IPSC Breakout Session #1

Too much to choose from; I prioritized things that were new to me.

Mark Bartholomew, A Right to Be Left Dead

If we can create new works in a dead author’s style after they’re gone and create conversations with them (including loved ones) after gone, and populate new entertainment with dead actors, isn’t that something new? NY State created a postmortem right of publicity specifically for computer-generated likenesses; Louisiana did so too. IP Subcommittee on AI: was a lot about whether we need a national ROP to deal with this. Wants to focus on the relevance of death.

How do other areas of law treat relevance of death? Map onto 3 main rationales for ROP.

Dignitary interests: false light, IIED, privacy typically expire w/person. There is some exception for actions immediately surrounding death or moment of burial. Death closes things off.

Consumer protection: laws meant to protect consumers, death doesn’t matter—Princess Diana’s image on collectible plates—TM claim was maintainable. So too w/false advertising. Makes sense b/c consumer protection law’s goal is information safety and not vindicating rights of decedent.

Property law: somewhere between all and nothing. Decedent’s operative intent to extinguish property right—when you bury people w/jewelry by their choice, no estate tax; it just disappears. Body parts. Forced share laws for spouses. To fix suboptimal postmortem allocations.

Need and precedent: how is AI being used to reanimate people? One use is grieving: used to create a chatbot w/specific person corresponding to a past entity. Advertising: false endorsement potential. Actors’ strike is in part about who controls past performances if they’re being used to populate new media productions? Great deal of variability in postmortem ROP. Okla and Indiana give 100 years, potentially infinite in Tennessee. Entertainment: stronger ground to articulate right in performances; incentive story makes more sense for this than for other invocations of right of identity. Stare decisis: can we really fight this any more?  We can at least fight how we structure the rules of postmortem ROP when it’s only found in about half the states.

Solutions: better ways to articulate postmortem wishes, including a way to abandon postmortem publicity rights. Putting it in a trust like Robin Williams did might not be enough—might be fiduciary duty to use it commercially.

Duration: goal is to recreate original; the right shouldn’t extend long past death, because the key is generational change/asserting difference from previous one is a key mechanism.

Prior exploitation requirement? Need to have used identity commercially during life in order to trigger postmortem right. Death is a demarcation point in many circumstances; we should have a mechanism for free use for research and other purposes for most people who didn’t have opportunity to commercially leverage persona during life.

Fred Yen: why analyze things through interests of dead person at all? Couldn’t we look at it through the interests of the living? Grief trolls—sending a person messages from deceased loved ones would be IIED; copyright can handle performances, collective bargaining can handle digital models in Hollywood. There’s lots of reasons to keep the dead from having too much influence over our lives.

Mark McKenna: many recent issues over use of personality after death would have been unanticipated during their lifetimes. How practical is it to imagine needing affirmative steps to anticipate those uses? Why not just a set of defaults?

[My thoughts: Intro sounded to me like classic anxieties over what currently seems like realistic tech of representation—putting words in mouth that never said happened in written word, in print, in image, in cartoon, and there have been repeated moral panics about how everyone will perceive these as real/deceptive; we just keep resetting our expectations.]

Consumer protection/TM: why would ordinary consumers care about consent of estate or believe there was unified control? And why would endorsement of estate equate to endorsement of celebrity in consumer’s mind? Assumptions skipped over in TM/false advertising analysis.]

Lucas Osborn, Christianity & IP

Core: creation, Fall, redemption, restoration. Genesis: G-d said, “Let us make man in our image, after our likeness. And let them have dominion over … all the earth.” Humans are categorically different from other animals and have some special relationship to G-d, our creator; we have a purpose in the world. Thus, we are created with creative tendencies/desires to create.

But all is not well because of the Fall. We also have a tendency to sin. The legal construct we use for that is the wealth maximizer, who maximizes their own happiness. We also sometimes act irrationally b/c our reasoning is messed up. Nonetheless there is still goodness in the world. That can map onto behavioral law & economics. We will not always act justly or see correctly what the just thing is to do.

Humans will generally not create at maximum potential or create things for the common good or use creation in a just way—incentives may be able to intervene here. Example: drugs that are overpriced; but even within Christian worldview, fallen humanity may require attending to incentives.

Deborah Gerhardt: Tree of knowledge is part of the Fall. Jewish theology sees this as opportunity to do good, to choose good or evil, a maturation of knowledge. We wouldn’t need rules if there was no difference.

Jeremy Sheff: Spread of knowledge—evangelical perspectives may differ from nonevangelical. Catholic tradition about authority over congregation/knowledge is very different. Control over text is part of some traditions, along with control of knowledge that might conflict with or comment on the text. Can you separate those issues from the theological issues? IP is as much about distribution of knowledge as it is about creation.

Dustin Marlan, Trademark Disclosure

TM registration requires disclosures just as patent does: undertheorized. First use/use in commerce date, drawing of mark, goods and services, owner, domicile.  Why? Protecting brand investment and consumers?

The TM bargain: registration can be made in a form prescribed by the Director, so there’s some statutory flexibility if we think policy justifies it. Specimens: one per class, as currently required.

Benefits: nationwide right of priority, evidence of validity/exclusive ownership, right to police imports, incontestability after 5 years, symbolic benefits like ®. Constructive notice to the public is often thought of as good, but it can put the claimant on the radar (as trade secrecy is an alternative to patent)—people could find you and send you a C&D; admissions could be detrimental in later LOC analysis, e.g. conceding to a disclaimer; might want to file in a jurisdiction without disclosure like Trinidad & Tobago to avoid tipping off the market; icky mark or brand could be unpalatable to the public.

Could TM disclosures be tweaked to make them more consumer-friendly? TESS is a mess. Could it be more consumer-friendly to allow more comprehensibility to the lay public?

RT: not sure that disclaimers ever matter to future rights, but collateral estoppel/B&B is a big deal now, as is the loss of potential defenses after Jack Daniels. Also I’m not sure that you can ever make registration an engine of consumer protection b/c people never look up classes, first use date, etc.

Justin Hughes: analogy to patent applications—written description and enablement are quite different. Classes/goods and services might be the closest analogy to metes and bounds.

Mark McKenna: natural to think about goods & services as description of claim in a world where the claim is for a word mark; the boundaries were clearer for Nike. But many other applications are less clear for what they are, and we need more rules around that. Courts don’t follow PTO rules about dotted lines; they aren’t careful about what the mark consists of or comprises, especially to get to inherent distinctiveness. That’s where disclosure rules need the most attention: definition and relation to what courts are going to do with the registration.

Alex Roberts: Different reasons to choose not to use system—stealth registrations in T&T are different versus “we define trade dress when we choose to sue over near copies”; Mattel enforces a lot against pink but doesn’t register it so it doesn’t have to define a specific color.

Bartholomew: Registration is optional, not mandatory as with patents; is this the right number of sweeteners to encourage people to register?

Hughes: could compare cases where they narrow the claim of the TM registration v. narrow the claim of the patent—Maker’s Mark case where they have a registration for a wax seal but claim only red.

McKenna: and the reverse, where they register narrowly but claim broadly.

Matthew Sipe: connection here with Katyal’s project where public doesn’t get everything it needs for full agency in consumption.

Elizabeth Townsend Gard: people don’t register color as trade dress—interesting to consider why not. Same with word marks—they register standard word mark when color is an important part of what they’re doing.

Lorelei Ritchie, is this generic :( ?

Consumer perceptions need evidence—surveys, declarations, dictionaries. Consumer perceptions change over time. Can a generic term be ungenericized? After Booking.com, maybe it can be because consumer perception is key. Evidentiary standard is not standardized. Merely descriptive=immediately conveys information about feature, function, or characteristic. But generic? The thing being named, or if it’s a key aspect or subgroup, which is where we start running into problems.

Possibilities: allow acquired distinctiveness for any asserted mark; require acquired distinctiveness for any asserted mark (requires legislative modification). Should TM registration be w/o much examination? Allow people to file claims and then go from there.

Another: expand consideration of a “mixed record” where there is some generic and some nongeneric use. Many people use “google” to mean “use Google.” Could expand on that more.

Legal standard: preponderance in inter partes case; ex parte move towards preponderance. She argues that they should go the other way: clear and convincing for everything. Why? Because generic terms get no protection. Should look for abandonment and fraud where we have a higher burden of proof. Consider preclusion as well. W/genericness, we are talking about the same thing, so preclusion would be appropriate.

