Transformative work of the day, Old Spice edition

Or New Spice, according to the username: this YouTube video offers "the grades your grades could be like."

sampling as political speech

Did the Decline of Sampling Cause the Decline of Political Hip-Hop?  At the Atlantic, Erik Nielson suggests that it might have been a causal factor.  “After all, sampling provided an important engagement with musical and political history, a connection that was interrupted by Grand Upright and the cases after it, coinciding with a growing disconnect between rap music and a sense of social responsibility.”

Eric Goldman on self-publishing our Advertising Law casebook

Forbes post up now.

It's not about the drugs: Lance Armstrong lawsuit fails

Stutzman v. Armstrong, No. 2:13–CV–00116, 2013 WL 4853333 (E.D. Cal. Sept. 10, 2013)

 

Plaintiffs sued Lance Armstrong, his publishers, and related defendants for violations of California’s consumer protection laws (and related state torts) based on alleged misrepresentations in and surrounding Armstrong’s books, including It’s Not About the Bike: My Journey Back to Life (Penguin), Every Second Counts (Random House), The Lance Armstrong Program: 7 Weeks to the Perfect Ride, Images of a Champion, and Comeback 2.0: Up Close and Personal.  The court found that California’s anti-SLAPP law applied and that plaintiffs failed to survive it.  The first two were best-sellers, and allegedly enabled Armstrong to publish and profit from the rest.

Defendants’ promotional efforts allegedly represented the books as truthful and honest works of nonfiction biography/autobiography when defendants knew or should have known that they weren’t.  Plaintiffs alleged that they wouldn’t have bought the books, or would’ve paid less for them, had they known the truth about “Armstrong’s lies and misconduct and his admitted involvement in a sports doping scandal that has led to his recent public exposure and fall from glory.”  Defendants’ promotional efforts were allegedly critical to Armstrong’s success, portraying him as a devoted advocate for cancer patients. Thus, an integral part of maintaining and growing the Lance Armstrong “brand” “was to vociferously and publicly deny any charge that Armstrong used performance enhancing drugs.”  Random House and Penguin allegedly stuck their heads in the sand on the merits of the doping charges so that they could keep making money.

California’s anti-SLAPP law makes it harder to maintain lawsuits arising from any act in furtherance of the right of petition or free speech in connection with a public issue.  Plaintiffs have to establish a probability of prevailing to survive a special motion to strike once the defendant makes a threshold showing of coverage.  This requires a sufficient prima facie showing to sustain a favorable judgment if the plaintiff’s evidence is credited, but a court shouldn’t weigh the credibility or comparative strength of competing evidence. 

Here, defendants’ conduct was “in connection with a public issue or an issue of public interest,” thus falling into one of the protected categories.  Though the anti-SLAPP law doesn’t define public interest or public issue, and though not everything the public finds watchable is therefore of “public interest,” the court concluded that Armstrong’s life story was.  One set of California cases has identified three categories of public issues: (1) statements “concern[ing] a person or entity in the public eye”; (2) “conduct that could directly affect a large number of people beyond the direct participants”; (3) “or a topic of widespread, public interest.”  Statements about Armstrong fit (1) and (3), given Armstrong’s fame and his books’ bestseller status.  Other California case law has a somewhat more restrictive test, distinguishing public interest from mere curiousity and requiring that the issue be of concern to a “substantial number” of people, not a relatively small, specific audience.  Also, “there should be some degree of closeness between the challenged statements and the asserted public interest; the assertion of a broad and amorphous public interest is not sufficient.” And a person “cannot turn otherwise private information into a matter of public interest simply by communicating it to a large number of people.”  But even under that more restrictive test, defendants’ speech still related to the public interest.  The connection between the challenged statements—statements promoting the book and denying Armstrong’s drug use—was direct.  A private controversy, even one between famous people, isn’t enough, but Armstrong’s books weren’t just about the personal details of his life.  They dealt with his public cycling career and cheating in the Tour de France—public activities, “which are the very things that interest people about [him].”

Plaintiffs argued that the anti-SLAPP law didn’t shield speech that’s not constitutionally protected because it’s in furtherance of illegal activity.  But “conduct that would otherwise come within the scope of the anti-SLAPP statute does not lose its coverage simply because it is alleged to have been unlawful or unethical.”  Instead, the speech loses protection “only if it is established through defendant’s concession or by uncontroverted and conclusive evidence that the conduct is illegal as a matter of law.”  Here, plaintiffs failed to provide conclusive evidence that Armstrong’s doping denials, the content of the books, and the promotional materials for the books were themselves criminal.  Also, the crime exception requires the protected conduct at issue to be itself criminal.  Armstrong may have broken the law in smuggling/trafficking drugs, but that’s not the conduct at issue—it’s his lies about his use of drugs, which aren’t criminal conduct.

In 2003, the legislature amended the anti-SLAPP statute to exclude from its coverage “any action brought solely in the public interest or on behalf of the general public” and certain causes of action arising from commercial speech.  However, these exclusions don’t apply to “[a]ny action against any person or entity based upon the creation, dissemination, exhibition, advertisement, or other similar promotion of any dramatic, literary, musical, political, or artistic work, including, but not limited to, a motion picture or television program, or an article published in a newspaper or magazine of general circulation.”  Hilariously and perhaps uniquely, given the history of discrimination against movies, the court spends a bit of time finding that books are as protected by this provision as movies are, even though they aren’t specifically listed and even though mostly the proponents of the amendment talked about movies and TV.  (California!)

The court then turned to whether plaintiffs showed a reasonable probability of prevailing on their claims.  They didn’t.

First, defendants argued that the UCL, FAL and CLRA failed because California’s consumer protection laws govern only commercial speech.  Under Bolger, speech can be characterized as commercial when it’s admittedly advertising, references a specific product, and is spoken with an economic motive.  Commercial speech inextricably intertwined with otherwise fully protected speech becomes fully protected.  There were three types of speech at issue here: (1) statements in the books; (2) promotional statements about the books, including copy on the flyleaves and covers; and (3) statements about Armstrong’s drug use that didn’t specifically reference or promote the books.

Statements in the books weren’t commercial speech; they did more than propose a commercial transaction.  Plaintiffs argued that the books weren’t entitled to full First Amendment protection because that’s not how they were sold—they were part of a branding effort. The court didn’t agree: books are core First Amendment-protected expression.

Likewise, the statements about Armstrong’s use of drugs did more than propose a commercial transaction; they didn’t propose a commercial transaction at all.  Also, they weren’t ads and didn’t refer to a specific product. The court was unwilling to consider Armstrong himself the brand or product at issue.  Though defendants likely had underlying economic motives from these statements, that was insufficient to make them commercial speech.

Finally, what about statements promoting the books?  These included claims that each of the books was a “nonfiction ‘biography’ “ about the “Tour De France Winner” or the “Five Time Tour de France Winner.”  The court held that the speech did more than merely propose a commercial transaction because it described the books’ contents and authors.  (If the subject of the offer hadn’t been a book, describing its features would be part of “merely” proposing a commercial transaction—proposing a transaction is more than “I’ll sell you X for $Y” and certainly includes factual claims about what the X on offer is.)  Here, the statements had components of both noncommercial speech and commercial speech, seeking both to entice and to inform.

For some reason focusing on language about whether a statement is “admittedly” an ad, the court found that defendants vehemently denied that the statements on flyleaves etc. were ads, thus weighing against a finding that they were commercial speech. (When the defendant is fighting the commercial speech characterization, this inquiry would be better understood as whether a statement has a traditional advertising format; the defendant’s denial has no independent weight when denial is so beneficial for the legal characterization of its speech.)  The statements did refer to specific products and had an underlying economic motive.  But the fact that “books, newspapers, and magazines are published and sold for profit does not prevent them from being a form of expression whose liberty is safeguarded by the First Amendment.” Thus, the court didn’t give this last factor much weight.  Regardless, the commercial and noncommercial elements were inextricably intertwined.  “In short, the economic reality in this age of technology is that publishing companies and authors must promote the books they publish and write in order to sell them, if publishing houses are to continue to operate and books are to continue to be sold in paper and hard copies. As Plaintiffs themselves suggested at oral argument, it is nearly impossible to separate the promotional materials for the Books from the Books themselves.”  Thus, they too were noncommercial speech not covered by the UCL, FAL, and CLRA.

