Monday, June 30, 2014

Friday, June 27, 2014

Website statements aren't trade dress for insurance purposes

Test Masters Educational Services, Inc. v. State Farm Lloyds, 2014 WL 2854536, No. H–13–1706 (S.D. Tex. June 23, 2014)
Test Masters offers test prep services.  It was involved in a series of lawsuits by and against third party competitor Singh.  In the underlying case here, Singh filed counterclaims alleging that Test Masters’ website purported to offer LSAT preparation courses across the country under the “Test Masters” name and mark, mimicked a map on Singh’s website, and made material misrepresentations in an effort to trick consumers into believing that Plaintiff’s services were associated with Singh’s.  State Farm agreed to defend the counterclaims, but when Singh dropped the accusation that Test Masters mimicked Singh’s map, it ultimately withdrew its defense because the absence of a trade dress claim meant there was no potential coverage under the advertising injury policy it provided Test Masters. This suit followed.
Texas uses the “eight corners” rule, under which the duty to defend considers only the pleadings, liberally construed, and the policy language, focusing on the factual allegations in the pleading rather than the legal theories.  Here, the only question for the court was whether the underlying complaint alleged infringement of “trade dress.”
Test Masters argued that Singh’s citation of §43(a) and allegations that Test Masters used a similar name, mark, and website constituted allegations of trade dress infringement.  But §43(a) covers more than trade dress, and statutory citation isn’t enough to trigger coverage.  The underlying complaint alleged that Test Masters “changed its website so that it was confusingly similar to Singh’s, purporting to offer LSAT preparation courses in every state,” and “represents on its website that it offers live LSAT classroom courses in 100 cities and in all 50 states,” and that its actions “as described above (in particular, [Plaintiff’s] use of the TESTMASTERS name and mark and domain name) are likely to cause confusion, mistake, or deception ... and thus constitute trademark infringement and false designation of origin in violation of Section 43(a) of the Lanham Act.”
This wasn’t trade dress, which is a product’s total image and overall appearance. The complaint didn’t allege anything about any “look and feel” of the website.  (The court mistakenly says “inherently distinctive” here but of course acquired distinctiveness can also—indeed only, in this case since website design would be product design—produce protectable trade dress.) “Absent some allegation of aesthetic similarity to another’s advertisement, a claim that defendant infringed a trademark does not itself comprise a claim for trade dress infringement.”  Allegations that the website was “confusingly similar” to Singh’s because Test Masters copied some of Singh’s course locations and purported to have taught “thousands of LSAT students” said nothing about the distinctive aesthetics of Test Master’s website as compared to Singh’s.  Advertisement of the locations in which one actually does business isn’t trade dress, so falsely advertising locations wouldn’t be copying trade dress. And even if a list of locations where courses are offered did constitute trade dress, the underlying counterclaims didn’t allege that the locations were copied—rather they alleged false advertising of Test Masters locations.
State Farm was entitled to summary judgment on Test Masters’ claim for breach of contract.

