Coach narrowly alleges grounds for cancellation of similar marks

Tapestry, Inc. v. Chunma USA, Inc., 2021 WL 1534988, No. 20-CV-0271 (JMF) (S.D.N.Y. Apr. 19, 2021)

Tapestry (Coach) sued Chunma for trademark infringement, false designation of origin, false advertising, and cancellation of Chunma’s registered trademarks under the Lanham Act, unfair competition and trademark infringement under New York state common law; and injury to business reputation under New York’s GBL, based on Chunma’s products bearing logos that allegedly infringe upon Coach’s trademarks, including Coach’s well-known “Signature C” mark. Chunma’s motion to dismiss the cancellation claims was denied.  

The claim for cancellation of the ‘675 Mark was based on fraud in obtaining the trademark registration and misrepresentation of source, whereas their claim for cancellation of the ’549 and ’077 Marks was based on misrepresentation of source alone.

077

549

675

For fraud, Coach alleged that Chunma made a material misrepresentation in its trademark registration application, in particular that the mark was in use as of the application date, when in fact there was no bona fide use until years later. Chunma also allegedly misrepresented the specimen that it submitted alongside its application as a “SCANNED ACTUAL TAG” when, in fact, it was merely a “computer illustration, digital image, or similar mockup” that the PTO would not have accepted.

As for false suggestion of a connection, Coach explicitly alleged that Chunma’s marks “falsely suggest a connection with Plaintiffs.”

However, with respect to the ’549 and ’077 Marks, the misrepresentation of source claim was “a close question.”  “[I]t is well established that “allegations ... of the type that typically support a claim of likelihood of confusion under Section 2(d)” do not suffice to state a claim for cancellation of an incontestable mark based on misrepresentation of source under Section 14(3).” (I note that, looking at TSDR, Coach requested an extension of time to oppose at least one of these marks, but does not seem to have actually opposed them.) “Significantly, even intentional copying of a plaintiff’s trademark does not, standing alone, state a misrepresentation claim.” Instead, a plaintiff must plead “specific facts reflecting [the defendant’s] activity that, if proved, would amount to an attempt to create the impression that [the plaintiff] is the source of [the defendant’s] services” or goods, such as conduct outside use of the registered mark itself.

The complaint did “narrowly” state a claim. Coach pled that Chunma sells “products bearing logos and source-identifying indicia and design elements that are studied imitations of [Plaintiffs’ well-known] Signature C Mark,” with “reckless disregard or willful blindness to Plaintiffs’ rights, and/or with bad faith, for the purpose of trading on the goodwill and reputation of the Signature C Mark” and to “deceive consumers, the public, and the trade into believing that there is a connection or association between [Chunma] ... and [the] Coach” brand. The complaint also showed images showing close similarities between Coach’s trademarks and some of Chunma’s products. Viewed in the light most favorable to plaintiffs, that sufficed for now, though Coach would “ultimately bear a heavy burden to prove this claim by clear and convincing evidence.”

accused product

another

another

The subsequent stipulation to a permanent injunction did not cover the registrations, but there is apparently a confidential settlement agreement that may have covered them.

There's no such thing as "leasing real estate in violation of the Lanham Act"

Wakefern Food Corp. v. Marchese, 2021 WL 3783259, No. 2:20-cv-15949-WJM-MF (D.N.J. Aug. 26, 2021)

Always something new in trademark! Wakefern, the largest retailer-owned supermarket coop in the US, sued Marchese for attempting “to lease commercial real estate in violation of the Lanham Act … and New Jersey common law.” 

Wakefern operates approximately 353 supermarkets under various brands such as ShopRite and Fairway Market across several states, and has a registration for ShopRite.

Marchese formed defendant Family Markets for the stated purpose of carrying out a retail supermarket business. In mid-2020, Marchese allegedly contacted Wakefern about the possibility of joining the Wakefern cooperative. He allegedly told Wakefern’s representative that he owned both Family Markets and a number of “Foodtown” supermarket locations across New Jersey, including a specific Foodtown location in Plainsboro. Wakefield told Marchese to submit a summary of his qualifications in writing, but he didn’t follow up. The supposed Plainsboro location was allegedly vacant.

“Marchese also contacted a real estate broker to inquire about a listing of a vacant 50,000 square foot supermarket in Middlesex, New Jersey.” He allegedly informed the broker “that he was interested in leasing the vacant space, that he was the owner/operator of an active supermarket business in Family Markets, that he had an ownership interest in several members of the Wakefern cooperative, including four ShopRite® supermarkets in New Jersey, and that he had started the process of becoming a Wakefern member himself.” Afterwards, the broker contacted Wakefern and was told that Marchese wasn’t a member and had no Wakefern/ShopRite affiliation.

Perhaps overreacting, Wakefern sued for trademark infringement and false advertising in violation of the Lanham Act and violation of state unfair competition law, which is coextensive and thus disappears from our story.

Trademark infringement: This just wasn’t use in commerce. Whether confined to the §1114 definition of “use in commerce” or using some other broader standard for §1127, Marchese’s statement didn’t qualify:

Plaintiff is correct that Marchese’s conduct in invoking Wakefern and the ShopRite® brand may have been an affirmative act ultimately designed to achieve some sort of commercial benefit (i.e. the acquisition of commercial space from which to operate a supermarket). However, there are no allegations that Defendant has ever offered, distributed, possessed, sold, or advertised any goods or services of any kind bearing or imitating Plaintiff’s marks, or even had the capacity to do so. Nor are there any allegations that, had Marchese been successful in securing the vacant commercial property, he would have engaged in any infringing conduct in the actual operation of a supermarket. Indeed, Plaintiff’s allegations suggest that Marchese made false representations to the broker in order to take advantage of the broker’s services rather than to sell or promote his own. Moreover, Plaintiff has not cited any case, and the Court is aware of none, in which a single, private business conversation, without any corresponding dissemination or marketing to the broader purchasing public, has been found to constitute a “use in commerce” for purposes of trademark infringement.

False advertising: Not commercial advertising or promotion. There was no organized campaign to penetrate the market alleged; there was also no targeting of a class of potential purchasers. “Marchese’s allegedly false statements regarding his relationship with Wakefern were made in the context of a private conversation with a targeted individual acting in his capacity as a broker rather than shared more broadly to a class of potential supermarket consumers. Such isolated, private statements, particularly to non-consumers, do not constitute the sort of dissemination to the relevant purchasing public necessary to state a false advertising claim under Section 43(a) of the Lanham Act.” Wakefield did allege that Marchese engaged in “similar conduct with respect to multiple Westside Market stores in New York City.” But there were no other details. “Regardless, even assuming Plaintiff intended to allege that Marchese has continued to claim a relationship with Wakefern to various real estate brokers in order to obtain a commercial lease to operate a supermarket, Plaintiff’s claim would fail: such statements would still be discrete communications targeted to specific non-consumers rather than promotions or advertisements disseminated to a segment of the purchasing public.”

Is disgorgement the new normal in Lanham Act cases?

Grasshopper House, LLC v. Clean & Sober Media, LLC, 2021 WL 3702243, No. 19-56008, No. 19-56072, --- Fed.Appx. ---- (9^th Cir. Aug. 20, 2021)

The TMA’s injunctive relief changes are probably going to make it even more clear that courts aren’t entirely sure whether damage is part of the cause of action for false advertising; since it isn’t for trademark infringement, trademark plaintiffs never have to show damage at all to get relief and even disgorgement, which has now become much more readily available. Is that true for false advertising plaintiffs?

Here, the parties compete in the market for addiction treatment. A jury found defendants liable for false advertising through a purportedly unbiased, independent site. The district court entered a permanent injunction against defendants but denied disgorgement of profits, attorneys’ fees and costs. The panel, over two separate dissents, sends it back for reassessment of disgorgement, attorneys’ fees and costs (and still doesn’t publish the opinion).