Fraud claims also failed.  The only statements specifically attributed to the publishers was that books were “biography” and “nonfiction,” and that Armstrong was the Tour de France “winner,” which was true even if the victory was later taken from him.  “Nonfiction” means based on true stories, not that every statement is true.  As Judge Kozinski wrote, “[s]peaking about oneself is precisely when people are most likely to exaggerate, obfuscate, embellish, omit key facts, or tell tall tales.”  The words “biography” and “nonfiction” aren’t “guarantees that the work contains only statements that are one hundred percent factual.”

As to the other individual non-Armstrong defendants, the plaintiffs didn’t plead reliance on their statements.

As for negligent misrepresentation, publishers “owe[ ] no duty to investigate the accuracy of the contents of the books it publishes,” given the risks of chilling First Amendment-protected speech. 

Plaintiffs were granted leave to amend, though, meaning that defendants weren’t entitled to attorneys’ fees and costs.

Sir Robin Jacob's new edition of Guidebook to IP

I had the pleasure of being paired with Sir Robin Jacob in Rochelle Dreyfuss & Jane Ginsburg's forthcoming volume on IP at the Edge; my contribution is about Barbie and copyright/trademark defenses. Sir Robin, Daniel Alexander QC and Matthew Fisher have just released the 6th edition of their Guidebook to Intellectual Property.

According to the publisher:

This is a unique book about Intellectual Property. It is aimed not only at law students studying the subject but also at interested users of IP - business people, inventors, scientists, designers and the like. It provides an outline of the basic legal principles which underpin and regulate the subject, educating the reader as to the shape of the law. However, critically, it also gives insight into how the system actually works. . . . There are no footnotes to distract. Although cases are, inevitably, referred to they are explained in a pithy, accessible manner. The authors try wherever possible to be both serious and light-hearted at the same time. All major areas of IP - patents, trade marks, copyright and designs -are covered, along with briefer treatment of other rights and subjects such as breach of confidence, plant varieties and databases. . . .

Here's the purchase info for those interested, including a discount:
270pp Pbk 9781849463256
RSP: £19.95 / €26 / US$40 / CDN$40
Discount Price: £15.96 / €20.80 / US$32 / CDN$32

Order OnlineUK, EU, ROW: If you would like to place an order you can do so through the Hart Publishing website. To receive the discount please quote the reference ‘GIP6’ in the voucher code field and click ‘apply’.
US: If you would like to place an order you can do so through the Hart Publishing website. To receive the discount please quote the reference ‘GIP6’ in the special instructions field on the credit card screen.

lawyer lacks Article III standing against ADR provider

Stahl Law Firm v. Judicate West, No. C13–1668, 2013 WL 4873065 (N.D. Cal. Sept. 12, 2013)

The court sua sponte ruled that it lacked Article III jurisdiction over this false advertising case, thus depriving it of the ability to rule on defendants’ anti-SLAPP motion (and to require fee-shifting). Judicate West is a provider of private dispute resolution services and sponsors neutrals, including retired judges such as defendant Di Figlia, to serve as mediators and arbitrators. Stahl alleged that defendants misrepresented their qualifications, experience, and reputation by failing to reveal a 2007 opinion of the Commission on Judicial Performance in which Di Figlia was issued a public admonishment.

Article III standing for false advertising under the Lanham Act exists “if some consumers who bought the defendant’s product under a mistaken belief fostered by the defendant would have otherwise bought the plaintiff’s product.”  Direct competition makes a strong showing that injury isn’t conjectural or hypothetical.  Plaintiffs can show that they compete with defendants for revenue/sales, or rely on “actual market experience,” including lost sales data or “probable market behavior” that establishes a likely injury by “creating a chain of inferences showing how defendant’s false advertising could harm plaintiff’s business.”  General factual allegations of injury may suffice at the pleading stage, but bare legal conclusions aren’t enough.

Here, the court held, there were only bare legal conclusions.  Stahl didn’t allege competition for the same business or any other theory of harm.  His allegations that they completed to provide legal services were conclusory because he didn’t allege the type of legal services he provided.  He did not allege that he competed or intended to compete for the same pool of customers: “those seeking to purchase alternative dispute resolution services.”  Nor did he adequately plead a chain of inferences showing how defendants’ alleged misrepresentations about their ADR services could cause him competitive harm.

Stahl argued that they were clearly competitors, since both offered their services in California and their offices were merely 20 miles apart (ah, the wide open spaces; cf. Best Cellars v. Wine Made Simple, finding that it was unclear at best that NYC’s Upper East Side and Upper West Side were in the same geographic market).  But geography isn’t everything.  “It would not matter if Plaintiff and Defendants were located in the same building if each were providing a different form of legal service and therefore were not in competition with each other.”

At oral argument, Stahl’s answers reinforced the court’s skepticism.  He said he was in the business of mediation, though his website didn’t target that business.  He stated that he made such offers in person, and had pursued mediation among other lines of business.  But his example of ADR that he’d done was, as far as the court could tell, representing one party in a mediation.  Representing a client in ADR isn’t the same as being an ADR service provider such as Judicate West.  Thus, Stahl failed to allege Article III injury and the complaint was dismissed with leave to amend.

The court noted that, if Stahl refiled, it would require him to satisfy Rule 9(b).  (Trademark plaintiffs aren’t required to do so under the Lanham Act, despite virtually identical statutory language; why sauce for the goose isn’t sauce for the gander puzzles me.)   Given that the court lacked subject matter jurisdiction, it also lacked the authority to award attorneys’ fees under the anti-SLAPP statute (would that even apply to a federal Lanham Act claim?).

It's not butter, it's Parkay ... but maybe the butter labeling rules apply

Allen v. ConAgra Foods, Inc., No. 13–cv–01279, 2013 WL 4737421 (N.D. Cal. Sept. 2, 2013)

“Is Parkay Spray more like Pam® or liquid butter? That is the question posed by this consumer fraud action.”  Allen alleged that ConAgra falsely marketed Parkay Spray as “fat free” and “calorie free” even though a 226 gram bottle of the butter-flavored spray contains 93 grams of fat and 832 calories. ConAgra moved to dismiss, arguing that federal regulations entitle food manufacturers to round down the fat and calorie content of their products when a single serving contains less than 0.5 grams of fat and 5 calories. Allen rejoined that ConAgra used artificially—and unlawfully—small serving sizes intended for non-stick cooking sprays such as Pam (one spray or .2 grams for cooking and five sprays or 1 gram for topping) in order to round its sprayable butter down to zero.  The complaint also alleged that the Parkay Spray bottle listed soybean oil and buttermilk as ingredients, without including an asterisk and disclosing the presence of fat in those ingredients, in violation of FDA regulations.

Allen alleged that ConAgra knew or should have known that its labeling was misleading, citing internet complaints that the label was deceptive, e.g.: “‘[t]his is exactly what the marketing of this product was supposed to do—make you believe ... that we are consuming less calories than we actually are.’”  Allen alleged that she bought Parkay Spray in reliance on the statements on the label and in ConAgra’s marketing, and paid a premium she wouldn’t have paid if she’d known the truth.

Allen conceded that FDA regulations controlled, but argued that ConAgra was in violation of them. The core of the parties’ dispute was the serving size.  ConAgra argued that its serving sizes were consistent with the FDA serving size table for adults, which sets forth the “reference amounts customarily consumed per eating occasion” from which the other labeling and content claim regulations flow.  Under the heading “Fats and Oils,” the reference amount for “spray types” is 0.25 grams.  That serving size renders the amount of fat in one and five sprays below .5 grams and therefore requires ConAgra to round the fat content down to zero and allows it to claim the spray is “fat free.”  The serving size had similar effects on the calorie content and rules.