multiplicity of products and labels makes class unascertainable

Bruton v. Gerber Products Co., No. 12-CV-02412, 2014 WL 2860995 (N.D. Cal. June 23, 2014)
Bruton brought the usual California claims against Gerber for mislabeling certain food products intended for children under 2. She challenged Gerber’s nutrient content claims and failure to label certain products labeled with a “No Added Sugar” or “No Added Refined Sugar” with a disclosure statement warning of the high caloric value of the products.  The court denied class certification on ascertainability grounds.
A class is ascertainable if it is defined by “objective criteria” and if it is “administratively feasible” to determine whether a particular individual is a member of the class.  Bruton proposed to certify a class of buyers of foods within Gerber’s “2nd Foods” category.  There were seven product sub-categories and multiple flavors within each sub-category.  In total, of the 93 varieties of baby food available in the 2nd Foods product category, 69 products were part of the proposed class.
The court first rejected Gerber’s argument that the class was unascertainable because Gerber doesn’t track who buys its products.  That may be the law of the Third Circuit, but not the Ninth. See Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013) (rejecting affidavits from class members as means of identification where defendant kept no purchase records). “In this Circuit, it is enough that the class definition describes a set of common characteristics sufficient to allow a prospective plaintiff to identify himself or herself as having a right to recover based on the description.”
However, labeling variation proved a fatal flaw. Gerber sold multiple versions of the same products during the class period. Most, if not all, consumers likely discarded the product packaging, forcing them to rely on memory alone, and it was too much to ask them to remember not just whether they bought 2nd Foods products within the class period, but what the flavors and labels were.
Of the 69 products at issue, 66 were labeled both with and without challenged labels during the class period.  Because of production and distribution realities, “a new label produced by Gerber may appear for sale on a store shelf anywhere between three and thirteen months after the new label is approved.” Gerber submitted evidence that at some times during the class period, there were two different labels simultaneously for sale in one store ,”such that on a given day one consumer may have purchased a product with a challenged label statement while another purchaser of the same product did not.” The court—Judge Koh—had recently certified other consumer classes, where all products in the class definition contained the allegedly problematic statements throughout the class period, but this was different.
While self-identification with affidavits can be enough for ascertainability, sometimes it isn’t.  In a case seeking certification of a class of consumers who had smoked twenty “Pack–Years,” or at least 146,000, Marlboro cigarettes over the class period, which spanned several decades, the court reasoned that this asked too much of class members’ prospective members’ memories. “Swearing ‘I smoked 146,000 Marlboro cigarettes’ is categorically different from swearing ‘I have been to Paris, France,’ or ‘I am Jewish,’ or even ‘I was within ten miles of the toxic explosion on the day it happened.’”  Likewise, another food case involving multiple products and labels was found unascertainable because the defendant “produced and sold multiple versions of each of the contested product labels during the class period, some bearing the allegedly misleading statements and others not.”  Consumers would have difficulty remembering whether or not they bought a product with an allegedly misleading label statement.
So too here.  Identifying class membership required consumers to remember whether they purchased a 2nd Foods product in a qualifying flavor; whether the product was in the appropriate packaging; and whether the product was labeled with a challenged label statement. But because Gerber sold more flavors of 2nd foods than included in the class definition, and because Gerber’s flavors were very similar in name, it was likely that consumers would have difficulty remembering whether or not they purchased a qualifying product. (For example, Apples and Bananas with Mixed Cereal or Apples and Cherries flavors were included, but Apple Peach Squash, Apple Berry with Mixed Cereal, and Apples and Chicken flavors were not.)
The multiple different labels further complicated the issue.  “Nearly all of the Gerber 2nd Foods products included in the class definition did not contain any challenged label statements during a portion of the class period.” Some of the labels were changed to remove challenged statements; some statements were moved from the front of the package to less prominent places.  The Apples and Cherries flavor, for example, had six different labels during the class period, one with a challenged statement on the top, five with challenged statements on the top and front, and one with no challenged statements.  That made accurate recall even less likely.
In sum: “[t]he number of products at issue in this case, the varieties included and not included in the class definition, the changes in product labeling throughout the class period, the varied and uncertain length of time it takes for products with new labels to appear on store shelves, and the fact that the same products were sold with and without the challenged label statements simultaneously make Plaintiff’s proposed class identification method administratively unfeasible.” Under these circumstances, affidavits would be unreliable, especially since Bruton sought money damages and the availability thereof might “encourage consumers to submit affidavits even though they cannot remember which products they purchased.”

Wednesday, June 25, 2014

Class can be certified when product is allegedly worthless

Ortega v. Natural Balance, Inc., 2014 WL 2782329, No. CV 13–5942  (C.D. Cal. June 19, 2014)
The court granted class certification for a California class of consumers of Cobra Sexual Energy, a dietary supplement containing various herbs, extracts, and other plant-based materials, which was allegedly falsely marketed as having beneficial health and aphrodisiac properties and being scientifically formulated to improve virility.  Plaintiffs alleged the usual California claims.
The court found the class ascertainable by objective criteria: whether they purchased the products during the class period in California for personal use (and weren’t persons connected to Natural Balance). Only those who lost money buying Cobra were included, so the class was defined as people who’d have standing.  The fact that there were no purchase records was irrelevant; “identifying individual class members is not germane to ascertainability.”
Typicality: Natural Balance argued that the class representatives’ claims weren’t typical because they had unrealistic expectations of the product and unreasonably interpreted the packaging.  But the particulars of their understanding didn’t make them atypical: “even if each Plaintiff and class member had somewhat varying conceptions of the results he could expect from a product marketed as virility-enhancing, each had the same marketing-induced expectation that the product would be virility-enhancing.”  Plaintiffs alleged that it wasn’t.  That made their claims typical, except as to class members whose claims would be barred by the statute of limitations. They couldn’t add to the period by arguing delayed discovery that tolled the limitations period, because that would add “a significant dimension in which the named Plaintiffs have no personal interest.”
Common issues predominated: falsity/misleadingness of the packaging itself, which would be determined based on a reasonable consumer standard and not on an individual basis.  “Plaintiffs’ other evidence—consumer surveys and expert testimony regarding the inefficacy of Cobra’s ingredients—is also applicable on a class-wide basis.” 
Classwide causation could be presumed upon a showing of materiality.  The allegedly misleading statements were nearly all of the statements on Cobra’s packaging, and it strained credulity to think that a manufacturer would put only immaterial statements on its packaging.  Thus, if plaintiffs chould show misleadingness, they could likely show materiality as well; certainly this couldn’t be ruled out as a matter of law.  It could be determined classwide because the packaging was uniform over the entire class period.
Natural Balance argues that individual questions predominated because plaintiffs couldn’t show that everyone was misled by the exact same statements—the named plaintiffs allegedly relied on the package’s image of a cobra snake and not on other statements.  But both plaintiffs testified to other statements on which they relied.  And the presumption of reliance and causation could moot any issue about which component any individual plaintiff read or remembered.
Nor did individualized damages defeat predominance.  Even if that could, by itself, defeat certification—which it can’t—plaintiffs had a tenable theory of how to ascertain classwide monetary relief.  What they spent on Cobra could be readily calculated using Defendant’s sales numbers and an average retail price.  Natural Balance argued that this didn’t take into account the actual value of the product to each individual. But plaintiffs argued that the product was valueless because it provided none of the advertised benefits and was illegal, entitling them to recover the full price.  Natural Balance’s “theoretically available defense” to this relief didn’t render damages an individualized issue that predominates over the common issues. 
The challenge of identifying class members was also insufficient to make individual issues predominate.  “[G]iven that one of the purposes of the class action procedure is to facilitate small claims, that it is likely Defendant’s aggregate liability could be reliably determined without imposing excess liability, and that all parties would be bound by the litigation, individual issues arising out of identifying class members do not predominate over common issues and the class procedure does not unfairly prejudice Defendant.”
Unsurprisingly, the court also found superiority.  Small individual claims would be difficult, wasteful, and unlikely.  Overall, certification was appropriate.
However, the court did reject two unusual features of the proposed notice—that Natural Balance be required to pay for it, and that it also be required to include the notice within Cobra’s packaging.  Nothing justified departing from the ordinary plaintiff-pays rule, and requiring notice within Cobra’s packaging “would be akin to issuing a mandatory injunction, a drastic step not warranted by the record before the Court.”

