False claims to retailers violate Lanham Act

Oreck Direct, LLC v. Dyson, Inc., 2008 WL 544230 (E.D. La.)

Though this case turned on res judicata, the analysis included some general statements of interest about false advertising liability under the Lanham Act.

Oreck sued Dyson for false advertising in marketing a model of vacuum cleaner. Both parties sell vacuum cleaners to consumers. Oreck primarily uses its own retail stores, but also sells through chains such as Bed Bath & Beyond and JC Penney and the shopping channel QVC. Dyson sells through chains such as Sears, Target, Bed Bath & Beyond, Circuit City, and JC Penney. Unsurprisingly, though crucially, Dyson first promotes its new models to retailers, and advertises to the general public after retailers have agreed to carry them.

The current case concerned allegedly false claims that the Dyson model DC18 doesn’t lose suction and that it is the “most powerful lightweight” vacuum cleaner. This suit was filed four months after an earlier false advertising suit was settled and dismissed with prejudice. That case was based on ads for Dyson vacuums claiming that they “do not lose suction.” Those claims covered all models. When Dyson began to advertise its DC15 model during the pendency of the first suit, Oreck requested and obtained discovery about the DC15.

Oreck settled for a confidential amount. The settlement included a release from all advertising claims related to the case, and an agreement that Dyson could use claims it was making about any product “existing in the United States marketplace” as of the effective date of the settlement without incurring any further liability.

While the first case was pending, Dyson pitched the DC18 (under a different name) to a number of nationwide retailers using the “most powerful lightweight” and “doesn’t lose suction” claims. Dyson produced in discovery multiple documents dealing with its plans to market the DC18. The DC18 was not, however, advertised to the general public before the settlement date; when the public campaign began, it included the same “no loss of suction” claims.

Dyson defended on grounds of res judicata. The court agreed that Oreck’s claims with respect to the DC18 were part of the same cause of action as the earlier lawsuit. The statements to retailers were “substantially of the same sort and similarly motivated as the claims that it made about other vacuum cleaner models.” Oreck had the opportunity to find out more about the DC18, but didn’t do so, even as its false advertising claims were not limited to any particular Dyson model. Dyson’s promotion of the DC18 began months before the first settlement, and Oreck could have known this had it investigated diligently.

Oreck argued that it couldn’t have brought its claims against the DC18 earlier because Dyson hadn’t begun advertising and selling the model to end consumers. The court disagreed, because statements to people other than ultimate consumers are actionable. Specifically, some of the retailers to whom Dyson pitched the DC18 also sold Oreck vacuums; thus, the parties competed with respect to retail customers. The Lanham Act covers claims made to intermediate purchasers. Retailers are a necessary part of Dyson’s business, and they constituted a relevant purchasing public. (It’s not entirely clear whether the court considered retail competition necessary; it might have been sufficient that the parties competed for end consumers, even if they sold to different retailers.)

Oreck then argued that it couldn’t have tested the truth of Dyson’s claims about the DC18 before it was on the market. But, because Dyson was already promoting the DC18 to retailers during the first suit, and because hundreds of test units were in the US, Oreck could have requested that a DC18 be produced in the earlier litigation. The DC18 was not “merely a concept” during the first action.

Oreck also claimed that it would have lacked standing to challenge the DC18 claims earlier because its injury would have been too speculative. But, the court reasoned, if Oreck is now likely to suffer harm because of Dyson’s ads to end consumers, it was then likely to suffer harm because of Dyson’s pitches to retailers. This is so because (1) Dyson “relies on sales to retailers to create a platform from which it can reach the individual consuming public” and (2) the parties compete for shelf space. Because Oreck alleged literal falsity, consumer deception would have been presumed. (I’m not sure why this matters, since a survey could test claims about to be put on the market as well as claims that are already on the market, but ok.)

Moreover, to enjoin literally false ads, Oreck wouldn’t have had to show actual lost profits or sales diversion. “[T]he mere solicitation of sales with false advertisements is sufficient to place goods into interstate commerce and thus expose a defendant to liability for false advertising under the Lanham Act.” At least it would have been able to get an injunction. “Clearly, then, a direct competitor has standing to challenge false advertisements that threaten it with injury. ... If Dyson’s false claims help to place its products in the market, then they would likely threaten lost profits to Oreck not only on its sales to retailers, but also on sales to ultimate consumers because the false statements help make it possible to reach individual consumers through retailers.”

Thus, all the elements of a false advertising claim with respect to the DC18 were in place during the first action. As a result, res judicata barred the present claims.

fraud on the consumer market rejected

Kwaak v. Pfizer, Inc., --- N.E.2d ----, 2008 WL 522878 (Mass. App. Ct.)

Plaintiffs Kwaak and Natale sued Pfizer, alleging that an ad campaign touting Listerine as “as effective as floss” was deceptive under Massachusetts state law. The trial court allowed class certification, and Pfizer appealed. (Previously: New York and California class actions failed.)

Background: the ad campaign targeted people who didn’t use mouthwash and who knew they should floss but don’t always do it or do it right (in other words, lots of us), and secondarily current occasional mouthwash users. The claim was based on clinical studies conducted by Pfizer which showed that twice-daily rinsing with Listerine was at least as good as standard, unsupervised (thus, badly-done) daily flossing in controlling gingivitis between the teeth. Many people don’t floss correctly, and about 87% of consumers floss infrequently or don’t floss. An estimated 68 million Americans saw Pfizer’s TV ads in their first month. The ads at first contained an unmodified “as effective as floss” message, which was later modified to add “against plaque and gingivitis between teeth,” and “there’s no replacement for floss” was also added. (I am reminded of infant formula ads and their now-reflexive nods towards the superiority of breastmilk, when it’s obvious they don’t really want you to breastfeed.)

