Filters and fair use

Fair use best practices for user-generated content – a project of the EFF, the American University Program on Information Justice and Intellectual Property, Public Knowledge, the Berkman Center for Internet and Society at Harvard Law School, and the ACLU of Northern California. This great document also comes with a test suite to show how the principles should apply.

Candyland everybody wants

Haritatos v. Hasbro, Inc., 2007 WL 3124626 (N.D.N.Y.)

Plaintiff makes and sells candy out of his home in Rome, New York. In 1919, three men developed “Turkey Bones” candy, shortly thereafter renamed “Turkey Joints.” In 1921, one of those men, along with plaintiff’s uncle (and namesake) Spero Haritatos, opened the Candyland restaurant in Rome, and sold “Turkey Joints” there. In 1972, Candyland closed, and plaintiff’s father took over making Turkey Joints, continuing to sell them under the Candyland name.
In 1983, plaintiff took over the business and registered “Original Candyland Candy Turkey Joints” as a mark. In 1992, plaintiff filed an application to register “Candyland” for his goods; the mark was registered in 1996. (And I’d love to get the story there.) The mark is now incontestable.

Hasbro, of course, owns the Candy Land board game and accompanying registration. In 2001, Hasbro licensed the mark to Toys ‘R Us (TRU) for candy goods sections in its toy stores, and TRU opened a Candy Land section in its Times Square store, which remained open until 2005. In 2002, Hasbro negotiated with plaintiff for rights in plaintiff’s mark, but the negotiations failed.

Hasbro argued that Candyland was generic. Here Hasbro had an ally in the classic Abercrombie & Fitch case, which is remembered more for its classification spectrum than its facts. But part of those facts involved holding “safari” generic for certain clothing items, and “safariland” generic for news bulletins about safari expeditions. Thus, Hasbro argued, Candyland is generic as a matter of law: it simply appends the suffix “land” to the generic term for a type of goods and uses the combined term as a name for a store that sells that type of goods.

The court ruled that Abercrombie & Fitch does not hold that such uses are, as a matter of law, generic. Moreover, plaintiff was seeking to recover for infringement of his mark for candy, not for candy retail services. My reaction was similar: Hasbro’s argument makes TRU’s use generic, thus perhaps entitling it to the descriptive fair use defense, or some other defense analogous to that recognized in the Third Circuit’s “chocolate fudge soda” decision. But I can’t see that it invalidates plaintiff’s mark as such. Still, if a term is generic for a particular use, then even showing likely success on the confusion factors shouldn’t entitle a trademark owner to preclude the use of that generic term – that’s what it means to say that generic terms can’t be made subject to ownership, even ownership by someone who has generated secondary meaning for the term or has other rights in it, as Apple has for computers. (The goods/services distinction, however, might not hold up. If a term is generic for services, it seems to me that the service provider should also be allowed to attach the term to goods sold through the services. But I could be talked out of that.)

Anyway, at this point, Hasbro hadn’t submitted enough evidence to meet its burden to show genericism, despite evidence of third-party use by other candy businesses.

Likewise, the Polaroid factors remained largely contested, despite the absence of any evidence of confusion. The court also nodded towards the Third Circuit’s revision of the multifactor test for assessing reverse confusion, A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 234 (3d Cir. 2000). The conceptual and commercial strength of plaintiff’s mark is unclear, and Hasbro’s argument about its own mark’s strength speaks only to reverse confusion. (Okay, but it’s the board game, not the store area, that is famous, and properly analyzed plaintiff only gets to challenge the store area. I bet that there is reverse confusion because of the game, but that bell was rung a long time ago.) Plaintiff also has some evidence of bad faith because Hasbro negotiated with him but continued to license the mark even after negotiations failed.

However, since plaintiff admitted he couldn’t show actual confusion, he wasn’t entitled to money damages on that basis. If he could show willful deceptiveness, he could recover damages and/or defendants’ profits.

Willful infringement and willful deceptiveness are not the same thing. The latter requires a showing that the defendant intended to confuse or deceive consumers into believing that the plaintiff was the source of the defendant’s goods (or vice versa in a reverse confusion case). I’m not sure reverse confusion should ever count as willful deceptiveness, since it seems to lack much of the usual consumer harm; also, it’s hard to imagine why someone would intend to cause consumers to think that someone else’s product was theirs – as opposed to being indifferent to that possibility, or misjudging it – whereas the motivations for standard passing off are much easier to imagine. And indeed, plaintiff had no evidence that defendants “willfully sought to convince consumers that they were the source of plaintiff's candy goods.” So, though he could possibly recover costs and attorney’s fees, plaintiff was barred from recovering damages or an accounting of defendants’ profits.