UK ASA finds ad for journalistic Free Speech Network misleading

Tragedy or farce?  I'll take "couldn't happen in the US" for $500, Alex.

Nonprofit's former chapter has false advertising, not TM, claims against parent

Alzheimer’s Disease Resource Center, Inc. v. Alzheimer’s Disease and Related Disorders Association, Inc. 981 F. Supp. 2d 153 (E.D.N.Y. 2013)
Plaintiff ADRC is the former Long Island chapter of defendant Association, dedicated to fighting Alzheimer’s.  In 1998, the parties entered into a “Statement of Relationship” (SOR) contemplating that they could part ways and providing that the distribution of chapter assets would be subject to binding arbitration in case of disagreement.  ADRC alleged that, over time, the Association breached the SOR by, among other things, permitting the Association’s NYC chapter to fundraise on Long Island.  They disaffiliated in 2012, and ADRC demanded arbitration, seeking to retain funds previously raised for the Association. 
ADRC sued the Association for unfairly competing with ADRC by sending out 15 mass mailings under the name “Alzheimer’s Association—Long Island Chapter” (ADRC’s former operating name) and for breaching an agreement between the parties by using donor information it previously obtained from the ADRC prior to the disaffiliation.  ADRC alleged that the Association lacked any presence on Long Island when the letters were sent, and that the Association forged the signature of ADRC’s leader in those mailings. Multiple donors allegedly mailed checks to the Association based on the mistaken belief that the donations were going to ADRC.
Lanham Act claim: the court dismissed the §43(a)(1)(A) aspect of the claim because ADRC conceded that it had no valid trademark in the name “Alzheimer’s Association—Long Island Chapter” or a related expression.  However, §43(a)(1)(B) was still available.  (This strikes me as an excellent use of channeling principles.  It's true that the name is part of the confusion, but ADRC abandoned the name.)  The court found that ADRC plausibly alleged that the use of confusing addresses, coupled with the inclusion of ADRC’s leader’s name on the mailings, had the capacity to deceive a substantial portion of the intended audience about the recipient of their donations.  ADRC alleged the identity of one such donor who was actually deceived.  The Association argued that ADRC failed to allege materiality, but the identified donor indicated that she “felt deceived” by the mailings.  Facts regarding the identity of other donors were peculiarly within the knowledge of the Association, meriting discovery.
The NY GBL §349 claim: ADRC successfully pled a claim for deceptive acts and practices. “Donors are the consuming public for charitable fundraising activities and are deceived, when a check intended for one charity is cashed by another.” There was a public interest in knowing who was receiving charitable donations.  Punitive damages could be available on this claim, though not on the others.
There was no common law unfair competition claim, because there was no protectable mark at issue, nor was there misuse of a trade secret in using publicly available information like a name or ADRC’s address. “In the Court’s view, the name of an organization’s executive and address does not neatly fit within the categories typically associated with a common law claim for unfair competition.” A conversion claim failed because there was no specific identifiable fund to which ADRC was entitled. And tortious interference with prospective economic advantage failed because there was no sufficiently alleged “business injury,” as required.  ADRC alleged injury in the form of lost donations, but didn’t particularize the damage to its relationships with its donors.  And there was no fraud because ADRC didn’t reasonably rely on any misrepresentations; allegations of third party reliance were insufficient under New York law.  The court also dismissed claims for breach of contract based on the Association’s continued use of donor information after disaffiliation.  The Association’s contractual obligations under the SOR ceased after disaffiliation, and what counted as assets—including donor information—was expressly reserved for arbitration.  Likewise, even if the donor lists constituted a trade secret, ADRC failed to allege that the information was used “in breach of an agreement, confidential relationship or duty, or as a result of discovery by improper means,” or in such a way as to constitute common law unfair competition.
An unjust enrichment claim, however, survived (based on the donations).