After a floss manufacturer successfully got the ads enjoined, Pfizer stopped the campaign. Sales of Listerine increased 10% during the campaign.

The putative class representatives had both used Listerine for at least ten years before the ad campaign to freshen breath and to fight plaque and gingivitis, and Natale has bought Listerine since the suit began. Both plaintiffs remembered seeing TV ads, but not the specifics; they didn’t remember the print ads, bottle labels, or neck tags that were also part of the campaign. “Essentially all they remember from the commercials is that Listerine was described as being as effective as floss. Neither testified that the commercials expressly stated that they should stop flossing. In fact, both continued to floss after seeing the commercials, although Natale testified that he did so less frequently. Kwaak testified to buying more Listerine than before she saw the commercials because she thought it could replace flossing, while Natale did not increase his usage.”

The court of appeals rejected class status because Massachusetts consumer class action law requires that an unfair or deceptive act have caused similar injury to class members. Past cases allowed class certification where the damages were economic – when class members paid more than the true market value of a product had its attributes been truthfully disclosed. Plaintiffs here argued that their damages were the difference between the advertised value and the actual value of Listerine.

However, the court reasoned, in prior cases the court could conclude that class members had each been “directly presented with the same, significant deceptive information,” for example when a statement was on every pack of cigarettes sold. By contrast, the class here was everyone who bought Listerine during the ad campaign, regardless of whether they were exposed to it. Moreover, the ads changed over time, from more blatant floss-replacement ads to less objectionable versions. Some of the ads might have been permissible puffery. And the relation between ads and purchases is unclear, since people might buy Listerine just to freshen breath or aid with flossing. Thus, causation can be expected to vary widely among consumers.

These variations could not be avoided by arguing fraud on the market. “This is a consumer and not a securities fraud case, so we do not assume ‘a nearly perfect market in information.’”

As a result, the certification was reversed, though the district court could consider whether a more limited class could be certified on remand.

Vista Capable class certified

Kelley v. Microsoft Corp., 2008 WL 509332 (W.D. Wash.)

This putative class action was based on Microsoft’s “Windows Vista Capable” and “Express Upgrade” marketing. In early 2006, nearly a year before the release of Vista, Microsoft allowed original equipment manufacturers (OEMs) such as Dell to place stickers on computers indicating they were certified as “Windows Vista Capable.” In fact, plaintiffs alleged, many of those computers could only run “Vista Home Basic,” which doesn’t include Vista’s unique enhanced features. Likewise, in late 2006, Microsoft offered an “Express Upgrade Guarantee Program,” which supposedly allowed consumers buying “Vista Capable” computers to receive upgrades to Vista for little or no cost. Again, plaintiffs alleged, the upgrade for many was only to Vista Home Basic.

Plaintiffs alleged that Vista Premium is the “real” Vista, while Microsoft argued that Vista Home Basic still provides material improvements over its predecessor, Windows XP. Some computers had a “Premium Ready” sticker distinguishing them from “Vista Capable” computers.

Plaintiffs also alleged that, because Microsoft was concerned about consumers delaying computer purchases over the 2006 holiday season in anticipation of Vista’s release, Microsoft engaged in deceptive practices to assure consumers that their new computers would run Vista. Plaintiffs’ evidence suggested that Microsoft included Home Basic computers in the “Vista Capable” marketing because Microsoft knew and was concerned that only a few computers on the market at the time could run premium versions of Vista.
Internally, Microsoft employees worried that consumers would be confused about whether their PCs could run the “real” Vista operating system. OEMs and retailers also complained to Microsoft about Microsoft’s decision to use “Vista Capable” to include Vista Home Basic.

Microsoft presented evidence that it created, and OEMs and retailers used, extensive marketing and training materials to explain the differences between Vista editions, and to explain that not every “Vista Capable” computer would be able to run every advanced Vista feature. For example, Microsoft’s “Get Ready” website described “Vista Capable” computers as providing the “core experiences” of Vista, but said they might not be able to support premium aditions, including the new Aero interface. This message was repeated in press releases, point of purchase displays, and emails. Press coverage also detailed the differences.

The named plaintiffs bought “Vista Capable” computers in late 2006. Kelley was not aware of the sticker when she bought hers and didn’t rely on the sticker. But the other named plaintiff, Hansen, testified in deposition that he ordered his computer “because ‘it would handle Vista,’ and that he was relieved when it arrived and had a ‘Windows Vista Capable’ sticker affixed to it.” He saw Vista marketing materials, but only knew to look for a “Vista” sticker.

Plaintiffs sued for violation of the Washington Consumer Protection Act or other state consumer protection acts and for unjust enrichment. They moved for class certification and for application of Washington law.

Given the importance of variations in state law to analysis of predominance and superiority for class certification purposes, the court addressed choice of law first. The first question was whether Washington state law could constitutionally apply to the entire class. The test is whether the forum state has a significant contact or aggregation of contacts to the claims asserted by each member of the class. This test was satisfied here: Microsoft created its allegedly deceptive marketing scheme in Washington; it’s incorporated, does business, and has its principal headquarters in the state; and it contractually required OEMs participating in the Vista program to litigate under Washington law. (I was wondering when I’d see a manufacturer’s choice of law provisions in its contracts of adhesion turned against it for class certification purposes.)

Next the court, applying Washington choice of law analysis, asked whether there was any conflict of laws and, if so, whether Washington had the most significant relationship to the action. The court found that there was an actual conflict: for example, Illinois consumer protection law requires a plaintiff to show that a defendant intended the plaintiff to rely on a misrepresentation or concealment, whereas Washington law doesn’t require a showing of specific intent. Washington law requires a showing that the defendant’s actions affected the public interest, but Illinois doesn’t. On unjust enrichment, Washington bars recovery if there’s an adequate remedy at law, but Rhode Island doesn’t. These are the types of variations that could change the outcome of claims, and thus an actual conflict of laws existed.