Plaintiff’s state law consumer protection claims were dismissed because he couldn’t show direct harm to consumers, as opposed to simple confusion caused by infringement.

Castles in the air: magnetic toys' performance in doubt

PlastWood SRL v. Rose Art Industries, Inc., 2007 WL 3129589 (W.D. Wash.)

The parties compete in the market for magnetic construction toy sets. Plaintiffs are an Italian corporation and its Delaware subsidiary, while defendant MEGA Brands is a Canadian corporation with a New Jersey subsidiary, Rose Art. The court dismissed MEGA Brands for lack of personal jurisdiction, though the claims against Rose Art remained.

Rose Art makes Magnetix, small plastic building blocks held together by magnetism. The ads and packages say that users can build many structures – “500 designs” – with the blocks, while plaintiff argues that in fact many of those structures are unbuildable and will collapse under their own weight.

Following on recent recalls, plaintiff also alleges that the “Ages 3 to 100” claim on Magnetix packaging misrepresents safety, since the magnetic beads “spontaneously release and can cause severe injury if inhaled or ingested.”

The court ruled that this latter claim was precluded by the Child Safety Protection Act (CSPA). The CSPA sets out labeling requirements for certain toys and games, but doesn’t create a private right of action (and preempts non-identical state and local regulation of small parts hazards labeling). The Consumer Product Safety Commission is responsible for enforcing the CSPA. (Doing a bang-up job, by the way.)

Failure to comply with the CSPA does not, therefore, qualify as a false or misleading statement under the Lanham Act. And plaintiff’s claim against the label “Ages 3 to 100” is really an attempt to impose a standard inconsistent with the CSPA. (I needed more explanation to follow this. Does the defendant’s labeling comply as a matter of law with the CSPA? If it’s possible for the product to be mislabeled, then it seems like we have a scenario often explored with the FDCA, in which there is room for Lanham Act claims, even Lanham Act claims that use FDA standards to define truth or falsity. This may be the right result, but the court just moved too fast over the specifics – especially since the statute clearly contemplates private causes of action based on state or local laws that impose identical standards.)

Plaintiff’s “collapsing structures” claim, however, survived. Defendant argued that under Rule 9(b) plaintiff needed to identify which depicted structures collapse. The court rejected the premise: cases applying Rule 9(b) to Lanham Act claims did so only in response to specific allegations of fraud or facts necessarily constituting fraud, which isn’t the case here. A short and plain statement that defendant overstated the qualities or capabilities of its product is sufficient.

Organicide

The NYT has a story on the increasing popularity of "natural" and "organic" cosmetics. The trouble is, while "organic" is a carefully defined and heavily regulated term for food, there are no standards for cosmetics. And there's a bigger problem (one that others have argued also applies to organic food): people believe that "organic" means healthier/safer, but there's not much evidence for that with respect to cosmetic applications.

Jeremiah McElwee, the senior coordinator in charge of personal care at Whole Foods, which is the company’s fastest-growing department[, said,] “The biggest impetus for buying natural or organic body care is the perceived health benefit.”

It would seem logical to assume that common ingestible ingredients like olives or soy would naturally be healthier for the skin and body than hard-to-pronounce, multisyllabic industrial cosmetic ingredients like the preservative methylchloroisothiazolinone. But representatives for the government and the beauty industry, as well as some environmental activists, acknowledge that there is no published scientific proof to support the notion that plant-based cosmetics are safer, healthier or more effective for people.

The Times labels this a problem of "truthiness." I think the traditional "misleading" might work fine, though regulators are unlikely to clamp down on such general claims, even though they clearly do communicate a superiority message to consumers.

Another tidbit from the article demonstrates the Department of Agriculture's institutional hostility to organic farming, despite its mandate to support such farming:

[P]eople should not interpret even the U.S.D.A. Organic seal — www.ams.usda.gov/nop/FactSheets/Backgrounder.html — on cosmetics as proof of health benefits or of efficacy, said Joan Shaffer, a department spokeswoman. Government-accredited certifiers simply vet the manner in which these food ingredients are grown and processed, just as they would for a jar of organic tomato sauce, she said.

