‘we do not use bots.’” Papaya even closed the accounts of two players who expressed suspicion about Papaya’s use of bots.

Papaya regularly identified Skillz as its largest direct competitor and benchmark for performance assessments. During Papaya’s bot era, Skillz saw a decrease in market share while Papaya saw an increase.

Papaya argued that Skillz lacked sufficient evidence that any of its advertising statements communicated a false message to consumers, were material, or caused Skillz injury. The court disagreed.

A reasonable jury could find literal falsity or falsity by necessary implication, leading to a presumption of deception. Papaya’s representations that its tournaments are “fair,” “skill-based,” and only between “players” and “individuals” who are “over the age of 18” could be false based on the undisputed evidence of bot use. Similarly, statements that Papaya has “no vested interest” in who wins or loses, and that it does not “profit on the outcome of a Tournament,” could be literally false because there is evidence that Papaya used bots to control the outcomes of tournaments (and speed them up so players could use their winnings on new games). [Frankly, I’d be inclined to grant summary judgment to Skillz on falsity!]

Papaya argued that it never expressly stated in its advertisements that there were no bots in its games. “The issue is what a reasonable consumer would understand Papaya’s statements to mean. Should a jury find, for instance, that the advertising necessarily and unambiguously implied that only human players competed in Papaya’s games, it would be entitled to find that the advertising was literally false.”

Papaya argued that “skill-based,” “fair,” “players,” and “individuals” were not literally false because those terms had multiple meanings. [Insert goose meme: what meanings? What ones???]. The jury could find that, in context, they were literally false or false by necessary implication. Papaya’s expert concluded that skill played a greater role than chance in the outcome of Papaya’s tournaments, regardless of bot usage. So what? It was undisputed that Papaya used tailored bots to control the outcomes of tournaments. Papaya “could prevent players from winning–or allow them to win–no matter how they performed in the game.”

Papaya also argued that its statements that it had “no vested interest” in and did not “profit” on tournament outcomes were accurate, because Papaya made less money in sessions with bots because bots do not pay entry fees. Its experts opined that human players received more in total cash prize awards due to Papaya’s use of bots. That was a jury question. [Seems pretty inconsistent with the profit motive—did human players walk away with more money total because of bots, or did they play more games/stay longer?]

Implied falsity: This can be shown through either “extrinsic evidence of consumer confusion” or “evidence of the defendant’s deliberate deception,” the latter of which must be “egregious” to “create[] a rebuttable presumption of consumer confusion.”

There was sufficient evidence for a reasonable jury to find deliberate deception, given Papaya’s repeated denials of bots’ existence. E.g., when one player asked, “Is every single player I play against in a tournament a real player or are there computers playing at times?”, Papaya responded, to “clarify that we do not use bots or computer players” and that “if it were possible to control [tournaments] manually, it would not be fair to other players.” Papaya CSRs were instructed to escalate any complaints that referenced bots to management, and one employee stated that a customer service representative “displayed poor judgment” by keeping open an account of a consumer who had complained about bots and demanded a refund. Papaya had an internal policy of removing posts in its Facebook group that mentioned bots.

Papaya argued that there should be no presumption of deception because Skillz failed to provide evidence that any intent to deceive was linked to a specific challenged statement. But internal statements by executives and the company’s awareness of consumer confusion, among other things, are relevant to intent. Here, there was evidence that Papaya and its executives recognized that its use of bots “did not align” with its public statements and that this “misalignment” confused customers.

Indeed, executives decided to respond to a consumer who asked for a direct answer on whether Papaya used bots by informing the user that the platform has “real players” and placing the blame on “rare cases where players use automated systems.” Recognizing that consumers noticing bots on the platform was a growing issue and impacted “trust in our fairness,” Papaya executives modified its bots’ performance to make bot profiles appear more human so that fewer users would detect their usage going forward. Another employee stated: “While understanding the need for bots, the margin of their winnings should be smaller and less obvious to our players.” A reasonable jury could find intentional deception, despite the testimony of Papaya’s Rule 30(b)(6) witness, who stated that instances in which Papaya told customers that it did not use bots were “an unfortunate mistake” committed by the customer support vendor and “not Papaya’s position.” The court noted that “Papaya’s executives have not made similar representations. They invoked their Fifth Amendment privilege to remain silent during their depositions and have not offered affidavits in support of this motion.” [Yikes.] Regardless, there was enough to go to a jury.

Skillz also offered extrinsic evidence of consumer confusion created by Papaya’s use of the terms “skill-based,” “fair,” “players,” “winners,” “individuals,” and “no vested interest,” in its advertising. Along with individual consumer responses, Skillz provided survey evidence.

Respondents had played at least one of four games that Skillz and Papaya offer on their platforms. Upon watching a Papaya ad, 45.8% of respondents indicated that they believed that the game used solely human players. The survey next presented respondents with a mock app store description constructed from Papaya’s public statements:

Solitaire cash makes sure to match players against other opponents with a similar skill level to ensure a fun and fair experience for everyone. You’ll be matched with other players within the same skill level, and you will get the same deck – so the game is totally fair and skill-based. The outcome of Solitaire cash is based on the skill of the players, rather than luck or chance. Solitaire cash has no vested interest in who wins or loses, nor does it profit on the outcome of a tournament that we provide.

After reading the description, 60% of respondents indicated that they thought the game included only human players.

Papaya argued that the survey was inadmissible because it did not use a control, stripped the statements to which respondents reacted of their “real world” context, and did not survey the appropriate populations, excluding prospective game players and thereby including too many men. These were issues for cross-examination, not demanding exclusion.

Papaya didn’t explain what kind of control could have improved the survey’s reliability. [This is a missed opportunity! A control ad could have just described the game mechanics and not the opponents and tested whether consumers thought they’d received any message about whether they were playing against other humans. I wouldn’t be at all surprised if the net confusion levels were still pretty high, given the explicit claims. Still, the court didn’t appear to understand the purpose of a control: “The survey is designed to test the impression created by the words Papaya chose to describe its games. Testing responses to statements that Papaya did not use in its advertising would be neither relevant nor illuminating.”]

Papaya also argued that the survey wrongly screened for past players of RMSB games, not prospective consumers to whom the ads were directed towards, who differed demographically. Skillz’ expert filed a supplemental report looking at what happened when he removed randomly selected male respondents to match the ratio of male to female respondents in Skillz’s own survey of Skillz’s actual customers. The differences were, he reported, statistically insignificant.

Materiality: While the materiality of the falsity and the injury to the plaintiff resulting from the defendant’s falsity are “separate essential elements ... where the defendant and plaintiff are competitors in the same market and the falsity of the defendant’s advertising is likely to lead consumers to prefer the defendant’s product over the plaintiff’s,” proof of injury to the plaintiff may also demonstrate the materiality of the falsehoods.

Skillz relied on evidence that consumers complained to Papaya and closed their accounts with Papaya when they came to believe that Papaya was using bots in its games, as well as on Papaya’s efforts to deceive consumers about its use of bots. It also offered a second survey that sought to measure the likelihood of consumers continuing to play if they learned that some of their opponents in real-money games whom they thought were human were actually bots.

Half the respondents were randomly asked if they would “continue” to play if they were informed that some of their opponents were bots, and the other half were asked if they would “stop” playing. Of the former group, 51.2% of respondents indicated they would be unlikely or very unlikely to continue playing. Of the latter, 66.8% indicated they would be likely or very likely to stop playing.

[It seems to me that with less evidence of deception, that amount of a swing (over 15% of respondents) from a small wording change would be concerning—but frankly, even if you take 51.2% as a midpoint and say that it might reflect only a range from 35%-66% materiality, those are big enough numbers that it shouldn’t matter. Which is also to say that I’m not sure that you should draw anything but qualitative conclusions from surveys like this. Also:]

The survey had a control: half the respondents were also asked if they would continue playing – with the other half being asked if they would stop – if they were informed that they had to wait one hour to learn the results of the game. Here, the numbers were 40.8% (unlikely or very unlikely to continue playing) and 54.8% (likely or very likely to stop playing), suggesting that the wording affected about 15% of respondents, which with these numbers didn’t matter much. “At bottom, regardless of how the question was phrased, a significant number of respondents showed a propensity to cease playing when they learned there were bots in the games.”

Papaya argued that the survey didn’t measure the materiality of bots, but rather the materiality of learning of intentional deception. That went to the weight of the survey, not its admissibility. [Especially if there was intentional deception!]