Allen argued that the proper reference amount was instead provided by the “butter, margarine, oil, shortening” category, for which the reference amount is one tablespoon.  If that were the case, ConAgra wouldn’t be labeling Parkay Spray properly.

The court found that Allen adequately alleged that Parkay Spray was a liquid butter substitute.  ConAgra circularly argued that Parkay Spray belonged under “spray type fats and oils” because it was a spray, and because the FDCA defines butter as containing milk, cream, or both.  But the reference table category for butter also included margarine, oil, and shortening along with it, and also provided that the reference amount for imitation and substitute products “shall be the same as for the food for which it is offered as a substitute.” Imitation butter therefore belonged in the same reference amount category as butter. 

ConAgra argued that the reference amount for spray type fats and oils was more specific, thus trumped the more general reference amounts. But that only applies when regulations are in conflict, which wasn’t the case here.  Even if there were a conflict, nothing indicated that the “spray type” category was more specific than any other.  The court noted that an 8-ounce Parkay Spray bottle claimed to contain 1130 single-spray servings, which the court found difficult to imagine.  Allen also alleged that Parkay Spray wasn’t typically dispensed in a single spray.  “Relying on ConAgra’s own serving size definitions would defeat the purpose of the regulations’ insistence on objective and uniform food labeling.”  Also, the nonbinding label statement guidance for spray type fats and oils is expressed as servings per second of spraying; ConAgra argued that this was inapplicable because Parkay Spray is a manual pump, not an aerosol spray—but Allen plausibly alleged that the reason the guidance didn’t apply was not because Parkay uses a pump, but because Parkay is labeled and used as a topping and butter substitute and not as a cooking spray.

Allen alleged substantial support for the contention that Parkay Spray should be categorized with other imitation butter products.  The product label and website advertised it as a substitute for butter that shares butter’s “Fresh and Creamy Taste” without the negative health consequences. “The front of the Parkay Spray bottle is an image of corn on the cob. The serving sizes on the bottle are for cooking and for topping.”  The website advertised Parkay “Spreads” together, including the spray: “Get the buttery taste of Parkay on all your favorite foods with zero calories per serving! It’s the guilt-free way to top vegetables, potatoes, poultry, and so much more. Plus, Parkay Spray has 0g of trans fat per serving.”

These claims were directly related to the FDA’s statement that “the serving size [ ] is an amount customarily consumed and which is expressed in a common household measure that is appropriate to the food.” Allen alleged that Parkay Spray is intended to be used as butter, and that customers use it that way; if this was true, then the correct reference amount is the reference amount for butter. 

In addition, FDA’s reading of its own rule, entitled to substantial deference, indicated that the spray type category wasn’t meant for products like Parkay Spray.  The FDA’s guide to the NLEA lists  each product category found in the reference amount table followed by each product to which the category applies. The products listed for the “butter, margarine, oil, shortening” category are “All types of butter and margarine (regular, diet, liquid, and whipped); spreads; oils; and shortenings.” The product listing for the “spray types” category reads “Nonstick cooking sprays (e.g., Pam).” A note indicated that each listing covered any form in which the product was found.  This, the court found, supported the conclusion that “[l]iquid butter, and substitute liquid butter, as well as spreads, belong in the butter product category.”

There was no implied preemption because Allen was suing to enforce California law, which is identical to federal law.  “Plaintiff’s allegation that Defendant’s statements violate FDA regulations as written is necessary for her claims to avoid preemption, but not necessary for her to establish the underlying state law causes of action.”  ConAgra’s primary jurisdiction argument also failed.  “Though the question of which reference amount requirement applies to Parkay Spray might narrowly be described as one of first impression, the same could be said of challenges to any food product that is not already explicitly listed in the regulations.”  The issues here could be resolved by applying the regulations straightforwardly.  A stay would do little to enhance uniformity, and would “needlessly frustrate” the states’ historic primacy in regulating health and safety.

The complaint also satisfied Rule 9(b).  ConAgra argued that Allen should have alleged what serving size she claimed as proper or the quantities in which she used the product, but the claim was that, no matter the serving size, or in what quantities she used Parkay Spray, she believed that the product didn’t have fat or calories based on ConAgra’s labeling and marketing.

ConAgra argued that Allen didn’t plead that a reasonable consumer would be fooled.  But the bottle contains 832 calories and claims to have none; the complaint included consumer complaints other than Allen’s own, each evidencing deception. This was enough to plead deceptive conduct, if not to prove it.  The court also declined to dismiss multiple state classes on the pleadings.

Allen’s express warranty claim also survived; cases dismissing Magnuson-Moss Warranty Act and Song-Beverly Consumer Warranty Act claims were inapposite because those laws define express warranties more narrowly than common law breach of warranty.  The allegation that the description of Parkay Spray as “fat free” and “calorie free” was part of the basis of the bargain was sufficient to state a claim for common law breach of warranty.

Fandom and traditional knowledge as limited common property

Mel Stanfill, Fandom, public, commons, Transformative Works and Cultures, no. 14. http://dx.doi.org/10.3983/twc.2013.0530:

Against the background of historically non-strictly-controlled forms of authorship and property, fan creative production seems open for exploitation, particularly in the context of a potential generational culture shift away from hard-line positions on these subjects—nobody owns it, but some may be starting to want to. With things like Fifty Shades of Grey or Kindle Worlds, the indigenous creativity and property parallel is particularly useful, as these projects follow the line of trying to (exploitatively) modernize alternative modes of creative production because the people doing them are imagined to not know their worth.

The problem with such disarticulation from fannish community is that fans are not foolish people freely giving away things they could (and should) be selling any more than are indigenous populations. Instead, fan creative production is productively understood as what [Carol] Rose calls “limited common property,” which is “property on the outside, commons on the inside.”

Health and nutrition claims for the under-2 set draw lawsuit

Bruton v. Gerber Products Co., No. 12–CV–02412–LHK, 2013 WL 4833413 (N.D. Cal. Sept. 6, 2013)

Bruton alleged that she bought a number of specified Gerber products for her under-2 child, including some from its 2^nd Foods group, Yogurt Blends, and Graduates.  She allegedly read and relied on the labels and Gerber’s website, which made unlawful/deceptive claims of three kinds: (a) nutrient content claims, such as “Excellent Source,” “Good Source,” “As Healthy As Fresh,” and “No Added Sugar,” (b) “natural” claims, and (c) sugar-related claims. 

She alleged that Gerber made nutrient content claims on virtually all of its products, even though the FDA authorizes nutrient content claims on foods for adults that aren’t permitted for children under 2 because of their different nutritional needs.  See 21 C.F.R. § 101.13(b)(3) (“Except for claims regarding [certain] vitamins and minerals ... no nutrient content claims may be made on food intended specifically for use by infants and children less than 2 years of age unless the claim is specifically provided for” by particular regulations).  This allegedly made all Gerber products for under-2 children misbranded if they claimed to be an “Excellent Source” of Iron, Vitamin A, and Vitamin C, or a “Good Source” of Calcium, Iron, Zinc, and Vitamins A, D, and E, “among other things.”  “As Healthy As Fresh” and “No Added Sugar” products were also allegedly misbranded because federal regulations don’t allow a “healthy” claim for products intended for children under 2.

Bruton also alleged that the “100% natural” products contained artificial ingredients or ingredients not normally expected to be in food.  And she alleged that many “No Added Sugar” products had disqualifying levels of calories and thus couldn’t be so labeled without an FDA-mandated disclosure.

The court first dismissed Nestlé USA as a defendant, though Bruton might be able to replead that Nestlé USA, for example, operated and controlled the gerberverybestbaby.com website, so amendment might not be futile.

