trademark law firm loses trademark lawsuit

Posted on December 19, 2025 by rtushnet

LegalForce RAPC Worldwide P.C. v. MH Sub I, LLC, No. C
24-00669 WHA, 2025 WL 3675365 (N.D. Cal. Dec. 18, 2025)

LegalForce, a law firm “specializing in trademark law,” sued
online referrer to law firms MH for infringing two service marks. The court ruled
for MH after a bench trial. CEO Raj Abhyanker served as trial
counsel, reminding me of the old adage about an attorney who serves as his own
lawyer.

LegalForce uses the service name LegalForce and legalforce.com,
and owns a search engine for trademarks that primarily has used the service
name Trademarkia and the website trademarkia.com. “The search engine has
attracted visitors looking for trademarks and has converted some into paying
clients for the law firm.”

LegalForce uses a composite mark with a parallelogram
colored orange, with two rounded corners and two sharp, with LF inside and the
stylized words “Legal Force” alongside. The composite is registered for “law
firm services” as well as services “providing general information in the field
of legal services via a global computer network.” Sometimes, LegalForce uses
just the symbol portion, and it registered that separately in anticipation of
this litigation. (Note: “Plaintiff failed to submit certified copies of the
above registrations before our October 2025 bench trial and had no acceptable
excuse for the failure. Instead, plaintiff … submitted certified copies after
the trial record closed.… This is emblematic of the way plaintiff has
prosecuted this entire case. Nevertheless, this order will treat the
certificates as having been proven.”)

Composite mark

symbol only

MH isn’t a law firm, but offers referrals. “People having
legal problems have been attracted by advertising to http://www.lawfirms.com, where
some have filled out an interest form. Defendant has packaged the resulting
client ‘leads’ and provided them to paying lawyers, including lawyers listed on
online directories defendant also owns,” including avvo.com. Lawfirms.com initially
used a mark that also had an orange parallelogram with two sharp comers; nested
inside was a white Roman column. A stylized word to the right read:
“LawFirms.com.”

accused mark

Soon after litigation began, and consistent with the court’s
suggestion trying to spare both sides the cost of litigation, MH changed the
symbol to crimson and changed the corners so that the tops were sharp and the
bottoms rounded. The column and stylized word remained.

replacement mark

LF continued the case, seeking only injunctive relief as to
the original composite.

There was no evidence of actual confusion. MH didn’t market
its services using the composite mark in the same places where LF markets its
services using either of its marks, “so there has been and will be no occasion
for consumers to see both services’ marks and to confuse one versus the other.”

Both parties have used keyword marketing but “no single web
search has returned or will ever likely return both plaintiff’s and defendant’s
websites showing their marks.” There was no evidence that the parties have or
would bid on the same keywords for the websites at issue (as opposed to other
sites like avvo.com). For SEO, there was “no credible evidence that defendant
has undertaken any effort to appear in search results for the same searches as
plaintiff, or ever would…. No credible evidence showed even that the service
names have appeared alongside each other.” Likewise, “no credible evidence
proved that anything about the websites themselves was confusing.”

At trial, LF offered a theory of AI chatbot confusion.
However, it offered no admissible evidence in support of such a theory.

The parties have used the service marks at issue in social
media, but not on the same social media platforms. LF used its symbol on
LinkedIn, but “LawFirms.com,” unlike LF, does not target businesspeople. “It is
not the service name of a standalone business with its own employees.” Instead,
defendant markets on Instagram, Facebook, and TikTok, where there was no
evidence of LF having marketed. There was no evidence that MH marketed or would
market at any conference or physical location. “LegalForce and LawFirms.com are
not marketed in the same places in part because they do not offer the same
services.”

There wasn’t even evidence that prospective lawyers buying MH
referrals would see the accused mark. While avvo.com has listed some trademark
lawyers, lawfirms.com “almost always has attracted and referred individuals
having personal problems”: car accidents, worker’s compensation, and divorce. “It
has presented all comers with a general webform. Some (very few) who have
completed the form have indicated in it that they had trademark needs.” Revenue
for each personal injury lead has been about $85, while revenue for each
trademark lead has been about $46. For all the relevant periods, lawfirms.com collected
and distributed fewer than 25 total trademark leads to trademark lawyers,
representing less than $1,000 in revenues, a small fraction of all leads and
revenue, and none of those came during the period when it used the accused
mark.  

Meanwhile, LF has never provided legal services for personal
injury, employment issues, or family law, received any appreciable number of
inquiries from any persons seeking any such services, or systematically made
referrals of any kind to any other lawyers or law firms. Although it asserted an
intent to do the first and third of these, the court found this not credible. “Plaintiff
has had more than a decade to broaden its legal practice and/or to begin making
referrals systematically to other lawyers and it has failed to do either.”

The customers are moderately careful: “They are more
mentally alert than someone grabbing a lemon-lime soda. They would not be
likely to confuse the two marks even if the marks were seen side by side.”
Although one of plaintiff’s experts testified that LF offered relatively less
expensive trademark registration services, “suggesting but expressly not
concluding that they may be relatively less sophisticated and take relatively
less care,” relatively less care was not no care — “especially if being
compared to the care taken for more expensive legal services.” “Protecting a
business’s reputation is important, even if it is on average more important to
be made whole after the kind of bodily injury that prompts a person to seek a
lawyer.”

The senior marks weren’t strong, despite the composite mark’s
incontestability. LF had “barely” used the two marks at issue, focusing instead
on “Trademarkia,” including in the header for legalforce.com. There was no credible
testimony or documentary evidence of any paid advertisement using LF’s
“LegalForce” service name or marks. LF did not even prove that its own law firm
clients know the name “LegalForce.”

Conceptually, LF’s marks “comprise common features arranged
in a common way, with limited distinctions.” A squat parallelogram with some
rounded corners and some unrounded ones is “shared by other marks in commerce.”
There were many other orange parallelograms already in use, although the
gradient added a slight distinction. Bolding one but not both words “distinguished
the stylings from other marks somewhat.” The choice of a “horizontal stack”
with the symbol on the left and the word on the right was not arbitrary, but
rather “a common and functional choice to fit well at the top of a website.” Thus,
there was neither commercial nor conceptual strength.

There was no intent to confuse: “Defendant had no reason to
ride plaintiff’s coattails, nor even to step on them: Plaintiff’s marks were
not well known. Plaintiff and Defendant were not proximate or expanding.” MH
chose a squat parallelogram “because it presented well on websites in
conjunction with words.” It chose its colors, fonts, and stylings to complement
one of its existing logos (Avvo blue): “designers treat those colors as
complementary.” MH then chose the sizing and stacking to match its existing
logos, so that its mark could be configured to appear clearly at the top of its
website.

“The worst that could be said was that defendant neglected
to do a trademark search before settling on a mark that assembled common
elements in a common way. … The failure to conduct a trademark search before
selecting the original mark did not result from bad faith. A trademark search
was not required by law.”