Tuesday, June 24, 2014

You have to laugh or you'll cry: supplement regulation

John Oliver has yet another fantastic, and accurate, advertising law-related story, this time focusing on the deliberate unregulation of dietary supplements.

More pondering on the relationship between sec. 2 and sec. 43

One question from last week’s TTAB REDSKINS decision concerns the effect on §43 if the §2 cancellation is upheld.  Mark McKenna has argued that, if we took history seriously, there should be no effect, because unfair competition historically covered lots of things that weren’t registrable.  I’m not so sure that ought to make a difference today, because now that we register trade dress, surnames with secondary meaning, etc., I don’t think there is currently a coherent account of unregistrable matter that is nonetheless protectable.  I don’t think it’s wrong to say that there ought to be such a set, but I don’t think there must be.  For a student research paper concluding that unregistrable ought to mean unprotectable, see James C. Bartholomew, The Scope of Protection Under §§ 2 & 43 of the Lanham Act, though the paper acknowledges that nobody has much to go on here. (Professor McKenna notes that one reason to apply §43 is that if §2 and §43 go together, then the case that §2 violates the First Amendment gets a lot stronger.  I’m also okay with that—I think the right result might be for parts of §2 to go, if we can figure out what the government interest in registration really is.  Right now, we don’t have a good account of that.)
The exclusions in §2 that arguably don’t go to core trademark policy (though this too is debatable) are those for immoral, scandalous, or disparaging marks; flags/coats of arms; names/signatures/portraits of living persons/deceased presidents with living spouses without written consent; geographic indications (GIs) on wine or spirits identifying someplace other than their origin; and primarily geographically deceptively misdescriptive terms.  Some of these exclusions are closer to source significance than others, and it might be worth noting that the “core” exclusions are pretty well mixed in with the non-core ones, so that “deceptive” is listed right in between “immoral” and “scandalous.”  Arguably it’s all congressional policy about what ought to serve as a mark.  (See the policy reasoning in Renna v. County of Union, arguing that governments ought not to have access to ordinary trademark remedies, given their First Amendment implications.) 
But anyway, the NAFTA amendments might seem to be a really obvious place to look for congressional policy about the relationship between registration and protectability.  Congress intended—before California Innovations gutted the change—to switch geographically deceptively misdescriptive marks from registrable to unregistrable.  Did it also intend to make them unprotectable under §43?  As my research assistant pointed out, in retrospect this seems like a really obvious question.  And yet, as I confirmed with Professor McCarthy, there seems to have been no consideration of that question.  Perhaps this is related to the fact that most of our treaty partners operate more registration-based systems, and weren’t attuned to the fact that the US now offers essentially the same protection to registered and unregistered marks. 
Relatedly, our NAFTA commitment required us to provide a remedy to persons harmed by the use of primarily geographically deceptively misdescriptive terms: “Each party [United States, Mexico, Canada] shall provide, in respect of geographical indications, the legal means for interested persons to prevent: (a)  the use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a territory, region or locality other than the true place of origin, in a manner that misleads the public as to the geographical origin of the good....”
Congress did not amend the Lanham Act to implement this provision, while it amended §2 to deal with registration.  Presumably, the assumption was that false advertising law covered the situation already.  Did Congress just not notice that materiality is a requirement under §43(a)(1)(B) (as it should be under §43(a)(1)(A))?  The use of geographically misleading terms is therefore not unlawful unless the misleadingness is material.  That’s probably not what our trading partners wanted, but it’s what they got—both for §43(a)(1)(B) and for §2, after California Innovations.  (I say that materiality was not supposed to be required because part of the theory behind protecting all GIs is that different places should be encouraged to develop reputations for specific qualities.  Protection should enable such reputations to develop even if they don’t exist now and therefore aren’t material now.  There’s other language that can be used to specify GIs with an existing reputation.)
The best that can be said, I think, is that Congress wasn’t really thinking that much about the details, and so the NAFTA amendments don’t help us much in figuring out how we should think about the modern relationship between §2 and §43.

Friday, June 20, 2014

Is DRM the source of Hachette's troubles?

So argues Cory Doctorow.  He makes a point that also came up at the 1201 exemption hearings: the copyright owner does not clearly have the right to authorize a user to strip DRM from a work, where the copyright owner isn't the source of the DRM (and the major forms of DRM aren't operated by individual copyright owners).  So Hachette can't, without some serious work, release a "read your Kindle books on a Hachette app" app.  Obviously there are other issues, especially with the physical books, but it's a point worth considering.