Gerber argued preemption: Bruton couldn’t seek to enforce labeling rules different from FDA regulations, nor could she enforce labeling rules identical to the FDA regulations because private litigants are barred from suing to enforce FDA regulations.  The first is true, but the second is not.  The NLEA explicitly says it shall not be construed to preempt any state law unless it’s expressly preempted.  California, through its Sherman Law, expressly adopted federal labeling requirements as its own.  Thus, Bruton was not suing to enforce the FDCA, but rather to enforce California’s identical legal requirements. Pom Wonderful LLC v. Coca–Cola Co., 679 F.3d 1170 (9th Cir. 2012), was no barrier, though it didn’t let Lanham Act plaintiffs sue to enforce FDCA regulations or bring a suit that would require interpreting those regulations.  Pom Wonderful wasn’t a state law case and didn’t deal with the presumption that Congress didn’t intend to supplant state law.  Cases about heavily regulated Class III medical devices weren’t on point; food labeling law is different, and not as rigorous, as the premarketing review required for such devices, and the NLEA doesn’t indicate any preemptive intent beyond express preemption, not implicated here.

A little conceptual juggling is required here: Bruton’s claims were that Gerber violated California rules identical to the federal rules, but she wasn’t suing because the conduct violates the FDCA, “but rather because Defendants’ conduct allegedly violates California’s Sherman Law, which could have imposed the exact same regulations even if the FDCA was never passed” (emphasis added).  Misbranded food is a traditional area of state regulation, after all.

A similar fate awaited Gerber’s primary jurisdiction argument.  “[O]nly those claims raising issues of first impression or particular complexity are appropriately dismissed or stayed based on primary jurisdiction.”  The issues here were neither novel nor especially complex, according to Gerber’s own argument that “there is no label element Plaintiff challenges that FDA regulation or policy does not address.” The case was far less about science than about misleadingness, which courts decide every day.

Next, of course, was standing.  Gerber argued that Bruton’s alleged injury was only a legal construct, and that even if there had been noncompliance with FDA rules, she suffered no cognizable harm.  But she alleged that she paid a premium based on the mislabeling.  This was enough to confer Article III standing at the pleading stage (except for the claims that failed for other reasons).  She alleged that she read the labels before purchase, didn’t know the nutritional claims were untrue, and relied on them to choose Gerber’s products over others.  She alleged that her reliance was reasonable because consumers understand that nutritional information on labels is heavily regulated; she also alleged that “[c]onsumers often do not look beyond the nutrient content claims and health claims made on the front of the food product packaging, and are less likely to check the Nutrition Facts panels contained on the back of packaging where front-of-packaging nutrient content claims are present.”  That sufficed.  (However, she did fail to allege plausible claims based on the “all natural” labels, given that the products she obtained were in fact made with 100% natural fruit, as advertised. She couldn’t plausibly allege economic injury or causation, and thus couldn’t show standing based on “all natural.”)

Gerber argued that a reasonable consumer wouldn’t be familiar with the FDA’s policy and regulations, and thus wouldn’t rely on the allegedly misbranded labels, whether a practice is deceptive is generally a fact question not appropriate for resolution on the pleadings.  And Bruton alleged exactly what was supposed to be false or misleading about the “good source,” “excellent source,” “As Healthy As Fresh,” and sugar-related claims, they satisfied Rule 9(b).

What about products Bruton didn’t buy and websites she didn’t see?  Courts are split on this for putative class actions.  Here, Bruton’s claims involved many different products, some specific to what she allegedly bought and some “so broad that they are practically unidentifiable,” e.g., listing just “examples” of products that made “Good Source” and “Excellent Source” claims.  The court couldn’t determine whether all the products she sought to include in the complaint were substantially similar to the products she did buy. The court granted Gerber’s motion to dismiss claims for products she didn’t buy, but with leave to amend to specify the exact nutrient content claims at issue for each product category and product flavor.

Also, Bruton alleged that she read Gerber’s website, but didn’t allege that she saw any of the alleged misrepresentations at the website.  She didn’t have standing to assert claims based on ads and websites she didn’t personally view.

Gerber also argued that Bruton couldn’t show any violation of FDA regulations, and that its statements were truthful commercial speech protected by the First Amendment (note that this throws the constitutionality of the FDA’s entire scheme into doubt!).  A First Amendment defense, however, was inappropriate for a motion to dismiss under Rule 12(b)(6).  As to the rest, Bruton sufficiently stated a claim (except for the “100% Natural” labeling).

Bruton argued that the regulations banned nutrient content claims unless there was an established daily RDI or unless the claims were specifically allowed in the regulations for foods intended for children under 2.  Gerber argued that “good source” and “excellent source” were simply statements that described the percentage of a nutrient in a food relative to an RDI, thus falling within the exception.  “Good source” means 10-19% of the RDI, and “excellent source” means 20% or more.

Bruton responded by citing a 2010 warning letter in which the FDA stated that Gerber Graduates Fruit Puffs were misbranded because “[t]he labeling for these products includes nutrient content claim [sic ] such as ‘good source of iron, zinc, and vitamin E for infants and toddlers,” which is not permitted for foods intended specifically for infants and children under age 2.  Notably, the regulation on “excellent source” and “good source” allowed those claims, except for “meal products” and “main dish products”—and the products Bruton bought might be meal products or main dish products.

Bruton also argued that “As Healthy As Fresh” (a Gerber trademark) was an unauthorized nutrient content claim. The regulations define when “healthy” claims are permitted, but don’t allow them for products specifically intended for children under 2, something also mentioned in the 2010 warning letter.  Gerber’s argument that “As Healthy As Fresh” was just “a dietary guidance statement that conveys the important message that processed vegetables and fruits are as healthy for a child, or anyone for that matter, as fresh vegetables and fruits” and at most, “non-actionable opinion or puffery,” was not responsive.  Unlike ordinary puffery cases, “the products at issue here are covered by federal regulations which impose specific labeling requirements and which appear to assume that consumers in fact do rely on health-related claims on labels.”  The NLEA was passed in response to widespread unfounded health claims. There was therefore at least a fact issue about the misleadingness of “healthy.”

Similarly, Bruton alleged that “No Added Sugar” or “No Added Refined Sugar” claims weren’t allowed on food products intended for children under two years of age, and that the products contained “disqualifying levels of calories that prohibit the claim from being made absent a mandated disclosure statement warning of the higher caloric level of the products.”  Gerber didn’t dispute the first, but argued that no disclaimer was required for foods designed for young children, and that some of the products were low calorie foods because they were under 40 calories.  Plus, Gerber argued that no disclaimer was required because children under 2 aren’t an age population for which the FDA recommends calorie restrictions.

Bruton contested the calorie counts, and argued that this was a factual dispute. The court agreed.

As noted above, though, the “100% Natural” claims failed.  Bruton alleged that the challenged products used citric acid, ascorbic acid, and other ingredients that are not “natural.” Gerber argued that its claim was “Made with 100% natural fruit,” which was truthful, and that those acids were acceptable preservatives.  Bruton responded that reasonable consumers wouldn’t read the ingredient list to contradict an explicit label claim.  But that didn’t address the point that the claim wasn’t “100% natural,” but rather “Made with 100% Natural Fruit.”  The court wasn’t convinced that the latter claim plausibly implied that the entire product was free of synthetic ingredients, though it granted leave to amend.

Bruton’s Magnuson-Moss Warranty Act claim failed because the alleged misbranding didn’t constitute warranties, but were rather product descriptions.  And the state Song-Beverly Consumer Warranty Act doesn’t cover consumables.

Nonpatented product was functional even though alternative designs were available

Groeneveld Transport Efficiency, Inc. v. Lubecore International, Inc., Nos. 12-3545/3576 (6th Cir.  Sept. 12, 2013)

Congratulations to Mark McKenna, whose amicus brief made the key arguments endorsed by the court here.  A jury awarded over $1.2 million on Groeneveld’s trade dress claims, but the majority found that Lubecore’s Rule 50 motion should’ve been granted.  Starting from the premise that trademark law “is designed to promote brand recognition, not to insulate product manufacturers from lawful competition,” the court allowed a competitor to copy the shape of a grease pump because (1) the plaintiff didn’t show nonfunctionality, and (2) no reasonable consumer of these expensive and niche products could be confused based on the shape.