Nor were the parties’ marks very similar. The column
distinguished them; the initials “LF” do not suggest the same thing as the
Roman column. While each set of letters in the words includes the capitalized
letters L and F, they spelled different words. The senior mark bolds only the
first word, “Legal,” but not the second, “Force,” while the junior mark bolds
both words “LawFirms.” “In meaning, the senior mark describes one legal force,
while the junior mark uses the generic term for many or all law firms.” As a
whole, they were arranged in a “common, functional” way for a mark designed to be
displayed at the top of a web page. “No credible evidence proved that when
viewing the marks as a whole this horizontal stacking itself was important to
any consumer impression or to any association with any service.” Indeed, “the
differences stood out in the overall consumer impression.”

LF’s survey showed respondents ead-to-head comparisons of
the composites and asked: “If you saw the logos [below] on two different
websites [whe]n searching for law firms, would you think they are connected,
affiliated, or associated in any way?” Thirteen percent answered “Yes.” Nineteen
percent said “maybe.” (The expert initially grouped these together as 32%; the
court was not pleased.)

“The survey question posed a scenario that was not specific
and that did not reflect any scenario proven to exist or to be likely to exist
in commerce.” It didn’t even show what the websites would look like. There was
no control. (Indeed, LF ran a survey with a control, showing no real difference
between the test and control cells, so it dropped the control and re-ran the survey;
“[o]ther methods to reduce bias were known to plaintiff but not followed in the
re-crafted survey.” The questions “incorporated false premises, were
ambiguously worded, and/or were reported to the Court with at first material
omissions.”

Defendant’s better survey showed consumers the junior mark
on lawfirms.com, then asked if they believed the services were put out by,
affiliated with, or approved by some other business, whose marks or name they
might recall and then write in. “No one responded with LegalForce, Trademarkia,
Raj Abhyanker, or anything similar. This survey was run with likely consumers
of plaintiff’s services and with likely consumers of defendant’s services. The
answer was zero for either cohort.”

The court had other criticisms of Abhyanker in his roles as
CEO and trial counsel. E.g., he “testified misleadingly under oath to having
spent $10 million advertising the mark. On cross-examination it was revealed
that zero of that $10 million had been spent buying ads showing the actual
marks at issue.” On the other hand, the court found that discovery was “marked
by failures by counsel on both sides.”

The only legal conclusion of note is the court’s recognition
that incontestability doesn’t add actual market strength. “[E]ven if
incontestable, a mark that remains conceptually and commercially weak cannot be
asserted to exclude from its designated market other trademarks that are
unlikely to be confused with it.”

from Blogger http://tushnet.blogspot.com/2025/12/trademark-law-firm-loses-trademark.html

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license agreement termination might be invalid transfer in gross without a new partner for licensor

Posted on December 17, 2025 by rtushnet

Form Portfolios LLC v. Food52, Inc., 2025 WL 3638165, No. 24-cv-07690
(NCM) (CLP) (E.D.N.Y. Dec. 16, 2025)

Form designs consumer products, partnering with other
companies that license those designs. Food52 sells cookware and other homegoods
under the brand Dansk. This dispute arises from their former collaboration.

Dansk is known for products
designed by Jens Quistgaard, a Danish designer…. After Quistgaard was no longer
Chief Designer for Dansk, Quistgaard continued to develop designs for
kitchenware on his own. … In 1992—long before defendant acquired Dansk—Dansk
and Quistgaard entered into a contractual arrangement) for Dansk to have the
opportunity to purchase designs that Quistgaard continued to invent. … Quistgaard
retained all rights for designs not accepted by Dansk. The 1992 Design
Agreement provided Dansk with a limited license to utilize Quistgaard’s
distinctive and famous name, signature, biographical data, photograph and/or
likeness on the accepted designs.

Quistgaard died in 2008; his heirs set up an entity that
entered into a new agreement with Dansk, providing it a right of first refusal to
certain archival designs and again provided Dansk a limited license to utilize
Quistgaard’s name, initials, signature, biographical information, and likeness
for promotional materials for the additional accepted designs. This agreement
expired in 2022.

The parties then entered into an agreement allowing Dansk to
make and sell products based on certain designs owned or managed by Form. Dansk
also asked Form to act as an intermediary with the Quistgaard Family because of
Form’s expertise working with the heirs of designers. The Quistgaard family
granted Form the exclusive right to negotiate a new agreement with Dansk,
including provisions making Form its legal representative. The parties then entered
into a new license, which said it superseded all previous licenses.

The new agreement stated, among other things, that “[a]ny
trademark, other than [defendant]’s house mark or brand, that is adopted by
[defendant] in marketing Licensed Products in addition to a Licensed Trademark
that becomes associated exclusively with any or all Licensed Products as a
result of such marketing, shall revert to [plaintiff] upon termination of this
Agreement for any reason,” including “the name of the designer in question,
their likenesses, signatures, logos and initials for use in connection with the
promotion, advertising, marketing and sale of Licensed Products.”

Then a dispute developed and Dansk allegedly unilaterally
ceased making payments to Form. But it allegedly continued to sell products
covered by the new agreement and to use various trademarks, including the Jens
Quistgaard name and the Kobenstyle registered trademark.

Form sued for trademark infringement under Section 32 of the
Lanham Act and false association, false advertising, and trademark dilution
under Section 43.

Section 32: Kobenstyle is a specific line of cookware. The
parties agreed that this trademark was initially owned by Dansk in 2013, but Form
argued that the license agreement transferred it to Form when the license was
terminated, implicitly arguing that the Kobenstyle trademark was not “[Dansk]’s
house mark or brand.”

First, the court found that summary judgment was the right
place to make the argument that the agreement’s reference to “revert” meant
that the agreement only covered marks Form previously owned; it never owned
Kobenstyle. At the motion to dismiss stage, though, the court accepted the
argument that the only things exempt from “reverting” are Dansk’s “house mark
or brand.”

Dansk then argued that, regardless, this section would fail
to actually transfer ownership because it was a prohibited “in gross” transfer
of trademark rights.  “[F]or a trademark
transfer to be valid, the transfer must include the underlying trademarked
commercial undertaking in some meaningful respect.” It was true that no aspect
of defendant’s business has changed hands, but Form argued that a trademark can
be validly transferred even without transfer of the underlying business so long
as the recipient continues or intends to continue producing similar goods. “The
fundamental requirement for a valid transfer of trademark is continuity of the
underlying product or business.”

However, the complaint didn’t plead that Form intends
to produce or market Kobenstyle products within a reasonable timeframe or
partner with a different collaborator to do so. Thus, the section 32 claim
failed.

43(a)(1)(A) false association: Form alleged that Dansk’s use
of Jens Quistgaard’s name, initials, signature, biographical information, and
likeness was actionable. Form properly alleged standing: its interests were
within the zone of interests, which for 43(a) doesn’t require trademark
ownership, and it sufficiently alleged that its re-licensing rights were being
harmed by Dansk’s competing uses.