Papaya also argued that bots are so ubiquitous in the industry that consumers “fully expect” them to be deployed, and that its failure to disclose was in line with industry practice. “These arguments fail to engage with the evidence of deception and materiality offered by Skillz.”

Injury: Injury “can be established when defendant and plaintiff are competitors in a relevant market and plaintiff demonstrates a logical causal connection between the alleged false advertising and its own sales position.” Papaya regularly identified Skillz as its largest competitor and benchmark for performance assessments, and Papaya’s growth in market share in 2021 coincided with Skillz’s decline in market share. “Even if Skillz were unable to quantify its damages with sufficient certainty to recover those damages, it could seek injunctive relief and disgorgement of the defendant’s ill-gotten profits.” And Skillz offered an expert to calculate both damages to Skillz and Papaya’s unjust enrichment, the latter of which was between $650 and $719 million, depending on whether that profit was measured by Papaya’s cost savings from its use of bots or by how much less it would have earned without deception. That report was admissible and relevant.

Papaya argued that “the but-for world in a false advertising case must be one in which the false statements were never made and cannot be one in which the accused business practice did not occur.” But the expert’s choice was not unreasonable. “There is evidence that Papaya may not have been able to operate in the RMSB marketplace at all if it publicly and accurately disclosed its use of bots.” If it did so, it might have been classified as a gambling platform by app stores—unlike RMSB platforms, gambling platforms hold a stake in the results. RMSB games don’t involve “playing against the house” and are supposed to collect the same revenue regardless of who wins, whether from entry fees, advertising revenue, or in-app purchases. “[H]ad Papaya disclosed its use of bots, Papaya may have been faced with the regulatory and tax requirements with which gambling platforms must comply. In addition, it may have lost access to app stores and payment processors and have been excluded from the RMSB market.”

GBL claims survived for the same reasons.

bad Lanham Act claim, swept up with bad patent claim, triggers Rule 11 sanctions

Raydiant Oximetry, Inc. v. ALC Medical Holdings LLC, --- F.Supp.3d ----, 2025 WL 3022882, No. 25-cv-00392-VC (N.D. Cal. Oct. 29, 2025)

Baseless patent and false advertising claims produce a big Rule 11 award. The patent stuff is eye-popping, and it’s hard to imagine that Rule 11 would have been appropriate just for the false advertising claim, which was baseless only because the challenged statements didn’t occur in “commercial advertising and promotion”/weren’t part of an organized campaign to penetrate the market. But still—a warning!

I’ll let the court introduce the facts:

This dispute began when ALC Medical Holdings sent Raydiant Oximetry a demand letter alleging that Raydiant’s medical device [a uterine device used to treat postpartum hemorrhaging] infringed ALC Medical’s patent. This accusation was false. Raydiant’s device has a “placement marker” that is permanently affixed, while the device claimed in ALC Medical’s patent requires an adjustable placement marker. In fact, the Patent and Trademark Office declined to approve the patent application until it was narrowed to require that the placement marker be adjustable.

Unfortunately, patent plaintiffs send baseless demand letters to defendants with some regularity. But this was no ordinary fishing expedition. To the contrary, all evidence available to ALC Medical and its lawyers at the time they sent the letter pointed strongly towards noninfringement. The sole founder of ALC Medical, Jennifer West, used to work at Raydiant. She helped develop Raydiant’s device and knew that it did not have a moveable placement marker. There was a reason for this design choice: Raydiant concluded that if the device’s placement marker were moveable, it would be dangerous to the patients who use it. Presumably for the same reason, the device West developed after she left Raydiant does not contain a moveable placement marker, even though her company’s patent requires one.

Thus, when Raydiant brought an action in this Court seeking a declaratory judgment of noninfringement, ALC Medical and its lawyers should have apologized and walked away.… Instead, they doubled down. They brought counterclaims against Raydiant, including one for infringement, asserting again that Raydiant’s device possessed a moveable placement marker. They also falsely alleged that West’s own device practiced the invention—that is, that her device had a moveable placement marker.

In support of the infringement counterclaim, ALC Medical and its lawyers submitted several diagrams depicting Raydiant’s device. On each diagram, they cited the YouTube video of a presentation Raydiant gave at an industry conference, indicating that the diagrams originated from the slide deck used in that presentation. But that was not entirely true. The lawyers manipulated one of the diagrams, superimposing dotted lines to make it seem like Raydiant’s device had a moveable placement marker. Nothing in Raydiant’s actual slide deck or the video of the presentation suggested that was the case.

Subsequently, Raydiant allowed ALC Medical and its lawyers to inspect the device. The inspection confirmed what all the evidence had previously suggested: the placement marker was not moveable…. ALC Medical and its lawyers … embarked on a ham-fisted scramble to avoid liability for Raydiant’s attorneys’ fees. First, they refused to dismiss their infringement counterclaim (or their equally frivolous false advertising counterclaim) unless Raydiant also agreed to dismiss its declaratory judgment action, with each side to bear its own fees and costs. Naturally, Raydiant refused. Then, ALC Medical and its lawyers filed a frivolous motion to dismiss Raydiant’s declaratory relief action for lack of jurisdiction, claiming falsely that Raydiant’s device was an “investigational device” immune from infringement claims. Later, they cobbled together a covenant not to sue that they argued mooted Raydiant’s declaratory relief claim, even though it clearly did not. At each step of the way, the position taken by ALC Medical and its lawyers became increasingly disconnected from the reality of the situation ….

Raydiant was awarded over $1.4 million in attorneys’ fees, with ALC Medical and its law firm Womble Bond jointly and severally liable.

The false advertising counterclaim was based on Raydiant’s presentation of its device at the Stanford Medicine Pediatric & Maternal Innovation Showcase, a pitch competition. Sanctions are warranted under Rule 11 if “(1) ‘the [challenged pleading, written motion, or other paper] is legally or factually baseless from an objective perspective,’ and (2) the attorneys failed to conduct ‘a reasonable and competent inquiry before signing and filing [it].’ ” The court found that both counterclaims “easily [met] this test.”

Just a bit from the patent discussion: Womble Bond denied bad faith in submitting the altered exhibit, asserting that the annotated dashed lines were made with a different font and in red color to distinguish the exhibit from the original slide. “This is difficult to swallow, particularly because counsel only submitted a black and white copy of its counterclaims to the Court, and the two fonts apparently used on [the exhibit] are not easily distinguishable. If Womble Bond and ALC Medical had truly been concerned about not misleading the Court, as opposed to disguising the baselessness of the infringement counterclaim, they could have easily included a disclaimer alongside the image clarifying that it had been annotated.” Practice tip ahoy!  

The Lanham Act counterclaim alleged that Raydiant’s discussion at the pitch session of its device’s being “cleared” or “approved” by the FDA was misleading because the device is a Class II device exempt from premarket notification requirements. “ALC Medical and its counsel knew or should have known that the claim was objectively baseless under Ninth Circuit law,” because only “commercial advertising or promotion” is actionable under 15 U.S.C. § 1125(a)(1)(B). This requires: (1) commercial speech; (2) made by a defendant who is in competition with the plaintiff [note that this is not necessary post-Lexmark]; (3) for the purpose of influencing consumers to buy the defendant’s goods or services; and (4) “disseminated sufficiently to the relevant purchasing public to constitute ‘advertising’ or ‘promotion’ within that industry.” A presentation at a one-off grant competition, “clearly” does not constitute “commercial advertising or promotion” under that definition. The court distinguished cases involving a press release and a conference presentation whose slides were posted on the defendant’s website. The pitch competition was more akin to “private statements made to actual and potential customers” that were insufficient to constitute sufficient dissemination. Thus, the counterclaim was “frivolous from the time it was filed.”

 

allegedly false claims for compounded weight loss drugs didn't plausibly threaten Eli Lilly's reputation

Eli Lilly & Co. v. Mochi Health Corp., 2025 WL 2998166, No. 25-cv-03534-JSC (N.D. Cal. Oct. 24, 2025)

Another of the cases in which Eli Lilly’s attempts to protect its GLP-antagonist market do surprisingly badly, once again highlighting the higher standards imposed on false advertising plaintiffs compared to trademark plaintiffs. Lilly sued defendants, alleging a scheme to mislead consumers into purchasing compounded versions of Lilly’s FDA-approved medications, Mounjaro and Zepbound, under California state and federal false advertising law. Defendants compound tirzepatide, which is the key ingredient in Lilly’s drugs.