In cases of actual conflict, Washington requires application of the law of the forum with the most significant relationship to the action. Under the Restatement, the court determined that Washington had the most significant relationship to the claims. In multi-state fraud cases, because the place of the injury can be fortuitous, the place where the defendant’s conduct occurred will usually be given special consideration.

Even assuming that contacts with other states were equally balanced, the court determined that Washington law should apply. No other state had a greater interest in determining the issues. Where the primary purpose of the law is to deter or punish misconduct, as opposed to ensuring compensation for injury, the state where the conduct took place may have the most significant relationship. Thus, Washington had a paramount interest in applying its law. Its consumer protection law targets unfair trade practices originating from Washington businesses.

Certification, then, required showings under Rule 23(a): (1) numerosity, (2) commonality of questions of law or fact, (3) typicality of class representatives, and (4) adequate representation by class representatives, as well as a showing under Rule 23(b), here argued to be (b)(3), which requires that common questions of law or fact predominate and that a class action is superior to other available methods of adjudication.

Microsoft understandably conceded numerosity, and didn’t dispute adequate representation. Nor did it dispute the existence of common questions of law and fact. It did contest typicality, predominance, and superiority.

On typicality, Microsoft noted that neither named plaintiff participated in the “Express Upgrade” program. Plaintiffs argued that this was part of the same overarching marketing program, but the court found that plaintiffs were overreaching. “[A]ll potential class members purchased a ‘Windows Vista Capable’ PC and were allegedly injured by the fact that their PCs will not run the premium versions of Vista, but only the ‘Express Upgrade’ program participants paid for an upgrade to ‘Vista’ that turned out to be only an upgrade to Vista Home Basic.” The latter suffered an injury correlated to the cost of the upgrade program, not the allegedly inflated price of “Vista Capable” PCs.

Thus, the named plaintiffs’ claims were typical of those of “Vista Capable” buyers, but the “Express Upgrade” claims would be dismissed if plaintiffs couldn’t add a named plaintiff who participated in that program.

Microsoft argued that causation requires an individualized showing for each plaintiff, thus preventing predominance. An earlier Washington Supreme Court case held that, under Washington consumer protection law, plaintiffs must show that a defendant’s affirmative misrepresenation proximately caused their injuries. Microsoft argued that proximate cause is inherently individualized. The court agreed that deception-based theories of fraud regularly preclude class certification. A trier of fact would have to determine whether each consumer saw the “Vista Capable” sticker, whether each was aware of the differences between Basic and Premium, etc.

Plaintiffs, however, also argued that all potential class members paid for Vista capability but didn’t receive it. This is a price inflation/fraud on the market theory of causation, in which Microsoft’s deception created artificially high demand. Though other courts have rejected similar causation theories, this court determined that Washington state law might allow it. On a price inflation theory, plaintiffs had shown predominance.

On superiority, the standard considerations favored class treatment, especially the fact that individual claims are unlikely. But Microsoft argued that class treatment would create difficult management issues. Under the price inflation theory, however, class treatment would be manageable because only a few common liability issues would need to be decided. Thus, the court certified a class of “Vista Capable” purchasers.

Translators needed

The Organization for Transformative Works website translation project is underway. Currently, we have German, Dutch and Italian volunteers hard at work but we need more volunteers in other languages, especially those who can translate English into Spanish, French, Japanese and Russian, to get those particular projects off the ground. (There is, at the most, 10 hours of work in translating, spread over two or three weeks.)

If you’re interested, please email comrel@transformativeworks.org.

Save a hip, sue a critic

Marilyn Mann pointed me to the following story:

Dr. Douglas Kiel and colleagues published a study in JAMA about hip protectors for elderly patients, concluding that their results “add to the increasing body of evidence that hip protectors, as currently designed, are not effective for preventing hip fracture among nursing home residents.” HipSaver, a manufacturer of hip protectors that weren’t tested in the study, not only published a response on its website, but subsequently sued Dr. Kiel for tortious disparagement. This Harvard Crimson story does a good job of articulating HipSaver’s argument that the study wrongly attributed failure to all hip protectors while testing only one brand:

“The question is, can someone testing the lowest end of a relatively new product conclude that all designs are poor?” [HipSaver’s lawyer] said.

…. Studies in the past have shown conflicting results as to the effectiveness of hip protectors, [HipSaver’s president] Goodwin said. But the manufacturer said that previous articles that were critical of hip protectors had made a clear distinction that their conclusions were restricted to hard-padded hip protectors. HipSaver’s models are soft-padded.

“The difficulty is that all of the media picked up on the abstract,” Goodwin said.

“Some of the old customers have stopped buying,” Goodwin said, adding that he has heard of at least one other hip protector company “having difficulties.”

Stating that there has been both experimental and anecdotal evidence in favor of HipSaver’s products, Goodwin likened Kiel’s article to “studying one automobile, finding negative results, and concluding that all automobiles are no good.”

HipSaver’s own statement, meanwhile, gets in a jab at a competitor, whose product was allegedly chosen for the test because of another study claiming that the competitor’s product was superior to others on the market. (HipSaver has also sued competitors for false advertising; see previously.) For a response to HipSaver's claims, see this post by a bone metabolism specialist.

Perhaps oddly, HipSaver doesn’t focus on what might seem to many to be a salient fact: three of the study’s authors consulted for or received money from makers of bone-strengthening drugs. This doesn’t make the study invalid, of course. But it’s something you might want to know if you think that there’s potential competition between bone-strengthening drugs and bone-protecting devices. JAMA stands by the study, and I have no reason to think it’s made any mistake, though I think the researchers should have disclosed the ties.