Also the note that removing DRM from Kindle books is "literally a three-word search," despite over 15 years of the DMCA.  As I've said before, the DMCA harms people trying to do the right thing and is irrelevant to people trying to do the wrong thing.

Something fishy about this trademark claim?

GurglePot, Inc. v. New Shreve, Crump & Low LLC, 2014 WL 2744283, No. C13–6029 (W.D. Wash. June 17, 2014)
I’m not really interested in the law in this personal jurisdiction case, finding that there’s no personal jurisdiction in plaintiff’s home state over Massachusetts-based New SCL for this the declaratory judgment of non-infringement. I just really liked the accused trade dress (I think it’s nicer than New SCL’s), and also it reminds me of Justice Scalia’s “cocktail shaker shaped like a penguin.”  Even if there is secondary meaning in the New SCL design, it seems to me that New SCL is asserting rights at the level of idea.

New SCL Gurgling Cod

Thursday, June 19, 2014

Apply fair use to burned area

Via Five Useful Articles, this deposition excerpt from HathiTrust is nearly priceless--what takes it beyond the usual snark is the very last dig the HT lawyer gets in at the Authors Guild's theory of the case.
So, HT's lawyer snarks about multiple litigation copies of HT witness's book the AG's lawyer has made in preparation for the deposition; AG lawyer rises to the bait (even though the book is, according to another AG lawyer, CC/noncommercial licensed) and suggests he'll destroy the extra copies before reading.  HT's lawyer: "I guess if no one else looks at something, it's not infringement? That's an interesting theory."

Wednesday, June 18, 2014

"original" and "first" are mere puffery

Bern Unlimited, Inc. v. Burton Corp., No. 11-12278, 2014 WL 2649006 (D. Mass. June 12, 2014)
Bern sued six of its competitors in the market for sports helmets, alleging trade dress infringement.  Answering Bern’s third amended complaint, defendants asserted false advertising counterclaims, which the court struck in part.
First, defendants alleged that Bern falsely advertised that its helmets were the “first visor helmet offering a protective visor cover in the front.” The court found this, and claims that the helmets were the “original” and the “first functional visor lid” to be puffery. They were not specific and measurable, and thus not actionable.  (No Dastar analysis required, then.)
Second, defendants alleged that Bern falsely advertised that its helmets were covered by a patent, implying that its competitors’ helmets were imitations.  Bern argued that there could be no falsity because the patent in fact issued and was presumed valid.  But the presumption can be overcome by showing objective and subjective bad faith.  What counts as bad faith is determined on a case by case basis; if the patentee knows of invalidity but represents that a competitor is infringing, that’s clearly bad faith.
The counterclaims alleged that Bern advertised and sold the helmet more than a year before the applicant applied for the patent, triggering the old on sale bar.  If the counterclaims were true, Bern’s statements that the patent covered the helmet were made in bad faith because it couldn’t reasonably have believed that the patent was valid.
Bern argued that statements could only be actionable if they directly referred to a competitor or its products, and that it didn’t explicitly claim that the defendants were infringing its patent.  But the counterclaims alleged that Bern characterized competing helmets as imitations, and did so in the same marketing materials that included references to the patent.  One ad included, on the same page, both a reproduction of the first page of the patent and the statement, “Every single brand in the market now has a brim, but your customer wants the original!”  While the argument that these statements in combination would reasonably cause consumers to believe that competing helmets were infringing was “thin, at best,” the allegations were sufficient to state a claim.
Bern also argued that defendants didn’t allege proximate cause, as required by Lexmark.  But Lexmark’s requirement of injury flowing directly from advertising is satisfied when “deception of consumers causes them to withhold trade from the [claimant].” The counterclaims properly alleged that scenario.
The court also rejected Bern’s argument that the counterclaims were added too late.  Defendants argued that they didn’t know until they received Bern’s document disclosure that Bern knew the patent was invalid from its inception, thus completing their counterclaim with the requisite bad faith.  The court had “doubts” about the timing and purpose of the counterclaims, but still declined to strike them on grounds of undue delay.  There would be some prejudice to Bern, because Bern would be entitled to discovery on deception and materiality (even though literal falsity creates a presumption of deception, that can be rebutted, and materiality has to be shown independently; thus discovery would be appropriate).  But that prejudice was not enough to overcome the interest in adjudicating related claims together; much relevant discovery was already completed, and it would be a waste to separate the claims.

Washington's football team registrations cancelled

If you didn't get the link from five other places, here it is.  (It turns out that today was a bad day to wear shorts to the office; it's not the best outfit for being interviewed by a suited TV reporter.)

My contributions: a reminder that Renna v. County of Union has some very important things to say about the lack of protection for marks under sec. 43(a) when those marks are not registrable under sec. 2.

Also, a picture from my collection: I got this from a yard sale; the guy who made them was forced to discontinue them due to threats from the team.  (Object in center of card is an Indian-head nickel.)  You can see Bad Frog Beer hanging out behind the card.

Grande deception?