Mochi allegedly changed the dosages for all its customers without consulting them or receiving a clinical indication from a physician, in violation of California’s prohibition on the corporate practice of medicine. In addition, Lilly alleged that Mochi also included “additives” such as niacinamide and pyridoxine, without patient consent or a clinical indication. Lilly points to a complaint posted by a Mochi customer on the Better Business Bureau’s website, indicating their dissatisfaction with the unilateral decision to add niacinamide to the compounded medication; the complaint said that the customer had broken out in a rash, which a dermatologist opined was caused by the niacinamide. Mochi released statements in response to customer queries, claiming that the additives were “not clinically significant” and changes were dependent on the pharmacy used to fill the prescription. Lilly alleged that this again violated the prohibition on the corporate practice of medicine.

As for false advertising, Mochi allegedly misrepresented the source of its products by claiming that it is a generic of Lilly’s Mounjaro and Zepbound; misrepresented its compounded tirzepatide medications as safe and effective based on studies conducted of Lilly’s products; falsely claimed that its compounded tirzepatide drug was “personalized”; falsely claimed that its pharmacy partner voluntarily stopped compounding tirzepatide medications; and falsely advertising Mochi’s founder and CEO as a licensed physician.

How did this allegedly harm Lilly? Lilly alleged that it suffered irreparable harm to its brand and goodwill because Mochi promised unobtainable results and traded on the credibility of Lilly products. The complaint alleged:

When consumers fail to achieve desired results from Mochi Health’s combination injection, consumers may conclude that tirzepatide is ineffective in general— an outcome made more likely given Defendants’ reliance on Lilly’s clinical studies and their explicit claims that their product functions identically to Lilly’s products, with the additives having no clinical significance. Worse still, if consumers are harmed using compounded tirzepatide products from Defendants—where their dosage and formulation are subject to repeated arbitrary changes based solely on Defendants’ business relationships without any clinical justification—consumers may even draw unwarranted conclusions about the safety and effectiveness of Lilly’s FDA-approved tirzepatide medicines.

The court found no Article III standing. The only harm Lilly alleged to itself was reputational: if Mochi’s products didn’t work, consumers might conclude that Lilly’s products were also ineffective, and if they harmed consumers, consumers might conclude that Lilly’s products were also harmful.

Lilly argued that, given its claim of reputational injury, competition wasn’t required for proximate cause; it was enough to allege that the defendant damages the product’s reputation “by, for example, equating it with an inferior product.” But that still required Lilly to allege a factual basis to support its conclusion that its reputation has been damaged by comparison to an inferior product. The complaint didn’t do so; it didn’t allege that Mochi’s compounded product failed to help consumers lose weight, nor did it allege facts that plausibly support an inference of failure. “Lilly appears to argue the mere fact a medication is compounded makes it an inferior version of an FDA-approved product with the same active pharmaceutical ingredient. But compounding is a federally recognized and regulated pharmaceutical practice ….” As a result [this is a proximate cause “as a result,” not a but-for cause “as a result”], “the existence of compounded tirzepatide medications does not, in itself, plausibly support harm to the reputation of a tirzepatide manufacturer.” More would be required for this theory: “facts supporting an inference that Mochi Health’s compounded medication fails to meet consumer expectations about tirzepatide.”

Similarly, Lilly didn’t plausibly allege that Mochi customers were harmed by the compounded medications “such that they could draw unwarranted conclusions about the safety and efficacy” of Mounjaro or Zepbound. A “lone internet post by an unidentified individual” didn’t support a plausible inference that Mochi customers could reasonably draw a negative inference about Lilly’s product. There were no allegations that Health misled consumers into thinking there was no niacinamide, pyridoxine, or glycine in the medication; “the customer who allegedly complained of a rash knew of the niacinamide in the product prior to using it, and remarked on how it was a new addition compared to their previous prescription.” Thus, this allegation showed a customer who understood the difference, which wouldn’t support an inference that Lilly could be harmed.   

No Article III standing, no federal case.  

Coinbase can't force claim for injunctive relief into arbitration

Khan v. Coinbase, Inc., 2025 WL 2985378, No. A172063, --- Cal.Rptr.3d ----, (Ct. App. Oct. 23, 2025)

The appellate court affirmed the denial of Coinbase’s attempt to send Khan’s false advertising claims to arbitration, holding that Khan sought public injunctive relief and that the arbitration agreement’s attempted waiver of the right to seek public injunctive relief was invalid. It rejected Coinbase’s argument that the relief sought was not for the “public” because only people who signed up for a Coinbase account were exposed to the targeted representations.

Coinbase is a digital currency exchange. Khan alleges that Coinbase charges customers a “hidden” transaction fee, the spread fee. “For example, when a customer seeks to make a purchase, the spread fee is not displayed on any of the screens that the customer reviews when placing an order. Nor is the spread fee included in the amount of the ‘Coinbase fee’ that is displayed to consumers.” Instead, Coinbase quotes a market price for various digital currencies, and after the customer indicates how much of a particular currency he or she wants to purchase, the customer is shown an “Order Preview” with a slightly higher price, either one or two percent. The only way for a customer to discover that Coinbase is charging this added fee is if the customer clicks a “tooltip” icon next to the word “Price.”

Coinbase allegedly designed its platform to take advantage of less sophisticated customers by charging a spread fee only to consumers who use Coinbase’s “default trading option,” and not imposing a spread fee on customers who select the platform’s “Advanced” trading option. He brought UCL and FAL claims.

Coinbase’s TOS include an arbitration clause with a “Waiver of Class and Other Non-Individualized Relief.” It states that “only individual relief is available,” and it precludes any customer or user from consolidating his or her dispute with that of another customer or user. Additional language expressly prohibits an arbitrator from awarding non-individualized relief: “Subject to this Arbitration Agreement, the arbitrator may award declaratory or injunctive relief only in favor of the individual party seeking relief and only to the extent necessary to provide relief warranted by the party’s individual claim.” And a severability clause provides that if the waiver is deemed “unenforceable as to a particular claim or request for relief (such as a request for public injunctive relief),” that claim or request for relief shall be severed and litigated in court. All disputes relating to the purported waiver of class or other non-individualized relief “shall be decided by a court of competent jurisdiction and not by an arbitrator.”

The trial court found that the arbitration agreement contained an impermissible waiver of the right to obtain public injunctive relief, and that Khan was indeed asserting claims for public injunctive relief. “[T]he injunctive relief sought is not limited to private parties or the putative class and will benefit the public at large,” and the “nature of the harm alleged” and “the statutory basis” for Khan’s claims showed that he was seeking public injunctive relief. Thus, he could not be required to arbitrate.

The California Supreme Court has held that a provision in the parties’ arbitration agreement that purported to waive the right to seek public injunctive relief in any forum was invalid. Injunctive relief available under California’s consumer protection statutes can be either public or private: “public injunctive relief ... is relief that has ‘the primary purpose and effect of’ prohibiting unlawful acts that threaten future injury to the general public”; by contrast, relief “that has the primary purpose or effect of redressing or preventing injury to an individual plaintiff—or to a group of individuals similarly situated to the plaintiff—does not constitute public injunctive relief.”

Public injunctive relief is available to private plaintiffs suing for violations of California’s consumer protection statutes, notwithstanding amendments to those laws that require private plaintiffs to have suffered individual injury. A private plaintiff who has suffered an injury in fact due to a violation of the UCL or FAL is filing the lawsuit “on his or her own behalf, not ‘on behalf of the general public,’ ” even if one of the remedies sought is injunctive relief, “ ‘the primary purpose and effect of’ which is ‘to prohibit and enjoin conduct that is injurious to the general public.’ ”

The waiver of public injunctive relief was invalid under Cal. Civil Code section 3153, which provides: “Any one may waive the advantage of a law intended solely for their benefit. But a law established for a public reason cannot be contravened by a private agreement.” Waiver of a statutory right is permissible only if the “ ‘statute’s “public benefit ... is merely incidental to [its] primary purpose,” ’ ” and “ ‘ “any public purpose” ’ ” would not be seriously compromised by the waiver. This is not true of waiver of public injunctive relief under consumer protection laws.