In any event, the elements of commercial disparagement are generally stated something like: (1) falsity; (2) publication; (3) malice (knowledge of falsity or reckless disregard as to truth or falsity); and (4) special damages. Some states require that the speaker must have intended, or reasonably should have known, that harm would result. HipSaver faces some high hurdles on malice—even if readers take away the implication that this study shows that all hip protectors are bad, and even if this implication is not true, it will probably be hard to show that the authors knew or recklessly disregarded the risk that readers would ignore the specifics of the study. In a straight-up falsity case, it’s easier to say that a defendant should have known that the facts were wrong, but in the absence of something like market research it’s harder to show that a defendant should have known that the audience would be misled by an implied claim.

School daze: anti-fake course a fake

Inside Higher Ed ran a story, This Course Brought To You By …, dealing with an anticounterfeiting trade organization’s undisclosed sponsorship of a Hunter College course that induced students, for credit, to deceive other students by creating a fake student whose blog chronicled the trauma she supposedly experienced when, after she offered a $500 reward for the return of her Coach bag, she received instead a (fairly decent) counterfeit. Counterfeit Chic has cringeworthy excerpts from “her” blog and a further account of an anti-fakes event she organized (apologies to Alanis, I’m going to go with that being ironic) but did not herself attend, due to (a) an announced family emergency and/or (b) not being real.

Inside Higher Ed describes the many and varied ways in which the course was troubling:

Some question why a for-credit college class at a public university should be doing, in effect, discount marketing work for an industry group. Some wonder about a college using some students to fool other students. Others are concerned about the circumstances of the course itself. It was created without any curricular review. The professor who taught it says that he was pressured to do so even though he has no expertise in advertising or public relations (he teaches computer graphics) and had ethical qualms about the course.

Further, the professor — and other professors who have investigated the circumstances of the course — maintain that the professor was required to teach only one side of the issue, had to accept industry officials watching him teach, and had little clout to fight back since he didn’t (and still doesn’t) have tenure.

The title of the IHE story, of course, discloses precisely what the college and the trade organization didn’t want students to know: that the course was sponsored. The college made students pay to do the sponsor’s work: did it deceive them about the nature of the educational experience?

I’m not sure that all falsity corrupts, but courses planned in stealth to satisfy non-university, profit-seeking groups are unlikely to have the best interests of students at heart. We expect ads to be one-sided, and we’re still vulnerable to their sweet nothings. It’s worse when we expect a teacher’s considered judgment – Ellen Goodman has identified this as epistemic corruption, a degradation of the channels through which we used to be able to expect noncommodified messages to travel. The professor “said that, looking back [], he has ‘real ethical problems’ with the course. ‘I don’t know if the problems that they have with copyright are concerns I necessarily share. It’s all very strange to me to be in a situation where I had to advocate those views,’ he said. ‘They gave us $10,000 and they got some good, cheap publicity.’”

Bonus questions for Zachary Schrag: Did the students crafting messages to reach their fellow students need IRB approval? Did the anticounterfeiting organization need IRB approval to give students in the course their assignments and then write a report about the results?

Fair use, why did it have to be fair use?

Substantial Similarity offers a take on Indiana Jones and the Transformative Work. I'd heard about the film but never thought I'd get a chance to see it. At least now I can see the trailer online.

Arbor day: wine trademark dispute continues

Quite a fact pattern here: Constellation Brands, Inc. v. Arbor Hill Associates, Inc., --- F.Supp.2d ----, 2008 WL 515028 (W.D.N.Y.)

Plaintiff Constellation owns the registered marks Arbor Valley and Arbor Mist for wine. Defendant AHA owns the registered mark Arbor Hill for wine. Both are headquartered in upstate New York.

AHA’s owners John and Katharine Brahm own the Arbor Hill Vineyard, which was at one time leased to Widmer Winery, which John Brahm co-owned. Constellation bought Widmer and got rid of Brahm. The Brahms then formed AHA. In early 1987, AHA chose and registered Arbor Hill as a mark for wine-based food products, but (on the advice of counsel) not wine. Around September 1987, AHA opened the Arbor Hill Grapery, a retail shop selling Arbor Hill food products such as wine sauces, jellies, and vinegars. The Arbor Hill Grapery was located within a few miles of Constellation’s facilities and, AHA alleged, some of Constellation’s management passed by the Grapery on a daily basis. Moreover, AHA contends that John Brahm told Constellation management (his former employers) that he was starting a business using Arbor Hill and that AHA bought wine-making ingredients directly from Constellation. Arbor Hill wine was sold in retail outlets, including two retail wine stores owned by Constellation. Constellation’s former chair and founder received a bottle of Arbor Hill wine in 1991 and complimented John Brahm on it.

In 1987, Constellation began selling wine under the federally registered trademark Arbor Valley, making its first sale in upstate New York in 1991.

Around August 1988, AHA began selling wine with a label stating “made and bottled by Arbor Hill Grapery.” Sometime before June 1989, AHA began using the brand name “Arbor Hill” for wine. Sales are local and modest, but persistent, and there has been some media coverage. Between 1993 and 2004, AHA’s annual gross revenues for the sale of Arbor Hill products ranged between $200,000 and $550,000. AHA spent between $10,000 and $30,000 per year advertising Arbor Hill products, and “more than 15,000 customers visit [the Arbor Hill Grapery] for wine tasting” annually.

AHA claimed not to have been aware of Constellation’s mark until 2001. Though AHA’s attorneys conducted a trademark search in 1987 in connection with the Arbor Hill mark, the search did not reveal Constellation’s Arbor Valley.

In 1998, Constellation began selling Arbor Mist, which is wine mixed with fruit juice, to appeal to consumers who think ordinary wine is too sweet. The name Mist was chosen, without awareness of Arbor Hill wine, to evoke the frosted bottle in which the product would be sold and the “cold refreshment” of the drink. AHA became aware of Arbor Mist as soon as it entered the market.