The district court excluded the plaintiff’s damages expert, finding that he didn’t apply a reliable methodology in assessing causation of damages because he discounted competing causal factors without an adequate basis and lacked the necessary expertise to make those judgments. The district court acted within its discretion in doing so, and properly cancelled the damages phase of the jury trial because no other witness had been disclosed on damages. Plaintiff argued that it should have been able to use the testimony of its principal, but even during deposition, plaintiff’s counsel stated that he “was not [there] to talk about causation and damages” and objected to questions directed to him about damages, declaring that this topic would be exclusively “within the scope of expert opinion.” He himself acknowledged at his deposition that it was “beyond his scope of understanding” to explain how plaintiff was damaged.

Disgorgement had to be sent back because the law on willfulness being required for disgorgement changed after the court ruled. But watch this language: “On remand, the district court should consider Defendants’ mental state — whatever that may be — when determining what award of profits is appropriate.” So plaintiff is apparently entitled to disgorgement without ever having shown that it was damaged by the false advertising. So, is damage to the plaintiff part of the cause of action or no?

The court said further: “it was an abuse of discretion for the district court to deny Plaintiff’s request for disgorgement on the ground that Plaintiff had not established causally, and to a reasonable certainty, the ‘financial benefit’ that Defendants received from their false advertisement as to Plaintiff.” The trial court was certain that the defendants had profited to some degree from false statements about the neutrality of the review and from a review that represented that it was “based on surveys of former [Plaintiff] clients.” Both parties’ experts calculated that each of the 192,434 visits to the relevant webpage had some value, though they disagreed about whether it was $40 or $1.80 per click. Even the lower bound would yield a disgorgement amount at least five times that of the ‘hypothetical’ alternative amount of $60,000 reached by the district court.” Because even defendants’ expert recognized some benefit to defendants, it was an abuse of discretion to find that the financial benefit to them could not be established to a reasonable certainty.

One of the dissents argued that, because the plaintiff’s theory of falsity was focused on the falsity of the process by which the review was repaired, the disgorgement theory needed to account for the possibility that the plaintiff’s facility deserved its review. That overstates a plaintiff’s burden. “Having presented sufficient evidence to show that the highly negative review was not generated by the process that was represented, Plaintiff amply established that the review was unreliable and therefore false and misleading. At the very least, Plaintiff demonstrated that the review falsely augmented its own trustworthiness and persuasiveness.”

The court vacated the attorneys’ fees award in case its ruling on disgorgement on remand affected its ruling on the award of attorney fees. And it reversed the denial of costs because successful plaintiffs are entitled to them; it wasn’t enough to say that the litigation was “excessively-protracted” or that they weren’t entitled to attorneys’ fees, which are judged by a different standard.

One partial dissent thought the district court prejudicially erred in cancelling the damages phase of the trial for civil procedure reasons.

The other partial dissent was on disgorgement. In its view, the jury only found falsity as to the procedure followed by the review and the statement of the process by which it was developed, not by any particular statement in the review itself or its ultimate star rating. Thus, damages would have to relate “to relate to people who were dissuaded from seeking treatment at [plaintiff’s facility] because of the failure to base the review on former clients’ assessments of the services, as set forth in the Process Statement.” 

Pandemic ski resort closures allow both contract and advertising claims

Goodrich v. Alterra Mountain Co., 2021 WL 2633326, No. 20-cv-01057-RM-SKC (D. Colo. Jun. 25, 2021)

Unlike the education cases so far, this pandemic case sustains both consumer protection and contract claims. “Plaintiffs purchased Ikon ski passes for the 2019-20 ski season but, due to the COVID-19 pandemic, Defendants closed their ski resorts on March 15, 2020.” Defendants declined to refund their money. The passes were allegedly offered as offering “unlimited access” to “ski or ride as many days as you want” with (in some instances) some blackout dates at covered resorts during the 2019/20 ski season.

California UCL, CLRA, FAL: First, defendants argued that under Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir. 2020) and its progeny, everything but the CLRA claim for damages should be dismissed because these equitable claims were only available if legal claims failed. Plaintiffs argued that they were allowed to plead in the alternative, but the court found that they had failed to do so. Thus, Sonner “dooms the claim for equitable relief at any stage.”

Did the CLRA damages claim survive? Defendants first argued that passes didn’t not qualify as “goods or services” under the CLRA, but were only temporary licenses, with services provided only ancillary to the license. The court found that plaintiffs plausibly showed that ski passes were encompassed within the definition of “services.” Ski pass holders plausibly purchased more than just a license to be on the slopes, including services such as providing groomed trails and ski lifts and gondolas to reach the trails, which were “at heart of what a ski pass holder purchased.”

Deception: Assuming Rule 9(b) applied, plaintiffs satisfied it. Defendants argued that the alleged promise of “unlimited access” for a “complete season” (the 2019/20 ski season) was not a “ ‘specific and measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact’ ” because they made no representations about the length of the 2019/20 ski season. But “a reasonable consumer would understand this was a promise for a definite period: the period of the 2019/20 year ‘during which snow conditions allow for skiing and when people typically go skiing.’”

Defendants argued that their statement wasn’t deceptive when made because they couldn’t have known about the pandemic or ensuing governmental closure orders. The court was persuaded that plaintiffs were plausibly misled about what would happen if the resorts closed, for whatever reason: defendants kept all their money. Defendants argued that they disclosed the payments were “non-refundable,” but that plausibly didn’t apply to these circumstances.

Was there an actionable omission? Previous cases hold that “to be actionable the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose,” in particular a safety hazard/physical defect going to central functionality. With services, though, matters were less clear, and the court found that omission claims shouldn’t be dismissed. And the relevant knowledge, for the omission claim, is knowledge that they’d keep the money if they had to close before the end of the “ski season,” that is, the period “during which snow conditions allow for skiing and when people typically go skiing.”

Loss causation: Plaintiffs alleged that they wouldn’t have purchased the ski passes on the terms offered had they known that, if defendants did not provide the promised resort access during the 2019/20 ski season, they would nonetheless retain all pass fees. That was sufficient. Illinois and Wisconsin consumer claims shook out similarly: no equitable relief, but where damages were available, those claims survived.

competition in the market of ideas isn't commercial competition

Children’s Health Defense v. Facebook Inc., 2021 WL 2662064, No. 20-cv-05787-SI (N.D. Cal. Jun. 29, 2021)

CHD, an anti-vaccination group (that also considers pesticides and wireless tech dangerous), sued Facebook and other defendants for violating the First and Fifth Amendments, Lanham Act false advertising, and RICO violations. It didn’t like having some of its content on its FB page labeled “false,” out of date, or unreliable. Prepandemic, FB also allegedly barred CHD from disputing any actions taken by FB, and allegedly began to demote its content (“shadowbanning”). FB deactivated the “donate” button on CHD’s page and barred it from buying new ads. After repeated violations, FB put a Warning Label at the top of its page: “This Page posts about vaccines. When it comes to health, everyone wants reliable, up-to-date information. The Centers for Disease Control (CDC) has information that can help answer questions you may have about vaccines. Go to CDC.gov.” Then, after the pandemic hit, CHD shared an article about the flu vaccine written by a third party website. PolitiFact labeled the title of the article as “false,” noting that the title is “ambiguous and misleading,” and the site changed the title to clarify that it was not about the novel coronavirus.

CHD alleged the usual fringe argument that the United States government — through Congressman Adam Schiff, the Centers for Disease Control (CDC), and the World Health Organization (“WHO”), as the CDC’s “proxy” — has “privatized” the First Amendment by “teaming up” with Facebook to censor CHD’s vaccine safety speech.