Here, “Khan alleges that particular Coinbase conduct in operating its online cryptocurrency exchange constitutes a deceptive business practice that is likely to deceive or confuse the public; he alleges this unlawful conduct is ongoing; and he seeks injunctive relief solely to prohibit Coinbase from continuing to violate the statutes in this manner.” That was enough to establish the public nature of the relief Khan sought, and how that relief would benefit the general public if he is able to establish his claim. “[A] complaint to enjoin future violations of California’s consumer protection laws seeks public injunctive relief when the relief sought is not limited to the plaintiff or a defined group, but is oriented to and for the benefit of the public at large.”  Here, Khan sought relief against practices that allegedly mislead members of the public who seek to buy, sell, or convert digital currency on Coinbase’s platform.

Thus, the waiver was invalid, even if included in an arbitration agreement; arbitration is on an equal footing with other contracts, but the FAA’s savings clause permits courts to declare arbitration agreements unenforceable “ ‘ “upon such grounds as exist at law or in equity for the revocation of any contract.” ’ ” “The principle that a law established for a public purpose cannot be contravened by private agreement is a generally applicable contract defense, not a defense that applies only to arbitration or that derives its meaning from the fact an arbitration agreement is at issue.”

 

Coinbase contended that the relief sought in the complaint was private because Khan sought to compel Coinbase to make additional disclosures to existing customers, and thus challenged conduct that is not directed at the public. But the complaint didn’t seek an order compelling Coinbase to make any disclosures specifically to Khan or any defined group of individuals.

Coinbase responded that the injunction Khan seeks couldn’t possibly benefit the public because only existing Coinbase customers could access the platform on which the allegedly unlawful conduct occurs. But the court wasn’t willing to allow Coinbase to “insulate itself from a public injunction simply by requiring a consumer to create a user account before engaging with Coinbase and its platform. In our view, the unlawful business practice that Khan describes and seeks to enjoin affects the general public because any member of the public may access and elect to use Coinbase’s online platform.” The user account requirement was “simply the online equivalent of driving to, parking at, and walking into a brick-and-mortar store,” “the threshold a potential customer must cross before transacting business with Coinbase.” Coinbase did not “demonstrate that it restricts access to its services in a meaningful way,” or that “any member of the public cannot simply create credentials and access Coinbase’s services.” “[W]e would surely say that an injunction preventing a grocery store from advertising one price in the grocery aisle, while charging a higher price at the register, was a public injunction even though it protected only customers who entered the store to buy groceries.”

Coinbase argued that the threshold of establishing a user account was materially different from walking into a store because signing up for a user account requires a potential customer to sign a contract agreeing to arbitrate claims, “but of course no agreement to arbitrate a claim seeking public injunctive relief is enforceable, so we do not see this difference as dispositive.”

In addition, conduct directed at a defendant’s customers can at least sometimes support a request for public injunctive relief. “When the primary purpose of an injunction is to prohibit an ongoing violation of consumer protection laws, the relief sought is usually public relief because the benefit to the plaintiff or a group of similarly situated individuals is not materially different from the benefit that inures to the broader public.” Here, Khan wasn’t seeking a specific change to Coinbase’s platform that would benefit him alone, or existing account holders alone, but not members of the public who become future users of the Coinbase platform. An injunction can both benefit a business’s existing customers and also benefit the public generally.

"GMO-free" avocado oil isn't deceptive even if all avocado oil is GMO-free

Whiteside v. Chosen Foods, LLC, --- F.Supp.3d ----, 2025 WL 2460192, No. 3:25-cv-00481-CAB-DDL (S.D. Cal. Aug. 26, 2025)

xkcd, "Free"

XKCD may hate it, but the law will allow it.

Plaintiff alleged that defendants misleadingly advertised their avocado oil by using a non-GMO label, because all avocado products are free from GMOs. The court found that reasonable consumers would not receive the message that other avocado oils had GMO ingredients from the label claims “non-GMO” and/or “non-GMO Project Verified.” The latter was literally true. “As a matter of law, the reasonable consumer and purchaser of the Products would understand that the Non-GMO Project Verified label means that the Products are certified by the Non-GMO Project,” and nothing more. The court agreed with defendants “that a reasonable consumer who cares about the GMO status of ingredients knows that there are no commercially available genetically engineered avocados, and if consumers had any questions about the Non-GMO Project’s certification standards, they would review those standards.”

Given that reasonable consumers are expected to know a fair amount about the world, “as a matter of law, the reasonable consumer of the Products would understand that only certain foods are available in both non-GMO and GMO forms, that certain ingredients—including avocado oil—are only available in a non-GMO form, and that avocado oil is a non-GMO alternative to canola or vegetable oils.” I think this is a lot to expect of reasonable consumers—a far better justification would be that reasonable consumers don’t think through the implications of a claim for other products unless they’re given more reason to do so than this. “Given this context, a reasonable consumer would not interpret the Products’ label to represent anything about whether other avocado oil products contain GMOs or the GMO-free status of commercially available avocados.”

Another "natural" claim proceeds for pet food labeled "natural + vitamins, minerals, and other nutrients”

Cobovic v. Mars Petcare US, Inc., --- F.Supp.3d ----, No. 24-CV-7730 (ARR) (JAM) (E.D.N.Y. Jun. 20, 2025)

Cobovic alleged that the use of the word “natural” on the front label pet food was false and misleading under NY law because the products actually contain “multiple synthetic ingredients.” True, the label includes the phrase “Plus Vitamins, Minerals and other nutrients,” but Cobovic alleged that a reasonable consumer would assume that the vitamins, minerals, and other nutrients are themselves “natural” rather than “synthetic.” She also alleged that “some of the synthetic ingredients in the Products,” such as xanthan gum, cannot be categorized as vitamins or minerals, such that the label is false either way.

The court read past cases to come to a consensus that “the relevance of the product’s ingredient list depends on whether or not the allegedly deceptive statement is considered ‘ambiguous.’” Where the plaintiff’s claim “turns on” the “unavoidable interpretation” of the statement in question, “the reasonable consumer is not expected to consult the ingredient list to ascertain the label’s meaning,” but ambiguity requires a reasonable consumer to consult the ingredient list “in order to clarify his or her understanding of the label.” “Consumers who interpret ambiguous statements in an unnatural or debatable manner do so unreasonably if an ingredient label would set them straight.”

Plaintiff satisfied that standard. Labelling a product that contains synthetic and/or artificial ingredients as “natural” may be false or misleading, and it need not state that the product is “all natural” or “100% natural” for a reasonable consumer to infer that the product is free from synthetic ingredients. Moreover, at this stage, defendants didn’t meaningfully contest the allegations that the products contain multiple synthetic ingredients.

Defendants did argue that the phrase “+ vitamins, minerals, and other nutrients” indicates that things that are not ingredients might not be natural, rending the label “true and accurate.” But, on the allegations, even assuming that the adjective “natural” does not modify the words “vitamins, minerals, and other nutrients,” at least one ingredient—xanthan gum—appeared to be neither “natural” nor a “vitamin, mineral, or other nutrient[ ].” Moreover, the ingredient list didn’t definitively resolve the grammatical ambiguity concerning the application of the adjective “natural.” The problem with consulting the ingredient list here was that it assumed that a reasonable consumer can identify which listed ingredients are natural and which are not. But that was not a factual assumption the court was willing to endorse, especially because many “naturally occurring forms of the same vitamins and minerals have similarly difficult-to-pronounce names.” A jury might ultimately conclude that the ingredient list would be intelligible to an ordinary shopper, and that “the appearance of ingredients that are obviously synthetic on [the Product’s] ingredient list undercuts plaintiff’s theory of deception,” but not on a motion to dismiss.

claims about scientific studies might imply FDA approval

BioGaia USA, LLC v. Probiotiv Naturals LLC, 2025 WL 2946910, No. CV 25-3592 PA (MBKx) (C.D. Cal. Sept. 5, 2025)

BioGaia sued Probiotiv – a competitor in the sale of priobiotic dietary supplements for oral health, for false advertising; Probiotiv counterclaimed for false advertising and the court declines to dismiss the counterclaim.

Probiotiv allged that BioGaia made unlawful health claims that BioGaia products “[d]efend against common dental issues,” provide “that good bacteria that your body needs to stay healthy every day,” and “promote healthy gums and teeth” that violate the Lanham Act. Priobiotiv further alleged that BioGaia’s claims that probiotics are backed by research and are clinically studied mislead consumers to believe that BioGaia products are effective like drugs, convey a false sense of scientific consensus and regulatory compliance, and mislead consumers to believe that the products provide the therapeutic benefits mentioned on the labels. Statements that its products are subject to clinical trials and longstanding research and trusted worldwide were allegedly likely to cause confusion and deceive consumers as to the scientific approval or endorsement of the products. [New category of endorsement confusion found!]