The court framed the issue as a battle between an established business and an upstart.  The parties make grease pumps for automated lubrication systems (ALS) used in commercial trucks.  An ALS delivers controlled amount of lubricant to different parts of a machine while the machine is in operation; its primary component is a grease pump.

Groeneveld has been making the grease pump at issue since the 1980s.  Lubecore was founded in 2007 by Jan Eisses, who had previous business/employment relations with Groeneveld.  It made a very similar-looking pump:

The jury found that Groeneveld proved by a preponderance of the evidence that its trade dress (“the external shape and appearance of the pump, including logo and color”) was nonfunctional and had secondary meaning, and that there was likely confusion as to the source of the pumps.  It also found the infringement willful.

The majority held that the overall shape was nonfunctional.  Groeneveld didn’t argue that individual parts were protectable.  The pump was a black cast aluminum base containing the pump mechanism topped by a clear reservoir.  The pump mechanism was connected by wires and hoses to the rest of the ALS.  Both pump and reservoir clearly served essential functions.  The trial testimony from Groeneveld witnesses made “clear that not only the basic manufacture of the grease pump’s components, but also their size and shape, are closely linked to the grease- pumping function.”  The shape of the base minimized the amount of material needed in construction (functional). The volume of the reservoir was dictated by the amount of grease needed during each servicing interval (functional).  The clear reservoir allowed users to easily see how much grease was left (functional).  Because the surface area (determined by the need to fit on the base) and volume were functionally determined, so was the height.  All the elements were there for a practical reason, with nothing ornamental.

“Because Groeneveld presented no evidence showing that the individual components of its grease pump or their overall configuration are nonfunctional, it failed to carry its burden of creating a triable issue of fact with respect to nonfunctionality.”  Combining individual functional components in a nonarbitrary manner is functional. 

The court rejected Groeneveld’s argument that this particular design wasn’t necessary for effective competition in the ALS business, as shown by the fact that no other competitors made a similar-looking pump.  But that’s exactly the argument that the Supreme Court rejected in TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23 (2001).  Competitive necessity is an appropriate inquiry in aesthetic functionality cases, but not in utilitarian functionality cases where a design is “essential to the use or purpose of a device” or affects its cost or quality.  When the design is functional under those standards, there is no need for further consideration of competitive necessity. “In other words, the question is whether the overall shape of Groeneveld’s grease pump was substantially influenced by functional imperatives or preferences. We accordingly reject Groeneveld’s invitation to drift back into the error of inquiring about possible alternative designs.”

Groeneveld’s VP of design and production van der Hulst, who was involved in the pump design, testifed that Groeneveld did not “have to make its pump look this way on the inside because of the way it works on the outside.” But that was insufficient to create a triable issue of fact under TrafFix Devices because it improperly focused on the possibility of alternative designs.  It was also conclusory: van der Hulst didn’t explain “why the chosen design was nonfunctional, and certainly did not speak with any particularity about the functional considerations that, as outlined above, apparently dictated the pump’s design.”  The bare fact of putting a manager on the stand to claim nonfunctionality doesn’t create a triable issue of fact. 

Groeneveld also relied on van der Hulst’s testimony that the “commercial people” affected design, but the majority thought that was unclear and unhelpful.  If they were executives in charge of evaluating commercial viability, their involvement said nothing about functionality. And even if it meant marketing/design employees, “[e]very viable mass-market product is presumably designed with marketing considerations in mind, and this unremarkable fact says nothing about whether the product design is nonfunctional.”  Van der Hulst also testified that other grease pumps on the market looked “terrible” and that Groeneveld’s founder had a good design sensibility; Groeneveld hadn’t switched to alternative designs, even though they might be cheaper, because the current pump is “a very nice pump” and “[e]verybody knows this pump.”  This too didn’t address nonfunctionality: something might look cleanly designed and be made of functional parts.  To the extent it was about alternative designs, it wasn’t relevant.  This was insufficient, especially in light of testimony from Groeneveld’s own witnesses to show that “the pump’s volume, shape, and materials are all essentially influenced by the dictates of function.”

The majority noted the public policy behind functionality: “to channel the legal protection of useful designs from the realm of trademark to that of patent. Such channeling ensures that the high public costs of monopoly are not imposed without an assurance that the design satisfies the rigorous requirements of patentability, including novelty and nonobviousness, and is protected for only a limited period of time.”  This isn’t trademark’s job.

The court nonetheless also addressed likely confusion.  The factors in the multifactor test “are helpful guides rather than rigid requirements,” with likely confusion the ultimate question.  The factors “are therefore not always weighed consistently in this court’s caselaw, and a particular factor might receive a greater or lesser weight depending on the circumstances.”  Sometimes cases can be resolved with reference to only one or a few factors.

Here, the presence of house marks was essentially dispositive.  The parties’ logos and trademarks appeared on the pumps, as well as on sales and marketing literature, and were “unmistakeably different.”   “In light of such a stark visual difference in branding, no reasonable consumer would think that the two grease pumps belong to the same company.”  This was reinforced by the fact that, at about $2500 apiece, ALS systems were “expensive industrial products that are not likely to be purchased without substantial care and research.”  “[P]otential purchasers of grease pumps are knowledgeable and sophisticated people. Such purchasers are therefore not likely to ignore the stark difference in labeling and mistakenly purchase a Lubecore ALS when they intend to purchase a Groeneveld ALS.”

Groeneveld argued that “(1) labels are not the predominant brand identifiers in the industry; (2) corporate mergers and acquisitions are frequent, so competitor affiliations are constantly changing; (3) many pumps bear multiple company names; (4) a pump’s label does not identify who made it or where it was manufactured; (5) Lubecore is a newcomer and has no independent brand recognition; and (6) witnesses who saw the Lubecores were still confused, notwithstanding the Lubecore label.”

Nope.  Mergers and acquisitions (2) and Lubecore’s newcomer status (5) had no bearing on the distinguishability of the pumps via the labels.  The claim that labels weren’t the predominant brand identifiers was “irrelevant” and not supported by record evidence.  “The most that the cited testimony shows is that certain witnesses were able to distinguish Groeneveld’s pumps from pumps other than Lubecore’s without even looking at the labels, which says nothing about whether a consumer would be able to distinguish a Groeneveld pump from a Lubecore pump with the labels.”  And points (3) and (4) didn’t apply to the labels at issue in the present case.  Only (6), actual confusion, was relevant—and wrong (see below).  Groeneveld at most “identified possible reasons why—hypothetically—differential branding might not be sufficient to distinguish the sources of competing products,” but it didn’t show those reasons applied.

The “starkly different branding” plus the “high degree of care presumably exercised by the pumps’ sophisticated consumers” compelled the conclusion that there could be no likely confusion as a matter of law.  The majority nonetheless ran through the rest of the factors.

Of note is its analysis of intent, the key point in Groeneveld’s analysis.  Yes, the similar appearance was circumstantial evidence of intent to copy, but “Groeneveld is mistaken about the legal significance of such copying.”  Its argument that intentional copying showed a bad intent and created a presumption of confusion “indicates a fundamental misapprehension of the purposes of trademark law.” 

Trademark doesn’t bar copying as such—that’s for trademark and patent.  If a manufacturer wants protection against copying, it should get one of those.  No harm is done to trademark’s incentive structure (which “incentivizes manufacturers to create robust brand recognition by consistently offering good products and good services”) by the copying of a product design that doesn’t confuse consumers as to source. “As long as a consumer can easily identify the source based on the trademark, the consumer will still be able to allocate his or her capital freely and efficiently, and manufacturers will retain the incentive to improve their offerings and solidify their brands.”  Thus, copying in the absence of confusion isn’t just legal; it’s often a positive good.