Starbucks and the “free” college education for its workers: The reporting on Starbucks’ offer has gone beyond the headline—and if treated like ordinary advertising, that headline is misleading.  As it turns out, Starbucks will only pay in full for two years, not four; it’s negotiated a discount with ASU online for everyone.  And Starbucks does not pay up front.  Instead, the employee must go out of pocket, and get reimbursed only after sufficient credits have been completed.  I don’t think this meets the standard for “free” offers set forth by the FTC.  Although most of the Guide is directed at other situations, it’s pretty clear that material constraints on the “free” offer have to be disclosed, and the requirement that the employee pay up front is quite significant, financially.  This seems to me similar to the cases involving purported early tax refunds, which were instead tax refund anticipation loans, with very different potential economic consequences.  Calling them “rapid refunds” was false and misleading. 

Consider also that Starbucks is using this announcement to tout its own specialness and corporate social responsibility, as on The Daily Show.  So it’s commercial speech, certainly under Nike v. Kasky.  Just as dolphin-safe tuna is an intangible product attribute that convinces consumers to buy even though saving dolphins does nothing for them directly, so is “free” college tuition for employees, something Jon Stewart highlighted when he stated that because of Starbucks' announcement he'd be buying from one of their stores.  Given all this, should Starbucks be worried about its PR moment turning into a moment in court?

Fair use decisionmaking

Deconstructing arguments that treat fair use as a mysterious and dangerous concept: This detailed analysis of a flowchart is quite useful. And it cites the OTW’s Fair Use Test Suite!

Tuesday, June 17, 2014

reading list: marijuana advertising and lessons from tobacco

Kimber P. Richter, Ph.D., M.P.H. & Sharon Levy, M.D., M.P.H., Big Marijuana — Lessons from Big Tobacco, New England Journal of Medicine:
[T]obacco was not always as lethal or addictive as it is today. In the 1880s, few people used tobacco products, only 1% of tobacco was consumed in the form of manufactured cigarettes, and few deaths were attributed to tobacco use. By the 1950s, nearly half the population used tobacco, and 80% of tobacco use entailed cigarette smoking; several decades later, lung cancer became the top cause of cancer-related deaths. This transformation was achieved through tobacco-industry innovations in product development, marketing, and lobbying….

Marketing strategies go hand in hand with product innovation. The market for marijuana is currently small, amounting to 7% of Americans 12 years of age or older, just as the tobacco market was small in the early 20th century. Once machines began mass-producing cigarettes, marketing campaigns targeted women, children, and vulnerable groups by associating smoking with images of freedom, sex appeal, cartoon characters, and — in the early days — health benefits. There is reasonable evidence that marijuana reduces nausea and vomiting during cancer treatment, reverses AIDS-related wasting, and holds promise as an antispasmodic and analgesic agent. However, marijuana manufacturers and advocates are attributing numerous other health benefits to marijuana use — for example, effectiveness against anxiety — with no supporting evidence. Furthermore, the marijuana industry will have unprecedented opportunities for marketing on the Internet, where regulation is minimal and third-party tracking and direct-to-consumer marketing have become extremely lucrative. When applied to a harmful, addictive commodity, these marketing innovations could be disastrous. This strategy poses a particular threat to young people. Adolescents are more likely than adults to seek novelty and try new products.

ALI CLE event on Lexmark, Pom, etc.

First, I apologize for the slew of RSS feed updates you may recently have received if you subscribe via an RSS reader like Feedly—the feed has apparently been broken since early May. I was still here though!  If you’re interested, you can browse the archives at, or use any tags of interest to see what you missed.  I have taken measures so I'll notice earlier next time.

Thursday July 10, 2014 1:00 - 2:00 pm Eastern
The law of false advertising has attracted national attention. Two recent Supreme Court decisions interpreting the Lanham Act will provide companies with more flexibility in policing their competitor’s product claims.
The Supreme Court recently issued Lanham Act opinions in Lexmark International v. Static Control Components and POM Wonderful v. Coca Cola, involving standing and preclusion, respectively. The Third Circuit will soon address whether a Lanham Act plaintiff who shows a likelihood of succeeding on its false advertising claim is entitled to a presumption that the defendant’s conduct causes irreparable harm.
What impact will these decisions have on future actions under the Lanham Act? Learn more at this CLE on the latest rulings on the Lanham Act.
What You Will Learn
Discussion will include:
analysis of Court’s decisions in Lexmark and POM Wonderful
standing to bring suit under Lanham Act
FDA preclusion and preemption
remedies: injunctive relief vs. damages
Who Should Attend
This continuing legal education program from American Law Institute CLE will benefit in-house counsel, IP and business attorneys, and other professionals involved in business marketing.
Planning Chair
Christopher M. Kindel, Member, Pirkey Barber PLLC, Austin, Texas
Mr. Kindel focuses his practice on intellectual property trademark and copyright. His experience crosses a wide range of industries including consumer and luxury goods, retail sales, hotel services, music and entertainment, pharmaceuticals, software, financial and consulting services and information technologies industries.
Saul H. Perloff, Member, Norton Rose Fulbright LLP, San Antonio, Texas
Mr. Perloff is a partner in the firm’s Intellectual Property Group and the head of the false advertising group where he represents domestic and international clients in a wide range of complex advertising and unfair competition disputes under the Lanham Act and state law. He also counsels and advises pharmaceutical, consumer product, biotechnology and other clients on advertising and brand protection strategies.
Adam L. Scoville, Vice President & Assistant General Counsel, RE/MAX, LLC, Denver, Colorado
Mr. Scoville leads a team of over a half dozen professionals charged with advertising substantiation, trademarks and brand protection, and other intellectual property issues at RE/MAX, LLC, which franchises real estate brokerage operations with over 90,000 sales associates, in over 6,000 franchised offices, in over 95 countries.
Rebecca L. Tushnet, Professor of Law , Georgetown Law, Washington, D.C.
Professor Tushnet is a professor of law at Georgetown specializing in intellectual property and is a frequent author and speaker on the topic. She also writes the widely-followed 43(B)log False Advertising and More which reports on current IP cases, issues, conferences, and debates.