Dansk argued that it was using Jens Quistgaard’s name and
initials only in a descriptive and factual sense—to convey to consumers that
defendant is selling goods that were, in fact, designed by Quistgaard. But this
doesn’t work on a motion to dismiss because descriptive fair use is a
fact-intensive inquiry. (Could this be reframed as a Dastar defense that
would work?)

However, the 43(a)(1)(B) claim was dismissed as duplicative
with the unregistered trademark infringement claim. T The idea that consumers
will falsely believe that defendant is authorized to sell trademarked goods
does not sufficiently entail or imply a false statement that “go[es] beyond
mere claims of false association.”

Dilution: of course not; Form didn’t even bother to defend
it.

from Blogger http://tushnet.blogspot.com/2025/12/license-agreement-termination-might-be.html

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Reading list and comments: Doctrine, Data, and the Death of DuPont

Posted on December 15, 2025 by rtushnet

Thomas Reichert, Doctrine, Data, and the Death of DuPont 

 Abstract:

For fifty years, courts have claimed to apply a comprehensive thirteen-factor test for trademark confusion. They are lying, or at least deeply mistaken. Using AI-powered analysis of 4,000 decisions, this Article proves what practitioners have long suspected: the test has collapsed to just two factors. 

 Using a large-language-model to extract scored findings for all thirteen factors from approximately 4,000 TTAB inter partes decisions (2000-2025), the study applied statistical models to predict case outcomes. Mark similarity (Factor 1) and goods/services relatedness (Factor 2) alone achieve 99.37% accuracy. Adding the remaining eleven factors increases accuracy to only 99.79%, which is a mere 0.42-point improvement with no practical significance. More striking still, a simple categorical rule predicting confusion if and only if both factors 1 and 2 favor confusion achieves 99.52% accuracy, outperforming the regression models. Further analysis confirms that most secondary factors either repeat information already captured by the core two factors or contribute nothing meaningful to outcomes. 
 These findings confirm at scale what prior scholarship has suggested: in determining trademark confusions, courts pay lip service to comprehensive multi-factor analysis while actually deciding cases based on just two considerations. The results also reveal concrete harms from this doctrinal gap: parties spend substantial resources litigating factors that do not influence outcomes, case results become harder to predict in advance, and adjudicators exercise broad discretion without meaningful constraints. 
 The Article explores how these findings might inform doctrinal reform, how reforms would center the two determinative factors and limit secondary considerations to narrow tiebreakers in genuinely ambiguous cases. Finally, it advances a broader “multifactor collapse” hypothesis and outlines a research agenda for testing whether other legal balancing frameworks exhibit similar patterns where doctrinal complexity masks simpler underlying decision-making.

My comments: Empirical support for John Welch’s mantra,
which turns out to be understated—mark and goods don’t predict 95% of the
outcomes of 2(d) appeals to the TTAB, they predict 99%!

A small point: I think the article understates Beebe’s findings
on the importance of intent, which is the factor that he finds to be important
that this analysis doesn’t. This may be related to the big point: You can’t directly
compare registration inquiries, which are conducted in the abstract, to infringement
inquiries, which consider all the relevant context. Actual confusion is
especially unlikely in 2(d) inquiries, and so is intent evidence.

This paper could be very useful, but without attention to the
differences between 2(d) and infringement, it will not reach its potential and
might serve to confuse people who aren’t already conversant in trademark law. This shows up already in the abstract, which starts off with “courts” but then discusses the TTAB. Likewise, on p.44, right after saying clearly that the results are about the
TTAB, the paper says “Some readers may object that courts must have reasons for
discussing all thirteen factors. This objection conflates rhetoric with
reality. Courts discuss Factor 8 (concurrent use) because doctrine requires it,
not because it changes outcomes.” But the TTAB is not a court. This also means
that, e.g., claims about litigation costs aren’t comparable; the proper figure
is estimates for costs of opposition, which AIPLA collects separately from
litigation costs in its surveys.

The results also have fascinating implications for the
question of crowding on the register. If crowded fields rarely matter, that
gives existing registrants even more of an advantage than the crowding
literature might suggest, even as 2(d) refusals seem to be rising.

from Blogger http://tushnet.blogspot.com/2025/12/reading-list-and-comments-doctrine-data.html

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reasonable consumers read promotion terms on a gambling app, court rules

Posted on December 15, 2025 by rtushnet

De Leon v. DraftKings, Inc., 2025 WL 3551627, No. 25cv644
(DLC) (S.D.N.Y. Dec. 11, 2025)

The court rejects false advertising claims against gambling
site DraftKings. “Three of the plaintiffs became addicted to online gambling
and have suffered both financial and emotional harm from using the defendants’
app to gamble on sports.” Nonetheless, they didn’t identify deception that had
caused this.

The plaintiffs challenged advertisements of “No Sweat” bets
and a $1,000 deposit bonus, and “the use of VIP Hosts to urge users of the app
to continue gambling even when they have lost sizeable sums of money.” Ads for
the “No Sweat” promotion allegedly imply that users may place bets of up to
$1,000 without the risk of losing that money, but a consumer who loses a bet
cannot simply cash out a refund but must place a “Bonus Bet” in the refund
amount. That “Bonus Bet” has no cash value, is non-transferrable, and has an
expiration date. They can only win by placing a successful, in-the-money Bonus
Bet, which might or might not happen. The key language:  “Get a bonus bet back in the amount of your
original wager if your first bet doesn’t hit.” There’s an “information or i
symbol” with a hyperlink to those terms, allegedly in “impractically small font
size.”

Another TV ad announced that new customers can receive “a
100% deposit match up to $1,000”. Plaintiffs alleged that this is misleading
because

DraftKings will only match 20% of a
user’s deposit. To obtain the full benefit of the promotion, a user must
deposit $5,000 and place bets with minimum odds of -300, risking at least
$25,000, all within 90 days. Moreover, the bonus is not rewarded as withdrawable
cash but rather as “DK Dollars”, which can only be used for further gambling.

The ad also said “Bonus funds are earned as you play,” and
allowed users to select an amount.  After
collecting payment information, the app described the terms of the offer in
more detail:

A user’s first deposit (min. $5)
qualifies the user to receive up to $1,000 in bonus funds in the form of site
credits that can only be used on DraftKings. Bonus amount is equal to 20% of
that deposit amount, not to exceed $1,000 (the user must deposit $5,000 to be
eligible to receive the maximum bonus amount of $1,000). Bonus funds will be
awarded to the user according to the following play-through requirement: for
every $25 played on DraftKings in DFS/Sportsbook/Casino, the user will receive
$1 in bonus funds released into their player account (e.g., a $5,000 deposit
requires a user to play through a cumulative total of $25,000 in daily fantasy
contests, sportsbook (-300 odds or longer), casino products, or any combination
thereof to receive the maximum possible bonus amount of $1,000). The play-through
requirement must be met 90 days from the date of first deposit to receive
maximum bonus. 