The court spent a bunch of time on the state action issues; I will only mention the theory that “government immunity [under Section 230 of the CDA] plus pressure (Rep. Schiff) … should turn Facebook and Zuckerberg’s private-party conduct into state action.” The pressure included an alleged threat to rethink §230 if FB didn’t take more action. No, because “Section 230 does not require private entities to do anything, nor does it give the government a right to supervise or obtain information about private activity.” Nor did the general “threat” to revisit §230 constitute direction to a specific entity to take a specific allegedly unconstitutional action against a specific person such as CHD.

Lanham Act: the warning labels and fact checks allegedly told consumers to abandon CHD and “instead to follow CDC’s recommendations to get the vaccines produced by its major advertisers, Merck, GSK, Sanofi, and Pfizer, who buy $1 billion per annum in advertisements from Facebook.” Thus, CHD alleged, “Facebook and CHD may reasonably be considered commercial competitors with respect to the messaging regarding vaccines and 5G that they promulgate to Facebook users.”

But if this is a political speech case, as CHD alleged, it was hard to see how it fell in the Lanham Act’s zone of interests. “[T]he warning label and fact-checks are not disparaging CHD’s ‘goods or services,’ nor are they promoting the ‘goods or services’ of Facebook, the CDC, or the fact-checking organizations ….” They didn’t encourage users to donate to anyone, but to look for reliable information at the CDC. “Thus, all of the alleged misrepresentations – the warning label and the fact-checks – are simply providing information, albeit information with which CHD disagrees.” “Information” was not a relevant service; “[u]nder CHD’s expansive and novel theory of false advertising, any Facebook warning label identifying an alternative source of information and any fact-check with an explanation would constitute false advertising under the Lanham Act because of an injury to ‘messaging.’”

Courts have held that “[t]he mere fact that the parties may compete in the marketplace of ideas is not sufficient to invoke the Lanham Act.”  In past suits where nonprofits’ Lanham Act claims were entertained, “the non-profit alleged an injury to a commercial interest in sales or reputation.” Thus, CHD was neither within the Lanham Act’s zone of interests nor did it allege that the warning label and fact-checks constituted “commercial advertising or promotion,” even assuming that Lexmark abrogated a commercial competition requirement in the test for the latter.

RICO claims failed because they were RICO claims.

Amazon pulls further ahead of possible competitors in TM secondary liability wars

Ohio State Univ. v. Redbubble, Inc., No. 19-3388 (6th Cir. Feb. 25, 2021)

“Because Amazon’s marketplace operates as a neutral intermediary between consumers and third-party vendors, courts have typically not found it liable for trademark-infringing goods sold through its platform.” But Redbubble wasn’t entitled to the same treatment.  “Because Redbubble’s marketplace involves creating Redbubble products and garments that would not have existed but for Redbubble’s enterprise, we find that the district court erred by entering summary judgment for Redbubble under an overly narrow reading of the Lanham Act.” The description:

Independent artists, not employed by Redbubble, upload images onto Redbubble’s interface. Consumers then scroll through those uploaded images and place an order for a customized item.

Once a consumer places a purchase on its website, Redbubble automatically contacts the artist and arranges the manufacturing and shipping of the product with independent third parties. So Redbubble never takes title to any product shown on its website. And Redbubble does not design, manufacture, or handle these products. But the shipped packages bear its logo, and Redbubble handles customer service duties such as returns.

Aside from managing the website, Redbubble plays a larger role in overseeing and executing sales made on its marketplace. For example, Redbubble helps market products listed on its website. And it markets those goods as Redbubble products to consumers; for instance, it provides instructions on how to care for “Redbubble garments.” When customers receive goods from Redbubble’s marketplace, they often arrive in Redbubble packaging and contain Redbubble tags. And if there are excess goods, Redbubble has the right to dispose of those items.

Some of Redbubble’s artists uploaded trademark-infringing images. When OSU sent Redbubble a C&D, Redbubble asked it to “specifically identify each infringing design.” OSU sent Redbubble a letter containing photos of nine offending items, but Redbubble told OSU that pictures, asking for URLs or other identifying information. There was apparently no reply, and Redbubble didn’t remove the offending products from its website. OSU sued for Lanham Act violations and a violation of Ohio’s ROP for use of the persona of a former employee who had transferred his rights to OSU.

The district court found that Redbubble did not “use” OSU’s trademarked images in operating its business model under the Lanham Act because it only acted as a “transactional intermediary” between buyers, sellers, manufacturers, and shippers.

OSU didn’t preserve a theory of vicarious liability, so the court considered only direct liability. (OSU claimed not to have known about Redbubble’s relationship with third-party vendors, but it could have amended the complaint once it learned more.)

Fortunately for OSU, the court of appeals held that the Lanham Act extends direct liability beyond manufacturers, sellers, and those “who apply infringing marks to sales displays or other related advertising materials.” eBay and Amazon are not subject to direct liability, and neither are sellers of domain names, but there’s a line to be drawn.

“[O]ne key distinction between a direct seller who “uses” a trademark under the Act and a mere facilitator of sales who does not is the degree to which the party represents itself, rather than a third-party vendor, as the seller, or somehow identifies the goods as its own. A retailer who sells products directly to a customer at a brick-and-mortar store is indisputably a seller to whom the Lanham Act applies. An online marketplace like eBay that clearly indicates to consumers that they are purchasing goods from third-party sellers is not. … Here, although the record is sparse, it appears that products ordered on Redbubble’s website do not yet exist, come into being only when ordered through Redbubble, and are delivered in Redbubble packaging with Redbubble tags. Under those facts, the district court erred in affirmatively placing Redbubble on the passive end of the liability spectrum.

Use of a third party to manufacture goods sold on the site, and the degree of control and involvement exercised by Redbubble over the manufacturing, quality control, and delivery of goods to consumers, were relevant to “whether the offending goods can fairly be tied to Redbubble for the purpose of liability.” The record needed further development. Still, “it appears that Redbubble brings trademark-offending products into being by working with third-party sellers to create new Redbubble products, not to sell the artists’ products.” That’s more than just being a passive facilitator. Plus, it calls the goods “Redbubble products” and “Redbubble garments,” so it goes beyond Amazon.

As for the ROP claims, the question was whether Redbubble used “any aspect” of the ex-employee’s persona for a “commercial purpose.”  While Amazon doesn’t make editorial choices about book covers [note judicial factfinding that seems both untethered to any record and somewhat improbable as a blanket statement], Redbubble is different. “Redbubble interweaves its brand with the products it sells.” Plus, the text of Ohio’s ROP statute prohibits using a persona in connection with a product, advertising a product, or soliciting the purchase of a product. “That broad language expands liability beyond directly selling trademark-infringing goods.” So even if Redbubble was passive, the ROP would apply. [And also it seems that cases letting Amazon off the hook wouldn’t apply to Ohio ROP claims either. More First Amendment conflicts coming!]

Record development was required because it wasn’t clear that OSU could win. It wasn’t clear what “Redbubble products” and “Redbubble garments” really meant. Redbubble never takes title. Factual gaps: “facts regarding the precise nature of Redbubble’s contractual relationships with third-party manufacturers and shippers”; “the precise degree to which Redbubble is involved in” selecting and imprinting trademark-infringing designs upon its products; “details as to Redbubble’s involvement in the process for returning goods”; “detail[s] on how Redbubble characterizes its own services”; and facts about “defenses to liability[,] such as possible fair use defenses or defenses that confusion is not likely.”