Unprotectable generic terms should be precise, like apple for fruit (note that this is a subset). Not a key aspect or subgroup. “Apple candy” is not generic for candy, it’s just a flavor/key aspect. Should be descriptive.

Relevant consumer: perceptions can determine commercial strength but the inputs are often the same as for conceptual strength—dictionaries w/lower-case references. Keep up with the culture by considering social media. Evolving norms of communication and branding both have no punctuation/capitalization: lululemon.

Hughes: Agrees that generic means thing: “highly descriptive” doctrine should be used to moderate this problem for things like apple candy. Relevant consumers for determination of genericness should be different for more narrow descriptiveness group of consumers. Singer was recaptured from genericity, as was Goodyear (probably).

McKenna: disagree w/Hughes b/c categories aren’t found in nature. Is diet soda a category or a subgroup? It’s market definition. Is apple candy a thing? That has no abstract answer. In favor of calling more generic: once you introduce secondary meaning, you’ve told defendants that the case will cost hundreds of thousands or millions, whereas genericity is more easily managed. Before Booking.com there was the competitive need test and that’s why failure to function has had a resurgence.

Roberts: Nike just got SNKRS w/vowels removed—that’s the Booking problem.

RT: [I agree on the subgroup issue: soup spoon; car is a subset of vehicle; apple for fruit is a subgroup; key aspect may be another way of saying market-defined subgroup.

Spectrum of descriptiveness/ “highly descriptive” category will likely defeat your attempt unless you take more steps to put that off limits too.

Clear and convincing: basis in statutory text? There’s a common-law case for treating fraud differently but I don’t see that for abandonment or genericity; the “harsh consequence” is the natural consequence of choosing a generic term. (Not to mention that these days you can still get unfair competition protection under §43(a), which is not the case for patents.)]

Deborah Gerhardt, Trade Dress Edges

Where does trade dress begin and end? The definition expanded far beyond packaging/display. Color, product design. This matters b/c we’re supposed to apply functionality for trade dress, and we often use Seabrook for distinctiveness, whereas there aren’t many disclaimer practices for trade dress and there are for word marks. So there are doctrinal differences.

Possibilities: (1) Trade dress a subset of TM (based on the statutory language in 1127); (2) partially overlapping (Two Pesos, where text might be included in some trade dress; INTA view of overall look and feel without functionality); (3) Restatement view of distinct categories. But do you have to apply functionality analysis if there’s a word involved?

PTO doesn’t use this categorization—it uses text, design, sound, etc. Traditional/nontraditional is also unhelpful and does no doctrinal work.

Tyler Ochoa: we call functionality genericity when it applies to word marks. [Not sure that’s entirely true—the AOL “you’ve got mail” case is functionality more than genericity.]

Trade dress got overexpansive; Two Pesos got cut back in Wal-Mart in particular with the tertium quid versus product configuration/packaging.

A: in sound marks we do see genericity and functionality merging—alarm sound.

RT: Consider substantial similarity—it’s the standard for everything in © but we recognize that different genres may require different analysis. Choral music requires experts to tell you what might count as similarity of expression in choral music, etc. The value is in finding patterns and so I’m comfortable with being in the subset box (1).

Betsy Rosenblatt: willing to go further—there are lots of words that are informationally functional and should be denied registration for that reason for relevant goods/services.

Roberts: what’s inside the “trade dress” circle? Are sounds and smells trade dress, or are they something else?

[Things that can be inherently distinctive v. things that can’t be as another important line?]

Sheff: identify where the distinction matters—functionality, maybe; inherent distinctiveness not available for product design; practical relevance: defining the unregistered trade dress is a big part of the job for §43(a)—even though there may not be a doctrinal issue it is a very practical one where we fight over how specifically we have to claim features.

A: Impetus: some sound marks are treated like text, and others like product design—analytically unsatisfying. Rules for registering text don’t work well.

IPSC Opening Plenary Session

 Matthew Sag, Copyright Safety for Generative AI

Not addressing whether training is always fair use in every circumstance; explain how generative AI fits w/in existing law (nonexpressive uses) and identify best practices to make generative AI fairer.

Non expressive uses: reverse engineering, anti-plagiarism, search plus text data mining, snippets. Although Authors Guild didn’t discuss it, that was very much about machine learning—the endgame was more sophisticated analysis using machine learning, not just frequency tables. His theory: rights of © are defined w/r/t communication of original expression to the public. Nonexpressive uses don’t involve human enjoyment of the original expression contained in a work and don’t lead to other humans potentially enjoying that original expression. Thus, nonexpressive uses don’t interfere w/the kind of interest © is designed to protect, which is why they are such strong candidates for fair use.

But is generative AI really the same? Are the outputs copies of the training data? Copying takes place prior to training; converted into tokens and training is a process of adjusting weights in the model, not copying tokens. Info acquired is much more abstract than the training data. The output is a novel synthesis, not just a cut and paste, usually combines abstract latent features learned from training data.

But CS literature on extraction attacks exists: in successful attacks, models may be trained on many duplicates of the same work; images associated with unique text descriptions; ratio of model size to training data is relatively large. Generally the extraction attacks fail; only succeed in edge cases. These are real risks, but rare. More common: The Snoopy problem: text to image models are set up to learn attributes of ©able characters: b/c same text description paired w/relatively simple images that vary only slightly. Not limited to characters; other images repeated w/ minor variations and consistently tagged w/same keywords: Banksy’s girl holding a red balloon.

Implications: too much memorization undermines arguments in favor of fair use. Hard to argue it’s highly transformative if training data come out as output. May also have implications under fourth factor. What to do? Ten suggestions in paper, but key: (1) reasonable measures to deduplicate; (2) reasonable measures in training and deployment to reduce probability of infringement—curate/pre-processing training data; using reinforcement learning through human feedback; installing restrictions on model outputs. (3) reasonable measures to safeguard privacy interests. (4) detailed records of works used and their provenance.

Sonia Katyal, A Trademark Theory of Rebranding

Lots of rebranding out there. Cultural and economic factors (change in what the business does over time, including startup drift and embrace then rejection of crypto). Practices are undertheorized and underregulated. Not transparent/information asymmetry for consumers. Internal contradiction in TM: rebranding could be characterized as contradiction b/t law and marketplace: marketplace gives incentives to rebrand, given lack of legal regulation thereof. A single user can obfuscate its past identity from its present. Source concealment/distortion.

Most common reason: change of ownership or structure, merger, acquisition, sponsorship change, shift from private to public, demerger

Change in corporate strategy—globalization or localization, diversify or divest. Change in competitive position or external environment (attracts the most commentary). TM doctrine assumes marks are chosen for potential for perpetuity. Allows tacking of priority w/continuing commercial impression. Material alteration requires new filing. This rule facilitates information asymmetry that can harm consumers by adding information costs. Distortion: expansion of boundaries by continuing commercial impression (actual TM boundaries). Also identity concealment—Worldcom to MCI; organizational misdescription—renaming, reorganization, shell companies; source obfuscation, where FB rebrands to Meta as distraction; affiliative disinformation—broader rebranding associated w social movements.

TM law should facilitate disclosure or it will fall behind market.

Sheff: What about licensing/merchandising in this system? That deprives consumers of info in the way that you’re talking about; the law used to treat it as a kind of deception but now we all love it.

Sag: Why isn’t this like bankruptcy? Fresh start.

A: good for companies, not so good for consumers.

Alex Roberts, Multi-Level Lies: Distinctive feature is that laypeople are making advertising claims to friends, social media followers, acquaintances, etc. Sellers make money by selling product but also by recruiting others. Exploitative: 99% make no profit/lose money; stuck w/unwanted inventory; exploitative based on false promises of wealth and miracle products—the seller gets free advertising. Not surprising that sellers make false claims—they’re desperate to sell. Lack knowledge/training; rules aren’t intuitive, including risks of sharing true but unrepresentative experience. Nondisparagement clauses, some of which purport to bind family members. Indemnification clauses (likely uncollectable, but still scary). Many contracts—77%--say sellers can only use marketing claims or materials provided by company; 71% say other claims must be pre-approved (that seems contradictory). 57% say sellers could be liable for false etc. claims, but only 24% reference or explain specific rules.