[FWIW, I think most regulators would think that the initial
offer needs to disclose that you don’t get withdrawable money but just site
credit. That’s a really material qualification!]

As for the VIP Hosts, one plaintiff’s VIP Host contacted him
after he had suffered a significant loss on the DraftKings platform and offered
him a 100% deposit match of up to $500, contingent on the plaintiff making a
new deposit that same day. “After the plaintiff informed his VIP Host that he
was behind on bills, the VIP Host sent him another text about a new deposit
promotion.” Another one reported that, on days of losses, the plaintiff’s VIP
Host would deposit more credits and offers into his account. “When the
plaintiff set temporary limits on his betting, the VIP Host promised to send
him new promotions and credits once the limits expired.” [This seems unfair,
even if not deceptive: again, regulators could intervene here without the
limits on individual plaintiffs.]

DraftKings allegedly only asks yes/no questions such as “are
you depositing expendable income that you can afford to possibly lose?” “When
one of the plaintiffs lost over $100,000 in a single day, which was nearly five
times what he earned at work in a year, DraftKings did not cut him off from
gambling on its site or connect him with addiction resources.”

First, the court reasoned, the allegations that “All of the
advertisements these Plaintiffs saw were materially similar” were insufficient
to state a plausible claim of misleadingness. [I would think “contained the
same deceptive promotion” should suffice.]

But also, there was no identified misleadingness. “Accurate
and complete terms of each promotion were fully disclosed to users of the app.”
While a reasonable consumer doesn’t have to consult the nutrition label on the
side of a snack box to check information about product ingredients that is
presented in large bold font on the front of the box, the court concluded that
apps are different:

The plaintiffs do not assert that
any information contained on the app was misleading. The terms of the
promotions are readily available on the app and are presented to the user
before and during the purchasing process. They are accessed through the very
same pages that the consumer uses to place the promoted bet. A reasonable
consumer of an online platform would be expected to look at the terms of
promotion, which are readily accessible, before accessing the promotion.

And the court concludes, puzzlingly to me, that font size
doesn’t matter on an app: “The FAC does not allege that the promotional terms
were in unusually small font for a phone app or that the size of the font could
not be expanded through operation of the phone and app.” My eyes don’t get
better when I’m looking at an app! And a user who’s encouraged by design not to
read tiny print still doesn’t get the material qualifications disclosed in the
tiny print.

Unlike the FTC, the court also thinks the “(i)” symbol with
a hyperlink was enough to put consumers on notice (the FTC’s position is that a
symbol that doesn’t tell you what it’s about will not give consumers enough
reason to click). And the full disclosure of the terms for the $1,000 Bonus was
made “on the very page of the app where the user made that selection. A
reasonable consumer acting reasonably under the circumstances would have read
the terms.”

Unjust enrichment and product design liability claims also
failed.

As for the VIP Host program, there weren’t plausible
allegations that such statements or conduct were directed to consumers at large.
“VIP Hosts engage in personalized and targeted outreach to unique consumers to
encourage them to gamble.” The complaint alleged that VIP Hosts are trained to
cultivate trust with individual users and to use the individual user’s data “to
give them outreach and attention that feels personalized and fortuitous.” “In
sum, the FAC describes personalized offers sent in response to an individual’s
situation. It does not describe communications that were deceptive or
misleading and that were directed to consumers at large or similarly situated
consumers.” Comment: this language is very promising for entities seeking to
avoid liability for whatever their AI comes up with!

Even though the complaint alleged that VIP Hosts’
solicitations “were substantially uniform in content, presentation, and impact
upon consumers at large,” that was too conclusory.

Gross negligence and fiduciary duty claims also failed.

from Blogger http://tushnet.blogspot.com/2025/12/reasonable-consumers-read-promotion.html

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Third Circuit affirms disgorgement award in “Made in the USA” case

Posted on December 11, 2025 by rtushnet

Newborn Bros. Co. v. Albion Engineering Co., No. 24-1548,
No. 24-3046, 2025 WL 3540060 (3d Cir. Dec. 10, 2025)

Along with his rally-going, Judge Bove did participate in
this nonprecedential affirmance of various rulings, including disgorgement,
in this false advertising case in which Albion was found liable for falsely
advertising its caulk dispensing guns as “Made in the USA.”

First, Newborn didn’t need a consumer survey where it had
other evidence of deception, from individual customers and distributors who believed
Albion products were made in America. Newborn also showed materiality: its
branding expert testified that “Made in USA” has “tremendous value” and was a
“factor in a significant portion of consumer decisions,” and Albion’s own
expert agreed that “sometimes ‘Made in the USA’ is material to some people.”

Newborn also showed sales diversion. For example, “a
distributor of Albion products testified that he pushed Albion products to the
detriment of Newborn’s products but, once he realized that Albion products
contained foreign materials, he sold more Newborn products.” The District Court
also found that “once Newborn filed this lawsuit and increased the attention on
Albion’s labelling practices, its sales rose.”

The injunction was also fine: The District Court ordered
Albion to send a letter to “each distributor it has sold a caulking gun to
within the past five years” and “request that any samples, displays, or other
materials referencing ‘Phila. PA.’ or referring to Albion caulking guns being
‘Made in USA’ be returned,” as well as display a notice concerning this
litigation. Albion argued that this was overbroad, but the District Court found
that Albion’s old products and marketing materials were still in circulation.

The District Court also ordered Albion to list on its
packaging each component of the product and its country of origin until CBP provides
Albion with updated guidance. Albion previously sought guidance from the CBP in
2012; in 2019, CBP told Newborn that importing steel rods and then changing
them in the US would “not constitute a substantial transformation,” and thus
the country of origin was not the United States. The District Court concluded
that “Albion has intentionally foregone a subsequent, clarifying ruling [from
the CBP], choosing instead to forego any country-of-origin markings at all.”
[That … seems unlikely to comply with the law regarding imported goods.] It was
not an abuse of discretion to require Albion to display detailed
country-of-origin information on its products until it receives CBP guidance.
Even though this applied to products that were already labeled “Made in Taiwan,”
which Albion argued was enough to satisfy CBP, “[t]he injunction does not order
compliance with CBP requirements; it is an exercise of the District Court’s
discretion to fashion a remedy.”