Homeopathy claims weren't unfair in the absence of proven falsity

Allen v. Hyland’s, Inc., 2021 WL 718295, No. CV 12-1150-DMG (MANx) (C.D. Cal. Feb. 23, 2021)

This class action, about whether certain homeopathic products didn’t perform as indicated on the packaging, went to a jury trial that ended in Hyland’s favor on breach of warranty, Magnuson-Moss Warranty Act, and CLRA claims. The court then ruled for Hyland’s on the equitable UCL/FAL claims, guided by the jury verdict. However, the court of appeals reversed in part because “[t]he UCL’s prohibition of unfair business practices sweeps more broadly than the CLRA, Magnuson-Moss Warranty Act, or express warranty.” The UCL claim in fact “encompassed both a deceptive advertising theory and an unfair business practices theory.” Because UCL unfairness applies to practices that are against public policy; that are “immoral, unethical, oppressive, unscrupulous or substantially injurious”; or that cause unforeseeable injuries to consumers that are not outweighed by countervailing benefits, “[t]he jury’s narrow findings as to deceptive advertising do not resolve [Plaintiffs’] broader unfair practices theory” in their equitable UCL claim.

The court deferred to the jury’s implicit factual determination that plaintiffs failed to prove by a preponderance of the evidence that the products cannot relieve the symptoms represented on Defendants’ products’ packaging. Plaintiffs failed to submit “evidence of definitive scientific research to meet their burden of proof as to the products at issue.” Though several did testify that they wouldn’t have bought the products if they knew the products had only a placebo effect, they didn’t meet their burden to prove by a preponderance of the evidence that the only medical benefit was via the placebo effect. Defendants’ products followed FDA labeling regulations (or lack thereof), indicating numeric dilution levels, ingredient names, and the word “homeopathic,” which by definition means the administration of remedies in minute doses. Defendants didn’t disclose the absence of controlled clinical trials or other medical testing, but they weren’t required to do so, despite the FTC’s determination that many consumers mistakenly believe manufacturers of homeopathic products test their products on people to show their effectiveness.

“While aspects of homeopathy are inconsistent with modern understandings of physics and chemistry, Defendants presented evidence that some clinical trials have shown favorable results from homeopathic treatment, as compared to a placebo or conventional treatment.” And there was evidence that “homeopathically prepared materials have an effect on animals and on human cells,” and that consumers are generally satisfied with the products.

Starting with an unfairness test borrowed from the FTCA, the factors that define unfairness are: “(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.” Because the jury found either that defendants’ products may perform as promised for some people or that plaintiffs failed to show otherwise, the court couldn’t find on this record that “the only conceivable benefit the products provide is as a placebo.” Thus, plaintiffs didn’t show substantial injury, especially with the evidence showing high levels of consumer satisfaction.

An alternative balancing test asks whether the alleged business practice “is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers and requires the court to weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” This too hadn’t been shown. The ingredients are safe and the FDA doesn’t require randomized controlled trials for homeopathic products. There was scientific controversy over whether they worked.

Under a final test, “that the public policy which is a predicate to a consumer unfair competition action under the ‘unfair’ prong of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions.” And plaintiffs couldn’t do this either. The FTC’s recent Enforcement Policy was issued after the trial.

Rogers test protects name of online news publication

Punchbowl, Inc. v. AJ Press LLC, --- F.Supp.3d ----, 2021 WL 3356848, No. 21-cv-03010-SVW-MAR (C.D. Cal. Jul. 16, 2021)

This Rogers case about the name of an online publication involves a motion to dismiss that was converted to a motion for summary judgment.

Plaintiff Punchbowl “is a technology company that develops online communications solutions for consumers, including online event invitations and greetings cards, with a focus on celebrations, holidays, and events.” It allegedly used its Punchbowl mark since April 2006, and it has a 2013 registration for “Punchbowl” in connection with online communications services.

AJ operates “Punchbowl News,” “an online news publication that provides newsletters, podcasts, and videos in the fields of government, politics, public policy, and current events.” It uses “Punchbowl” because that is the Secret Service nickname for the U.S. Capitol (a fact that Punchbowl didn’t contest), and its logo also invokes the Capitol building. Punchbowl sued it for trademark infringement and related claims.

The court concluded: “[N]o reasonable juror could find that Defendant’s use of Plaintiff’s mark either (1) is not artistically relevant to the underlying work, or (2) explicitly misleads consumers as to the source or content of the work.” Part (1) was simple; the geographic/political reference to the Capitol was analogous to the geographic reference to the “Empire State” in Empire.

(2) is a “high bar that requires the use to be an explicit indication, overt claim, or explicit misstatement about the source of the work.” Use of a mark, even a well-known mark, isn’t explicitly misleading if it only implicitly suggests endorsement or sponsorship. The recent Dr. Seuss case found that Rogers applied even when the defendant’s work was not a copyright fair use, and the work used Seussian font, Seussian illustration style, and a similar title. Under Ninth Circuit precedent, explicit misleadingness is assessed contextually [a contradiction, but here we are], considering also “(1) the degree to which the junior user uses the mark in the same way as the senior user; and (2) the extent to which the junior user has added his or her own expressive content to the work beyond the mark itself.”

No reasonable juror could find that either consideration weighed in favor of Punchbowl. More broadly, no reasonable juror could find an explicit misrepresentation.

For (1): The parties’ services, though both online, were entirely distinct: events/parties versus journalism, targeting respectively “families and, specifically, mothers with young children” versus “individuals who follow politics closely.”

But, Punchbowl argued, they both used the mark in the same way: as a source identifier. First, that argument “is effectively an argument that mere use of the mark itself is sufficient for a finding that a defendant uses the mark in an explicitly misleading manner.” But we know that’s not the Rogers test. Second, Punchbowl was really arguing that the parties both operate commercially and sell services to consumers, so the name was explicitly misleading; Empire foreclosed such an argument since that’s also what happened there (and was arguably more confusing since the parties were both related to hip-hop music production). [This discussion really highlights that getting rid of the title v. title exception to Rogers actually ended up complicating the doctrine much more. You don’t need the extra contextual considerations of Gordon if you just treat titles of works versus titles of other works separately, and that would have been a much better path. Under plain old Rogers, this is an easier case.] Finally, the facts refuted Punchbowl’s argument, since AJ consistently used “Punchbowl News” and not “Punchbowl.” And it added its own expressive content with every use.

This case was unlike Gordon, where the parties sold, “at least in part,” the same product: greeting cards. That overlap was the primary reason the court found a triable issue on explicit misleadingness, and it wasn’t present here.

Finally, alleged evidence of actual confusion didn’t show explicit misleadingness. Under Rogers, “[the] focus [is] on the nature of the junior user’s behavior rather than on the impact of the use.” Thus, evidence of actual confusion wasn’t “particularly relevant.” The recent Dr. Seuss case, for example, rejected the relevance of a survey purporting to show 24% confusion.

No reasonable juror could find that the parties use Punchbowl in the same way, and even if they could, that wouldn’t be enough, as in Dr. Seuss where both parties used marks for graduation-themed books but the defendant added expressive content to the work beyond the mark itself. No reasonable juror could find that defendant failed to add its own expressive content to the work beyond the mark itself. Punchbowl was not used “as the centerpiece of an expressive work itself, unadorned with any artistic contribution.” Even in the mark, “Punchbowl News” appears, “almost always, next to the image of the Capitol dome, upside down and filled with punch.” And the publication was consistently explicitly connected to its founders, highly credentialed journalists; this was similar to the Dr. Seuss case, which empashized that the use there wasn’t explicitly misleading in part because the cover “conspicuously lists” the authors of the book and not the plaintiff.