Many actual sellers (convenience sample) make effectiveness claims—80% almost always/half the time; 85% make testimonial claims; 73% make data-based claims (lose 1.8 pounds/week); 86% make positive subjective claims; 78% make business opportunity claims. 59% were aware that laws/rules constrain the claims they make, mostly made aware by training or other reps from company. Did they influence how you advertise? Many people said yes, but many people skipped the respondents—47% said they almost always follow the rules. Many expressed uncertainty that the rules applied to them. 46% said desire to sell outweighed desire to comply; didn’t expect enforcement. 37% said the company didn’t say anything about restrictions on claims or said that there were no restrictions.

Takeaway: companies, not lay sellers, must be held liable for false, misleading, or noncompliant claims disseminated by sellers. FTC and FDA think this already!

More enforcement; more training for MLMs with interactive onboarding/continuing education. Expand social media monitoring.

Contract issues: limiting arbitration and class action waivers would help; classify sellers as employees? Platforms should enforce own TOS against these claims.

Katyal: are the influencer rules different/should this be folded in?

A: biggest difference is that influencers get paid by the seller and MLM sellers don’t. Affiliate marketers get a cut of sales; that’s similar to how MLM works, so it’s pretty easy to see how they fit in, but you don’t really need that piece because FTC has said elsewhere that the companies are liable for claims made by sellers—the case law doesn’t require the endorsement piece to hold the company liable for the claims.

Q: endgame?

A: even with the ones that aren’t snake oil, and many are, there are risks of false income claims that should be guarded against. FTC could go harder against supplement market in general; FTC/FDA should team up more often.

Christopher S. Yoo, Common Carriage and Social Media

Hating on social media is bipartisan. Turning to common carriage analysis. Declare as matter of statutory announcement that they’re common carriers and hope that makes the regulation constitutional, as in Fl and Tex. Can that be right? No. Turner Broad. Sys. v. FCC says that the Court has to assess those judgments. Thomas once said that labeling a regulation a common carrier scheme “has no real First Amendment consequences.”

What about common law? Rationales are almost all debunked but one works.

“Affected with a public interest.” That’s not enough. It’s an empty category. Newspapers were critical for disseminating information, but that doesn’t deprive them of 1A protection for editorial judgments.

“Monopoly power.” That’s historically not been true. The root is not in 17th century English common law, but 20th century laws creating public utilities. Even if that were the case, should it make a difference to the 1A analysis? Not in Tornillo, even though most cities were one-newspaper towns at the time.

“Transportation/communication.” This is a useless category. Lumping things together doesn’t teach anything (Oliver Wendell Holmes). Too general to be helpful. There are tons of communications media that aren’t regarded as common carriers.

“Quid pro quo.” Section 230 as a quid pro quo. But not clear that common carriers are the beneficiaries of 230. Another statute enacted at the same time says “nothing in this section shall be construed to create interactive computer services as common carriers or telecom carriers.” There’s clearly some immunity for entities that aren’t common carriers.

“Holding oneself out as serving the entire public.” It’s an antifraud test, but easily evaded. DC Circuit says that FB, Google, etc. don’t hold themselves out as affording neutral, indiscriminate access and that net neutrality didn’t apply to any services involving editorial judgment.

The real motivation: syllogism, not 1A analysis.

Major premise: old regimes like common carriage must be constitutional.

Minor: new regulations of social media are like common carriage.

Conclusion: new regulations ok.

Major premise is problematic; SCt has never resolved. Precedents uphold access regulation only for media in which one actor exercises physical, not economic, control that social media lack. Invoking common carriage accomplishes nothing/serves as a distraction.

Lemley: What do you do with telephones? We clearly apply that to telephones.

A: dial-a-porn cases can help answer. Both sets of cases say that even a common carrier offering services, you can also offer video over which you exercise complete discretion. You can be a common carrier for only part of your services.

Lemley: but only b/c we put telephony and cable in different buckets. Why not exercise discretion over how and under what circumstances we deliver telephone calls?

A: is the logical implication that there are limits on that? Yes.

Interestingly, neither Fl nor TX bars discrimination in the ordinary sense—deplatforming and shadowbanning are not the same things. Not a true common carrier regulation.

Chris Newman: nondiscrimination in common carriage is about passage, not behavior on the vehicle/harassing other passengers.

A: agreed. The author of the 5th Circuit opinion said we reject constitutional challenges to nondiscrimination laws, but that’s about economic discrimination, not speech discrimination. That’s handwaving.

Nicholson Price, Empirical Studies of Medical AI Patents (w/ Mateo Aboy & Seth Raker)

Applications are up even after Bilski, etc. Grant rates dipped but then went back up. 3 of top 5 patent applicants are the 3 biggest MRI makers. Disclosure is only ok; universities do better. Predictions to contrary underestimated the cleverness of patent lawyers. We’ll get lots of patents anyway; people figure out ways over around and through doctrinal barriers.

poop bag seller's "compostable" claims are plausibly ... false

Natale v. 9199-4467 Quebec Inc., 2023 WL 4850531, No. 21-CV-6775 (JS)(SIL) (E.D.N.Y. Jul. 28, 2023)

Many lawsuits against “recyclable” claims have been dismissed, but not this “compostable” one. Defendant sells “Earth Rated Certified Compostable Poop Bags.” “On the packaging [of] the 60-count version of the Product, Defendant represents that the Product is ‘Certified Compostable.’ ” The packaging for the 105-count and the 225-count versions of the Product are “identical in all respects except for the size” and likewise state that they are “Certified Compostable.” Defendant’s website says that its “certified compostable bags meet the ASTM D6400 standard for municipal composting as well as the EN13432 Home and Industrial standards for compostability.” It further says that the Product “is ‘certified for home composting’ and is compostable at a ‘city compost’ facility.”

But: “On the back of the 60-count version of the Product,” the packaging “includes a small print disclaimer in small font” stating: “COMPOSTABLE IN INDUSTRIAL FACILITIES[.] Check locally, as these do not exist in many communities.” The packaging also states “[n]ot suitable for backyard composting.” A small print disclaimer on the side panel of the 60-count version also says: “[s]hould only be disposed of in commercial composting facilities where pet waste is accepted.” The 105-count and 225-count versions of the Product also include small-print disclaimers stating: “Should only be disposed of in commercial composting facilities where pet waste is accepted. These facilities may not exist in your area. If you want to compost your pet waste in a home compost, please ensure to only use the resulting compost on non-food crops.” The disclaimers on the website require clicking a “Read more” tab; FAQs don’t use relevant titles. Users must navigate to an innocuously titled FAQ: “[h]ow should I dispose of the compostable poop bags” to access the disclaimers. Plaintiffs alleged that “[n]o reasonable consumer would expect that by clicking on ambiguously named or indiscriminate links, they would find small print language on Defendant’s website ... that would contain language inconsistent with the representation that the Product is capable of being composted.”

The FTC “has stated that ‘compostable’ claims on dog waste products are ‘generally untrue,’ ” given that “dog waste cannot be composted because it can contain harmful contaminants (e.g., E. Coli).” The EPA has stated that “[e]ven in backyard composting ... dog waste can contain harmful parasites, bacteria, viruses, or pathogens.” Plaintiffs further alleged that the phrase “if [the] city’s municipal composting accepts pet waste” was false and misleading because “industrial composting of dog waste is not available in the United States.” Plaintiffs alleged that “[n]o reasonable consumer would expect that the small print language on the back and side panels of the Product would contain language inconsistent with the representation that the Product is capable of being composted” and that no reasonable consumer would “expect that a ‘certified compostable’ dog waste bag would not be capable of being composted.”

The FTC’s Green Guides use two relevant examples:

Example 2:

A garden center sells grass clipping bags labelled as ‘Compostable in California Municipal Yard Trimmings Composting Facilities.’ When the bags break down, however, they release toxins into the compost. The claim is deceptive if the presence of these toxins prevents the compost from being usable.

Example 4:

Nationally marketed lawn and leaf bags state ‘compostable’ on each bag. The bags also feature text disclosing that the bag is not designed for use in home compost piles. Yard trimmings programs in many communities compost these bags, but such programs are not available to a substantial majority of consumers or communities where the bag is sold. The claim is deceptive because it likely conveys that composting facilities are available to a substantial majority of consumers or communities.

The 60-count version sells approximately $0.15 per bag. Defendant’s similar 120-bag product that is not certified compostable sells for approximately $0.06 per bag.