Constellation maintained that a grape arbor is a generic term for a place where grapes are grown, and that visuals of arbors are commonly used in selling wine. Moreover, there are a number of other wines in the US that use “arbor” as part of their marks, including: Arbor, Arbor Crest, Arbor Brook, Arbor Knoll, Arbor Frost, Arbor Trails, Thornapple Arbor, Bel Arbors, Old Arbor, and California Arbor. Constellation registered Arbor Mist in 1998; though it conducted a trademark search, it didn’t specifically seek an opinion about Arbor Hill, though it was aware of the Arbor Hill Grapery.

AHA applied to register Arbor Hill for wine in 1999; the registration issued in 2000, though the mark had been in use since 1989. In early 2001, AHA complained to Constellation about Arbor Mist. Litigation ultimately ensued.

Constellation sought a declaratory judgment of no likely confusion between Arbor Mist and Arbor Hill. In the alternative, Constellation requested a finding that the Arbor Hill mark infringed the Arbor Valley mark.

Arbor Hill counterclaimed for trademark infringement and false advertising. It alleged that Arbor Mist is not considered a high-quality wine and that Arbor Mist is not actually “wine,” because its alcohol content is too low.

AHA alleged that it received a number of phone calls, emails, and letters from consumers confused about the association between Arbor Hill Grapery and Arbor Mist. It created a form letter for consumers, and “[n]early 30 such confused customers signed such forms.” Of the documented instances of alleged confusion, “four were inquiries by individuals wondering if Arbor Hill produced Arbor Mist, one of the instances involved a mistake by a telephone operator, six of the instances involved people who actually bought Arbor Mist products and thought that it was produced by Arbor Hill, and 36 of the instances involved people who assumed that they could buy Arbor Mist at the Arbor Hill Grapery.” Twice, local publications mistakenly referred to Arbor Mist as Arbor Hill.

A former AHA employee also submitted an affidavit stating that, during her six years of employment at the Grapery, 15-20 people per week sought to purchase Arbor Mist at the store, and she received complaints from consumers dissatisfied with Arbor Mist. Though the court cannot determine credibility on a summary judgment motion, it did note two “curious” features of this affidavit: First, the 15-20 people per week number is inconsistent with AHA’s submission of only 36 instances of such confusion, “even though it began documenting such instances of confusion, by asking confused customers to sign pre-printed forms, in the Fall of 2000.” More curious than that is that the employee herself signed one of the pre-printed forms in September 2000, a year after she began working at the Grapery.

AHA further submitted a summary of the results of a pilot survey of 52 consumers of “domestic wine, and/or wine coolers and/or fruit flavored wines,” in Syracuse, purportedly showing that between 15.4% and 17.3% of the respondents were “confused into believing either that Arbor Hill came from, was connected with, or received authorization from the makers of Arbor Mist,” “based only upon the brand name.” Each respondent was asked to examine a bottle of Arbor Mist as if considering a purchase; the surveyor then removed the bottle and asked questions about it. Then respondents were shown 3 bottles of wine – Arbor Hill, the fictitious Argent Mist, and Beringer – and asked more questions about confusion. AHA didn’t submit the actual questions asked or the verbatim responses.

Constellation opposed the introduction of the pilot survey, since AHA declined to produce it in discovery, claiming work product privilege. In the alternative, Constellation argued the survey was inadmissible on Daubert grounds. Separately, Constellation contended that, since 1998, it has sold hundreds of millions of bottles of Arbor Mist and never received any calls or messages indicating confusion.

Fraud

While the litigation was pending, Constellation’s patent attorney, who didn’t know about the lawsuit, notified Constellation that it was time to file a “combined Section 8 and Section 15 affidavit” concerning the Arbor Mist mark with the PTO. In such an affidavit, the affiant swears that the mark has been in use for five years and that the mark has not been the subject of any legal dispute. The patent attorney contacted Constellation’s VP/General Counsel, who was responsible for overseeing trademark matters. After some back-and-forth over whether the affidavit would be forwarded to an individual at Constellation, the VP, who at the time did not recall the specific contents of a combined 8/15 affidavit, agreed with the patent attorney’s suggestion that he (outside counsel) could just file the affidavit over his own signature, meaning that no one at Constellation actually reviewed the affidavit. The patent attorney verified that Arbor Mist was still in use by buying a bottle; he knew that it had been in continuous use because he’d seen it in stores. He believed that the mark was not the subject of litigation, because he’d represented Constellation since at least 1964 and was familiar with Constellation’s trademark affairs, including matters involving the Arbor Mist mark. Thus he didn’t ask anyone at Constellation about pending litigation.

AHA accused Constellation of fraud on the PTO. Constellation voluntarily withdrew the affidavit, but AHA amended its answer to seek cancellation of the mark on the grounds of fraud. AHA alleged that Constellation had filed ten Section 15 affidavits during the VP’s tenure, and that he must have known what such an affidavit required. (My own take: it seems much more likely that he honestly forgot – an embarrassing mistake, but a plausible one; I rarely attribute to evil intent what can be explained by negligence.)

The standard for cancellation of a registered trademark for fraud is clear and convincing evidence. Mere error or inadvertence will not suffice, only a deliberate attempt to mislead the PTO with respect to a material fact. The burden on a party seeking cancellation is heavy, and doubts must be resolved against cancellation, especially on a motion for summary judgment. The courts give registrants considerable room for “honest mistake, inadvertence, erroneous conception of rights, and negligent omission” (citation omitted). Because AHA didn’t submit evidence disputing Constellation’s account of the mistake, it couldn’t succeed in its motion.