“The National Organic Program is a marketing program, not a safety program,” Ms. Shaffer said, likening the department’s organic seal to its grading system for beef. “Steak may be graded prime, but that has no bearing on whether it is safe or nutritious to eat.”

Here's another example of true-but-misleading statements: organic certification is, indeed, not safety inspection. But at least some organics have nutritional advantages over their conventional counterparts, and the absence of pesticide residues is another important factor in assessing their potential health and safety benefits. The contours of the organic standards are definitely shaped by marketing concerns, but I'm still dismayed to see a federal spokesperson speak of them so dismissively.

Right of publicity trick or transformative treat?

Slate on celebrity Halloween masks. I do wonder whether celebrities with no shame, like Paris Hilton, could make a better false endorsement/right of publicity claim than Hillary Clinton or Rudy Guiliani.

False advertising in the global supply chain

This fascinating NYT story about Chinese chemical exports contains many gems, including this:

“We don’t have the resources and means to produce medicine,” said Gu Jinfeng, a salesman for Changzhou Watson Fine Chemical. “The bar for producing chemicals is pretty low.”

Even so, Watson Chemical advertises that it makes active pharmaceutical ingredients. But Mr. Gu said he would export them only to countries with lower standards than China, or if “we can earn really good profits.”

Less scary, but more to the point for this blog, was a statement by the managing director of Honor International Pharmtech, accused of various counterfeiting and customs violations:

He denied shipping counterfeit Viagra, but he acknowledged other indiscretions: making false advertising claims, using another company’s import-export license and creating a fake corporate name.

“We don’t really have a factory,” Mr. Nie said, even though he advertised that he did. Honor International is just a trading company, he said, adding, “As a trading company, saying you can manufacture attracts business. It was fake advertising.”

Claiming to be a manufacturer might seem at first to be a trivial statement, but here's an acknowledgement that it's material to key purchasers. As the Times goes on to point out, manufacturing matters especially with drugs because it goes to their provenance; obscuring origin is associated with serious safety risks.

Batman v. Batman

This series of images from the Adam West Batman, combined with captions from Frank Miller's version, works as commentary just by juxtaposition, with no original material added. Here's my favorite:
You really have to know the Miller to get it, but I think it's fabulous.

McCarthy on Using Someone Else's Trademark

Webcast of lecture at AU here. This was a student-oriented presentation offering an overview of permitted uses, which McCarthy argued should not all be shorthanded as "fair use."

The highlight for me was a trademark lawyer who spoke during the question period, referring with something between dismay and disdain to "this First Amendment business" and suggesting that discovery abuses were the only credible justification for a fee award for the defendant in Mattel v. Walking Mountain (the Food Chain Barbie case). We should, she suggested, be sympathetic to trademark owners sending cease & desist letters to artists etc., because they're just trying to protect the reputation of their marks -- you wouldn't want your daughter looking at Food Chain Barbie, would you? (Causing me to think, first, about the kinds of things my friends and I did to our Barbies -- Forsythe doesn't really rate on the Barbie abuse scale -- and, second, that defamation lawyers were just trying to protect the reputation of their clients, and "this First Amendment business" caught up with them too.)

Not Fooling Anybody

The title of the website to which this post refers suggests that standard confusion claims against the businesses that have set up shop in places formerly occupied by distinctive fast food chains could not succeed. But there's always initial interest confusion and dilution. For your consideration:

White Castle to Veggie Castle, Mister Donut to Master Donut, Dairy Queen to Dairy K, Pizza Hut to Chinese Hut.

Could the new occupier defend against trademark claims by saying there's no use of a distinctive building shape as a mark, just as someone might refill a discarded Coke bottle? This may be another puzzle of "use as a mark," where one user really is using a trade dress as a mark but another really isn't. Without getting into that debate, one could resolve the issue in favor of the new occupier by imposing on the trademark owner a duty to remove the distinctive features of its building before leaving, just as some cases impose on trademark owners the duty to remove marks before putting damaged goods on the market as salvage. Having let the goods out into the market, the owner cannot then impose on someone a noncontractual duty to alter them. It might be reasonable to say the same thing here -- or maybe not, especially given that these are all likely to be franchises, and the franchisor may not have control over the way in which the ex-franchisee disposes of the building.