Unsurprisingly, plaintiffs properly alleged economic injury sufficient for standing. And they adequately pled deceptive acts/false advertising under N.Y. G.B.L. Sections 349 & 350. They plausibly alleged lack of compliance with the Green Guides, getting out of NY’s safe harbor provisions for when an “act or practice is ... subject to and complies with the rules and regulations of, and the statutes administered by, the [FTC] or any other official department, division, commission or agency of the United States.”

It was plausible that the disclaimers weren’t clearly and prominently displayed both because they were on the side/rear and because they contradicted the prominent “Certified Compostable” claim on the front, as well as defendant’s admission in one place on its site that “industrial composting of dog waste is not available in the United States.” There were further contradictions in that the 60-count package said it wasn’t is not suitable for home composting but the larger count versions state they are compostable at home, but not for food crops. Regardless, plaintiffs also alleged that pet waste is not safe to compost at all due to its release of harmful bacteria as it decomposes. This was sufficient to survive a motion to dismiss.
“[W]here appropriate facilities are not merely limited, but are in fact non-existent, the suggested language that customers should ‘check locally’ because such facilities ‘do not exist in many communities,’ or that facilities ‘may not exist in [the customer’s] area,’ is plausibly deceptive in that it suggest that if consumers were to look for an appropriate facility they may find one, when, in actuality, no such facilities exist.” This problem was compounded by the contradictory disclaimers; if it wasn’t safe for backyard composting or eligible for industrial composting, then it was plausibly deceptive because it wasn’t compostable at all. The package didn’t explain what the ASTM standard meant or why it would matter if the consumer couldn’t actually compost the product.

Warranty, fraud, and negligent misrepresentation claims also survived.

allowing free "For Sale By Owner" ads doesn't imply no agents will be involved

Picket Fence Preview, Inc. v. Zillow, Inc., 2023 WL 4852971, No. 22-2066-cv (2d Cir. Jul. 31, 2023)

District court opinion discussed (second) here.  The district court dismissed Picket Fence’s false advertising/unfair competition claims against Zillow under the Vermont Consumer Protection Act and Lanham Act, and the court of appeals affirmed.

Picket Fence is a For-Sale-By-Owner (FSBO) “publication business” that permits private homeowners to list available properties directly to potential buyers in exchange for a fee. Zillow provides an “online portal” for the advertisement of property and realtor services to “the general public.”

Unlike Picket Fence, however, Zillow advertises that it permits FSBO property listings on its website for free. Picket Fence alleged that these claims were false. The problem was that, after a seller would post a FSBO listing, Zillow would allegedly “divert potential buyers to its paying Premier Agents” by “stripp[ing] out all contact information” for a FSBO listing’s owner or by posting the FSBO owner’s contact information beneath an advertisement for a Premier Agent’s services, inducing potential buyers into paying additional charges. This contradicted the FSBO promise because a FSBO advertisement was allegedly “one that allows a person to advertise their property so that potential buyers can see the advertisement and contact the owner/seller directly without the use of a third party intermediary.” By making Premier Agents a part of the transaction, Picket Fence alleged, Zillow was falsely advertising that it permitted FSBO listings for free.

The deception was allegedly that a FSBO seller would perceive a “guarantee that, in addition to listing their property for free on Zillow’s website, no real estate agent could represent a potential buyer or be involved in any part of the potential transaction,” and therefore chose Zillow over Picket Fence. [You can tell how this is going to go by the description of the claim.]

The basic problem: “Zillow’s advertisement would not mislead a consumer who was interpreting the message reasonably. Zillow simply advertises that FSBO sellers can post for free, and that is true.” It made no additional representations that Premier Agents would not be involved in FSBO transactions, nor that FSBO buyers would not incur transaction costs. The complaint even alleged that sometimes buyers of FSBO properties have agents, which made Picket Fence’s interpretation unreasonable.

A predatory pricing claim also failed, as did an argument that FSBO ads must contain no agent/intermediary involvement. This was an implicit falsity argument, and the allegations in support of the consumer deception element were:

Picket Fence had former Zillow For Sale By Owner customers complain about the deception on Zillow and specifically said had they known the truth about how Zillow operated its website and their For-Sale-By-Owner advertisements, they would have chosen to advertise with Picket Fence. Picket Fence is aware that For-Sale-By-Owners would ch[o]ose a free advertisement ... since they assumed a free advertisement [ ] would be a cheaper alternative.

But these were conclusory allegations without supporting detail, and anyway there wasn’t even implied falsity, since Zillow wasn’t alleged to have required the use of an agent by FSBO sellers.

WaPo on gold advertising and right-wing media

 I'm quoted in the story.

Defendant's belief its ads were effective is evidence of injury

Sandoz Inc. v. Amgen Inc., 2023 WL 4681569, No. 2:22-cv-05326-RGK-MARx (C.D. Cal. Jun. 29, 2023)

Sandoz brought state and federal false advertising claims against Amgen for its advertising of Neulasta, a pegfilgrastim injection used to treat the immunity-reducing side effects of chemotherapy, in particular the risk of the life-threatening infection febrile neutropenia (FN), by stimulating the production of neutrophils, a type of white blood cell that helps the body fight infections.

Thanks to its patents, Amgen enjoyed a temporary exclusivity period for pegfilgrastim injections until 2015. In 2014, Amgen introduced Onpro, a new method for delivering Neulasta through an “on-body injector.” With Onpro, patients could receive timed pesfilgrastim injections the day after chemotherapy without returning to the healthcare facility. The first pegfilgrastim biosimilar hit the market in November 2018, and would ultimately be followed by five others, including Sandoz’s Ziextenzo in November 2019.

A few months after Ziextenzo launched, Amgen launched a multi-million-dollar ad campaign to promote Onpro. These ads claimed that “Pegfilgrastim PFS resulted in a significantly higher risk of FN vs. Onpro” and “[w]ith PFS, FN incidence increased by 31% vs Onpro.” These ads were based on an obseivational study Amgen conducted itself, in an effort to remain competitive with the emerging biosimilar market. But the FDA, independent reviews at scientific journals, and even some of Amgen’s own employees criticized the advertising claims as unsupported and misleading. A second Amgen study received similar criticism. But Amgen continues to run its ads, now with updated claims that Onpro lowered the incidence of FN by 36% as compared to pegfilgrastim PFS based on its new study. Amgen saw the ads as successful, believing that they increased sales and convinced customers not to switch to biosimilars.

Ziextenzo did not perform well at launch, but the true cause was disputed. Amgen argued that there was no impact because the ads didn’t refer to Sandoz or Ziextenzo, and Sandoz couldn’t identify a single patient, prescriber, or insurer that would have used Ziextenzo but chose Onpro because of the advertising claims. After all: (1) Ziextenzo was not the first biosimilar on the market; (2) Ziextenzo was not reimbursable by Medicare; (3) Ziextenzo was more expensive than both Onpro and its biosimilar competitors; and (4) the COVID-19 pandemic drove a higher demand for on-body injectors like Onpro because on-body injectors minimized patients’ need to travel to healthcare facilities. But Sandoz’s experts claimed over $32 million in lost net profits even after accounting for these.

Injury: Damages and disgorgement under the Lanham Act require injury (for false advertising, not trademark infringement, despite the same statutory language covering both; no, I am not going to stop pointing this out any time soon). Proving an injury through lost sales data can be challenging because lost sales are often “predicated on the independent decisions of third parties; i.e., customers.” Thus, “[a] plaintiff who can’t produce lost sales data may therefore establish an injury by creating a chain of inferences showing how defendant’s false advertising could harm plaintiff’s business.” Such an inference may be established through economic models using “actual market experience and probable market behavior.”

The evidence here, including direct competition between the parties, would allow a jury to reasonably infer injury:

Ziextenzo was among the handful of pegfilgrastim biosimilar PFS products on the market in late 2019. … According to Defendant’s internal memoranda, the advertising campaign was designed to “optimally position Onpro in [the] face of biosimilar competition.” These ads ultimately succeeded, driving 89,000 additional units by Defendant’s own estimates. From these facts, a jury could reasonably infer that the entire pegfilgrastim biosimilar market lost sales as a direct result of Defendant’s advertising. And, because Ziextenzo was one of those biosimilars, a jury could further infer that Ziextenzo lost sales, thereby causing Plaintiff an injury.