BioGaia argued FDCA preemption/preclusion. Although “the Fourth Circuit has held that false advertising claims based on allegations of implied governmental approval are not allowed absent an allegation that there was an explicit representation of government approval,” Mylan Lab’ys, Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993), and many courts have followed it, courts have also recognized a false advertising claim based on a theory of implied government approval where it is adequately alleged that “the message ‘our product is FDA-approved’ was actually conveyed to consumers.” That just requires the court to be convinced of the plausibility of the plaintiff’s theory of deception, usually because of statements that are drug- or FDA-adjacent (e.g., references to “off-label” use or use of formularies/systems that are usually reserved for FDA-approved products).

Here, BioGaia’s use of phrases such as “clinically proven,” “most clinically studied,” and “backed by 30+ years probiotic research” allegedly conveyed a false sense of scientific consensus and regulatory compliance. That was more than implied governmental approval [from silence]. [That is, this court seems to read the preemption line as rejecting any theory that people assume that products are legally on the market, thus making their mere presence an implicit representation about legality. But people probably do assume this. I’m not sure why even that wouldn’t be enough if you proved the elements required for a Lanham Act violation (communication of a false/misleading message, materiality, harm) along with a clear enough FDCA violation. I understand the problems with predicting how the FDA would come out where it has discretion; that’s a decent reason for declining to find determinable falsity, but there are some pretty clear scenarios out there where a Lanham Act claim doesn’t require agency interpretation to determine falsity, or where the interpretation is statutory and thus the agency has no special expertise.]

Anyway, this also allowed a state-law false advertising claim to survive.

New Jersey would not recognize a common law tort of false advertising, says fed ct

Pim Brands, Inc. v. New Cibo Vita LLC, No. 25-cv-01418(MEF)(AME), 2025 WL 2938602 (D.N.J. Oct. 16, 2025)

The parties compete in the market for yogurt-covered fruit snacks, and the plaintiff alleged false advertising, including unfair competition claim under New Jersey common law. Here, the court rules that New Jersey does not recognize an unfair competition claim that is based, as here, only on an allegation of false advertising that is not comparative and does not involve passing off, and thus doesn’t assert interference with some property-type interest. (Also, in a footnote, unfair competition can include “antitrust-type claims” or “what amount to claims for tortious interference with contract”; query how an antitrust claim is an interference with the plaintiff’s property.)

The court characterized the tort as relatively new (late 19^th century) in origin, but quickly assumed a definite shape: “The essence of the wrong in unfair competition consists in the sale of the goods of one manufacturer or vendor for those of another; and if defendant so conduct its business as not to palm off its goods as those of complainant, the action fails.” Howe Scale Co. of 1886 v. Wyckoff, Seamans & Benedict, 198 U.S. 118 (1905). Thus, the tort was about “palming off.” It protected consumers, but only indirectly and only by protecting a company’s “brand equity.” [Not a particularly contemporaneous term.] It differed from trademark by covering, e.g., “palming off of what we would today call service marks” and “palming off based on brand symbols that for one reason or another could not be formally registered as trademarks.”

But the tort stretched “a bit” to encompass INS v. AP misappropriation. They still shared the “core DNA” of being property-like. But “[i]f a company engages in false advertising—if it says something untrue about its own product—how is it potentially taking property from another company? … [L]osing out on possible future business is a long way from being deprived of here-and-now property (or quasi-property).”

Thus, a false advertising claim is not an unfair competition claim. American Washboard Co. v. Saginaw Manufacturing Co., 103 F. 281 (6th Cir. 1900), was the key case involving false advertising that a washboard was made with aluminum, rejecting a false advertising claim on the ground that “the private right of action in [unfair competition] cases is not based upon fraud or imposition upon the public, but is maintained solely for the protection of the property rights of a complainant.” Courts around the country “routinely stick to the line [American Washboard] drew.”

Thus, the court predicted that the New Jersey Supreme Court would hold that there can be no unfair competition claim based only on a false advertising theory, as the one relevant NJ appellate case had held. Tris Pharma, Inc. v. UCB Manufacturing, Inc., 2016 WL 4506129 (N.J. Super. Ct. App. Div. Aug. 29, 2016).

True, the Third Circuit stated in an infringement case, pre-Tris Pharma, that “the federal law of unfair competition under § 43 (a) [of the Lanham Act] is not significantly different from the New Jersey [common] law of unfair competition[.]” But that was only true with respect to passing off (and other things like the relevance of common-law agency principles).

Finally, the court noted, the Third Circuit has indicated that “where two competing yet sensible interpretations of state law exist, we should opt for the interpretation that restricts liability, rather than expands it, until the Supreme Court of [New Jersey] decides differently.” Travelers Indem. Co. v. Dammann & Co., Inc., 594 F.3d 238 (3d Cir. 2010) (cleaned up). [I’m not sure Chief Judge Becker of blessed memory would endorse this view—he thought of judging as the process of doing justice, and he was willing to evolve the common law towards that end.]

Conspicuous Consumers, NYU Engelberg Center

Welcome and Keynote: Nancy Mahon, SVP, Global Corporate Citizenship & Sustainability, The Estée Lauder Companies

Interesting talk; I learned that UK consumers respond well to claims that a product decreases the company’s carbon footprint, but US consumers aren’t interested in that and want to know about the effect on their own carbon footprint.

Sustainability in the Eye of the Beholder

Rochelle Dreyfuss, Engelberg Center on Innovation Law & Policy, NYU School of Law (moderator)

Anna Tischner, Jagiellonian University in Krakow: European TM law can override sustainability despite EU’s attempted commitment to carbon neutrality. Hermes won a case against an atelier that incorporated scarves into new clothes. But her research shows consumers understand that refurbished etc. goods have qualities not reflecting on the TM owner. Need more space for this. British case didn’t allow refurbishment to convert devices to electric, but only b/c the advertising was confusing—which is correctable, and thus perhaps a positive sign.

Maggie Chon, Seattle University School of Law: Discussed certification marks as ways to build consumer trust/purchase interest. Issues: standards represented by certification mark can be opaque; hard to figure out what they really require. Also, certifications can compete and have different standards—consumers aren’t equipped to figure out which “fair trade” marks are more stringent or less stringent.

Jessica Silbey, Boston University School of Law: Project w/Mark McKenna on interviews with designers: insist on design as a process, not an outcome; they want to unify form and function; and they consider themselves human-focused, oriented to solving problems. In the sustainability context, they want to act as moral entrepreneurs. Coherence, minimalism, sustainability, accessibility, and inclusivity are goals—coherence and minimalism seem aesthetic but they’re also about avoiding material waste. The last three are considerations they think necessary for good designs/progress: the ability for everyone to use the design. E.g., designing for an insulin pen that will actually be used (many people don’t take their meds). OXO dustpan designed to be used by all kinds of hands.

Aaron Perzanowski, University of Michigan Law School: Right to repair and sustainability—appliances, electronics, vehicles need fixing; can that be done outside authorized channels? Firms have strong incentives to assert control over repair process, which can be incredibly lucrative. Fixing cracked phone screens is $3 billion/year in US alone. Expensive repairs also drive new device purchases. 150 million mobile phones are discarded per year; 60 million metric tons of e-waste a year. About 70% of toxic waste in US landfills is e-waste. DMCA as a big problem; 1201 exemptions allow repair of, e.g., tractors, but no one is allowed to distribute a tool to others to do this, so farmers better be good programmers.

Patent law can also be an issue, as can individual component parts covered by utility or design patents, giving power over price and availability. Especially problematic given incredibly low standards for design patent—big uptick in auto parts as well as home appliances. Fed Cir did away with longstanding test for obviousness of design patents in GM v. LKQ; what that means in long term is not yet clear but could mean fewer low value design patents. Trade secrets are also an issue, but claimants can’t usually defend them—the info is generally ascertainable through simple reverse engineering. We don’t need to respect your wishes not to disclose info just b/c you’d make more money if you kept it to yourself.

TM too (already covered by other speakers). Biggest problem here is importation—exhaustion. But TM law prevents “material differences” and courts are much too eager to find such differences—a difference in warranty; existence of phone support (even for ball bearings). Nominative fair use does a good job in its lane, though.

So far we’ve passed right to repair laws covering 100 million people in US, including in California. Also worked on National Defense Authorization Act to get right to repair requirements in any purchase DoD makes.