On the cross-appeal, Newborn argued that the lower court
shouldn’t have accepted Albion’s unclean hands defense, which involved Newborn’s
use of a U.S.A. logo to market imported goods. No dice. “[B]oth Newborn and
Albion attempted to market themselves as American manufacturing companies and
reap the benefits of that image.” Although “the connection between the
misconduct and the claim must be close” for unclean hands to apply, and
although there were “material differences in timeframe, content, and context”
for some of the examples offered by Albion, the District Court focused on
Newborn’s 2007 trademark renewal application. Newborn averred in that
submission that it was still using the “Newborn U.S.A.” trademark and “submitted
an example of a calking-gun advertisement bearing the trademark without
reference to Newborn’s U.S. warehouse facilities.” Thus, the district court
didn’t abuse its discretion.

Nor did the unclean hands doctrine require evidence of
consumer confusion or injury. “[O]ne’s misconduct need not necessarily have
been of such a nature as to be punishable as a crime or as to justify legal
proceedings of any character. Any willful act concerning the cause of action
which rightfully can be said to transgress equitable standards of conduct is
sufficient cause for the invocation of [the unclean-hands doctrine.]”

It was also not an abuse of discretion to reduce the disgorgement
award for repeat customers. Albion’s expert opined that after a customer or
distributor purchased an accused product, “he or she became aware of the
products’ foreign origin by either stamp, sticker, or hang tag such that it is
reasonable to infer that any subsequent purchase by that same customer or
distributor would be made for reasons unrelated to the country of origin,” and
the court relied on that to reduce the award. I agree with Newborn that the
expert—an economist who focuses his practice on providing economic analyses for
litigation, including disgorgement calculations—wasn’t qualified to testify
about consumer beliefs. But the court of appeals held that testimony “concerning
consumer behavior” “falls squarely within” an economist’s expertise.

Comment: Ah, the dismal science! Actual experts in consumer
behavior would note that consumers don’t generally do that kind of
preference-updating. Having bought the product—in part because of its US origin
claims—consumers generally try to justify their purchases retroactively. As the
Supreme Court explained
long ago,

We find an especially strong
similarity between the present case and those cases in which a seller induces
the public to purchase an arguably good product by misrepresenting his line of
business by concealing the fact that the product is reprocessed or by
misappropriating another’s trademark. In each, the seller has used a
misrepresentation to break down what he regards to be an annoying or irrational
habit of the buying public—the preference for particular manufacturers or known
brands regardless of a product’s actual qualities, the prejudice against
reprocessed goods, and the desire for verification of a product claim. In each
case, the seller reasons that, when the habit is broken, the buyer will be
satisfied with the performance of the product he receives. Yet a
misrepresentation has been used to break the habit, and … a misrepresentation
for such an end is not permitted.

from Blogger http://tushnet.blogspot.com/2025/12/third-circuit-affirms-disgorgement.html

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despite rejecting Lanham Act PI, court enjoins D from making negative statements about P in public if prospective customers might see

Posted on December 11, 2025 by rtushnet

Red Sense LLC v. Bohuslavskiy, 2025 WL 3539968, No.
25cv12281 (EP) (AME) (D.N.J. Dec. 10, 2025)

This case illustrates that tortious interference has a small
remaining scope—where there’s no “commercial advertising or promotion” because
of the failure to solicit a substantial number of the relevant consumers in the
context of the relevant industry, targeting specific consumers with false
claims can still constitute tortious interference. The preliminary injunction
bars both targeting and certain public statements, which the court warns it
will treat as targeting. I’ll ignore the trade secret claims, but they are also
present.

RedSense offers cybersecurity threat monitoring and
reporting services. Bohuslavskiy was RedSense’s former Chief Research Officer;
Red Sense targeted his acts both before and after his resignation. (The
principals left another company to found RedSense and recruited him from there,
which probably makes their trade secret claims seem bitterly ironic to their former
employers.) [Information about clients redacted.] RedSense alleged that, for cybersecurity
companies—which have intimate knowledge of their customers’ vulnerabilities—a
“rumor regarding impropriety, ethical concerns, or a similar vulnerability is
enough to ruin the service provider’s reputation and cause a customer to seek
their threat intelligence from another more reputable source that they can
trust.”

Bohuslavskiy agreed to provide “ ‘in kind funding’ in the
form of Threat Intelligence and Intellectual Property for [RedSense’s] benefit
and use by [RedSense] in lieu of the $100,000 seed funding contribution.” Bohuslavskiy
represented to RedSense to that he had ownership rights in this IP as a
co-founder of the previous employer.

Bohuslavskiy allegedly promised multiple customers an
AI-driven search and report generation tool that would allow RedSense to
provide more targeted threat intelligence reporting, but did not deliver. Key
customers such as [Redacted] allegedly “have questioned the value of the
RedSense deliverables absent this automation tool.”

Bohuslavskiy disputed RedSense’s account and argued that he
was developing the AI tool on the side, and delivered a different product as
promised. He alleged that a key principal attacked Bohuslavskiy’s ethnicity and
immigration status, and that his complaints were ignored: After Bohuslavskiy
“confided” in a different principal about his concerns as an immigrant in light
of the new administration, the other one implied via text that he would report
Bohuslavskiy and his family if Bohuslavskiy did not “do [his] job.” At an
emergency partner meeting, another principal allegedly stated that RedSense was
“in the zone of insolvency” and suspended all partner distributions. Bohuslavskiy’s
position was rendered an “unpaid job,” and Bohuslavskiy and his team went weeks
without pay. He ultimately resigned, with his brother, “[d]ue to the unilateral
and arbitrary use of company finances by the CEO—actions [they] perceive as
coercion against our subordinates—as well as breaches of signed contracts and
unresolved financial disputes.”

However, he argued that he resigned only as CRO and retained
his partnership interests. Via email, he stated that, “as a partner of
RedSense,” he would “be informing each customer about this illegal action
tomorrow, as well as what lead [sic] to it. With all screenshots and evidence
attached.”

As promised, despite a C&D from RedSense’s counsel, Bohuslavskiy
began contacting many of RedSense’s existing and prospective customers—at least
a dozen. In emails to at least two customers, Bohuslavskiy stated he “recently
resigned from RedSense due to ethical and contractual concerns” and that
despite his resignation, he remains a co-founder, partner, and shareholder of
RedSense, and therefore, will continue to honor his obligations to ensure
“seamless intel provision and continuity.” In some follow-up emails,
Bohuslavskiy also provided threat intelligence reports and offered to schedule
a briefing with a client “consistent with [his] previous briefings.” He also
made a public LinkedIn post regarding his resignation as CRO from RedSense.

According to Red Sense, customers are not sure who is
responsible for providing the contracted-for services—RedSense or Bohuslavskiy—and
some customers have even asked whether Bohuslavskiy’s emails are part of a scam
or from an individual pretending to be Bohuslavskiy. Some customers were unsure
of Bohuslavskiy’s status with RedSense given his representations that he is
still operating as a representative of RedSense. Several previously satisfied customers
“informed RedSense this ongoing issue with Bohuslavskiy has stained RedSense’s
reputation and has undermined the otherwise high quality of services customers
have received from RedSense.” [Redacted]—RedSense’s largest customer—has
directly expressed disappointment and has yet to pay past due subscription fees
to RedSense. The Director of Cyber Intelligence and Threat Engineering at
[Redacted]–“a strategically important client of RedSense”—told RedSense that it
needed to “work it out” with Bohuslavskiy. [Wonder what they’ll think of this
result.] A prospective client also supposedly halted discussions with RedSense
when Bohuslavskiy made public comments regarding his resignation.