Monday, June 16, 2014

Such a lonely word: "honest" isn't puffery

Salazar v. Honest Tea, Inc., 2014 WL 2593601, No. 2:13-cv-02318 (E.D. Cal. June 10, 2014)
Salazar alleged that HT’s Honey Green Tea bottles didn’t contain the amount of antioxidants represented on their labels, where independent lab testing determined that the bottles contained an average of 186.7 mg of flavonoids per bottle, or 24 percent below the “247 mg Antioxidants Green Tea Flavonoids Per Bottle” highlighted on the labels.  (Previous versions claimed “250mg EGCG2 Super Antioxidant,” though independent testing showed only 70 mg, and then “Antioxidants 190mg Tea Catechins/Bottle,” though independent testing showed only 119 mg.  Salazar alleged that HT changed its labels but not the formulation.)  Salazar alleged that HT’s “Refreshingly Honest” and “Brutally Honest,” and interactive campaigns centered on the word “honesty,” made this more deceptive.
Salazar brought the usual California claims.  HT argued express preemption, because her tests didn’t employ the FDA-mandated test protocol for nutrient content claims.  Salazar argued that the FDA requirements only apply to disclosures in the “Nutrition Facts,” and that HT’s alleged misrepresentations weren’t “nutrient content claims” subject to the FDA regulations.  The court disagreed.
Under FDA regulations, “compliance with requirements for nutrient content claims” must be determined by analyzing a sample consisting “of a composite of 12 subsamples (consumer units), taken 1 from each of 12 different randomly chosen shipping cases, to be representative of a lot.”  However, Salazar’s claims were based on (1) her own independent testing (finding, for example, an average of 70 mg of EGCG, less than a third of the claimed 250 mg amount, with similar lower-than-claimed results for catechins and bioflavonoids), (2) a report from (finding 57.5 mg of EGCG, with similar lower-than-claimed results for catechins), (3) HT’s own marketing materials referring to supposed independent tests by Men’s Health Magazine (finding 71 mg).
The court found that the label statements were nutrient content claims even if not required to be in Nutrition Facts. Therefore, their accuracy had to be challenged under the 12-sample test method, which allowed for some variation in nutrient content of each individual product.  The complaint didn’t allege such testing. It was therefore dismissed with leave to amend.
However, the court did find that Salazar had standing, making the usual allegations of reliance.  But could she sue for the earlier labels, given that she began buying only in 2012?  At this stage, she’d alleged sufficient similarity between the Honey Green Tea products she bought and those she didn’t. The formulation was identical from 2008-2013, and all the variants related to the advertised antioxidant content.  Material differences, if any, were better addressed at the class certification stage.
HT argued that claims based on  the “Honest Tea” name; its “Refreshingly Honest” and “Brutally Honest” taglines; or its “just a tad sweet” and “a kiss of honey, but not enough to gross you out” statements should be dismissed because they are non-actionable puffery. Salazar argued that she believed them, as a reasonable consumer would.  While nonspecific, nonmeasurable assertions are puffery, some courts have found “honesty” to be actionable.  See, e.g., Richman v. Goldman Sachs Grp., Inc., 868 F.Supp.2d 261, 277 n. 8 (S.D.N.Y.2012) (“If Goldman’s claims of ‘honesty’ and ‘integrity’ are simply puffery, the world of finance may be in more trouble than we recognize.”).  The honey-related statements were more blatant puffery:
It is unclear how one could verify whether the level of honey in defendant’s product qualifies as a “kiss” and is “not enough to gross you out.” A “tad” and a “kiss” are vague and non-specific terms that lack any clear, objective indication of their levels. “Not enough to gross you out” is inherently subjective; two different consumers may have different tolerance levels to the honey.
Thus, the claims were dismissed with prejudice insofar as they relied on honey-related statements.
But “honesty” required more analysis.  The term’s frequent use in trademarks was “suggestive of its hyperbolic, generalized nature.”  HT’s use of “honest” was similar to non-actionable claims for “reliability” and “authentic[ity]” in other commercial product cases. “Adding the terms ‘refreshingly’ and ‘brutally’ to ‘honest’ in the tagline may appeal to consumers but may not substantively contribute to notions of honesty.”  On the other hand, “honest” might imply claims to provide only truthful information, and truthfulness can be measured. 
“Honest Tea” by itself also had a “concrete message.”  HT’s ad campaigns included a website posting, “Honest Tea: If it’s not real, it’s not Honest”; re-styling of the label to accentuate the word “Honest”; a billboard campaign of truths such as “YES, THAT DRESS DOES MAKE YOU LOOK FAT, BE REAL. GET HONEST” and “IT’S NOT ME IT’S YOU, BE REAL. GET HONEST”; and a National Honesty Index social experiment measuring compliance with an honor system across cities. As alleged, “defendant sets out to paint itself as honest and bases virtually its entire product image on that characteristic. These claims are not mere puffery.”