Finally, Punchbowl argued that there was no interference with AJ’s First Amendment rights because it could select any non-infringing mark and still report and comment on the news. But Rogers applies to all “expressive works.” Accepting Punchbowl’s argument would eviscerate Rogers because one could always create a different work or different title. As Rogers itself says, “[i]n the context of titles, this ‘no alternative’ standard provides insufficient leeway for literary expression.”

failure to allege comparative performance dooms falsity claim

Ruiz v. Owlet Baby Care, Inc., 2021 WL 3370259, No. 2:19-cv-00252 (D. Utah Aug. 3, 2021)

A proposed class action against Owlet’s Smart Sock pulse oximeter sought to cure earlier defects by alleging that other pulse oximeters were used differently (and not on babies’ feet). Nonetheless, plaintiffs sought to allege, “Owlet deliberately and misleadingly aligns itself with both medical grade devices and consumer wellness products, seemingly whenever it was convenient for sales.”  Owlet’s representations thus allegedly led “consumers to reasonably expect the Owlet Smart Sock to be at least as accurate as hospital grade pulse oximeters” and that Owlet took advantage of “consumer expectations by their use of hospital grade and similar terminology in their advertisements.”

Amendment would be futile. Plaintiffs didn’t sufficiently allege differences in accuracy and reliability between medical pulse oximeters and consumer products incorporating pulse oximeter technology—let alone between medical pulse oximeters and the Smart Sock or between other consumer products incorporating pulse oximeter technology and the Smart Sock. They also failed to allege that Owlet’s failure to disclose “frequent and unnerving false alarms, inaccurate readings, and complete failure to detect and alert to abnormal oxygen levels and heart rates” was material, “because it is not clear what the disclosure means, and thus whether it differs from what a reasonable consumer would expect from a consumer product incorporating pulse oximeter technology.” The magnitude and persistence of alleged problems with accuracy and reliability were not specified. Was the Smart Sock inaccurate twice in two weeks, twice in one week, or something else? Based on the allegations, it was impossible to compare that with what a reasonable consumer would expect from pulse oximeter devices.

Cherry-picking consumer reviews didn’t help. Most of the reviews didn’t distinguish among false alerts and other errors, or indicate expectations about medical pulse oximeters—although plaintiffs sought to omit one reviewer’s statement that “[p]ulse oximeters in the hospital also have false alarms all the time, not sure why I thought this would be any different.” Anyway, the reviews were “far from a representative sample.” On Owlet’s own site, the Smart Sock had more than 3,226 reviews, with 2,489 five-star reviews and an average rating of 4.6 stars. On Amazon.com, the version of the Smart Sock used by Ruiz has more than 5,250 ratings, with 4,013 5-star ratings, 1,658 5-star reviews, and an average rating of 4.5 stars. The court said it would’ve taken judicial notice of these facts, which strikes me as troubling, given the well-known problems with fake reviews. What would the judicial notice be, exactly?

"ethical" fur sourcing claims not puffery

Lee v. Canada Goose US, Inc., 2021 WL 2665955, No. 20 Civ. 9809 (VM) (S.D.N.Y. Jun. 29, 2021)

Lee sued Canada Goose alleging misrepresentations about the methods used to procure coyote fur for certain Canada Goose jackets:

“The Canada Goose Fur Transparency StandardTM is our commitment to support the ethical, responsible, and sustainable sourcing and use of real fur”;

• “The first traceability program to cover the wild habitat, it ensures that all fur sourced by Canada Goose is in accordance with the Agreement of International Humane Trapping Standards (AIHTS) in Canada and the Best Managed Practices (BMP) in the United States, and is fully traceable throughout the supply chain”; and

• “The standard certifies that we never purchase fur from fur farms, never use fur from endangered animals, and only purchase fur from licensed North American trappers strictly regulated by state, provincial and federal standards.”

Lee alleged that these statements suggested that the fur-sourcing practices used by Canada Goose trappers “prevent the infliction of extreme pain or distress on animals trapped for its fur products” when they do not. In reality, according to Lee, “Canada Goose’s suppliers use cruel methods that cause strangulation and broken bones to coyotes and other animals who are inadvertently trapped and discarded,” specifically leg traps and snares, in contravention of its “ethical” and “sustainable” language. Even alternatives to traditional leg traps allegedly cause “severe distress and injuries,” with long-term effects for animals released after trapping. Likewise, studies on the use of snares and leghold traps allegedly indicate that up to 67% of the animals caught in the traps are not the intended targets.

As to the AIHTS and BMP standards, Lee alleged that the claims were misleading because “these standards themselves authorize inhumane trapping practices that reasonable consumers would perceive as neglectful and unduly harmful.” AIHTS standards allegedly tolerate traps in which up to 20% of animals tested demonstrate physical and emotional suffering, while BMP accepts 30%. Neither bar leg traps or snares, and while AIHTS standards require that any device used to kill animals must render them “irreversibly unconscious within 300 seconds,” snares do not consistently accomplish that, and the ones who don’t die immediately “suffer painful injuries including dehydration or starvation, compounded by the fact that in many cases snares may be left unchecked for lengthy periods of time.”

Likewise, Canada Goose’s statements about licensure of its trappers and compliance with governmental regulations were also allegedly misleading: Canada Goose states that it “only purchase[s] fur from licensed North American trappers strictly regulated by state, provincial and federal standards,” but many places have no relevant licensing or regulation, and Canada Goose didn’t exclude fur from those places. Anyway, licensing from the North American Fur Industry Communications group is “simply a matter of taking a training course on conservation and trapping systems, and then purchasing the license.”

The court dismissed the claims with respect to some statements, but not with respect to “ethical, responsible, and sustainable sourcing” which was plausibly alleged to mislead a reasonable consumer. But statements about compliance with AIHTS and BMP standards, and sourcing from licensed fur trappers regulated by state, provincial, and federal standards, were “accurate and therefore unlikely to mislead,” which is not really what “misleading” means.

It was not enough to allege that the AIHTS and BMP standards were too low, or that licensing for trappers was too minimal, without alleging that Canada Goose didn’t comply with those standards or didn’t only work with licensed trappers. Because accurate claims generally aren’t misleading, these weren’t. [This result may be right, but the reasoning reads “misleading” out of the standard, replacing it with “false.” Sigh.]

Nor was it false to claim they worked with “North American trappers strictly regulated by state, provincial and federal standards” when there were no US federal standards for trapping—Canada is also a federal system and the word could refer to federal laws in Canada.

However, Canada Goose’s purported commitment to “ethical” fur sourcing could be misleading because Canada Goose obtains fur from trappers who use allegedly inhumane leghold traps and snares. And this was material because plaintiff alleged that reasonable consumers consider “animal welfare” to be an important factor in whether a product is “ethically produced,” and that consumer-perception research indicates that terms such as “sustainably produced” are perceived as signaling compliance with “higher animal welfare standards.” These weren’t puffery: “the ethical, responsible, and sustainable sourcing and use of real fur” was measurable and discernable, not “outrageous” or “generalized.”

No standing for injunctive relief, though.

Defendant's survey too flawed to avoid class certification in "rapid release" case

Bailey v. Rite Aid Corp., 338 F.R.D. 390, 2021 WL 1668003, No.. 4:18-cv-06926 YGR (N.D. Cal. Apr. 28, 2021)

Bailey brought claims over Rite Aid’s marketing of its over-the-counter acetaminophen gelcaps as “rapid release.” Studies allegedly show that “traditional, non-rapid release acetaminophen products can be equally effective in the same, if not faster, time period than its Rite Aid rapid release products,” but Rite Aid still charged a premium. The court reasoned that Bailey’s theory of economic harm was predicated on consumers having been misled into thinking that the Rite Aid gelcaps are faster-acting than Rite Aid tablets “by virtue of having compared the labels and prices of both products,” so “only consumers who purchased Rite Aid gelcaps at brick-and-mortar Rite Aid stores could have suffered the economic injury alleged in the FAC.”