Although some cases disparage defendants’ own expectations and beliefs about causation as evidence of injury (in false advertising cases; never in TM cases), I believe this is both the majority and the correct rule. The court found Amgen’s evidence corroborated by Sandoz’s experts, who opined that the entire biosimilar market suffered as a result of Defendant’s advertising. “Courts routinely find expert testimony sufficient evidence of an injury to survive summary judgment. And economic analysis is a valid means of proving an injury caused by false advertising.”

Because the advertisements are ongoing, there was also a genuine dispute of fact as to the likelihood of future injury.

California law requires an “economic injury”; there was also a material fact issue on that for the same reasons.

Former distributor's continuing use of "authorized distributor" leads to TM and false advertising claims

Axon Enterprise, Inc. v. Luxury Home Buyers, LLC, No. 2:20-cv-01344-JAD-VCF, |2023 WL 4636917 (D. Nev. Jul. 19, 2023)

In what seems likely a missed opportunity due to insufficient investment in the defense, the court grants summary judgment against an argument that “Taser” is generic (quick quiz before reading further: what is the generic name for a Taser device?) but also narrows the issues somewhat; the larger infringement, cybersquatting, and false advertising claims can’t be resolved on summary judgment. [Edit: Please note that the court later granted reconsideration on the infringement claims.]

Axon makes Taser “non-lethal weapons” (but that can’t be the generic name—anything that encompasses a Taser and a beanbag gun is clearly too broad). Defendant LHB is a former distributor now selling used Tasers that its owner refurbishes in his home workshop. Axon sued for infringement of the Taser word and design marks and for holding Taser-related domain names for ransom. Axon apparently characterizes its non-lethal electric weapons as “conducted energy weapons.”

When it was an authorized Axon distributor, LHB’s owner registered various domain names including taser.org and tasers.org to help it market Tasers online. LHB currently owns 64 domain names containing references to Taser or Axon Taser models. “And while neither party knows exactly when their distributor relationship ended, they agree that it ceased sometime around 2000.” Does that sound like the claims against the domain names might be lached?

On websites, emails, and mailers, LHB uses Axon’s Taser character, stylized word, and design marks, often in proximity to its own marks. On several of its websites, LHB also makes representations that it is an “Authorized TASER® Distributor” and that “TASER® is a Trademark of the Mister Stungun.”

Its marketing also focuses on the superiority of the Taser X26E CEW over other models—that is of course the refurbished model it sells, while Axon has moved on—stating that the X26E “wield[s] the highest degree of takedown power of total and absolutely unsurpassed effectiveness[;]” “offers the highest degree of takedown power ever available with the same level of safety[;]” “has the most powerful technology and stopping force[;] “lasts for over 20 years—and works every time[;]” and has “twice the power” of the X26P CEW. LHB also advertises that its products are “factory refurbished,” “professionally refurbished,” “thoroughly tested,” “refurbished to the highest standard,” “completely refurbished” to “work like new,” “even better than new,” and reprogrammed “with the latest software.”

Axon was entitled to summary judgment on genericity. LHB offered only two news articles and a Ninth Circuit opinion that use the word “Taser” without the trademark symbol:

The mere fact that two article authors and a Ninth Circuit panel utilized the mark without a corresponding trademark symbol does not show as a matter of law that the primary significance of “Taser” to consumers is as a type of good rather than a source identifier. And the context of each reference was to refer to an Axon product or to distinguish other products as alternatives to Axon’s weapons.

Even if they were generic uses, two articles and one opinion weren’t sufficient to overcome the “strong presumption” of validity of a registered mark.

Likely confusion: Obviously, this is a nominative use. But is it a nominative fair use? Toyota Motor Sales v. Tabari asks whether “(1) the product was ‘readily identifiable’ without use of the mark; (2) defendant used more of the mark than necessary; or (3) defendant falsely suggested [it] was sponsored or endorsed by the trademark holder.”

The court rejected Axon’s argument that LHB could have identified its products by calling them CEWs; they were Taser brand products. However, it used more of the marks than reasonably necessary, favoring Axon (the court seems to be treating this as a balancing test, to be finalized in the third factor). The court applies the non-empirical but fairness-based line of 9th Circuit cases stating that using logos and not just names risks confusion. (When I see these claims I think about all the businesses using Facebook, Twitter, LinkedIn etc. logos on their materials to identify their social media accounts. Does anyone think that increases the likelihood of confusion over affiliation? Just as with first sale, there is an unambiguous truth—I have a legit product to sell, I have an account on this site—coupled with a less-significant possibility of confusion about whether there’s a greater relationship than that. I don’t think using the logo guarantees confusion, but the context of social media may be much more clarifying than the context of resales.)

Most importantly, there were genuine issues of fact about whether LHB suggested Axon’s sponsorship or endorsement. LHB argued that it avoided consumer confusion by fully disclosing that its products are refurbished and by maintaining the basic nature of the Taser through the refurbishment process. “Axon responds that the first-sale doctrine isn’t dispositive of this prong because affiliation confusion can still exist for disclosed refurbished products.”  

As the Ninth Circuit held in Sebastian International v. Longs Drug Stores, first sale doctrine “is not rendered inapplicable merely because consumers erroneously believe the reseller is affiliated with or authorized by the producer.” The Sebastian court thus held that, “[w]hen a purchaser resells a trademarked article under the producer’s trademark, and nothing more, there is no actionable misrepresentation.”

Still, that’s limited to using the trademark on a resold article and its immediate packaging, but not using stylized marks and logos on advertising materials. Axon didn’t seek to enjoin the sales of refurbished Tasers.

Axon’s evidence of actual confusion was three emails from various police officers and personnel inquiring about any affiliation between Axon and LHB, as well as declarations from two officers that they were confused about an affiliation between the parties. LHB pointed out that it markets to thousands of police departments, and one declaration only states that he was under the belief that LHB “could be affiliated with Axon.” Still, that was enough to create a genuine issue of fact. [Note that the cases are just divided on this—inquiries and uncertainty often indicate that the inquirers correctly understood that they needed to know more before concluding that there was an affiliation. Compare this to the treatment of ambiguity in advertising law—outside of trademark, courts make consumers work much harder.]

The context of the use also mattered. Axon pointed to LHB’s phrases such as “100% certified to work like new,” false description of itself as “an [a]uthorized TASER® distributor” (this was, LHB argued, an oversight on some of its websites left over from when that was true), use of Axon’s stylized mark in the top left corner of every single page on accreditedsecurity.com, and incorporation of Axon’s globe/bolt logo into that same page. It argued that LHB’s disclaimers were ineffective at curing confusion because of their placement alone—they appear in small font at the bottom of LHB’s website and are thus “buried and easy to miss.” However, the disclaimers were not ineffective as a matter of law. Whether LHB suggested affiliation was an issue of fact.

False advertising: As noted above, LHB made superiority claims for the model it sold; claims that its products were “factory refurbished,” “professionally refurbished,” “thoroughly tested,” “refurbished to the highest standard,” “completely refurbished,” “work like new,” and reprogrammed “with the latest software”; and affiliation statements that it is an “[a]uthorized TASER® [d]istributor” and “TASER® is a [t]rademark of the Mister Stungun.”

The product superiority claims failed. Although these statements weren’t puffery, but specific and measurable, they weren’t shown to be false either. Although LHB admitted it never tested that model against others, it relied on “two media articles, his personal opinions, stories from his customers, and unspecified google searches.”

But this wasn’t a “tests prove” case. [Did the statements inherently suggest the existence of scientific research backing them up? I might’ve gone the other way on this.] Thus, showing that reliable studies didn’t support the claims didn’t suffice to falsify them. Axon didn’t submit any evidence of falsity. The closest it got was an expert report stating that “Axon has established a 5-year useful life for its CEW products and strongly discourages ... use of CEWs beyond their 5-year useful life.” “But a manufacturer’s strong recommendation of a product’s useful lifespan does not show that the device cannot last for more than 20 years.”

Refurbishment quality: Axon argued that LHB’s Tasers cannot be “factory refurbished” because the process takes place only in its principal’s home or in the homes of his independent contractors; nor “professionally refurbished” because he has no degree or expertise in mechanical engineering; nor “thoroughly tested” because LHB does not run independent testing other than superficial inspection; nor “refurbished to the highest standard” because LHB identified no standards it was using; nor “completely refurbished” to “work like new” because Tasers are sonically welded together such that their internal components cannot be examined or replaced. And finally, while Axon agrees that LHB’s Tasers might be reprogrammed “with the latest software,” it argues that such a claim is misleading because the last X26E firmware update was in 2014 and LHB does not have access to the most recent updates for two of the other Taser models he sells.