For further consideration, there's KFC to Gilstrap Chiropractic, with the KFC bucket still on the sign. And a newspaper story in which the chiropractor is quoted:

Gilstrap said he decided to leave the bucket on the sign because it’s such a longtime fixture.

“That bucket has been there for somewhere around 30 years,” he said. “Everybody knows where the old KFC is, but they don’t know where my office is.”

They do now.

“I don’t go anywhere where somebody doesn’t say, “Hey, you’re that KFC chiropractor.’”

Dilution?

And the winner: Texaco to Exaco. The thing is, I can almost construct a parody defense, given the independent meaning of the "ex" prefix.

Avis tries harder...

but to do what is not entirely clear. As I picked up from the Trademark Blog, it appears that a lawyer representing Avis has told a legal blogger that he has no "right to use Avis' trademark as [he did] in this particular piece." The piece happens to be a report on a decision invalidating a federal law granting car rental companies immunity from negligence liability in certain circumstances, with which Avis is no doubt concerned. The blogger illustrated the report with the Hertz and Avis logos.

The blogger has asked for comment, and as he called me out by name, I will say something (though he is of course aware that I am not his lawyer!): even to analyze the ways in which an infringement or dilution claim must necessarily fail in these circustances is to give this -- charitably -- overzealous claim more respect than it deserves. Eric Goldman nicely points out in comments that Avis's move is dumb both legally and from a marketing standpoint; I'm in full agreement.

Pancreatic enzyme can't dissolve Lanham Act claims

Axcan Scandipharm Inc. v. Ethex Corp., 2007 WL 3095367 (D. Minn.)

Plaintiff makes the Ultrase line of pancreatic enzyme supplements. The supplements contain enzymes that some disease sufferers need to break down nutrients in food; Ultrase has three formulations, MT12, MT18, and MT20, which correspond to the amount of lipase (an enzyme) in each. Defendants sell “generics” for Ultrase called Pangestyme and Lipram. Plaintiff alleged that neither Pangestyme nor Lipram was truly a “generic equivalent” to Ultrase.

In addition to Ultrase, there are two other major-brand name lines – Creon (by Solvay) and Pancrease (by Ortho-McNeil) – which also come in different formulations, differing from Ultrase in the amounts of amylase and protease (other pancreatic enzymes) they contain.

In 1999, Lipram came on the market as a “generic equivalent,” in three formulations. In 2000, Pangestyme also came on the market in three formulations, UL12, UL18, and UL20. Plaintiff alleged that defendants advertise their drugs as “identical in formulation to Ultrase” even though they contain different amounts of lipase and other pancreatic enzymes from Ultrase. Separately, plaintiff alleged that the Defendants invite pharmacists and others to compare the labeled ingredients in their drugs with Ultrase, and thereby imply that those drugs are “generic equivalent substitute[s] for Ultrase,” when in fact they contain different formulations.

Solvay sued defendants over similar conduct in 2003, eventually culminating in a jury verdict for defendants. Solvay’s lead counsel represents plaintiff here.

Defendants argued that the FDA has exclusive jurisdiction over the claims at issue. Relying heavily on the Solvay reasoning, the court disagreed. This is a slightly unusual situation because none of the drugs at issue are FDA-approved; though in 1995 the FDA announced that NDA/ANDA approval would be required of all pancreatic enzyme drugs, it permitted them to remain on the market while fleshing out the approval process. (Comment: it’s been 12 years. How fleshy does the approval process have to be?)

So naturally defendants’ drugs haven’t been tested, approved, compared, or otherwise evaluated by the FDA, any more than plaintiff’s have been. Defendants argued that only the FDA can determine whether their drugs are “equivalent” to Ultrase, if “equivalent” means pharmaceutical and bioequivalence. (Comment: it’s interesting, though perhaps not particularly surprising, that the FDA hasn’t jumped in to claim preemption in Lanham Act cases the way it’s been doing in consumer class action cases, though logically one might expect the same arguments to apply.)