"rapid release" results

FWIW, my search for “rapid release acetaminophen” on Rite Aid’s website actually offered me non-rapid release versions to compare, so I have questions about this conclusion, but Bailey conceded the issue at the hearing and limited the proposed class to in-store purchasers.

The court certified a damages class, rejecting Rite Aid’s objections to Bailey’s expert Silverman, who testified based on advertising experience and not based on a specific survey of Rite Aid gelcaps consumers. “[A]n expert who offers testimony on the question of whether a reasonable consumer is likely to be deceived by an allegedly misleading statement, or whether a reasonable consumer would find such a statement to be material, is not required to conduct a consumer survey if his or her testimony is otherwise reliable.”

Rite Aid’s own survey purported to show lack of deception/materiality, but the survey “suffers from significant flaws that detract from its persuasiveness as evidence that the issue of likelihood of deception cannot be resolved with common proof.” One part of the survey asked past consumers of Rite Aid gelcaps to select from among twenty-three reasons for why they purchased the product, but none of the twenty-three options was “rapid release.” Nor did they describe attributes consistent with Bailey’s theory of liability, such as “faster-acting” or “works faster.” These closed-ended questions didn’t offer respondents the option to select a response that is consistent with Bailey’s theory of liability. Other closed-ended questions in the survey had the same flaw; even when they gave respondents the options of choosing that the product “is fast release,” they didn’t allow respondents to answer in ways indicating a comparison with other products. Nor did the images used allow a survey respondent to compare the prices and labels of the Rite Aid gelcaps with those of the Rite Aid tablets.

Rite Aid also argued that the statement wasn’t actually false, because it just meant the speed at which the gelcaps dissolved relative to the FDA’s standards for “immediate release” dissolution. But “Rite Aid points to no evidence showing that consumers of Rite Aid gelcaps were uniformly aware of the FDA’s standards for immediate dissolution and uniformly interpreted the ‘rapid release’ statement at issue in light of such standards.”

Likewise, given the survey flaws, the court wasn’t convinced that it showed that consumers didn’t have a common understanding of the term “rapid release.” Plus, the plaintiff wasn’t required to establish a uniform interpretation at the class certification stage.  

LinkedIn dodges UCL claims because big businesses aren't covered plaintiffs

Topdevz, LLC v. LinkedIn Corp., 2021 WL 3373914, No. 20-cv-08324-SVK (N.D. Cal. Aug. 3, 2021)

Plaintiffs, on behalf of a putative class of advertisers, alleged that LinkedIn overstates the level of actual user engagement with ads on its platform in order to charge premium rates to advertisers. Every advertiser “agree[s] to pay on the basis and at the rate shown when a campaign, order or other purchase was submitted … e.g., price per impression, click” or other pricing options. LinkedIn does not provide advertisers with access to raw data regarding which users viewed their ads, their level of engagement, or whether the users are real humans or automated bots. It provides various metrics, such as “reach metrics,” which purport to measure the number of impressions, views, and clicks.

In August 2020, LinkedIn discovered that its video ad metrics for Sponsored Content ads may have been inflated: it was counting views in the app even when the user merely scrolled past the video and the video was only playing offscreen. A couple of months later, LinkedIn notified the affected advertisers and provided them with makegoods.

Plaintiffs brought UCL and common-law claims.

Some courts have held that “where a UCL action is based on contracts not involving either the public in general or individual consumers who are parties to the contract, a corporate plaintiff may not rely on the UCL for the relief it seeks.” But other courts have only excluded “sophisticated corporations or large corporations,” a rule the court applied here (and which might seem to preclude class treatment even if these claims continue). The complaint alleged that “[m]ost LinkedIn advertisers are small businesses.” It described each named plaintiff as a corporation or limited liability company, and didn’t plead facts that they were small and/or unsophisticated entities, seeking to represent a class of all persons or entities who paid for ads on LinkedIn’s platform, without limitation as to size or sophistication.

Other courts have held that “[t]he relative size of the plaintiff companies … is secondary to the analysis of whether, as a result of the alleged unfair or fraudulent business practice, consumers are adversely affected.” But the allegations of harm to the public were vague and conclusory. Thus, the UCL complaint was dismissed with leave to amend, apparently allowing repleading on either theory if appropriate.

Also, their claim for restitution under the UCL failed because they couldn’t show that they lacked an adequate remedy at law, following Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir. 2020), in which held that “a federal court must apply traditional legal principles before awarding restitution under the UCL and CLRA” and “state law cannot expand or limit a federal court’s equitable authority.”

Other claims didn’t fare much better.

failure to disclose environmental risks in MTBE data sheets not actionable

In re Methyl Tertiary Butyl Ether (“MTBE”) Products Liability Litig., 2021 WL 3371938, No. 1:00-1898, MDL 1358, No. 14 Civ. 6228 (VSB) (S.D.N.Y. Aug. 3, 2021)This MDL litigation centers on contamination—actual or threatened—of groundwater from various defendants’ use of the gasoline additive MTBE and/or tertiary butyl alcohol, a product formed by the breakdown of MTBE in water.

I will focus on the court’s holding that the commonwealth of Pennsylvania failed to make specific allegations of deceptive and misleading conduct that are actionable under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL).

Pennsylvania alleged, that in connection with the marketing, distribution, and sale of their products, certain defendants prepared and distributed material safety data sheets (MSDSs), which are documents used by manufacturers of hazardous materials to address OSHA hazard communication requirements. The relevant defendants allegedly knew that MTBE was highly soluble in water and mobile, and that MTBE contamination of water was therefore difficult to remediate. Despite this, they published MSDSs between 1986 and 2006 that suggested that MTBE gasoline could be handled just like traditional gasoline, according to the same standard of care. However, internal documents acknowledged, e.g., that ethers “are much more water soluble than hydrocarbons and will have a tendency to dissolve in – groundwater if allowed to leak or spill” and that they are more difficult to clean up than non-oxygenated gasoline. Thus, the document continued, “facilities handling ethers and ether/gasoline blends must be designed and operated to insure (1) low likelihood for spills and leaks, (2) early detection of leaks when they occur, and (3) rapid repair and cleanup when leaks are found.” And an e-mail to Shell Oil from its hydrologist detailed the risks to groundwater posed by MTBE and cautioned that “MTBE and similar oxygenates should not be used at all in areas where groundwater is a potential drinking water supply. If it is used, engineering design and site operations ... should be carefully developed to minimize the potential for a release.”

But in public statements, the relevant defendants allegedly promoted MTBE gasoline as “clean burning gasoline good for the environment,” failed to disclose “the significant environmental dangers that MTBE and MTBE gasoline posed to the public and private water supplies in the event of a spill or leak,” and “disparage[d] ethanol oxygenated gasoline.”

A UTPCPL claim may only be based on an omission if the maker of the statements has a duty to disclose, and Pennsylvania didn’t sufficiently allege such a duty. Nor was there a clear statement in the MSDSs that MTBE gasoline “could be handled according to the same standard of care as ordinary gasoline.” Nor did the Commonwealth provide “any context or explanation to suggest that the text could mislead a downstream purchaser or customer into believing that regular gasoline and MTBE gasoline could be handled in the same manner.” The Commonwealth didn’t compare the MSDSs for regular gasoline to support its argument for implied falsity. “Indeed, the example MSDSs advise the handler to ensure the MTBE gasoline does not enter the water supply; the Commonwealth has not provided any allegations or context as to why these warnings were insufficient or misleading.”