The court nonetheless held that filing a false Section 15 affidavit could justify cancelling the registration, though the relevant authorities are scant and McCarthy appears dubious that falsity on a matter going to incontestability would justify cancelling the registration itself. In any event, the court found triable issues of fact on fraudulent intent.

Arbor Valley Claim

AHA also sought summary judgment on Constellation’s alternative claim that Arbor Hill infringes Arbor Valley. Constellation argued that, if Arbor Mist infringes Arbor Hill, then Arbor Hill must infringe Arbor Valley. AHA argued that Constellation’s infringement claim was barred by laches, since Constellation was aware of Arbor Hill for at least a decade before suing. The court agreed.

Laches requires (1) awareness of the defendant’s mark; (2) unreasonable delay; (3) prejudice to the defendant; (4) clean hands. Because the Lanham Act has no statute of limitations, courts look to analogous state limitations periods for laches purposes, and that determines which party has the burden of proving or rebutting the defense. For trademark, the analogous New York statute of limitations is six years (for fraud). Since Constellation waited longer than six years, laches may be presumed. Though Constellation stated that it had no idea when it became aware of Arbor Hill, the standard for laches is when a plaintiff should have known. Constellation knew or should have known about Arbor Hill at least twelve years before the litigation started. AHA also suffered prejudice by continuing to develop and promote Arbor Hill wines, and there was no evidence of bad faith.

Constellation argued that, if Arbor Mist infringes Arbor Hill, that would be a change in the applicable trademark law, which in fairness should allow its own infringement claim. It cited cases holding that plaintiffs aren’t dilatory when they fail to act based on a reasonable belief that the current state of the law prevents them from pursuing claims. But there’s been no change in the relevant trademark law here.

Arbor Mist Noninfringement Claim

The court found that Arbor Hill was an arbitrary mark. (Comment: Really? Not descriptive or suggestive of wine?) Arbitrary marks are conceptually strong. But marketplace strength must also be considered; there’s extensive third-party use of “arbor” in the wine industry. (Comment: Which is why the Arbor Hill mark shouldn’t be considered arbitrary.) Moreover, AHA has only achieved modest, regional success with its Arbor Hill wine.

The marks are “marginally similar” because they both contain “arbor.” Other than that and the fact that they’re sold in similarly shaped standard wine bottles, there’s little similarity. The marks don’t sound the same, and in terms of meaning, Arbor Hill suggests a geographic location (comment: see above re: not arbitrary), whereas Arbor Mist suggest a more general connection to grape arbors or vines. The marks use different typefaces and labels, including different colors, pictures, and accompanying words. The Arbor Mist bottle differs from standard wine bottles like Arbor Hill’s because it’s clear, frosted glass, and has a screw-off cap instead of a cork.

The overall impressions of the products, the court concluded, were very different, and sufficiently memorable to avoid confusion even when the products weren’t side by side. Similarity weighed heavily in Constellation’s favor.

Competitive proximity: the products are sometimes sold through the same channels of trade, and they do compete, though Arbor Mist is less expensive. But the products differ: Arbor Hill is traditional table wine, but Arbor Mist is a mix of wine and fruit juice with a lower alcohol content. (Comment: I would think that consumers might easily perceive them as related, just as the Body Shop’s White Musk perfume has a less-intense variant known as Waves of White Musk – Arbor Mist could be Arbor Hill Lite.) The products also differ in geographic distribution and market position – Arbor Mist is a major national product, and Arbor Hill is not. Ultimately, though the products compete, this factor doesn’t “overwhelmingly favor” AHA.

Bridging the gap: There’s no gap to bridge, and this factor is therefore irrelevant.

Actual consumer confusion: The court declined to consider the pilot survey because AHA refused to produce it in discovery. In any event, the court didn’t consider the two-page summary of the survey admissible. Without pictures of the actual bottles used, specification of the questions asked, or lists of the responses, the court couldn’t determine whether the survey was reliable. Moreover, surveys have little probative value “where they show only that a certain number of consumers will assume that some type of relationship exists between two companies with similar names.” In the absence of other information, consumers may presume that two companies with similar names are likely to be connected, but that doesn’t show likely public reaction under actual market conditions.

The rest of the confusion evidence was anecdotal. “Overall, it appears that six instances involved actual purchasers of Arbor Mist, and as many as 6240 instances, over a six-year period, involved people who stopped at the Arbor Hill Grapery assuming that they could buy Arbor Mist.” (The court used a 20-people-a-week figure based on the AHA employee’s affidavit.) Viewing the evidence in the light most favorable to AHA, this factor favored AHA.

Good faith: Mere knowledge of a senior user’s mark doesn’t necessarily establish bad faith. Good faith can come from selecting a mark based on the product’s characteristics, from doing a trademark search, or from relying on advice of counsel. AHA conceded that there was no attempt to benefit from Arbor Hill’s goodwill. But AHA argued that Constellation was aware of its mark. The court, though, reasoned that the specific employees who came up with the Arbor Mist name were unaware of Arbor Hill. Though “arbor” is not necessarily connected with wine, it’s suggestive of grapes and wine just as “orchard” is suggestive of apples. Thus, Arbor Mist reflects product characteristics, and Constellation had already been using Arbor Valley for over a decade.

AHA maintained that Constellation acted in bad faith by failing to seek legal advice specific to Arbor Hill. But Constellation did run a trademark search for Arbor Mist, so failure to address Arbor Hill specifically wasn’t bad faith. This factor favored Constellation.

Quality of the defendant’s product: Low quality counts against a junior user when the senior user’s reputation could be harmed by a poor-quality junior use. But big quality disparities militate against likely confusion, so AHA’s evidence of poor quality might cut against its claim. In the modern era, however, this just isn’t a very important factor in likely confusion; it goes more to likely harm from confusion. And AHA’s evidence of consumer dissatisfaction was hearsay for purposes of showing inferior quality. The only admissible evidence was that Arbor Mist is a sweeter, lower-alcohol drink that appeals to a different set of consumers. This factor favored Constellation. (Comment: And here I just told my class that this factor never favors a defendant.)