The court didn’t buy it. Plaintiff wasn’t claiming a false implication of equivalence “in the FDA sense --that is, bioequivalent and pharmaceutically equivalent to Ultrase.” Rather, plaintiff was arguing that defendants’ claims were false under “the proper market definition[s]” of “generic equivalents” and “substitutes.” (This doesn’t really get at the underlying issue – that the market, reasonably enough, defines these terms with reference to the FDA standards that usually govern – but I think it’s the right result anyway.) Plaintiff’s claims don’t require the court to make the FDA’s judgments for it, nor do they concern safety and efficacy (though presumably differences in the products would enter into the deceptiveness and public interest inquiries).

The court further noted that plaintiff could rely on the FDA’s definitions of bioequivalence and pharmaceutical equivalence in seeking to prove its claims, in order to establish the standard that defendants allegedly failed to meet.

On other matters, the court applied a six-year statute of limitations borrowed from state law to bar claims prior to June 1, 2007 based on the date plaintiff’s complaint was filed. It rejected plaintiff’s invocation of the continuing violation doctrine, holding that the conduct here was a series of repeated identical violations, each of which could have been separately challenged, rather than one incessant violation.

The court held off on the question of whether res judicata applies. Defendants argued that plaintiff was “virtually represented” by and in privity with Solvay. In assessing virtual representation, courts look at (1) identity of interests between the parties, (2) the closeness of the parties’ relationship, (3) participation in the prior litigation, (4) acquiescence in the prior litigation, (5) whether the present party “deliberately maneuvered” to avoid the effects of the first case, (6) “adequacy of representation” --whether the first litigant had a “strong incentive” to protect the current litigant’s interests, and (7) whether a public-law issue or a private-law issue is raised (if the former, the concern is that res judicata is necessary to prevent an endless stream of plaintiffs).

The problems here came especially in (6) – plaintiff competes with Solvay and thus their interests are not necessarily aligned; the same rationale creates uncertainties about (2). Use of the same counsel is not dispositive. And there are other factual uncertainties about other elements.

Likewise, the court deferred consideration of defendants’ laches argument. Though plaintiff did wait out the conclusion of litigation on a similar claim, it argued that it was attempting to convince defendants to stop their false advertising. Moreover, it will be difficult for defendants to demonstrate prejudice, a showing of which depends on the idea that they would have changed their conduct had they been sued earlier. Given that they continued making these claims throughout the Solvay litigation, there’s good reason to think that they can’t demonstrate any change in their position due to plaintiff’s delay.

Defendants argued that claims based on “compare to” and “alternative to” ads should be dismissed because such ads are acceptable comparative advertising as a matter of law. This didn’t work. The court discussed other cases that had allowed “compare to” false advertising cases to proceed; one case held that “compare” makes an implied establishment claim, suggesting that a product’s performance has been tested and verified. The idea of an implied establishment claim makes sense for drugs and supplements; with house brand shampoos, the implied claim is more likely just equivalence of the relevant active ingredients and a similar smell. Here, plaintiff alleges that inviting pharmacists and others to “compare” the drugs falsely suggests equivalence in efficacy or ingredients.

Likewise, “alternative to” ads may violate the Lanham Act if they falsely suggest that drugs have the same active ingredients in the same quantities – again, something that makes perfect sense in the drug context, whereas pear sauce might be a perfectly good alternative to apple sauce.

Finally, the court rejected defendants’ argument that plaintiffs had failed to plead with particularity under Rule 9(b). As the court pointed out, there is a split over whether the Rule even applies to Lanham Act claims. But assuming that it did apply, plaintiff’s allegations satisfied the heightened pleading requirement.

I Can't Believe It's Not Peat

Canadian Spaghnum Peat Moss Ass’n v. Organix, Inc., complaint filed Oct. 18, 2007, D. Or.

First worm poop, now cow poop. As green marketers mature and compete with existing advertisers, we are seeing interesting false advertising cases arising out of various and sundry superiority/equivalence claims that go beyond the standard “environmentally friendly.”

Plaintiffs sell peat moss for home gardening and allege that peat moss is widely recognized to have unique beneficial properties as a growth medium. Organix markets a “peat moss replacement” or “renewable peat moss substitute” made from dairy manure. This product will allegedly reduce the ecological burden of dairy waste -- for discussion, see here – and the costs of peat harvesting – see Organix’s page here (along with related claims, including the nationalist benefits of using American dairy waste instead of Canadian peat).