At the time of briefing, there was also an issue of whether the MSDSs were “advertising,” but the Pennsylvania Supreme Court subsequently held that “subsection (v) ... encompass[es] activities other than ‘advertising,’ ” and that a statement need not have impacted a purchasing decision to be actionable. Commonwealth by Shapiro v. Golden Gate Nat’l Senior Care LLC, 194 A.3d 1010, 1028 (Pa. 2018) (accepting allegations that a nursing home made representations to individuals after they had become residents of facility about “the extent and quality of services to be provided”).

What about public statements about ethanol and MTBE? An allegedly disparaging ad placed by the American Petroleum Institute disparaging ethanol as “Government Gas” was protected by Noerr-Pennington: it “exhorts readers to contact their legislators and ask them to vote against specific amendments to the Clean Air Act.” It wasn’t relevant that this served API’s commercial interests, or that it allegedly contained misrepresentations; the First Amendment still precluded liability. There was nothing to distinguish UTPCPL “from the many Pennsylvania state law causes of action that courts have found to be subject to Noerr-Pennington. Moreover, courts have applied the doctrine to consumer protection statutes in other states.” This was not commercial speech: the Supreme Court specifically held in Noerr that “a publicity campaign to influence governmental action falls clearly into the category of political activity.”

What about statements to newspapers about “cleaner” gasoline? E.g., “[T]he future is in gasolines, in fuels that are more environmentally compatible”; Shell “came to the conclusion that the customer ... really wanted an environmentally enhanced fuel”; the MTBE blend was “an important step in the right direction for cleaner air” that it “reflect[ed] Shell’s commitment to make environmental considerations a priority in development of our new products and processes.” These weren’t false representations of fact about MTBE or ethanol, or disparaging ethanol—they were vague, nonactionable puffery.

Found on road deceptive: "track car" claim plausibly misleading

Tershakovec v. Ford Motor Co., --- F.Supp.3d ----, 2021 WL 2700347, No. 17-21087-CIV-MORENO (S.D. Fla. Jul. 1, 2021)

In this multistate class action based on purchases of the Shelby GT350 Mustang, the court granted Ford summary judgment on some claims and certified nine state law classes and Magnuson-Moss Warranty Act classes in Texas and California. Background:

The Shelby Mustang is a performance version of the standard Mustang. It is several cuts above both the base version of the Mustang and the Mustang GT (which has a V8 engine). Only true car enthusiasts opt for the Shelby GT350, and they do so mainly for its racing and track capabilities. In fact, the name “Shelby” comes from Carroll Shelby, a race car driver and designer for Ford in the mid-20th century. Indeed, Ford touted the Shelby as “an all-day track car that is also street legal.”

There were five packages: Base, Technology, Track, R, and R technology. The two first didn’t come with coolers that prevent the engine from overheating at consistently high rotations per minute, allowing the driver to drive faster for longer. In order to prevent overheating in the lower Shelbys, Ford programmed those packages to rapidly decelerate when engine temperature got too high. This “Limp Mode” was an intentional design choice; the coolers were removed from those two packages before launch, allegedly to increase profit margins.

“Plaintiffs allege that many of their vehicles unexpectedly entered Limp Mode, both on the track and the open road. The Shelbys are essentially unusable for sustained track driving—the main reason many Plaintiffs bought the car.” Plaintiffs argued, in essence: “1) Ford advertised all Shelbys as track-capable, the advertising induced Plaintiffs to purchase the car, and then the car did not perform as advertised. 2) The consistent occurrence of limp mode is a breach of Ford’s express and implied warranties.”

Ford argued that its ads were puffery.

It advertised the entire Shelby lineup as “track-ready” and “track-capable.” And it that knew race-track enthusiasts were the Shelbys target audience. For example, “[i]n a track day invitation sent to all Shelby owners post-purchase, Ford’s marketing manager wrote that the GT350 had ‘exceptional race track capabilities, we’re sure that’s one of the reasons you purchased your GT350—perhaps the main reason.’” Other advertising materials include: “an all-day track car that’s also street legal,” “tested endlessly on the most challenging roads and tracks in the world,” “we wanted to build the best possible Mustang for the places we most love to drive – challenging back roads with a variety of corners and elevation changes – and the track on weekends,” and “track-focused.”

Still, Ford argued that the claims were puffery because no one really agrees on what “track-capable” means and because its ads differentiated the Base and Tech models from the others by lavishing much more “track” praise on the higher end models and specifically warning consumers that Base and Tech models would need aftermarket coolers.

Puffery: “At the summary judgment stage, this argument, much like the Mustangs’ engines, blows smoke.” Although individual plaintiffs offered different definitions of what the term meant to them, this was a question of fact for a jury. For example, one press release touted the Shelby GT350s’ transmission as “developed with all-day track capability and high-RPM capability at the forefront.” “This statement is specific—it focuses on the car’s transmission—and it is empirically verifiable.” The court thought Ford’s argument was “ironic”: “Racing is an activity obsessed with metrics and objective verification—victory is often decided by tenths of a second and Ford relentlessly tests its performance vehicles so that they meet the expectations of their target customer, considered ‘gearheads.’” Internal Ford documents show “that the Base/Tech Shelbys caught fire after being put through their paces by Ford Engineering, and afterwards, the engineering team informed the marketing team that it was concerned that the Base Shelby was not ‘track durable’ nor ‘appropriate for track use.’”  If Ford thinks those terms are objective, a reasonable jury could agree.

Did the ads as a whole avoid deceptiveness by warning consumers about the need for aftermarket coolers and specifying elsewhere that certain non-Base and non-Technology models were the “track day specialists”? Again, a reasonable juror could find that a reasonable consumer would be misled by the “net impression” created by Ford’s advertising. The recommendation to add coolers if they planned on “sustained high speeds or track day use” “came on page 25 of the Supplemental Owner’s Guide—a pamphlet only available in the glove box of the car one has already purchased.” (Ford argued that the Guide was available online pre-purchase, but that was disputed—and by the way, not the kind of thing you should have to read the supplemental manual to find out.) And while a Ford marketing employee told one customer that if he planned to use his Technology package Shelby on the racetrack for “sustained lap sessions, we would still recommend that you purchase coolers,” that was one consumer, not the general consuming public.

Nor did marketing the R model as “the most track-ready” and the Track model as the “track-day specialist” while staying silent on the Base and Technology models’ track capabilities avoid deception. “With all due respect to American engineering, Plaintiffs surely knew a Ferrari would be better suited for intense track driving than the Base Shelby, but they were nonetheless entitled to rely on Ford’s representation that its car was an ‘all-day track car.’”

The jury would have to decide whether individual plaintiffs relied on these claims, even though many saw online reviews suggesting potential problems or had other possible sources of knowledge. Ford argued that plaintiffs who took delivery after February 2016 could not reasonably claim to be misled “because of information and rumors available on Internet forums that the cars at issue could not do track days. Plainly, this argument is not a summary judgment winner. … [P]osts on Internet forums are not sufficient evidence to put the question beyond the debate of a jury.”

Omission claims: There was not enough evidence that Ford knew that Limp Mode would occur on public roads under normal driving conditions. One Ford Performance parts manager was aware of a consumer report that Limp Mode occurred on a public road; a 2014 internal email from Ford’s Chief Functional Engineer warned not to send cars without coolers to Germany (likely due to the manner of driving on the autobahn); and Ford added standard coolers in later model years. “Of all the evidence in this case, it is telling that there is only one internal email that mentions Limp Mode on public roads; and even then, the email merely relays a single, unverified consumer report with no other diagnostic information.” This wasn’t sufficient to show Ford’s knowledge that Limp Mode would begin under normal driving conditions.

“[P]erhaps 12 examples could provide a sufficient factual assertion in the proper case. But here, not only is it a very small number relative to the ‘hundreds of thousands’ of vehicles that supposedly have this defect,” but plaintiffs also failed to offer context about how many complaints are normal. “Just as unverified internet reports could not give consumers objective knowledge of Limp Mode, they are not sufficient to impute to Ford Management actual knowledge of Limp Mode occurring on public roads.”