Given these baseline principles, the intent that is relevant is not the intent to copy but the intent to confuse.  Otherwise, a legal and beneficial act “would be transformed into evidence—or worse, as Groeneveld suggests, a ‘presumption’—of unlawfulness.”  This would “subvert the fundamental purposes of trademark law.”  Intent to copy might be probative of secondary meaning, but “such intent standing alone has no bearing on the likelihood-of-confusion issue.” 

Here, copying had salutary effects, as posited by the general rule: “the similarity serves the procompetitive purpose of signaling the existence of a competitive alternative by alerting potential consumers that the pumps might work the same because they look the same.”  Lubecore’s use of similarity “targeted consumers who are familiar with the Groeneveld pump and offered them a competitive option.”  And “using a functional product’s look to promote a competitive offering is a procompetitive practice.”  It would be unfair if there were confusion, but Lubecore “scrupulously avoided such confusion by choosing a starkly different logo that it prominently displays on its pumps and on all its sales and marketing literature.” By targeting Groenveld customers, “Lubecore focuses its competitive activity on those who are most interested in such competition, thereby decreasing the consumers’ search costs and intensifying competition where it matters most.”  Maybe Lubecore doesn’t make a better pump, but aggressively courting consumers and offering them choices is good, from a public policy viewpoint.

One of Groeneveld’s witnesses, Dean Osborn, proved the point by testifying that he likes the way the Groeneveld pump works but does not particularly care who manufactures it. He testified that he was satisfied with both and never confused.  With the labels off, he wouldn’t be able to tell the difference, but to him, “that means I’m comfortable with the product. If it be whose product it is, I don’t care. I have a good experience with it.… I’m looking at the mechanism that functions the grease to go to the spots where the greasing, that’s all I’m -- that’s all I care about.”  The fact that the pumps looked similar gave him confidence to choose either, since he knew how the Groeneveld worked.

Groeneveld argued that Lubecore’s pumps were worse, and that Lubecore offered to extend Groeneveld’s warranty and to replace Groeneveld pumps and parts with Lubecore products.  But that was no aid to Groeneveld: “If Lubecore’s pumps are in fact inferior, all the better for Groeneveld: Consumers would soon realize the difference in quality on the clearly labeled pumps and flock to Groeneveld.”

The court then rejected an anti-copying ideology:

Groeneveld’s protestations against slavish copying admittedly have a certain emotional appeal and presumably swayed the jury. After all, people generally dislike copycats. But, as the foregoing discussion demonstrates, the proper application of trademark law requires us to focus our analysis not on the intent to copy the product design, but on the likelihood of consumer confusion. Evidence of Lubecore’s intent to copy Groeneveld’s product design is therefore of no help to Groeneveld. Such evidence, if anything, shows the procompetitive benefits of Lubecore’s practices and cautions against allowing the issue to go to the jury. See Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205, 214 (2000) (discussing the desirability of “summary disposition of an anticompetitive strike suit” in the trade-dress context).

Then the majority ran through the other factors.  Groeneveld had evidence that its design was recognizable in the industry, which was sufficient to support a factual finding of a strong trade dress—but that was no help without evidence of likely source confusion.  Similarity weighed heavily against Groeneveld, because of the “starkly different” labels and trademarks.  And Groeneveld had no evidence of likely confusion; it offered the testimony of a single customer, who unequivocally testified that he wasn’t confused.  Testimony that Groeneveld’s own employees and affiliates were shocked and surprised by the copying wasn’t consumer testimony, and anyway they weren’t confused.

Overall, the trade dresses (including logos) were dissimilar, the purchases were sophisticated, there was no evidence of actual confusion, and the “intent and effect” of Lubecore’s design copying was procompetitive.  The factors that weighed in Groeneveld’s favor were the strength of the trade dress, the relatedness of the products, and the similarity of the marketing channels.  But those three factors standing alone didn’t raise a triable issue of fact about likely confusion.  No reasonable jury could find that Groeneveld met its burden.

Adding in initial interest confusion didn’t change anything.  IIC might make sense “under the right circumstances,” and here the court offered a billboard analogy: you’re lured off the interstate by a sign for McDonald’s, but discover only a Burger King.  “You are not so fond of Burger King but, having already made the detour and loath to waste even more time, you reluctantly buy a Whopper and get on with your trip.”  Even without purchase point confusion, this harms “consumer interests, brand-development incentives, and efficient allocation of capital.”

But that wasn’t the case here.  First, Groeneveld didn’t explain how there could be any initial interest confusion at all, given the different labels and logos.  Nor did Groeneveld explain why any confusion wouldn’t dissipate without harm. “[A] hypothetical chance that a consumer might think for an instant that two products come from the same source is simply not enough.”  Groeneveld wasn’t really upset about initial interest confusion, but rather initial interest.  It’s natural enough to dislike competition, but not a trademark problem.

The court  also refused to consider Groeneveld’s dilution theory of harm (that Lubecore harmed its brand image by introducing low-quality knockoffs) for the first time on appeal. 

The majority also rejected false advertising claims based on Lubecore’s practice of offering to extend Groeneveld’s warranty and to replace Groeneveld pumps and parts with Lubecore products.  Targeting the customers of a competitor by extending a warranty program or offering the replacement of parts wasn’t unlawful; that’s competition.

Judge Helene White dissented, arguing that the jury could reasonably have found differently than the majority did.  The appropriate focus should have been the overall trade dress rather than each component.  (I think the majority approach, carving out the house mark, is much better—it avoids the problem of the plaintiff claiming that the overall trade dress including the mark is nonfunctional, then claiming confusing similarity based only on similarities in functional elements.)

The majority overread TrafFix, which only held that the possibility of alternative designs can’t render an otherwise functional trade dress nonfunctional.  (Seems to me that’s exactly what the majority says!)  But that doesn’t mean the possibility of alternative designs is irrelevant, or relevant only in cases of aesthetic functionality.

The dissent read the testimony to say that the form wasn’t dictated by function.  Anyway, a nonfunctional configuration of functional components could be protectable, as long as the features were configured in an “arbitrary, fanciful, or distinctive way.”  (Note that this quote, from an earlier case, can’t fully be squared with Wal-Mart’s holding that there’s no such thing as inherent distinctiveness in product design.)  There was evidence supporting a finding that the pump’s overall configuration was designed to look distinctive in the industry rather than due to functional concerns. The dissent would’ve found it sufficient fact that the outer appearance wasn’t dictated by internal functioning (even though that’s exactly the reasoning reversed in TrafFix).  Here, “the round and cylindrical shape of the clear reservoir, the grooves on the top and bottom of the reservoir, the particular placement of the product label and other features, and the irregular shape of the base” had no inherently functional purpose, even if individual components had functional qualities.  And Groeneveld’s witness van der Hulst testified that the pump could be made in different ways—horizontal or vertical pistons, round or square reservoirs—and work the same.  (The quoted testimony also says the reservoir could be made in different sizes … because that affects the time between fillings.  I see why the majority wasn’t impressed.) 

 

Van der Hulst also explained that the pump was designed to look nice and “completely different” from other pumps made with lots of different “bolts and screws”—the Groeneveld pump was “[o]ne piece worked and finished” and thus looked much nicer than the alternatives.  Where “the pump’s design was based on aesthetic considerations, the shape does not dictate the pump’s function, other designs would result in the same function, and the design does not result in superior performance or cost effectiveness,” the dissent would allow a finding of nonfunctionality.