Peat producers are unhappy about this, and filed suit specifically challenging the trademark: RePeat (which Organix has filed an application to register). On its general product page, Organix does not “mention that RePeat contains no peat, but consists of dairy manure.” (As noted above, the product-specific page is pretty clear about this, and the general page labels RePeat “the renewable peat moss substitute.”)

The gravamen of the false advertising claim is that the trademark will make people think that the product contains peat or peat moss. At this point, plaintiffs do not appear to be focusing on the claim that dairy manure is an acceptable substitute for peat moss. (They do allege confusion as to affiliation or sponsorship in that consumers will be confused about Organix’s connection with actual peat moss producers, but that’s pretty clearly hostage to the idea that RePeat contains peat moss.) There is a claim that RePeat will “damage the image” of true peat moss because RePeat is largely untested and has not been proven to share peat moss’s unique qualities. But this is not quite a falsity claim – for which plaintiffs would have the burden of disproving equivalence.

My quick take: the mark does seem, at a minimum, deceptively misdescriptive – despite the cleverness of the name, I’d assume it contained some sort of reprocessed peat; “re” is not a transparent prefix the way “mock” or “faux” or “imitation” might be. And given the alleged market reputation of peat, the name would be deceptive in that it would likely influence purchasing decisions. So I’d say it’s unregistrable. But whether in context it constitutes false advertising is a much closer question; “replacement” and “substitute” do seem to indicate pretty clearly that the product is not in fact peat. Whether prominent placement of these terms next to the mark can counteract the impression given by the mark itself will have to be determined.

FDA preemption goes to the dogs

Putney, Inc. v. Pfizer, Inc., 2007 WL 3047159 (D. Me.) (magistrate judge)

Pfizer, the defendant, moved for a preliminary injunction on its false advertising claims against Putney based on Putney’s advertising of its cefpodoxime proxetil medicine to vets and others as being FDA-approved for animal use.

Pfizer sells cefpodoxime proxetil as Simplicef, used to treat canine skin infections, originally FDA-approved for humans under the name Vantin; in 2004 this approval was extended to dogs, and Pfizer got exclusive rights to market it to vets until July 22, 2009. In 2007, Putney began selling cefpodoxime proxetil to vets. It obtains the drug from Ranbaxy, which has FDA approval to make and sell the drug for human use because Ranbaxy established bioequivalence to Vantin in humans. Ranbaxy packages the drug with Putney’s name and label, selling it at a substantially lower price than the human-directed version.

Pfizer alleged that Putney falsely told vets that Putney has FDA authorization for cefpodoxime proxetil for use in animals, that its product had been FDA-approved as bioequivalent and thus is a generic for Simplicef, and that the FDA had approved Putney’s product for use in animals. Putney’s marketing brochure begins “PUTNEY[:] YOUR PARTNER FOR HIGH QUALITY FDA APPROVED GENERICS.” It continues: “For the first time there is a brand that stands for high quality, FDA approved drugs that are equivalent to brand name drugs at competitive prices, exclusively for veterinarians. … We are focused on the development of high quality, true generics that are FDA approved and bioequivalent to brand drugs and important therapies where choice and competition are limited. Our goal is to launch generic versions of drugs veterinarians have requested to enable veterinarians to make prescribing decisions based on pet patient needs…. Putney sells only FDA approved products ….” The brochure also contains a chart touting the rigorous FDA NDA review process.

But to market the drug legally under the FDCA as generic Simplicef, Putney would have had to file an Abbreviated New Animal Drug Application, and this it has not done; nor could it successfully do so during Pfizer’s market exclusivity for Simplicef.

The magistrate judge rejected Putney’s FDA preemption claim, accepting Pfizer’s argument that the issue is whether Putney’s product has been approved for use in animals, not whether it should be, and only the latter type of claim is preempted. This is not quite the same as, though related to, the question of whether representations of FDA approval have to be explicit in order to be actionable under the Lanham Act, since past cases have also suggested that the mere expectation of consumers that drugs are FDA-approved is not enough to make advertising of unapproved drugs violate the Lanham Act. Here, however, the brochure’s claims about FDA approval are “reasonably clear” and there is no need to leave the matter to the FDA. Thus, the counterclaim successfully alleged an affirmative misrepresentation.