Tischner: EU design law has a repair clause for spare parts. This allows independent manufacturers to make & sell parts that reproduce a protected design as long as it’s genuinely for repair. The real tension comes from TM law, not design law—the design law exception doesn’t apply horizontally across IP, so companies use TM to block repair and control markets. Surveyed professionals: saw logo on repair part as description of part, not indication of origin. TM law is also normative, but results of our and similar empirical studies should inform TM policy.

Q: do designers think about repair?

Silbey: They think about durability.

Perzanowski: there’s a tradeoff b/t durability and repairability, which we need to recognize and educate about. Sometimes the market recognizes this, as for cars. Not so much whether it’s designed for repair but who gets to do the repair there. Consider relatively direct regulatory intervention in design: mandating user-replaceable batteries on consumer electronics, for example. If Apple was required by law to make a swappable battery, it would probably do a really good job, but it won’t if it’s not forced to; we’ve already seen this work with USB-C.

The Consumer Scientist

Chris Morten, Engelberg Center on Innovation Law & Policy, NYU School of Law (moderator)

Fran Visco, National Breast Cancer Coalition: created a science education program for patient advocates: how to analyze clinical trials, interpret statistical information, understand the cell cycle—important for determining endpoints.

Hilary Koch, Advocate for people living with diabetes: continuous glucose monitors existed, but couldn’t be monitored remotely—advocates like Koch created an open source solution for this. Likewise, devices didn’t talk to each other; created open solution for that. Able to sleep through the night for the first time in 10 years! Huge improvement in diabetes management. Non-FDA approved device was better than anything on the market b/c patients came together to make it themselves. Everyone had to make it themselves (adding software to FDA-approved devices) to avoid FDA [and 1201?]. But someone was available to provide advice 24/7. Now there’s an FDA approved device to talk to other devices, and one reason is b/c of the earlier patient-based devices. Non-approved devices are also still out there and ahead of the FDA-approved devices thanks to patient scientists.

She also had a really interesting discussion of how each patient’s experience is different and they’re experts on their own experiences and need more control: women want information on how their menstrual cycles affect them and want to be able to press a button on their device to flag this; many hospitals don’t allow insulin pumps, but today’s insulin pumps take care of everything and this rule makes diabetics terrified to go into hospitals for other issues.

Steve Woloshin, Dartmouth Geisel School of Medicine: patients are often underrepresented in product design, testing, and regulatory approval. Communication with patients to understand what the products (tests, devices, drugs) do and how to use them is vital but it’s often an afterthought. DTC ads: oversight is spotty and they aren’t required to tell you how effective they are. Covid home test kits example: Although they did test the instructions, which was good, they didn’t test whether people understood what results they were getting—have to use Bayes’ law to understand the chance that you’re infected, given a positive or negative test result. It’s easy to get wrong and the instructions didn’t explain it at all. Empirical tests showed that 33% of people in a high risk group (symptoms, exposed to someone with determined covid) would not understand the risks of a negative result. Were able to reduce that to 14% with revised instructions, and to decrease unnecessary quarantine decisions. An untested communication can be as dangerous as an untested drug.

DTC ads: Billions of dollars spent on them; people see 9 drug ads/day. But they overstate benefits/downplay harms/overstate certainties. There’s a lot of opportunity to make ads better but the system is reactive/slow. FDA announced that it will revisit DTC ads. Dozens of warning letters about ads, largely b/c visual messages were allegedly misleading (take this drug and you’ll be able to climb mountains). Good start, but tip of iceberg. Basic problem: ads fail to tell consumers how well the drug works. Often unclear what outcomes the drug treats, or even conditions. Quantify the outcome! Same for common serious harms.

Current regs say you have to discuss benefit, but benefit just means indication under current rules—so if you say “decreases cholesterol” you’re done. But does that affect your chance of having a heart attack? Does it cut it in half from 2% to 1%? Something else? Nothing in current regs about quantifying benefits or harms; nothing about pretesting ads for accurate communication. Should have a drug facts box like a nutrition facts box.

Charles Duan, American University Washington College of Law: standard IP incentive theories don’t explain open source innovations here, which involve huge amounts of effort donated to the community. People who change their diets to improve their health are also experimenting on themselves—self-motivation is very important. Need to think about how to regulate open source devices, where there isn’t a wealthy drug company behind them.

IP Rights as a Signal to Consumers

Jeanne Fromer, Engelberg Center on Innovation Law & Policy, NYU School of Law (moderator)

Chris Cotropia, University of Richmond School of Law: Do patent claims matter to consumers? No, not really. There’s a false marking provision in patent law that seems to think that they might. Patent is more about communication between competitors/producers, less about consumers. Patent’s justification: Incentive for invention, and for commercialization. Get the new, useful, nonobvious thing created and produced. But can communicating to consumer create a direct feedback effect?

Notice statute: can’t get patent damages unless infringer has notice. Can be actual, or constructive by marking the patented product. The audience is not the consumer, but competitors. False marking statute, though, has consumers in mind—can’t mark product as patented or patent pending if that’s not true; initially empowered qui tam actions. Theory was a consumer oriented theory—that there was potential harm to the consumer. Lots of people engaged in false marking b/c they had, e.g., plastic molds; the patent would expire and they’d keep using the molds. Entrepreneurial lawyers started suing; then AIA changed the law to require competitive harm from the false marking. So, what information are consumers getting from the patent marking?

Study by Alexander Billy & Neel Sukhatme: convinced drugstores to let them enhance marking on actually patented products in some drugstores and not others; they found essentially a perfect null effect. Tried again on Mechanical Turk with vignettes and found the same null effect. Do find that “patented” label leads survey respondents to think that the product was more innovative; didn’t translate into willingness to buy. Another study, Gavin Milczarek-Desai & Derek E. Bambauer: showed ads, some said patented, patented pending, Consumer Reports supports, or nothing, and found no variation, but “patent pending” may have a slight effect on reported willingness to buy. His own study: crowdfunding campaigns. Found same (lack of) effect. Patent label didn’t change success right, but “patent pending” had higher success rate. In lab, people are 2x as likely to invest in a project that says “patent pending” as opposed to “patented” or nothing. Consumers are just looking at the products and deciding if they want to buy. Why might “patent pending” be different? Might seem even more innovative—haven’t even had time to get a patent yet! But we don’t know.

Jacob Noti-Victor, Cardozo Law: Copyright side—copyrights are also not strong signals to consumers. There may be a theory that the © next to a work confers legitimacy, but hasn’t seen empirical studies. Maybe video game industry achieved some legitimacy by using ©? But we do know that consumers don’t know what © means when they see it.

©’s human authorship requirement and effects of AI: enabled or even manufactured consumer-facing signals of things consumers do care about, such as authenticity. There’s no authorship for computer generated works as such—long tradition of not recognizing nonhuman authorship. Trickier when there’s a human and an AI system. Human prompting isn’t sufficient for human authorship, CO says, even with detailed prompt engineering/iterative prompting. Office based this on a reading of the law and the mechanics of the technology—there’s too attenuated a connection b/t the prompt and the final output; the prompter can’t predict or conceptualize the expressive output—there’s no requisite causation/connection b/t idea and expression. Like Chapman Kelly garden case where 7^th Circuit says a garden is too unpredictable to be ©able. But there can be protection for human selection, coordination, and arrangement of AI products—curatorial decisions around AI content, not AI content itself; will be thin copyright.

Office’s choices here are coextensive with consumer preferences for process: preferences tied to the means of production and not solely to the output. Fair trade coffee. Consumers are more likely to want to buy non-AI work; this isn’t just squeamishness but ethical priorities and desire for authenticity that affects consumer decisionmaking especially in aesthetic contexts. Authenticity can have dark sides, but it’s also a way to acknowledge the social role of art and its role in moral identity/self-identification.

Office requires disclaimers of AI generated material. Registration potentially provides info to consumers. Could be a good record, assuming copyright claimants are telling the truth. But more can be done.

Mark McKenna, UCLA School of Law: Most obvious way IP rights might signal to consumers is by being a marketing tool: claimant advertises it has an IP right to show the product is meritorious or unique compared to other products, and that might work even w/o a clear idea of the content of the right. The patent evidence is interesting; maybe there’s an analogy here to how some colleges publicize percentage of faculty w/terminal degrees and others don’t feel the need to do so; maybe at the top end, producers assume you know they’re innovative (Apple) and don’t prioritize patents.