Likewise, the dissent would’ve upheld the confusion finding.  There was testimony that the pump was recognizable by its shape, and strong evidence of intent to copy.  “When a newcomer to the market copies a competitor’s trade dress, its intent must be to benefit from the goodwill of the competitor’s customers by getting them to believe that the new product is either the same, or originates from the same source as the product whose trade dress was copied.”  (Yes, and it’s that either/or that is the issue: as the majority says, it’s not the case that we condemn intent to confuse and are simply neutral about intent to communicate comparability.  To the contrary, public policy supports copying, and thus communication of copying, product features, at least where confusion can be avoided.  Because one of the two possibilities is a positive good, it would be foolish to find that intent to copy was intent to confuse.)  The dissent would’ve used the copying as evidence of secondary meaning (though of course for the same reasons copying might just be evidence of a good product design that, if unprotected by patent, is free for all to try.)

The dissent, rather implausibly for these particular products, evoked the rule that likely confusion has to be judged not side by side, but singly, “to account for the possibility that sufficiently similar [trade dresses] may confuse consumers who do not have both [trade dresses] before them but who may have a general, vague, or even hazy, impression or recollection of the other party’s [trade dress].” And the pumps look similar despite the different labels.

High degree of care wasn’t enough as a matter of law.  Adding a house mark isn’t dispositive, and doesn’t always need to be given significant weight.  In the Maker’s Mark case, the court credited testimony that many consumers didn’t know about brand affiliations, and that some companies produce multiple types of distilled spirits.  When two products are related enough, one might associate with the other and still use a house mark. “Confusingly similar marks may lead a purchaser who is extremely careful and knowledgeable . . . to assume nonetheless that the seller is affiliated with or identical to the other party.”  Since the most important factors are similarity of marks and strength of the plaintiff’s mark, consumer care couldn’t overcome them. 

The same reasoning was available to the jury here; the district court found that the different markings might not be enough “given the testimony regarding corporate mergers and acquisitions in the industry; the fact that many pumps bear multiple company names; and, the fact that labels may not be the brand identifiers relied on in this industry.”  The dissent argued that “facts that undermine presumed consumer care in differentiating between products are relevant to the overall analysis, and dissimilarities in the trade dresses based on labeling have less weight in the context of such industry-specific evidence.” There was testimony that people in the industry didn’t rely on labels to distinguish pumps (though they didn’t need to until Lubecore entered the market—as the majority concludes didn’t and couldn’t are potentially very different things).  But the evidence that consumers usually used the design to identify the brand “supports the inference that labels are not necessarily indicative of the product’s manufacturer as the consumer’s focus in this industry is on the design.”  (As a matter of policy, given functionality doctrine, perhaps we should discourage consumers from this focus, since for functional designs it will lead them astray.)

Also, Lubecore was a new company with minimal brand recognition, which undercut the effect of the labeling: “even a sophisticated consumer cannot be expected to recognize brands that have little name recognition or have been in existence only a short time.”  That short time on the market also undermined the weight the majority gave to the lack of evidence of actual confusion.

As to intent, the dissent agreed that intentional copying isn’t itself actionable.  But then the dissent said that a presumption of intent to confuse arises from evidence of copying, unless confusion is unlikely based on other factors.  So intent to copy wasn’t irrelevant.  Lubecore’s founder testified that he liked the Groeneveld pumps because they had a good reputation and Lubecore didn’t want its pumps to look like those of a company with a bad reputation.  This was “compelling circumstantial evidence” that Lubecore intentionally copied to benefit from Groeneveld’s established reputation.  Also, Lubecore’s extended warranty specifically targeted Groeneveld customers and products, and not other competitors. This also supported an inference of intent to confuse, “as an unaffiliated company normally does not (and cannot) extend another company’s warranty.”

Anyway, intent never favors the defendant, as the majority seemed to hold.  “Intent … is an issue whose resolution may benefit only the cause of a senior user, not of an alleged infringer.”   The same was true of lack of evidence of actual confusion, which is rarely present.

Strength of the trade dress and relatedness of the goods, while discounted by the majority, are factors that bear on whether confusion is likely.  (This is a core problem with the multifactor test treated as if it were uniformly applicable—fortunately here just by the dissent.  Strength of a trade dress and relatedness of goods, along with similarity of marketing channels, may be “significant” in a likely confusion inquiry, but only if other factors are present.  Coca-Cola’s trade dress in its bottle epitomizes trade dress strength.  But that doesn’t mean that Pepsi’s bottle is likely to infringe!)

Because the dissent would’ve upheld the permanent injunction, it addressed Groeneveld’s appeal arguing that the injunction should’ve been broadened to include Canada. The dissent disagreed.  Extraterritorial application of the Lanham Act requires a court to consider “(1) whether the defendant’s conduct has a substantial effect on commerce in the United States; (2) whether the defendant is a citizen of the United States; and (3) whether there exists a conflict between defendant’s trademark rights established under foreign law, and plaintiff’s trademark rights established under domestic law.”

Lubecore is a Canadian corporation, weighing heavily against extraterritorial application of the Lanham Act, though Lubecore had no claim to the trade dress in Canada so barring its use wouldn’t interfere with Canadian sovereignty.  Groeneveld’s argument that Lubecore’s Canadian activities had a substantial effect on US commerce was speculative—it just claimed a likelihood that Canadian trucks with Lubecore pumps would cross in and out of the US, affecting sales and reputation in the US.  “Even if (as Groeneveld asserts) U.S. consumers can access Lubecore’s web sites and order products online, that does not prove that Lubecore’s Canadian activities have a substantial effect on domestic commerce.” The possibility of a US impact wasn’t enough.

Monster beverages, monster puffery

Fisher v. Monster Beverage Corporation, No. EDCV 12–02188, 2013 WL 4804385 (C.D. Cal.)| July 9, 2013)

Plaintiffs brought the usual California claims, including warranty claims, over Monster’s energy drinks’ allegedly excessive and unwarned-for caffeine.  Until recently, Monster called the drinks “dietary supplements” instead of beverages, allegedly to avoid disclosing their caffeine content, but changed the classification in early 2013.  Individual plaintiffs alleged that they believed that Monster beverages were safe and therefore bought them, sometimes starting when they were under 18 due to Monster’s marketing/free sampling targeting young people; one alleged that he drank so much—often with alcohol—that he developed serious health issues, including critically high blood pressure and withdrawal headaches when he tried to stop.  (Yeah, I get those.)  Other alleged health risks from excessive consumption include dehydration and high-risk behavior. 

Plaintiffs alleged that Monster targeted young people, including by sponsoring extreme sports and by “obfuscat[ing]” the risks of the product as well as by enticing them with labels such as “It’s the ideal combo ... to deliver the big bad buzz that only Monster can” and “Athletes, musicians, anarchists, students, road warriors, metal heads, nihilists, geeks, hipsters, bikers, and milfs dig it. You will too.” Monster allegedly promoted mixing Monster drinks with alcohol, and energy drink consumption is a risk factor for alcohol dependence.

Monster allegedly contains very high levels of caffeine, including stimulants like guarana, which contains “hidden” additional caffeine. Though Monster doesn’t label each can’s content, it has disclosed elsewhere that a 16-ounce can has 160 mg of caffeine, while the FDA considers 400 mg safe for healthy adults daily, and the American Academy of Pediatrics recommends only 100 mg for adolescents.  The can states: “Consume responsibly--Max 1 can per four hours, with limit 3 cans per day. Not recommended for children, people sensitive to caffeine, pregnant women or women who are nursing.”

Monster argued that the plaintiffs didn’t have standing because they didn’t allege physical injury, only that Monster drinks could be bad for their health.  Plaintiffs argued that they alleged economic injury—they overpaid/wouldn’t have bought the product if they’d known the truth.  The court found two plaintiffs’ allegations insufficient to demonstrate economic injury, because they didn’t allege misrepresentation or deception, only that they “saw nothing on the labeling of the [cans of Monster Drinks] that would lead [them] to believe that drinking [the Monster Drinks] could be bad for [their] health....”  This was a purely hypothetical injury.  They also didn’t allege that they paid a premium because of any misrepresentation (since they didn’t allege a misrepresentation) or that they would’ve bought something else absent a misrepresentation.