LHB responded that each Taser “undergoes several aesthetic and functionality inspections” in which he “installs new batteries, new firmware, cleans any internal carbon build-up in the front cartridge, clears any error codes, and ensures each element of the [display] functions properly.” Its principal maintains a “designated space [that] LHB references as a ‘factory’ area to perform the refurbishment process.”

The court found that reasonable jurors could disagree about the “subjective” meanings of the claim. [Doesn’t that mean that evidence of consumer deception is required, in the absence of literal falsity?]

Affiliation statements: Everybody agrees that neither “[a]uthorized TASER® [d]istributor” nor “TASER® is a [t]rademark of the Mister Stungun” is true. But Axon still needs to show deception and materiality. Literal falsity leads to a presumption of materiality and deception, and “[n]othing in the record suggests that those presumptions should not apply here.” [This might be a good case for why there shouldn’t always be such a presumption, although I think it should still exist in many cases; neither “always” nor “never,” the more recent judicial trend, is ideal.]

But Axon wasn’t just seeking a permanent injunction; it sought compensatory damages, but pointed to no evidence of actual injury or damages from the false affiliation statements. It lost summary judgment on damages but won summary judgment as to injunctive relief.

Trial only on LHB’s refurbishing-quality statements.

Nevada deceptive trade practices: Similar results, but somewhat different remedies for the affiliation statements. LHB knew it was aware the distributor relationship was over well before Axon filed suit. Nevada’s law allows a court to require a liable party “to pay to the aggrieved party damages on all profits derived from the knowing and willful engagement in a deceptive trade practice and treble damages on all damages suffered by reason of” that practice. And its consumer-fraud statute requires a court to award a deceptive-trade-practices claimant “any damages that the claimant has sustained; any equitable relief that the court deems appropriate; and the claimant’s costs in the action and reasonable attorney’s fees.” Thus, Axon could recover damages and attorney’s fees but would have to prove the amount.

Then, surprisingly reversing the result on the product superiority statements in the Lanham Act context, the court says that although there’s no evidence of falsity, “Nevada law imposes liability for disparaging claims based on true-but-misleading statements,” so that would have to go to trial. But the Lanham Act also imposes liability for true-but-misleading statements; it just requires evidence that consumers were misled to do so—here, about the nature and quality of LHB’s supporting evidence. Having a different result on the state law claim is conceptually weird but does highlight that traditional common-law claims are more likely to be decided on vibes, whereas Lanham Act false advertising has adopted a technocratic, probabilistic structure that often demands survey or other empirical evidence.

The court also denied summary judgment on the ACPA claim, even though one of LHB’s websites listed its various Taser-related domains with a headline banner labeled “Domain Names for Sale.” The court agreed that bad faith could arise after registration of a domain name. Still, there were genuine disputes over bad faith because the prior distributorship, and current sales of refurbished Tasers, weighed against things like LHB’s offer to sell the domain names to Axon. Even redirecting four of the contested domains to porn sites didn’t sufficiently show intent to tarnish the Taser mark for summary judgment purposes.

Laches (I wondered!): Although Axon had knowledge of some of the contested domains since at least 1999, LHB didn’t fully analyze the laches standard or offer evidence that it suffered prejudice from delay. Summary judgment for LHB on laches denied.

over aggressive partial dissent, 11th Cir. allows some class claims against Ford "track ready" claims to proceed

Tershakovec v. Ford Motor Company, Inc., --- F.4th ----, 2023 WL 4377585, No. 22-10575 (11th Cir. Jul. 7, 2023)

Discussion of district court opinion. Ford advertised its Shelby GT350 Mustang as “track ready.” “But some Shelby models weren’t equipped for long track runs, and when the cars overheated, they would rapidly decelerate. A group of Shelby owners sued Ford on various state-law fraud theories and sought class certification, which the district court granted in substantial part.” Ford appealed and the court of appeals tinkered with the certification, over a dissent that thought that enforcing consumer protection laws in this case would violate the Constitution in multiple ways (edging close to the claim that the class action mechanism violates Article III).

The key question was predominance, which depended on whether the specific state laws at issue required proof of reliance, whether reliance could be presumed, and if so under what circumstances.

As for the facts:

The Shelby is an upgrade of the standard Mustang and, importantly here, was advertised as “an all-day track car that’s also street legal.” Track-capability refers to the vehicle’s capacity to perform at higher-than-normal speeds in a controlled environment—like, say, on a racetrack. Track-readiness was a central theme in Ford’s Shelby advertising.

Yet, of the five Shelby trims, the Base and Technology trims lacked “transmission and differential coolers,” a feature—originally included as standard on all Shelbys—that is designed to prevent engine overheating. Without them, the Shelbys compensate at high RPMs by reverting to “limp mode,” which reduces the vehicle’s power, speed, and performance to avoid engine damage—and is inconsistent with track-capability.

“On appeal, twelve separate claims remain, arising under the laws of seven states: California, Florida, Missouri, New York, Tennessee, Texas, and Washington.”

The parties focused on reliance, so the majority did as well, dismissing the dissent’s claim that reliance and causation are inherently intertwined as inconsistent with governing state law. See, e.g., Carriuolo v. Gen. Motors Co., 823 F.3d 977, 983, 986 (11th Cir. 2016) (Florida) (holding that plaintiffs “need not show actual reliance on the representation or omission at issue,” even when causation is an element). Thus the majority also declined to address the manifold constitutional claims made by the dissent.

The majority did, however, find that the district court erred by overgeneralizing the set of cases in which reliance can be presumed to those cases where a defendant’s representations to the entire class were uniform. But this can only be done if the underlying state law allows for it. “Affirmatively proving reliance is a very individualized inquiry, the kind that would predominate over other common questions in a class action. By contrast, where the presumption of reliance applies, it does so generally and can therefore be resolved on a class-wide basis.”

And then the majority does something very weird, albeit (it says) prompted by the parties’ concessions. It says that presuming reliance from materiality often is only appropriate where the cause of action is omission-based, relying on cases decided under the federal securities laws. I have no idea why those are relevant (and indeed the majority seems to understand that California, at least, does not take that position, agreeing with the district court that a uniform material misrepresentation can lead to a presumption of reliance).

From that, the court then rejected plaintiffs’ argument that this was an omissions case; at its core, this case was about misrepresentations, not omissions. And it rejected plaintiffs’ invocation of Klay v. Humana, 382 F.3d 1241 (11th Cir. 2004), abrogated in part on other grounds by Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008), for the proposition that common evidence about misrepresentations can be used to prove reliance on a class-wide basis, because there the misrepresentation that a HMO would pay for procedures was the central factor driving the transaction. “While one who provides services in exchange for a payment relies only on the payment guarantee, a purchaser of a car may choose to rely on any of a number of marketing and branding representations.” (I mean, so might the provider of medical procedures, especially in a world where they can sue the patient for any underpayment; this bright line does not seem consistent with many state law decisions I’ve seen and seems to underweight the idea of material misrepresentation in particular.)

With that out of the way, claims based on state laws that didn’t require reliance could proceed on a classwide basis, and claims based on state laws that didn’t presume reliance couldn’t. For claims based on state laws that sometimes presume reliance, the majority examined whether reliance could be presumed.

No reliance required: Florida Deceptive and Unfair Trade Practices Act; N.Y. Gen. Bus. Law § 349(a); Washington’s consumer-fraud statute; and the Missouri Merchandising Practices Act.

No presumption of reliance, therefore no certification: Texas Deceptive Trade Practices-Consumer Protect Act and common-law fraud claims under Washington, New York, and

Tennessee law.

Causes of action that require proof of reliance but allow it to be presumed in certain circumstances: The usual California claims, both statutory and common-law, fell in this category. On remand, the district court should consider whether “the defendant so pervasively disseminated material misrepresentations that all plaintiffs must have been exposed to them.” If so, certification would be appropriate.

But California and Texas classes for breach of implied warranty and violations of the federal Magnuson-Moss Warranty Act required further analysis. The district court first needed to decide “whether California and Texas law require pre-suit notice, an opportunity to cure, and manifestation of the defect.”