GIs: could also publicize the characteristic of a good as being (supposedly) geographically  unique.

What about feedback loops where existence of rights feeds back into scope of rights? TM: b/c those rights depend on consumer understanding, but consumer understanding can be shaped by their beliefs about what law allows/requires. The existence of rights depends on consumer understanding, b/c it determines whether there’s been trademark use, or secondary meaning to make it a TM; the scope of rights depends on consumers’ beliefs about what others are allowed to do. The rules on secondary meaning give a lot of weight by actions taken by putative owner to claim the existence of rights: creates incentives to publicize claims—the nature of putative mark’s presence in ads matters a lot. Matters even more when the claimed matter is complex; courts will often condition protection on “look for” advertising—to call it out from the background noise.

Claims of rights in relation to certain kinds of uses of TM can also shape consumer understandings in ways that turn out to affect legal scope. This is true at the retail level—particular uses of a particular mark, like NFL’s assertion of extremely broad rights in “Super Bowl” TM. Threatens bars, churches, community organizations that advertise they’ll (legally) show the Super Bowl. Even if there’s no suggestion of sponsorship other than the use of “Super Bowl.” These are paradigmatic nominative fair uses and shouldn’t be w/in the scope of the NFL’s rights, but the NFL has been unbelievably successful with these threats, so most references are to “the Big Game,” which itself is both cause and effect of consumer beliefs. But by the same logic, NFL can claim rights in “the Big Game.”

This effect can also work at the wholesale level—entire categories of uses like merchandising—50 years ago no one thought universities had the sole right to use university marks on T-shirts. Madison, like every other college town, was full of T-shirts featuring UW marks, some of which predated UW’s own use on t-shirts. But a major campaign branded these as counterfeits; leveraged relationship with university bookstores to control major apparel companies. Strategy seems to have worked; many people now believe the law requires university permission even though no one thinks the university is responsible for the quality of the t-shirts. PTO even made up the “secondary source” rule: use on the front of a T-shirt functions as a mark if the mark is known in some other setting. Created ©-like rights in anything related to them, justified by reference to the consumer understanding they’ve created. Can also be used for, e.g., mid-century modern design—association of design w/designer can be leveraged into “source” claims for the actual furniture.

Consumer understanding can be shaped, and some claimants are well situated to do so and have strong incentives to do it; but we shouldn’t hand over the game to claimants.

Rebecca Tushnet, Harvard Law School

I decided to frame my part of this panel as “can claims of IP rights mislead consumers in a way that triggers general advertising law?” I’m going to start with two requirements of false advertising law that don’t generally apply to IP rights. First, federal false advertising law targets only false or misleading statements in “commercial advertising or promotion.” This is probably not a big barrier for the kinds of claims at issue here, but it’s worth keeping in mind: use instructions, as discussed in the previous panel, might not be advertising (though it likely depends on the product). Second, materiality: to be actionable, a false or misleading statement has to be the kind of statement that is likely to affect consumers’ decisions, as opposed to TM law, which doesn’t require materiality for infringement.

As we already heard, materiality is often a problem in litigating alleged IP-related falsehoods, including false patent marking – most of the time, consumers don’t really care about patent rights. In addition, a Supreme Court case, Dastar v. Twentieth Century Fox, limited the scope of the federal Lanham Act in a way that turns out to be relevant to IP-related signals. That case interpreted the language barring any "false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which ... is likely to cause confusion ... as to the origin ... of  goods" to mean only references to physical origin, rather than the source of ideas or expressions embodied in a product.

Lower courts have subsequently held that Dastar limits the scope of federal false advertising law b/c representations about IP rights aren’t representations about physical origin; thus, falsely stating or implying that your music is properly licensed does not constitute a false representation covered by the act. Courts also interpret many state consumer protection laws to be coextensive w/the Lanham Act, though it’s possible to argue that some are broader. There is also a limiting case where the representations are not just about IP rights but also state or imply facts about the physical product: Crocs, Inc. v. Effervescent, Inc., No. 2022-2160 (Fed. Cir. Oct. 3, 2024).

Crocs sued competitors for patent infringement; defendant Dawgs counterclaimed for false advertising about the characteristics of the primary material Crocs uses to make its footwear products, a material it promoted as the “patented,” “proprietary,” and “exclusive” “Croslite.” But “authorship, like licensing status, is not a nature, characteristic, or quality, as those terms are used in Section 43(a)(1)(B) of the Lanham Act.” By contrast, “here, the false claim that a product is patented does not stand alone. Dawgs presents allegations and evidence that the falsity of Crocs’ promotional statements is rooted in the nature, characteristics, or qualities of Crocs’ products.” So the question will generally be whether the statement about IP rights conveys a factual claim about the more tangible characteristics of the good (or service) at issue.

Finally, I want to introduce as an additional framing point that law, including product liability law, often doesn’t require TM licensors to take responsibility for their products even when consumers might expect that and even when the TM probably drove the sales—arguably false advertising should not accept this result. Example: Troncoso v. TGI Friday’s Inc., 2020 WL 3051020 (S.D.N.Y. Jun. 8, 2020)

Troncoso purchased a bag of snack chips labeled “TGI Fridays Potato Skins Snacks,” mistakenly believing the chips to contain real potato skins given that the restaurant chain TGI Fridays sells a Potato Skins appetizer that includes the flesh and peel of the potato. But, even though the TGIF branding is probably what led consumers to have a lot of their expectations about the product, and even though the court found that the product was plausibly deceptive, the trademark owner was off the hook. The court said: “TGIF may be liable for that misleading labeling under GBL §§ 349 and 350 and principles of common-law fraud only if it engaged in making the misleading labeling.” The allegation of licensing “does not suggest that TGIF was involved in any aspects of the labeling beyond its own trademark, which Plaintiff does not allege is misleading”

It’s an example of IP rights—the right to license the mark to others—as false signals. I’ll end with a potentially contrasting case: Puma v. Wal-Mart Stores East, LP, No. A-1-CA-38023, 2022 WL 3221810, -- P.3d – (N.M. Ct. App. Aug. 9, 2022) The Pumas alleged that defendants violated the New Mexico Unfair Practices Act based on their purchase of a Black & Decker-branded coffeemaker.

Based on Black & Decker’s reputation, the Pumas thought the coffeemaker would be better than the lower-priced store brand and paid more for it as a result. However, Black & Decker did not in fact design, manufacture, distribute, or warrant the coffeemaker. The district court, after a bench trial, found that defendants’ conduct constituted an “unfair or deceptive trade practice.”

Thus, the presence of the trademark plus the absence of any disclosure on the product or the advertising could deceive reasonable consumers about either (1) the relationship between Black & Decker and Applica; or (2) that the product was in fact a product of Applica, rather than of Black & Decker. The court pointed out that the name, “Black & Decker 12 Cup Programmable Coffeemaker” “emphasized that the ‘Black & Decker’ name was an important characteristic of the Coffeemaker; these statements tended to deceive a reasonable consumer, and Defendants knew or should have known that potential purchasers of the Coffeemaker would likely regard information about the Coffeemaker being a Black & Decker product as material.”

The court emphasized that it was not holding “that the use of a trademark by a licensee pursuant to a trademark licensing agreement by itself constitutes an unfair or deceptive trade practice,” or that individual or widespread licensing was “per se irrelevant” to the inquiry. Nor was evidence of the quality of the licensed product “per se irrelevant.” Rather, the court of appeals was simply holding that the Lanham Act did not govern the UPA claim, “and that, under the circumstances of this case, Defendants’ knowing and willful use of ambiguity as to material fact, which tended to deceive a reasonable consumer, constituted an unfair or deceptive trade practice.” I tend to believe we’d be better off if we held TM owners more clearly to their bargain—when they license in order to make a product more attractive, we should recognize that the TM is helping to sell the licensed product and thus hold them jointly liable for quality.

California's limits on use of "doctor" in healthcare settings are constitutional regulations of commercial speech

Palmer v. Bonta, 2025 WL 2882948, No. EDCV 23-1047 JGB (SPx) (C.D. Cal. Sept. 19, 2025)

Plaintiffs alleged that California Business and Professions Code § 2054(a), on its face and as enforced, violates the First Amendment because it provides, in relevant part:

[a]ny person who uses in any sign, business card, or letterhead, or, in an advertisement, the words “doctor” ..., the letters or prefix “Dr.,” ... or any other terms or letters indicating or implying that the person is a physician and surgeon ... without having at the time of so doing a valid, unrevoked, and unsuspended certificate as a physician and surgeon under this chapter, is guilty of a misdemeanor. No person shall use the words “doctor” or “physician,” the letters or prefix “Dr.,” ... or any other terms or letters indicating or implying that the person is a physician and surgeon ... in a health care setting that would lead a reasonable patient to determine that person is a licensed “M.D.” or “D.O.”