RedSense’s Lanham Act false advertising arguments centered
on the emails to “a handful” of RedSense customers.  In previous cases allowing claims based on a
few contacts to proceed, “the fact the defendant reached a significant portion
of the target audience with its statements was key to the determination that
the sharing of information even with a small number of individuals was
sufficiently disseminated to be actionable under the Lanham Act.” Here,
however, the numerator was “slightly more than a dozen,” and the denominator
was a market that is “large and highly competitive … across various industries,”
including healthcare. The relevant purchasing public thus included “entire
industries, and therefore, is comprised of at least hundreds, if not thousands
of companies.” Thus, the emails were not sufficient to constitute advertising
or promotion.

But tortious interference succeeded! The court found “a
clear intention to maliciously interfere with RedSense’s current contracts.” He
badmouthed RedSense and offered to “honor” its obligations to customers, and
provided one with a bespoke report that included analysis for [Redacted] on its
particular vulnerabilities.

“Bohuslavskiy knew or (at the very minimum) should have
known that sending emails directly to known RedSense customers could lead to
interference with RedSense contracts.” What is wrongful about the underlying
behavior? The court isn’t entirely clear, mentioning falsity but not identifying
anything specifically as false. It might be more trade secret-y, since the
court also quoted another case stating that the “taking of plaintiff’s
confidential and proprietary properly and then using it effectively to target
plaintiffs’ clients, is contrary to the notion of free competition that is fair.”
“His emails make clear he resigned due to ethical and contractual concerns and
that RedSense cut his access to corporate channels of communication, but he
also referenced ‘we’ and an intent to ensure seamless integration and
continuity.” Thus, “by reaching out to known RedSense clients and providing
them with bespoke information and data relevant to their specific needs, he
knew or was substantially certain that he would be maliciously interfering with
RedSense’s contracts.”

What about loss causation and damages? [Redacted 1’s]
complaints were apparently “rooted in product and service-related issues.” [Not
what I’d want in an opinion giving me injunctive relief.] Even if those
concerns traced back to Bohuslavskiy’s alleged failure to deliver the new AI
product, that was separate from whether he has tortiously interfered with
RedSense’s contract with [Redacted] by sending them emails.

But [Redacted 2] also apparently informed RedSense that it
would not be renewing its subscription service, citing “Bohuslavskiy’s actions
as a primary concern” because, despite blocking “Bohuslavskiy’s personal Gmail
address … Bohuslavskiy continued to make contact on non-blocked platforms,
including on Signal using an alias.” [Redacted 2] also “articulated security
concerns about Bohuslavskiy, including that it feels vulnerable due to
Bohuslavskiy’s knowledge of the customer’s cybersecurity concerns.” Thus, RedSense
did show causation and damages from that contract.

What about tortious interference with prospective economic
advantage? RedSense also showed that it was engaged in “serious discussions
with [Redacted], and an executive at [Redacted] told Miller that unless
RedSense resolves its issues with Bohuslavskiy, [Redacted] would not retain
RedSense’s services.” [Is that caused by defendant’s tortious behavior, or
caused by the split? The court does express desire for more detail, presumably
as we move on from the PI stage.]

Even if a defendant did not know of a specific contract, he
may still be liable for tortious interference if he intended to harm a specific
plaintiff, had knowledge of a particular “category of contracts,” and “the
resulting consequential damage to that plaintiff was a proximate result of the
defendant’s conduct.” This meant that Bohuslavskiy’s LinkedIn post could
constitute tortious interference. But, at this stage, that wasn’t enough.

While Bohuslavskiy’s LinkedIn post states that he resigned
from RedSense due to “ethical and contractual concerns”—which the court called “a
concerningly vague and ominous remark”—that was not the type of conduct that is
generally actionable under a claim for tortious interference: there was no
trade secret misappropriation or other wrongful attempt to lure away customers.
Plus, it wasn’t even clear that RedSense’s contracts with customers should be
considered one “category.” It was not clearly reasonably foreseeable that
prospective clients like [Redacted] would decide not to enter agreements with
RedSense based on Bohuslavskiy’s LinkedIn post.

But he could still have interfered with prospective contract
renewals with existing customers, so the same evidence above justified finding
likely success on the merits with respect to the emails.

Although economic loss isn’t irreparable harm, RedSense
showed irreparable harm because Bohuslavskiy reached out to over at least a
dozen other RedSense clients in a similar manner to how he contacted [Redacted]
“It is entirely reasonable for RedSense to fear that Bohuslavskiy’s others may
terminate their current contracts or decide not to renew their contracts the
way [Redacted] did.” Lost goodwill was also sufficient for irreparable harm.

Bohuslavskiy maintained that his outreach to customers was
solely in his capacity as a RedSense partner—not as part of a competing
venture. “If that is true, then Bohuslavskiy has no competing venture that
faces a potential loss of business from an injunction, and given his position
that he is a partner in RedSense, he has a strong interest in limiting
reputational and financial harm to RedSense.”

Thus, the court enjoined Bohuslavskiy from: (1) publicly or
privately soliciting and/or contacting RedSense’s current customers and known
prospective customers; (2) publicly or privately denigrating the quality of
RedSense’s cybersecurity services to RedSense’s current customers and known
prospective customers; and (3) publicly or privately making statements about
RedSense and/or its products and services for the purpose of stealing business
away from RedSense. The court limited (1) to “customers Bohuslavskiy
specifically knows RedSense was soliciting. Given wide swaths of companies
could potentially be RedSense customers, the Court will not prohibit
Bohuslavskiy from seeking to do business with companies he is not aware
RedSense sought to do business with.”

Comment: Why is (2) ok? Some of this would be
nonfalsifiable, and we have no finding that any of it is untrue. Shouldn’t the
remedy be limited to prohibiting him from soliciting known customers? Seems
like a First Amendment problem, especially if he’s not engaging in competing
commercial activities. Indeed, in a footnote, the court specifically says: “With
respect to enjoining Bohuslavskiy from making false statements publicly or
privately about RedSense, RedSense failed to establish a violation of the
Lanham Act.” So why is it ok to enjoin an even broader category of
statements—negative statements, regardless of truth or falsity? In another
footnote, the court justified its restriction on public statements because “RedSense
has shown that prospective clients have seen Bohuslavskiy’s LinkedIn post, and
that the post has already caused one prospective client to not move forward
with RedSense at this time,” so the court warned the defendant that “future public statements may further interfere
with RedSense’s business expectancies.” But why would public, untargeted statements, if not false or not falsifiable, be tortious?