Superiority: “Ford fears that jurors will have to remember testimony from multiple witnesses, all while keeping track of the class members’ states, the applicable common-law rules and statutes, and burdens of proof.” The district court thought that “appropriate jury instructions” and “multiple verdict forms that tick through the [varying] elements of [the] certified state class[es]’ statutory and common law fraud claims” would suffice, but the majority was more worried. Given that some of the claims had been kicked out, on remand the court “should consider the manageability challenges anew on remand and should more clearly articulate a plan for addressing them to ensure that the difficulties of managing the class action do not impede the fair and efficient adjudication of the case.”

Senior Judge Tjoflat concurred as to the claims that were tossed out and dissented as to the claims kept alive, engaging in a wide-ranging rejection of state law precedents as unconstitutional or inapposite or just wrong or all of the above. I didn’t know that federal courts (other than the Supreme Court) were supposed to tell state courts they interpreted state legislation wrong, and I suspect that’s one reason the majority doesn’t engage with the dissent much. We’re obviously in a period of great constitutional doctrinal change, and so disregarding positions as “off the wall” is a risky game, but I will just sketch out what Judge Tjoflat says are the constitutional problems rather than recount all the arguments state by state.  

The FTCA declares unlawful “[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce.” That’s vague, but the FTC tells businesses they’re violating the Act before punishment (I … didn’t think that was the standard for avoiding unconstitutional vagueness). Importantly [for its constitutionality], the FTCA doesn’t allow for damages or a private right of action. (!!!! Judge Tjoflat mentions civil penalties, but doesn’t explain why in his view they are ok.)

Even when state laws explicitly refer to FTC standards, then, they have different constitutional constraints because they authorize private actions for backward-looking damages. But vagueness when barring misrepresentation is less troubling than vagueness when barring unfairness, including because misrepresentation comes with an inherent causal mechanism. Plus, prior decisions under the statute can limit vagueness:  

First, we can look to prior decisions under the statute. “Unfair business practice” might not in itself tell a cruise ship company that it cannot charge customers an additional fee, label it a “port charge,” then pocket some of that extra money as profit. But a previous case decided by a court under the consumer protection statute dealing with that situation would.

Or we can provide notice by using the common law definition of fraudulent misrepresentation, where the common law provides the notice. (Treating the common law as clear and natural and non-evolving is an important part of the conservative judicial project, but it’s used so incoherently that I’ve never been able to develop a full account.)

Either way, when there’s a misrepresentation, reliance is required (I believe option 1 required reliance because the baseline was requiring reliance so any previous case must have either imposed a reliance requirement or announced a change.) Harm only occurs if there’s reliance (Judge Tjoflat is no fan of price premium theories). Here, “[s]ome of the class members (1) may not have seen the advertisements at issue, (2) may not have wanted a track-ready car, or (3) wanted merely to collect the car without ever driving it around the track.” They couldn’t have relied on the alleged misrepresentation. [Especially for (3), that’s a bold factual claim.] No reliance means no causation, and none of the statutes at issue here explicitly disclaims reliance.

All those state court cases talking about contributing cause versus but-for cause, or presuming reliance from materiality, don’t count, because “by reading out a reliance element in all cases, a court usurps the legislature’s power and attempts to bind future courts in a way inconsistent with our conception of judicial power.” “Our” here is doing a lot of work, not just in an ideological way but also in terms of putting Article III constraints on state courts.

Certifying a class here therefore poses problems of free speech, due process, separation of powers, and standing. [Oh look, the Article III challenge to the class action mechanism I’ve been waiting for has arrived!]

Free speech: “While the First Amendment does not protect untruthful commercial speech, the judicial elimination of a causation element makes a speaker liable for speech with or without the speech actually harming anyone. This chills protected speech.” It would be fine under the First Amendment to enjoin deceptive commercial speakers or hold them liable for the actual damage they cause, but not to assess damages even for consumers who weren’t deceived. [And statutory damages? Punitives? Statutory penalties?] Even though a consumer protection law only prohibits deceptive commercial speech, without reliance, “any rational businessperson would stand so far away from the ill-defined line between outlawed advertising and permissible advertising—thus chilling protected speech—to avoid the potentially catastrophic consequences of damages to all.” [No citation to cases about chilling commercial speech, because the current doctrine is that commercial speech is hardy enough to resist chill.] Prophylactically prohibiting “potentially misleading—and therefore protected—speech” “goes well beyond that necessary to further a state’s interest in protecting consumers from misrepresentation.” [That doesn’t even follow! “Potentially misleading” is a new concept and not the same as “misleading”—or at least it is currently.]

Due process: bound up with the above, but worse with a class action. Where reliance ought to be an element of a claim, class actions violate due process because unnamed plaintiffs might get relief without having a meritorious individual claim. “Much as a court eliminating causation from the traditional elements of negligence would deprive a defendant of property without notice—thus denying the defendant due process—so would excusing the reliance (and therefore causation) element in these state consumer protection statutes.” It would be a judicial taking! [One thing that fascinates me is the on/off characterization of causation, reliance, damages, etc. If one thinks that presumptions and probabilities are appropriate subjects of legal rules, this imagined field of infinite liability becomes much more bounded.]

Anyway, without reliance and thus causation, there’s also an Article III standing problem. An objective test for a forward-looking injunction is fine, but not for damages. “[E]ven though ‘Congress [or a state legislature] may elevate harms that exist in the real world before [the legislature] recognized them to actionable legal status, it may not simply enact an injury into existence.’ ” TransUnion. Plus, the state shouldn’t be able to delegate enforcement power into private hands because they aren’t democratically accountable.

And finally, there’s a separation of powers problem because any state court that announces that a state statute doesn’t require showing reliance in a misrepresentation case has usurped the legislature’s power and rewritten the statute. This makes the free speech problem worse because state legislatures have the police power to protect citizens from injury, but courts don’t.

And now we get to presumptions: a rebuttable presumption of reliance can’t possibly apply to any of the claims in this case. Such presumptions are only allowed when the party with the burden of rebuttal has better access to the evidence, and consumers have better access than sellers to evidence about what motivated them. [This is probably untrue as a matter of consumer psychology and marketing knowledge, and it also doesn’t seem to me to describe the full range of rebuttable presumptions that exist, either. Does the TMA’s rebuttable presumption of irreparable harm to trademark owners put the burden on the party who has most access to the evidence? This seems like “common law as fixed, natural, and just as I think it should be” again.] Plus, allowing Ford to rebut the presumption would make a class action unmanageable.

So it would have to be a conclusive presumption, which has all the problems above: California courts shouldn’t have created it either for the statutes or for the common law (even if it were correct about the statutory standard “as a linguistic matter”). State courts holding otherwise aren’t entitled to full faith and credit because they don’t “wrestle” with the constitutional questions (and resolve them as Judge Tjoflat wants).

Likewise, though Florida’s FDUTPA explicitly requires courts to interpret the statute by giving “ ‘due consideration and great weight’ to Federal Trade Commission and federal court interpretations of section 5(a)(1) of the Federal Trade Commission Act,” it makes “no sense” to say, as Florida courts have, that because the FTC Act allows suits without proving reliance, so should the FDUTPA. “How the FTC Act treats reliance has nothing to say about the FDUTPA’s damages provision,” since the FTCA doesn’t allow private damages, only prospective relief or “civil damages.” The court here should also ignore the Michigan Supreme Court because it gave short shrift to due process concerns in interpreting its own law.

Judge Tjoflat has been on the bench for decades, but I do wonder whether he’d have written this opinion before a few years ago, given the swing-for-the-fences approach many judges in his circuit are now willing to take.

Covid-19 Act gives government more options in proceeding against supplement seller

U.S. v. Nepute, 2023 WL 4623089, No. 4:21-CV-437 RLW (E.D. Mo. Jul. 19, 2023)

The US sued Nepute (a chiropractor) and Quickwork (a company of which he is a member/co-manager). for deceptive advertising of dietary supplements in violation of the FTCA and the COVID-19 Consumer Protection Act. Here, the court excluded/limited Nepute’s proposed experts, denied partial summary judgment to Nepute, and granted partial summary judgment to the US on a few issues, including whether the challenged materials were ads.