The Board of Registered Nursing supported this law only if it allowed nurses with a terminal degree (i.e., Doctor of Nursing Practice) to use “Dr.” “regardless of setting” so long as they indicated their profession or specialty on their badge and in communication. Bonta, on behalf of the Board of Registered Nursing, filed an Accusation against Erny, who is a Doctor of Nursing Practice (DNP), for “representing to patients that she was a medical doctor” in violation of Section 2054; the District Attorney for San Luis Obispo County then sought an injunction, civil penalties, and other equitable relief against her. She was ordered to pay $19,750 in civil penalties.

Plaintiff Palmer also holds a DNP. Between 2020, when she earned her DNP, and 2023, Palmer (1) wore a clinician’s jacket embroidered with “Dr. J. Palmer, FNP-C”; (2) introduced herself to patients, “I’m Dr. Jacqueline Palmer. I’m a nurse practitioner”; (3) signed her name on official clinic documents using the title “Dr.” and “FNP” as a post-nominal; and (4) was not aware that it was illegal to use the title “Dr.” on her clinician’s jacket or in any other way so long as she disclosed that she was a nurse practitioner. Palmer always disclosed to patients that she is a nurse practitioner and never practiced outside of her scope of practice for licensure.

Nonetheless, patients have assumed that Palmer was a medical doctor. The American Medical Association’s survey results that show that 39% of patients believe that a DNP is a physician.

After learning about the legal actions against Erny, Palmer stopped wearing her clinician’s jacket, stopped signing official clinic documents using the title “Dr.,” and asked others not to refer to her as “Dr.” She would like to return to her previous practices. Other plaintiffs had similar stories.

There is nothing that a nurse practitioner that has a DNP can do that a nurse practitioner that does not have a DNP cannot. DNP programs range from one to two years; they can be online with no in-person classes; they don’t have stringent admission requirements; they may not have, and plaintiffs’ programs didn’t have, courses in, e.g., anatomy, biology, biochemistry, immunology, physiology, pathology, or pharmacology; so too for clinical work with patients/patient interaction.

One plaintiff testified that he believed that he would attract more patients to his aesthetic clinic if he can call himself “Dr. Hanson” as opposed to not using the title “doctor,” because “[i]f patients were given the opportunity to pick between two clinics, one with Dr. Hanson and one with Mr. Hanson written on it, most would gravitate to the former.” Plaintiffs didn’t know whether patients know what the letters DNP, PHN, MSN, MASE, BSPT, or FNP-C mean (all relevant terms for credentialing) and largely didn’t know the terms until they sought more credentials.

Plaintiffs argued that Section 2054 is a content-and speaker-based restriction on speech, and thus subject to strict scrutiny. The court rejected this argument.

Facial challenge: Plaintiffs argued that the law “sweeps in its ambit an array of professionals who are not physicians or surgeons but who still can truthfully (and regularly) call themselves ‘Dr.’: psychologists (PsyD), pharmacists (PharmD), naturopaths (ND), physical therapists (DPT), and Ph.Ds (including honorary Ph.Ds).” In a First Amendment facial challenge, “[t]he question is whether a substantial number of the law’s applications are unconstitutional, judged in relation to the statute’s plainly legitimate sweep.”

“The first step in the proper facial analysis is to assess the state laws’ scope.” “What activities, by what actors, do the laws prohibit or otherwise regulate?” The second step “is to decide which of the laws’ applications violate the First Amendment, and to measure them against the rest.” The party bringing the First Amendment facial challenge has the burden to show the full scope of the law’s coverage; to identify which of the law’s applications are constitutionally permissible and which are not; and, ultimately, to show that the law “prohibits a substantial amount of protected speech relative to its plainly legitimate sweep.”

The California Court of Appeals has found that the “purpose of [S]ection [2054] is to protect the public,” specifically by regulating the use of certain professional titles associated with the medical field—i.e., “Dr.” and “doctor”—in healthcare-related advertising and healthcare settings. The court found this was a regulation of commercial speech. The “use of professional titles and certifications in advertising, yellow-pages listings, business cards, and stationery is commercial speech.”

Plaintiffs argued the law expanded into noncommercial space by adding the phrase “in a healthcare setting that would lead a reasonable patient to determine that person is a licensed ‘M.D.’ or ‘D.O.’ ” Because the patient is already seeking out care from plaintiffs by the time they use “Dr.” or “doctor” in a healthcare setting, they argued that they were engaged in noncommercial speech and that any commercial speech was inextricably intertwined with fully protected speech.

Although using “doctor” in a healthcare setting wasn’t a traditional ad format, it was still commercial speech: The “specific product” plaintiffs sought to advertise when using “Dr.” or “doctor” in healthcare settings was “the expertise, knowledge, and quality of services these professional titles convey to patients and colleagues.” And they had an economic motive for the speech: “to solicit [and retain] a patient base” and improve their professional brand.

The facial challenge failed because the law regulated misleading speech, and even if it went beyond that, was ok under Central Hudson.

As-applied challenge: The Supreme Court has distinguished between “inherently misleading” speech and “potentially misleading” speech. When “advertising is inherently likely to deceive or where the record indicates that a particular form or method of advertising has in fact been deceptive,” the advertising enjoys no First Amendment protection. The government may ban this type of commercial speech entirely. But if the speech is only “potentially misleading,” in other words, “if the information also may be presented in a way that is not deceptive,” Central Hudson (intermediate) scrutiny is required.

But here, the record indicated that plaintiffs’ particular form or method of advertising has “in fact been deceptive.”  It was undisputed that patients assumed Palmer was a medical doctor and that plaintiff Hanson makes it a point to explain to patients that he is not a physician when they call him “Dr.” Thus, the speech was inherently misleading even though it communicates truthful information. Plaintiffs conceded as much by agreeing that the use of “Dr.” or “doctor” in healthcare settings without further clarification generally refers to licensed physicians or surgeons. Accordingly, “[t]he assumption that substantial numbers of potential clients would be so misled is hardly a speculative one.”

California not only regulates the title “doctor,” it regulates the licensing and practice of physicians and surgeons. Plaintiffs didn’t meet these statutory requirements, and thus their use of “Dr.” or “doctor” was inherently misleading.

Even if it was only potentially misleading, the regulation would still satisfy Central Hudson in advertising and healthcare settings. California has a substantial interest in “protecting consumers from those who falsely hold themselves out as licensed physicians but [who] have not been duly licensed.” What about the fit between the legislature’s ends and the means it chose?

Plaintiffs argued that “at least as applied to nurse practitioners with DNPs, [who truthfully refer to themselves as “Dr.” or “doctor,”] [S]ection 2054[ ] does not directly advance Defendants’ only stated interest because it does not prevent fraudulent misrepresentations.”

Under Central Hudson, “the State must demonstrate that the challenged regulation advances the Government’s interest in a direct and material way,” which requires it to show “that the harms it recites are real and that its restrictions will in fact alleviate them to a material degree.” Empirical data, studies, anecdotes (whether in-state or extra-jurisdictional), history, consensus, and common sense are all relevant. Here, the “harms [California] recites are real” because the speech has caused some patient confusion. And it was reasonable to infer that some consumers will assume that Plaintiffs are licensed physicians or surgeons if they use “Dr.” or “doctor” in healthcare settings and in advertising materials promoting medical services even if Plaintiffs also identify themselves as DNPs, as borne out by the AMA survey showing 39% of patients believe that a DNP is a physician and plaintiffs’ own ignorance of what the letters DNP meant until they started pursuing higher education.

What about less restrictive alternatives? Plaintiffs argued that they were already required to disclose and explain their license and credentials, and California’s false advertising and unfair business practices laws already address concerns about patient deception. However, “[i]n considering the restriction imposed on commercial speech, [courts] do not require that it be the least restrictive means available.” Rather, what is required is “a reasonable fit between the legislature’s ends and the means chosen to accomplish those ends.”

Here, Section 2054 didn’t limit plaintiffs’ ability to describe themselves as DNPs or to otherwise accurately state their credentials. So there was a reasonable fit.