Is “gag one party to prevent him from speaking” really the
resolution that RedSense’s clients and potential clients wanted to bring them confidence?

from Blogger http://tushnet.blogspot.com/2025/12/despite-rejecting-lanham-act-pi-court.html

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9th Circuit chips away at consumer protection again

Posted on December 11, 2025 by rtushnet

Hussain v. Campbell Soup Co., No. 24-6041 (9th
Cir. Dec. 10, 2025)

Nonprecedential despite a dissent. The majority affirms
dismissal of claims in a putative class action suit alleging that Kettle Brand
“Air Fried” chips are deceptively labeled as solely air fried when they are, in fact,
deep fried in oil.

Hussain failed to plausibly allege that a reasonable
consumer would be deceived into believing that the chips are not deep fried in
oil: The front of the packaging prominently states that the chips are not just
“Air Fried,” but also “Kettle Cooked Air Finished.” “The front label therefore
expressly describes a two-step process that involves both kettle cooking and
air frying. The suggestion that the chips are exclusively air fried is belied
by the plain language of the front of the packaging.” [Ed. note: I’m with the
dissent here. Using “fried” for one process and “cooked” for the other implies
that the second process is not “frying.”] 

The majority found that reasonable consumers would
understand “kettle cooked” to refer to “the commonly understood method of deep
frying potato chips in oil”; it wasn’t plausible to understand the term as including
cooking with water or steam. “[A] front-label burst indicates that these chips
have ‘30% less fat than regular Kettle Brand’ chips, and a reasonable consumer
would understand that the remaining fat content cannot come from potatoes
alone, without a significant amount of oil.” 

Anyway, even if the front label is
ambiguous, the back lists “vegetable oils (canola, sunflower and/or safflower)”
as the second ingredient and reiterates: “We batch cook them in kettles, then
air fry them for a light and crispy crunch!” And there is also “a pictorial
depiction of potato slices being dropped into a vat of boiling liquid that a
reasonable consumer would understand to be oil, especially given the visible
droplets bubbling out of the pot. Given this context, no reasonable consumer
unsure of the meaning of the front label would be deceived into thinking that
the chips are not deep fried in oil.”

Judge Mendoza dissented, arguing that the majority ignored
the plausibility standard and failed to take the perspective of ordinary
consumers. “At the Rule 12(b)(6) stage, our task is only to determine whether a
‘reasonable consumer’ could at least plausibly conclude what the front of this
packaging obviously intends to communicate: that the chips are exclusively ‘Air
Fried.’ The complaint alleges exactly that, and the labeling readily supports
it.”

In stand-alone font and sizing, the
front panel prominently states “Air Fried,” a phrase widely used in consumer
marketing to signify an exclusive and healthier frying method. … At best,
“kettle cooked” functions as a vague descriptor of texture or artisanal batch
cooking, not as a qualifying statement as to the frying method (i.e. that the
chips are in fact also deep fried in vats of oil). Consumers purchasing bags of
chips at a store are not required to understand formalized industry jargon or
technical food-processing methods.

The dissent noted that Campbell Soup’s counsel at oral
argument “readily conceded” that the term “kettle cooked” is an “industry” term
of art. “Any person with access to the internet  can also review the countless blogs, forums,
and websites that are devoted to explaining (and debating) the exact meaning of
‘kettle cooked.’” [I personally have no knowledge at all of what “kettle cooked”
generally means.]

Indeed, the “30% Less Fat” statement “operates in tandem
with the dominating ‘Air Fried’ label to further mislead a reasonable consumer”:
it plausibly gives the impression that the chips contain less fat because they
are exclusively “Air Fried.”

The majority contends that a
reasonable consumer simply must know and conclude that the presence of any fat
or oil necessarily means that the chips are also deep fried. But, again, the
majority is simply incorrect. Air frying does not suggest the use of no oil or
fat, but a lesser use of oil that is placed on the chips so that they fry via
circulating hot air.

After all, the complaint alleged deception about whether the
chips were deep fried, not whether the chips have any oil or fat. “When a
manufacturer chooses to intentionally place a prominent, dominating
health-coded claim like ‘Air Fried’ alongside a smaller, quantified
fat-reduction claim, a consumer is plausibly entitled to take those messages at
face value without searching for other obscure and technical qualifiers that
hold vague and unqualifying meanings.”

The back label, to the dissent, didn’t help—it repeated the
cook/fry distinction and did not disclose a deep-frying process. “[K]ettles can
be used for steaming, boiling, par-cooking, or a variety of non-frying
processes – all of which are indeed methods of making potato chips. The
packaging suggests to the consumer that the process of frying is exclusively
via air while not equally disclosing in any clear way that the chips are also
deep fried.” The “miniscule” back-of-package graphic was also ambiguous.

The packaging “appears deliberately engineered to foreground
a health-coded exclusive frying message while burying the true deep-frying
process behind jargon and technical phrasing that only a judge or label-lawyer
would ever bother to parse.”

from Blogger http://tushnet.blogspot.com/2025/12/9th-circuit-chips-away-at-consumer.html

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sitting by designation, Judge Bibas says there’s no de minimis exception to Lanham Act false advertising

Posted on December 9, 2025 by rtushnet

Montway LLC v. Navi Transport Services LLC, — F.Supp.3d
—-, 2025 WL 3151403, No. 25-cv-00381-SB (D. Del. Nov. 11, 2025)

Judge Bibas either likes sitting by designation or is
willing to take one for the team; here’s another of his IP district court
decisions. This case involves alleged trade secret theft (departing employees)
in the cross-country car-shipping business, which has only a “handful” of
competitors. The trade secret claims survive in key part, as do the false
advertising claims, on which I will focus.

Defendant Navi’s website generally resembled plaintiff
Montway’s own, including a Terms of Use page that “chose to apply Illinois law”
even though Navi was headquartered in Delaware. “The website also contained a
handful of peculiar, similarly worded reviews, including multiple reviews by
people with the same name. And the website claimed that Navi had shipped more
than 20,000 vehicles, even though the entity had only been in business for a
few months and had a negligible online footprint. … [A]t least one positive
internet review of Navi … had been posted by an ex-Montway employee who had
never used Navi’s services.”

The court did dismiss Delaware state trade secret claims,
without prejudice so that Montway could, if it was able to, add more facts that
could support applying Delaware law to Navi’s conduct (much of the misconduct
allegedly took place in Bulgaria).

The court noted that, while some courts have imposed a “slightly
heightened” pleading standard for Lanham Act false advertising claims, neither
the Supreme Court nor the Third Circuit had done so, and it agreed with
Delaware district courts that had been skeptical of inventing such a standard.
Nonetheless, because the parties didn’t dispute the issue, it analyzed the
claim under that intermediate standard.