Class certification: Did individual issues about each class member’s knowledge of the truth about his car “swamp” the common questions about Ford’s conduct” Plaintiffs argued, first, that materiality, reliance, and causation can be proven on a class wide basis with reference to an objective consumer standard. Second, the depositions of named plaintiffs didn’t show that they understood that the lack of coolers specifically meant the Base and Tech GT350’s were incapable of Track Days, or that they knew the truth from Ford itself. The court agreed with the second argument. “[S]urely a reasonable consumer cannot have been expected to search the Internet for unverified reports of problems she did not know existed.” Although plaintiffs may have had multiple reasons for buying their cars, Ford’s representations were uniform. “In this particular predominance inquiry, the Court finds that the more relevant considerations are Ford’s uniform course of conduct and the dearth of evidence pointing to individual reliance issues that stem from Ford’s communications.”

There might be individual affirmative defenses, but “[t]he general rule, regularly repeated by courts in many circuits, is that courts traditionally have been reluctant to deny class action status under Rule 23(b)(3) simply because affirmative defenses may be available against individual members.”

Damage theories: Although plaintiffs calculated their damages in two different ways (benefit of the bargain and fixing the cars), that didn’t violate Comcast. “[A]ntitrust law requires a plaintiff to specifically explain which effect of a defendant’s conduct makes the conduct unlawful and calculate the damages attributable only to that isolated impact. The fraud laws at issue in this class action impose no such requirement.” The alleged harm was that plaintiffs overpaid for their cars. “On the other hand, … the harm suffered by antitrust plaintiffs by each different antitrust impact is legally separable and distinct and requires a damages calculation tied to its theory of liability.” So, because plaintiffs’ damage model calculated how much a class member “overpaid” for his vehicle due to Ford’s misrepresentations and omissions, it was “the translation of the legal theory of the harmful event into an analysis of the economic impact of that event,” and thus satisfied Rule 23(b). Either version of damages could be applied classwide. Thus, the court certified state consumer protection classes where state law allowed class-wide proof to win a presumption of reliance and causation.

However, unjust enrichment couldn’t be evaluated classwide.

Certification: statutory and common law fraud classes in California, Florida, Illinois, New York, and Washington; statutory fraud classes in Missouri and Texas; common law fraud classes in Oregon and Tennessee; and implied warranty and Magnuson-Moss classes in California and Texas.

Rogers v Grimaldi doesn't apply to alcohol, but Peaky Blinders still can't get injunction

Caryn Mandabach Prods. Ltd. v. Sadlers Brewhouse Ltd., 2021 WL 2497928, No. CV 20-10220-CBM-(JEMx) (C.D. Cal. May 19, 2021)

Mandabach produces the TV series Peaky Blinders, and it alleged that it owned trademarks and other intellectual property of the show “and certain quotations/sayings/phrases from the show.” Defendants allegedly sold three alcoholic beverages under the name “Peaky Blinder” and used quotations/sayings/phrases from the show. Mandabach sued under §43(a) and coordinate state law claims and sought cancellation of a trademark registration.

one of the beverages

Defendants argued that their use “communicates messages and ideas to consumers such as Defendant Sadler’s historical connection to the real Peaky Blinders gang,” so Rogers should apply. Defendant Sadler’s managing director declared she “felt that Peaky Blinder was an appropriate name” for Sadler’s new dark beer because the Peaky Blinder gang’s “well-known dark history” “connected” with the dark beer and she was interested in naming the beer after the Peaky Blinder gang in light of her family and Sadler’s history with the gang.

The court rejected the argument: “Such evidence does not demonstrate Defendants’ use of the mark conveys an idea or point of view, and therefore the Rogers test does not apply.” Of course, this is both the right result (the name of the beer is commercial speech on a nonspeech product) and completely bonkers reasoning (the Supreme Court has twice held in the past few years that trademarks often convey ideas and points of view). If we got rid of the bizarre idea that Rogers was about artistic works and correctly labeled it as being about commercial speech, courts would do much better.

Did Mandabach have valid marks? The dictionary definitions of the words “Peaky” and “Blinders” were not dispositive.  As applied to a TV show about a group of persons named the Peaky Blinders, it was descriptive or suggestive. (That doesn’t seem a helpful conclusion, but the court seems to think that suggestive terms must have secondary meaning to be protected.) And Mandabach failed to show actual association of the TV show with a particular source. It submitted 14 social media posts “which it contends shows consumers and retailers attributed a particular source to Defendants’ liquor and Plaintiff’s television show.” But there was no evidence that these were actual purchasers of Sadler’s products, and only one actually stated that they came from the same source (“I’m a MASSIVE fan of the Peaky Blinders TV series so I had to try their Irish Whiskey and give it a review.”). By contrast, another asks, “Are you a Peaky Blinders fan? Check out this awarding [sic] winning gin and whiskey from @sadlersbrewco!” That didn’t show that the person thought they both came from the same source.

What about other evidence of sales etc.? Mandabach submitted evidence demonstrating the show ranks as a top-5 Netflix original drama upon the release of each new season, a “teaser” trailer for the fifth season of the show has been viewed 2.5 million times, and the show has 4 million followers on in its Instagram account, 2.6 million followers on Facebook, and 686,000 followers on Twitter. There was also coverage by The New York Times, The Wall Street Journal, LA Times, Rolling Stone, Variety, Vox, and Mashable. But this didn’t show source significance. And five years of use in the US was insufficient to show secondary meaning.  Nor did Mandabach show its use was exclusive, so it didn’t show likely success on secondary meaning.

Comment: Meanwhile we have courts saying that even generic terms can be the foundation of §43(a) claims and therefore allowing claims based on part number comparisons to go forward.  

Anyway, Mandabach also didn’t show likely confusion. The mark was weak; the goods were not proximate; the marks were similar; one social media instance of confusion was insufficient to show likely confusion; marketing channels didn’t favor likely confusion because everyone uses the internet and social media; cost below $25 favored confusion.

As for intent, an article from Sadlers’ sales director about Peaky Blinder Beer said: “It’s been selling like mad and done exceptionally well; (2) The idea came from our managing director Chris Sadler, who is also head brewer. To be honest, the idea was inspired. And with a second series of Peaky Blinders set to hit the screen in September, its popularity is only likely to increase; and (3) we are confident it will be a success because of the popularity of the television programme.” But that didn’t go to intent in initially selecting the mark. The managing director declared “[a]t the time that I chose the name Peaky Blinder, I had never heard of [Plaintiff’s] Peaky Blinders television program ... and no one at Sadler’s was familiar with the program as far as I was aware,” and further declares she “felt that Peaky Blinder was an appropriate name” as discussed above.

Product line expansion: Though Sadler’s was unlikely to expand to TV, Mandabach’s commercial director declared “there has been great interest from third parties for licenses for wines and spirits,” in May 2020 Plaintiff executed a license agreement with a third party for red wine featuring the Peaky Blinders mark, and Mandabach “has been unable to complete a deal” with potential third-party licensees “for other types of alcohol and spirits ... as a result of the dispute with Defendants and their continued unauthorized use of the Peaky Blinders” marks. That favored a confusion finding.

On balance, Mandabach failed to make a “clear showing” of a likelihood of confusion at this stage.

False advertising/passing off: Same basic problems.

Even if the rebuttable presumption of irreparable harm applied, Mandabach had actual knowledge of the use of the mark in April 2018, when its licensee sent a warning letter to Sadler regarding its purported infringement. But Mandabach waited until November 2020 to sue and moved for a preliminary injunction only in March 2021. This delay demonstrated an absence of irreparable harm.