Purchaser sophistication: Courts in wine cases have said lots of things about consumer care and sophistication in choice of wine. Here, neither party submitted evidence on this point. Arbor Hill wines cost $7-$12 per bottle, and Arbor Mist costs $3-$4 per bottle. Given the cheapness of the products, both parties’ customers might be presumed to be unsophisticated. Thus, though the court was unconvinced that much sophistication was required to distinguish between the products, this factor favored AHA.

On balance, the court determined, summary judgment was inappropriate. Triable issues of fact on actual confusion precluded summary judgment.

Not that there's anything defamatory about that

Missy Chase Lapine, who wrote The Sneaky Chef: Simple Strategies for Hiding Healthy Foods in Kids’ Favorite Meals, accused Jerry Seinfeld’s wife Jessica of plagiarizing her cookbook, which also features fruit and vegetable purees hidden in more “fun” food. She then sued for copyright infringement (not plagiarism) and defamation. Slate said sensible things about the plagiarism accusations.

E! News reports:

The defamation charge … stems from an appearance the comic made on Late Show with David Letterman back on Oct. 29, in which he discussed Lapine’s supposed accusation of “vegetable plagiarism” against his wife.

“My wife never saw the book, read the book, used the book,” Seinfeld said on the show. “Didn’t know anything about it.”

…. He went on to refer to Lapine as a “wacko,” and in the pièce de legal résistance, he unflatteringly likened her to some historical three-named forbears—chiefly, the assassins of John Lennon and Martin Luther King Jr.

“She’s a three-name woman, which concerns me,” he told Letterman on the show. “If you read history, many of the three-name people do become assassins. Mark David Chapman and, you know, James Earl Ray. So, that’s my concern.”

… “Are you worried now that discussing it on the television program, that it will incite or exacerbate the circumstance?” the host prodded.

Seinfeld has now filed a motion to dismiss the lawsuit. CNN reports:

In a filing in U.S. District Court in Manhattan, attorneys for the former sitcom star asked a judge to throw out a lawsuit filed by Missy Chase Lapine against Seinfeld and his wife, the New York Daily News reported in Tuesday editions.

“Jerry Seinfeld made overstatements of opinion for comic effect,” the comedian’s lawyers said in the filing.

Comment: Seinfeld’s status as a well-known comedian probably gives him more leeway than many people would have to make “overstatements” for comic effect. Because defamation requires that a defamatory statement be something people are likely to believe, someone known for making outrageous statements is simply less likely to cause the type of reputational harm that defamation targets, even though Seinfeld’s statements are also more likely to be widely disseminated because of his fame. (Even someone not known for comic dialogue would probably be perceived as joking if she said that “three-name people do become assassins.” That’s just not a particularly believable claim.)

Seinfeld’s lawyers also embed the comic effect argument in the more general rule that statements of opinion aren’t actionable unless the audience would understand that the opinion relies on particular defamatory factual propositions. Unless a person is a trained psychologist or other expert, his statement that someone else is a “wacko” probably is understood as just opinion, especially when joined with implausible claims about the probability of becoming an assassin. Interestingly enough, defamation law generally relies on the judge or jury to determine the meaning understood by the audience, without any of the tools for assessing likely reaction developed by false advertising and trademark law. So if a judge agrees with me, the defamation case will go away – even if Lapine has a survey to offer.

Fees in false advertising and copyright cases

Allen v. Ghoulish Gallery, 2008 WL 474394 (S.D.Cal.)

Previously: Allen won a false advertising claim but lost his copyright claims against the Ghoulish Gallery, a competing producer of “haunt portraits,” at a bench trial. The trial, at which Allen represented himself, lasted five days; the court extended Allen a lot of leeway in recognition of his pro se status, including accepting all his trial documents even though most were late. Most of the trial, and much of the briefs, focused on the copyright claims, which concerned the parties’ respective websites.

Both parties sought fees. In denying Allen’s (late) fee request, the court noted that Allen now admitted that he was not proceeding entirely pro se but had been contracting work to his attorney. Regardless, Allen was not entitled to fees under the Lanham Act, which allows fee awards to prevailing parties in exceptional cases. Though Allen prevailed, the court never found that defendants engaged in intentional false advertising or other misbehavior.

The Ghoulish Gallery fared better on its motion for fees. Under the Copyright Act, fees are not limited to exceptional cases. They may be awarded at the court’s discretion, and the standards are the same for prevailing plaintiffs and defendants (except that a prevailing plaintiff may only receive them if the copyright was timely registered). Factors to be considered include: “frivolousness; motivation; objective unreasonableness (both legal and factual); the need to advance considerations of compensation and deterrence; and promotion of the Copyright Act’s objectives.”

The court found that Allen’s copyright claim was frivolous and objectively unreasonable. He claimed to own a copyright in the entirety of his “Haunted Memories Changing Portrait Website.” For the first 14 months of the case, including the discovery period, he was represented by counsel, and the only discovery he produced relevant to his copyright claim was a copy of the registration certificate, not any evidence of the website content itself. He didn’t produce any evidence of that until the penultimate day of trial, at which time he proffered an unauthenticated CD-ROM. The court admitted screenshots from the CD-ROM. Though the court held he had a valid compilation copyright, there was no presumption of validity.

Allen was unclear about what he alleged was infringing; the court examined nine individual website components as well as Allen’s selection, coordination, and arrangement. The court found that none of the individual elements (such as a “Buy It Now” button and a charcoal-colored frame for the images of the portraits) were copyrightable. Comparing the selection, coordination, and arrangement of Allen’s website with the Ghoulish Gallery website under the objective test, the court found only one substantial similarity – the use of Ruben font for the business name and Rudelsberg font for the tag line. The evidence showed that both fonts are publicly available and commonly used in the “haunt” industry. Under the subjective test, the court found no substantial similarity.