Although plaintiffs argued that their claims weren’t grounded in fraud, the court concluded that they were and that they flunked Rule 9(b).  Plaintiffs brought claims against 28 varieties but only alleged purchase of 8 specifically, then generally alleged that they consumed others.  They also didn’t allege which ads or labels specifically misled them.

Monster also largely succeeded in its preemption arguments, despite overrelying on  POM Wonderful LLC v. Coca–Cola Co., 679 F.3d 1170 (9th Cir. 2010), which didn’t consider state law claims that imposed requirements “identical to” FDA requirements.  However, Monster argued that plaintiffs were seeking to impose caffeine labeling requirements not identical to the FDCA/FDA requirements.  Insofar as the consumer protection claims were based on failure to adequately label the ingredients, the claims were dismissed, since Monster disclosed the total quantity of ingredients in its “proprietary blend” as required.  Also, the FDA doesn’t require the caffeine warnings sought by plaintiffs, so claims based on their absence were preempted.

The court also rejected plaintiffs’ breach of warranty claims.  Monster’s statements were nonactionable puffery, not warranties:

• “It’s the ideal combo ... to deliver the big bad buzz that only Monster can.”

• “Athletes, musicians, anarchists, students, road warriors, metal heads, nihilists, geeks, hipsters, bikers, and milfs dig it. You will too.”

• “[B]igger is better ... because you can never get too much of a good thing.”

• “We hacked our carbohydrates and calories, transplanted the wicked buzz and dialed in the flavor. Lo–Carb MONSTER energy still delivers twice the Buzz of a regular Energy drink, but only has a fraction of the calories.”

• “You’re gonna love it cause it’s a new kind [of] buzz.”

• “No regular bottle could handle this evil energy brewski. So we designed our own with the biggest chugger friendly wide mouth we could make.”

• “A shot it’s not ... but then you don’t have to plug your nose to drink it!”

• “Monster Extra Strength packs our biggest punch!”

• “[B]uzz that’s bigger than ever. This is no “Whip-it” but it will whip you good.”

• “Our friends at the Rehab pool party in Vegas know all about recovering from a long night and together we came up with Monster Rehab Green Tea  Energy.”

• “[Q]uenches thirst, hydrates like a sports drink, and brings you back after a hard day’s night.”

• “[O]ur bad Rehab energy blend to fire you up.”

• “It’s a wicked mega hit that delivers twice the buzz of a regular energy drink.”

Nor did plaintiffs successfully allege that Monster breached an implied warranty of fitness for intended use.  They alleged that the drinks “can cause serious and even fatal health problems, ... and excessive consumption may result in increasing heart rate, blood pressure, other cardiovascular complications, sleep deprivation and diarrhea, among others.”  But they limited their allegations to the claim that the drinks didn’t conform to the promises on the label, and such claims were preempted.  These failures got rid of the Magnusson-Moss claim as well.

media interviews weren't commercial speech for Lanham Act purposes

Vincent v. Utah Plastic Surgery Society, No. 2:12–CV–1048,  2013 WL 4782354 (D. Utah Sept. 5, 2013)

Plaintiffs are cosmetic surgeons—a specialty “dedicated exclusively to the enhancement of appearance through surgical and medical techniques” but “performed by surgeons from a variety of disciplines.”  Plastic surgery, by contrast, is “dedicated to the reconstruction of facial and body defects.”  Plaintiffs alleged a comprehensive effort by various doctors and plastic surgery associations to eliminate cosmetic surgeons from competing in the cosmetic surgery market.

Defendants allegedly placed billboards along an interstate designed to look like PSAs, e.g., a young woman with a distressed look on her face with the caption “I didn’t know ... [m]y ‘Cosmetic Surgeon’ wasn’t a Plastic Surgeon.” The billboards also displayed, among other things, the logo of the American Board of Plastic Surgery (ABPS).  Plaintiffs also challenged messages found on the Utah Plastic Surgery Society’s website, including “Cheaper, Faster, Scarier” and “Lack of Training Can be Deadly in Cosmetic Surgery.” That website also had the ABPS emblem, along with brief profiles of each of the UPSS’s member physician.  Also, one of the individual defendants, Fairbanks, gave a TV interview stating that “there is a dentist doing breast augmentation and an ob-gyn doing lipo.”  Fairbanks said that patients believe these physicians are plastic surgeons when in fact they are not unless they are board certified.  Another defendant allegedly told one plaintiff’s PR spokesman that defendants intended to run an ad campaign against plaintiffs, using billboards to target plaintiff Vincent by stating: “Did you know your Tummy Tuck was done by a dentist.”

ABPS challenged the court’s jurisdiction over it for lack of sufficient state contacts.  Although the Lanham Act doesn’t provide for nationwide jurisdiction, the Sherman Act does.  Only due process limited the exercise of jurisdiction, and in a federal question case the Fifth Amendment controls.  In such circumstances, the burden is on the defendant to show that its liberty interests actually have been infringed, and that using the plaintiff’s chosen forum will make litigation “so gravely difficult and inconvenient” as to put the defendant at a severe disadvantage.

ABPS had no offices or employees in Utah, didn’t own any property in Utah, and wasn’t registered to do business there.  It certifies doctors in the plastic surgery field, using a written exam and an oral component.  The oral component hadn’t been administered in Utah since the 1970s.  ABPS corresponds with Utah doctors about certification and mails an annual newsletter, but denied involvement with the ad campaign at issue.

The court found that ABPS had “very few” contacts with Utah.  Nonetheless, defending in Utah wouldn’t be particularly difficult, because ABPS already operated across state boundaries and had access to counsel.  “Further, given modern advances in technology and transportation, the distance from Pennsylvania to Utah does not support a finding of inconvenience.”  And judicial economy would be served by adjudicating claims against all defendants together.  Given the remedial nature of the Sherman Act, it should be construed broadly; to the extent ABPS was involved in a violation of the antitrust laws, its effects would be felt beyond the states in which ABPS concededly operated.  Thus, ABPS failed to show that its liberty interests had been infringed at a constitutionally significant level.

However, the court then dismissed the antitrust claims, because nobody wins those.

It also dismissed the Lanham Act claim, which was based on (1) “I did not know ... [m]y ‘Cosmetic Surgeon’ wasn’t a ‘Plastic Surgeon;’ “ (2) “Cheaper, Faster, Scarier;” and (3) “Lack of training can be deadly in Cosmetic Surgery.”  Plaintiffs argued that, in combination with other facts, including Fairbanks’ statement to the news, these statements falsely implied that plaintiffs weren’t qualified to perform cosmetic surgery.

But, while the billboards and internet ads were commercial speech, the statements to the news station weren’t.  The statement didn’t “eschew” the purchase of a product or service from one source over another.  (?)  It didn’t have a “clear commercial component”; it didn’t directly reference plaintiffs or promote defendants’ products over plaintiffs’. (What did it do?)  So it wasn’t commercial speech for Lanham Act purposes.

As for the billboard and internet ads, they were statements by commercial competitors designed to influence the purchasing decisions of potential cosmetic surgery patients, disseminated to a broad audience.  But they weren’t literally false: the statements just encouraged awareness on the part of people seeking cosmetic surgery—at most, they encouraged consumers to use a plastic surgeon instead of a cosmetic surgeon.  (Yes, but was the reason given for that choice factual?  I think the court wants to say this is negative puffery/not specific enough to be actionable.)  They also weren’t implicitly false.  The use of the term “Public Safety Announcement” and the seals of various plastic surgery entities “lend the ads an added layer of credibility,” but didn’t imply that plaintiffs weren’t qualified to perform cosmetic surgery.  (I’d think that safety would be a pretty important consideration for my surgeon.)  Also, the ads didn’t target plaintiffs.  Noncommercial statements by certain defendants didn’t show that plaintiffs were the focus of the covered ads.

Also, plaintiffs failed to adequately plead damages, which can’t be presumed without literal falsity.  A mere allegation of a “cooling” in business since the ad campaign began was insufficient.