In a footnote, the magistrate judge expressed the same dissatisfaction I have with prior precedent, and suggested that the Lanham Act does not require “explicit assertion[s] of FDA approval for both the drug at issue and the use of that drug at issue,” because that limitation would “open a hole” in the Lanham Act to careful advertisers.

Putney argued that there was no advertisement or promotion at issue. It’s a drug company, it sells drug products to vets, and it has a business brocure that “describes its company.” But, it said, there’s no ad! The magistrate judge made justifiably short shrift of this argument – the brochure was a means through which Putney disseminated information to a class of consumers. It was significant that Pfizer alleged that, at the relevant time, Putney had only one product on the market. (Though I think this argument should be laughed at regardless.)

The magistrate judge also rejected Putney’s contention that Lanham Act claims should be subject to a heightened pleading standard.

Putney did succeed in having the state-law consumer protection claims dismissed, since only consumers have standing.

And Putney ultimately avoided a recommended injunction because it had pulled the brochure from distribution and stated under oath that it wouldn’t use the brochure in the future (at least during Pfizer’s exclusivity period). Because the question of liability was a close one, Putney’s continued protestations of innocence did not lead the magistrate judge to conclude that Putney was likely to resume its offending conduct.

Hybrid vigor: Honda class action claims survive

True v. American Honda Motor Co., Inc., --- F.Supp.2d ----, 2007 WL 3054569 (C.D. Cal.)

Plaintiff sued for allegedly false and deceptive claims about the fuel efficiency and cost savings of the Honda Civic Hybrid automobile. Disclosure: I own and love a Civic hybrid, and think that we’d see major gas mileage improvements in non-hybrid cars if every car had the same MPG indicator as a hybrid does, just by virtue of people training themselves to drive more efficiently once MPG was more salient.

Anyway, plaintiff alleged that actual fuel efficiency was up to 53% less than advertised – plaintiff averaged 32 MPG in mixed highway and city driving over six months, compared to 49-50 advertised. A Consumer Reports article in Oct. 2005 reported only 26 MPG in the city. (My experience: 40 MPG pretty much on the nose, in mostly city/Beltway traffic.)

Plaintiff alleged that mileage claims were important to the putative class, and they were communicated to every member because federal law requires every new car, including the hybrid, to display at the point of sale a sticker showing fuel estimates based on EPA-mandated methods. Federal law also requires the inclusion of “Actual mileage will vary,” but Honda’s print and internet ads downplayed (using “may” instead of “will”) or omitted the disclaimer.

Honda argued that the state law claims were preempted due to conflict with the Energy Policy and Conservation Act, 49 U.S.C. § 32901 et seq. The court applied a presumption against preemption because of the state’s historic powers to protect consumers. EPCA requires the display of the stickers and requires dealers to make a booklet on fuel economy available to consumers. But nothing in the EPCA or its accompanying regulations purports to regulate fuel economy advertising beyond that. Preemption thus only extends to state regulation of the sticker or the booklet.

Honda argued that plaintiff was really challenging EPA testing guidelines, but the court didn't see that in the complaint. I am sympathetic to Honda’s point, however; the problem can be traced to the testing guidelines, which everyone knows overstate mileage. The difficulty is that with a new technology, the hybrid, consumers don’t have enough knowledge to tell whether the same discounting should apply to hybrid MPG claims. I know I hoped to get advertised MPG. I, like every other ordinary consumer, lacked the expertise to know whether EPA’s tests would be more accurate with respect to hybrids, but it’s reasonable to think they might be, because the basic selling point of the car was its better mileage. Nonetheless, because plaintiff was challenging non-federally-regulated ads, there was no preemption.

Honda also argued that plaintiff failed to state a claim because he didn’t allege reliance. California UCL/FAL plaintiffs may claim an inference of reliance when a misrepresentation is material. Plaintiff’s allegation that MPG was substantial/controlling in hybrid purchase decisions was sufficient to state a claim.

Finally, Honda argued that the complaint needed to plead fraud with particularity under Rule 9(b). The court, however, found the complaint sufficient to provide fair notice; at this point, plaintiff didn’t need to identify the particular ads that induced his purchase.

Recent press: Kevin Trudeau

The Chicago Tribune runs a story on Trudeau's continuing battle with the FTC, in which I'm quoted. Check out the Google ads on the second page; the comments say Trudeau's a scammer and people who buy his malarkey are just stupid, but Google's targeted ads say they're just like you and me.