Overall, the minimal evidence on Allen’s side led the court to conclude that a fee award to the Ghoulish Gallery was justified. Along with unreasonableness and frivolousness, the court determined that compensation and deterrence principles supported a fee award, given the time and expense to which the Ghoulish Gallery was put in defense, “especially in light of Defendant’s counsel having to invest substantially more time in dealing with a pro se plaintiff than they would if dealing directly with counsel.” Moreover, Allen has sued the Ghoulish Gallery’s principal for defamation in other litigation. “A fee award is appropriate so that Plaintiff may fully consider and appreciate the monetary, emotional and physical costs of litigating unsubstantiated claims.”

Sugar and spice and everything false

The LA Times reports that DNA tests marketed for sex identification of fetuses in early pregnancy are being promoted with unsubstantiated claims: “The Federal Trade Commission, which protects consumers from false and misleading advertising, has warned buyers to be skeptical of at-home genetic tests, which are now unregulated.” But from the story’s reporting, the FTC has reason to do more than warn. More than 100 women have sued one company, Acu-Gen. “Acu-Gen's website lists dozens of clinical studies that it says corroborate its approach, though none of them involved the specific DNA sequence that Acu-Gen says it uses in Baby Gender Mentor and none reported accuracy as high as 99.9%.”

The companies may be relying both on probability – as one disappointed father says, you could flip a coin and refund the money every time you were wrong and still make money on a sex identification test – and on parents’ feelings of guilt in the case of a wrong prediction. It’s hard enough for people to admit they’ve been duped by scientific flimflam. Revisiting a desire for a child of a different sex may be especially psychologically difficult when an actual child is already present. These are exactly the vulnerable consumers that government regulators are best suited to protect – especially given that competitors have little incentive to question the scientific basis of their shared industry. In the consumer/competitor/regulator triangle, the regulator here is the obvious choice to rein in invalid claims.

Of course, that people who use the tests may be considering sex selective abortions adds a significant wrinkle: regulating for false advertising, rather than banning the practice entirely, may be part of the cultural acceptance of the desire to actively select a child’s sex, as this Slate piece suggests.

Lipitor campaign to end

The New York Times reports that Pfizer will end its Lipitor ads featuring Robert Jarvik as a spokesman; his contract was already set to expire next month.

The ads had been attacked for misleading consumers about Jarvik’s qualifications – a pioneer in making artificial hearts, he’s not a cardiologist and isn’t licensed to practice medicine – and about his athletic prowess, using a body double in an ad that implied he was a vigorous rower. Pfizer’s president of worldwide pharmaceutical operations, Ian Read, said: “The way in which we presented Dr. Jarvik in these ads has, unfortunately, led to misimpressions and distractions from our primary goal of encouraging patient and physician dialogue on the leading cause of death in the world — cardiovascular disease…. Going forward, we commit to ensuring there is greater clarity in our advertising regarding the presentation of spokespeople.”

To add in another issue, some of Dr. Jarvik’s former colleagues have complained that the ads wrongly attributed inventorship of the artificial heart to him. (This is unlikely to be material to consumers, but it’s very material to his former colleagues!) As the Times reports, at least one former colleague claims inventorship himself, while three former colleagues argued that credit should go to Dr. Jarvik’s mentor, Dr. Willem J. Kolff, and his associate, Dr. Tetsuzo Akutsu. Even in the brief account in the Times there are other contenders for credit: “a large team that worked on the heart,” and another former colleague, Dr. Clifford S. Kwan-Gett, who “stated that the Jarvik series of hearts were simply different versions of prototypes that Dr. Kwan-Gett had made more than a year earlier.” Dr. Jarvik’s company begs to differ. This reinforces my conviction that attribution problems are already hard enough when there’s no money at stake.

I Have a ... Xerox

Drew Hansen writes on plagiarism and orators in the Houston Chronicle, proposing that political oratory operates under different standards from academic writing. Oratorical reuses that are transformative, are done with consent, or are obvious quotations from near-universally known sources such as the Bible, he argues, are not plagiarism. (I'm a little dubious about the idea that the actual words of the King James Version are currently so well-known that quoting Isaiah will be immediately recognized as quotation by most of the intended American audience, but I'll go with it.)

It depends on what the meaning of "Made in Italy" is

Counterfeit Chic linked to a Consumerist post about this LA Times story: Goods labeled "Made in Italy" may well be made in sweatshops staffed by Chinese immigrants. Implicitly false despite its literal truth? As one owner of a small family business says, "'Made in Italy' ... means tradition, know-how and standards. . . . It means not only made in Italy, but made in the Italian way." Is it time for a certification mark for Italian goods?

New article on teaching IP with AV

Sight, Sound and Meaning: Teaching Intellectual Property with Audiovisual Materials, 52 St. Louis U. L.J. -- (2007).

This short article addresses my experience using audiovisual materials from the Georgetown Intellectual Property Teaching Resources database. I use audiovisual materials extensively in class to allow students to see the subject matter of the cases rather than just reading verbal descriptions and enable them to apply the principles they read about to new, concrete examples. Many students in IP courses have special interests in music, film, or the visual arts, and the database allows me—and other teachers—to present materials that engage them. I have found that students are more willing to speak up in class when they can see or hear for themselves and can point to specific aspects of the underlying materials. I also briefly address the copyright question: should teachers worry about using digital materials in class? Fortunately, the available statutory exceptions are supportive of in-class teaching. Using images and sounds to illustrate litigated cases and hypotheticals is pedagogically valuable and legally justified.