“Since early 2020, Defendant Nepute and Quickwork have used several platforms, including social media, emails, and radio, to tout the purported benefits of Vitamin D and zinc and to promote Wellness Warrior supplements.” The government alleged that Nepute made false and misleading claims about the supplements, including that Wellness Warrior supplements containing Vitamin D and/or zinc are effective for the treatment, cure, prevention, or mitigation of coronavirus disease 2019 (“COVID-19”), and that they provide equal or better protection against COVID-19 than available vaccines. Given its powers under the COVID-19 Act, the government sought not just a permanent injunction, but damages, including recission/restitution/disgorgement, as well as civil penalties.

The court excluded the testimony of Dr. Parks, who had (as relevant) a Ph.D. in cellular and molecular biology in 1999 but hadn’t conducted academic or peer-reviewed research since 2000; none of this research related to zinc or any dietary supplement, or to covid.  Since 2004, she worked as a high school teacher at a homeschool co-op in Michigan. Her education and research were insufficient to qualify her to testify as to the clinical benefits of zinc and the prevention and treatment of COVID-19.

Defendant Nepute also couldn’t testify as an expert (as opposed to as a fact witness). He has a 2007 Doctor of Chiropractic degree and some post-doctorate training, including certification as a Doctor of Natural Medicine and as a Certified Nutrition Specialist. He conducted no studies or research, led/participated in no clinical trials, and published no academic papers in any peer-reviewed journal. The primary focus of his practice is the treatment of neuromusculoskeletal complaints and fatigue; he does not treat disease in his chiropractic practice, and there was no record of any experience treating infectious diseases or covid. He lacked the education, training, and experience to testify regarding the clinical benefits of Vitamin D and zinc to prevent or treat COVID-19.

As a fact witness, the government agreed that he could supply what he claims is “the scientific basis upon which he made the alleged misstatements” for the purpose of assessing whether he had sufficient substantiation for his claims.  But he couldn’t testify as an expert on whether such evidence was sufficient to satisfy the relevant scientific community that Vitamin D and zinc can treat and/or prevent COVID-19.

Were the publications at issue ads? “In general, advertisements provide consumers with information regarding products or services for sale in commerce.” Under Section 12 of the FTC Act, an “advertisement” is a publication that has the “tendency or capability to induce the sale of [a] product.” Publications “designed to convey the point that consumption of a particular product [will convey a health benefit] are clearly likely to induce the purchase of that product.” It was undisputed that Nepute used several platforms to share the purported benefits of Vitamin D and zinc and his Wellness Warrior supplements, including Facebook videos, emails, and FM radio shows. Along with the claims, consumers were directed to websites where they could get a “free” bottle and buy additional bottles.

Nepute argued that these were just educational materials and argued that, “in many cases, listeners were directed to the Quickwork website[s] for the express purpose of providing further health information.” Because the websites do more than simply sell vitamins and supplements – they are “interconnected with the exposition of ideas about how to live a healthy life” – he argued that references to the websites in the publications didn’t make them ads, and that his content was “infused with political speech.” First, Nepute didn’t offer a First Amendment defense in the answer and couldn’t do so now. But even if he had, his speech was not entitled to First Amendment protection: The publications were commercial speech, and there were fact issues on falsity/misleadingness, for which he could be held liable.

The evidence didn’t support the claim that the websites were used as educational references. E.g.:

So here’s what I want you to do. Go to freevitamindeals.com – that’s freevitamindeals.com so that you can get the products that you need. I’m giving you a bottle of zinc for free, a bottle of D3 for free. I need you to buy that immune pack. You’d be silly not to get it. If you don’t want to, that’s fine. But I’m just telling you what you need to do. According to the research, it’s what you should be doing.

By the delivering the message about the benefits of Vitamin D and zinc in conjunction with providing the websites where viewers and readers could purchase Vitamin D and zinc, the videos and emails were clearly likely to induce the purchase of these products.

The radio shows were a closer call; they were two hours long and weren’t limited to Vitamin D and zinc, or even COVID-19, vaccines, or other available treatments. But the parts that the government was challenging were ads: “During the radio programs themselves – outside the scheduled commercial breaks – Defendant Nepute made statements that the consumption of Vitamin D and/or zinc will provide certain health benefits; he delivered his message in conjunction with providing websites where listeners could purchase Wellness Warrior Vitamin D and zinc supplements; and he instructed, either explicitly or by clear implication, that listeners should purchase vitamins and/or supplements.”

The government can show either falsity/misleadingness or lack of substantiation to prevail. The government was entitled to summary judgment on the issue that there is no substantiation for representing that Vitamin D and/or zinc provide equal or better protection against COVID-19 than the vaccines, to the extent Nepute made such a claim in his advertisements. (He argued that he didn’t, and that he was just attacking the efficacy of the vaccines without making comparisons. Sure.) It also received summary judgment that there was no substantiation for a claim that zinc is effective for preventing and treating COVID-19.

Materiality: there was no dispute that the challenged claims were material. “This would be especially true during the COVID-19 pandemic.” Also summary judgment for the government.

However, there was a fact issue of whether all the ads at issue made those claims.  

The videos and radio shows appear to have been unscripted, impromptu performances, which at times were rambling and disorganized. Certainly, Defendant Nepute made assertions about Vitamin D, zinc, COVID-19, and the vaccines, among other things, in his advertisements, but he often jumped from topic to topic and did not make connections between his statements. Furthermore, some of the representations he made about Vitamin D and zinc were vague or ambiguous. Drawing inferences most favorable to Defendant Nepute, the Court finds the issue of whether representations made in each of the 64 advertisements created the net impression that either (1) Vitamin D and/or zinc provide equal or better protection against COVID-19, or (2) that zinc is effective for preventing and/or treating COVID-19, is a matter for the Government’s presentation of evidence at trial and determination by the jury.

Nepute’s individual liability: An individual is liable for a company’s violations of the FTC Act if he (1) “either participated directly in the deceptive acts or practices or had the authority to control them”; and (2) “either knew or should have known about the deceptive practices.” It was undisputed that he both controlled and participated in the practices and knew about the contents, so the government also got summary judgment here.  

Number of violations: The government calculated that the 16 Facebook videos, 33 emails, and 15 radio shows have been disseminated 10,175,234 times for purposes of the COVID-19 Act, apparently by adding the number of “views” for the videos on Facebook, the number of email addresses to which the email advertisements were sent, and the number of “views” the radio shows had after they were posted on Facebook and CloutHub. But there were factual disputes about how “views” are counted on Facebook, and the court signaled its discomfort with that kind of raw counting. Even if each unlawful letter in a mass mailing is a separate violation, “[p]osting videos and radio shows on social media is entirely different than calling consumers or sending letters, … as the latter are targeted forms of communication where the number of intended recipients is readily calculable.” [That would seem to give a premium to using mass/social media to disseminate false ads, which seems like the opposite of the right incentive.] The court wanted more from the government when it asked the jury to find liability for a number of violations.

Nepute argued that the government wasn’t entitled to civil penalties under the COVID-19 Act, because the evidence didn’t support a finding that he knowingly violated the Act. The relevant standard required a showing that Nepute acted “with actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or deceptive and is prohibited” by the COVID-19 Act. Knowledge can be “fairly implied” where “a reasonable and prudent man under the circumstances would have known of the existence” of a statute or regulation, and “that the action charged violated that provision.”

The COVID-19 Act was enacted on December 27, 2020. On March 30, 2021, the FTC sent a letter enclosing a copy of the COVID-19 Act to Nepute’s attorney, informing Nepute that the Act “provides that marketers who make deceptive claims about the treatment, cure, prevention, or mitigation of COVID-19 are subject to a civil penalty[.]” It filed suit on April 15, 2021. Nepute argued that he didn’t know about the COVID-19 Act before March 30, 2021, and he had no knowledge that he might be in violation of it prior to the filing of this lawsuit. But, in May 2020, the FTC sent a letter to him stating he was unlawfully advertising that supplements Vitamin C and D can treat or prevent COVID-19. It is undisputed that he was advised in this letter to review “all other claims for your products and services and immediately cease making claims that are not supported by competent and reliable scientific evidence.” Also there was evidence that Nepute had marketed vitamins and supplements for at least a decade, and that he kept abreast of the news and participated in legislative decision-making related to Vitamin D, zinc, and COVID-19. A jury could accept that “a reasonably prudent person, with over a decade of experience in vitamin and supplement marketing, and who advertises on behalf of a multimillion-dollar supplement enterprise, would have been aware of a major federal consumer protection statute implicating his business and marketing.”