infringement isn't disparagement for advertising injury purposes

Hartford Casualty Ins. Co. v. Swift Distribution, Inc., No. S207172, 2014 WL 2609753 (Cal. June 12, 2014)
The California Supreme Court here provides a relatively rare state court interpretation of the scope of an advertising-related insurance policy.  Hartford insured Swift (here, Ultimate) for claims arising from “[o]ral, written, or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.”  A third party, Dahl, sued Ultimate, alleging patent and trademark infringement, false designation of origin, and damage to business, reputation, and goodwill based on Ultimate’s sale of a media cart.  Hartford denied coverage on the ground that the underlying suit didn’t allege disparagement.
The duty to defend is broad.  It can be triggered by the allegations of the complaint, or where extrinsic facts known to the insurer (whether disputed or undisputed) suggest that the claim may be covered. 
The court nonetheless held that a claim of disparagement “requires a plaintiff to show a false or misleading statement that (1) specifically refers to the plaintiff’s product or business and (2) clearly derogates that product or business. Each requirement must be satisfied by express mention or by clear implication.”  These limits derive from the common law tort of disparagement, which has been shaped by First Amendment considerations even as applied to nonmedia defendants. 
These specificity requirements “significantly limit the type of statements that may constitute disparagement, especially since advertisements and promotional materials often avoid express mention of competitors,” though the court noted that other courts “have found certain kinds of statements to specifically refer to and derogate a competitor’s product or business by clear implication.” This can occur when a false or misleading statement necessarily refers to and denigrates a competitor’s product.  A total superiority or uniqueness claim may clearly or necessarily disparage another party without expressly mentioning them. 
The underlying complaint here alleged infringement and dilution, and attached Ultimate’s ads, which didn’t name the Multi-Cart or any other competing product.  Ultimate offered two theories of disparagement: the first focused on Dahl’s claim that the products’ similarity in design and product name led to confusion, while the second involved false statements of superiority that allegedly implied the inferiority of Dahl’s product.
Even if the use of Ultimate’s “Ulti-Cart” could reasonably imply reference to Dahl’s “Multi-Cart,” there was no disparagement.  Consumer confusion does not by itself mean disparagement.  Intentional mimicry, without more, doesn’t derogate or malign the subject of copying.  Even assuming it’s true that confusing consumers into thinking that you offer a high-quality product and then offering them a cheap knock-off is derogatory to the trademark owner, because confused consumers will believe that the cheap knock-off represents the legitimate product’s actual quality, no such conduct was alleged here.  Instead, Dahl repeatedly asserted that the two products were “nearly identical, folding transport carts.” “A false or misleading statement that causes consumer confusion, but does not expressly assert or clearly imply the inferiority of the underlying plaintiff’s product, does not constitute disparagement.”
Ultimate argued that its 2010 product catalog disparaged the Multi-Cart by asserting the superiority of the Ulti-Cart: “Ultimate Support designs and builds innovative, superior products,” provides “unique support solutions that are crafted with unparalleled innovation and quality and accompanied by superior customer service,” and the Ulti-Cart has “patent-pending folding handles and levers.” The catalog was referenced in the complaint and should be considered, but were insufficient. Except for the patent-pending statement, the statements were general descriptions of the company.  And “superior” doesn’t necessarily imply a derogatory comparison; according to the dictionary, it may be used to describe something “[o]f great value or excellence; extraordinary” or “notably excellent of its kind: surpassingly good.”  Nor does “patent-pending” guarantee that a patent will be granted or that the product is of higher quality. These statements weren’t specific enough to call into question Dahl’s proprietary rights in his product or to suggest that the Ulti-Cart had any important, unique feature.  Instead, they were mere puffing.  “Were we to adopt Ultimate’s theory of disparagement, almost any advertisement extolling the superior quality of a company or its products would be fodder for litigation.”  That would be a free speech problem.