For proximate cause (why would the false advertising take
sales away from Montway, instead of the handful of other competitors?), the
trade secret theft—which meant that “Navi targeted Montway customers by sending
unsolicited, cheaper quotes to individuals who have asked Montway for quotes”—sufficed.
The allegedly false statements on Navi’s website would plausibly lead a
consumer to do business with Navi instead of Montway.

As for falsity, the complaint provided screenshots of
specific reviews: “three near-identical reviews posted by individuals with
three different names within the period of several weeks in 2024, more
near-identical reviews posted by individuals with the same three names months
later, and repostings of those exact reviews a few months after that. The
suspicious timing and wording of those reviews makes their falsity plausible.”
And a screenshot of a glowing review posted by an alleged ex-Montway employee
“who had never used Navi’s services” also made the ‘fake reviews using names of
real people’ allegations plausible. So too with the allegation that Navi
falsely claims to have “shipped ‘over 20,000 vehicles,’ ” where falsity was plausible
given allegations that fewer than 125 people visit Navi’s website each month
and that Navi has only been in business since May 2024. “To be sure, if it
turns out after discovery that Navi’s customer reviews were legitimate, or that
it has in fact shipped more than 20,000 cars, Montway’s false-advertising claim
will run into problems. But trying to litigate that issue now puts the cart before
the horse.”

Navi argued, cheekily, that 125 visitors/month was not enough
to cause more than de minimis harm. “The Lanham Act does not have a de minimis
exception.” Anyway, given the allegations of customer swiping, “[i]f even some
of those visitors decide, after reading the statements on Navi’s website, to do
business with Navi instead of Montway, that obviously harms Montway more than a
little.”

Meanwhile, a wholly owned subsidiary of Montway that served
as its sales/servicing arm had standing to sue for misappropriation, but not
for false advertising.  The complaint
failed to allege any harm from the false advertising to the subsidiary.

from Blogger http://tushnet.blogspot.com/2025/12/sitting-by-designation-judge-bibas-says.html

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paying a late-disclosed “drip pricing” fee suffices as injury under Cal’s new law

Posted on December 8, 2025 by rtushnet

Chowning v. Tyler Tech., Inc., 2025 WL 3496690, No.
4:25-CV-04009-YGR (N.D. Cal. Dec. 5, 2025)

One of the first “drip pricing” cases I’ve seen under
California’s new law, which the court reads to enable certain claims over and
above previous law.

The California Department of Parks and Recreation awarded
Tyler a 10-year contract to design and operate ReserveCalifornia.com, a website
that enables online booking for campsites located in California State Parks.

Reserve California charges campers
a campsite fee and a $8.25 reservation fee. In exchange for Tyler’s services,
DPR “agreed to compensate [Tyler with] the eligible reservation-based
transaction fees.” The contract requires DPR to approve any service and
reservation fee that Tyler charges and requires Tyler to comply with federal
and California laws and regulations in designing, operating, and otherwise
performing any services related to Reserve California.

Plaintiffs alleged that the $8.25 reservation fee that Tyler
charges is not included in “the initial price displayed to consumers” and is
not disclosed “until the final check-out screens.” Although Tyler disputed this,
arguing weakly that it discloses the reservation fee under the “Show More” link
related to unit details, amenities, and other remarks regarding the selected
campsite, “[a] website is not judicially noticeable, nor does the Court resolve
factual disputes on a motion to dismiss.” Note: even if the court did consider
this, it shouldn’t matter— “Show More” is a classic example of an
uninformative, useless disclosure that wouldn’t allow consumers to understand
that additional fees are being added. In the screenshots below, the fee is only
mentioned at step 3 (checkout page 1), and the true full price of the
reservation is shown at step 4 (checkout page 2).

step 1: “starting at” price doesn’t include fee

step 2: specific choice doesn’t show fee

step 3: fee mentioned in middle of text, no indication of total

step 4: the actual price!

The plaintiffs brought the usual statutory California claims and also alleged unjust enrichment.

The 2023 Honest Pricing Act prohibits certain deceptive advertising tactics, including “drip pricing,” where a firm advertises the product’s base price and later reveals other mandatory fees. It added the following provision to the CLRA:

(a) The unfair methods of competition and unfair or deceptive acts or practices listed in this subdivision undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer are unlawful:

…

(29) (A) advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than either of the following:

(i) Taxes or fees imposed by a government on the transaction.

(ii) Postage or carriage charges that will be reasonably and actually incurred to ship the physical good to the consumer….

Tyler argued that plaintiffs couldn’t show causation or harm, because they paid the final price knowing what it was.  The court noted that “the legislature’s decision to prohibit a particular misleading advertising practice is evidence that the legislature has deemed that the practice constitutes a ‘material’ misrepresentation, and courts must defer to that determination.” The complaint alleged that, “had [plaintiffs] known the true nature of the Junk Fee … [they] would have attempted to pay in person directly to [the California state park].” That sufficed for materiality, which itself suffices for the elements of reliance and causation.

“At this early stage of litigation, it would be inappropriate for the Court to hypothesize about the availability of alternatives or other factual circumstances surrounding the transaction.” Plus, the court declined to create a Catch-22: “any consumer seeking to enforce the new CLRA provision could either purchase the product (despite the fee disclosure, which, according to defendant would strip a plaintiff of standing due to a lack of causation) or decline the purchase (meaning the plaintiff was not damaged, and therefore did not have standing).” Quoting a previous decision: “Surely the Legislature did not pass a law with no practical effect—especially given the overarching purpose of the CLRA.”

This also resolved questions about what constituted damage: “A plaintiff is injured when they pay for an unlawful fee in the context of drip pricing,” whether or not they knew the full amount they were paying. “While the Court agrees that Tyler is not required to disclose to whom the reservation fee is paid, Tyler’s argument does not address its alleged failure to disclose the complete price, including the reservation fee, in the first instance.”

For the CLRA claim, Tyler argued that: (1) campsite reservations are neither “goods” nor “services” for purposes of the statute; and (2) the reservation fee is exempt because it is a tax or fee that the government imposes. The court rejected both arguments. In evaluating whether the challenged conduct is a good or service, a court must follow the statutory requirement that the CLRA shall be “liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.”

A campsite reservation isn’t a good, but it is a “service,” given that the Honest Pricing Act was “designed to prohibit drip pricing in all industries,” which, as the California Legislature explained, includes “short-term rentals, [and] hotels.” If a hotel reservation is a service, so is a campsite reservation. The court distinguished cases about entrance tickets and limited-time licenses to stream a film or TV show.

The fee was also not a “[t]ax[ ] or fee[ ] imposed by a government on the transaction” under the law’s exemption. Any exception to the CLRA (and the other California laws) should be construed narrowly. It wasn’t enough that DPR permits contractors to charge fees and requires DPR approval of those fees. The “airport use fees, hotel taxes, tourism board fees, [and] wheelchair accessible vehicle fees imposed on Lyft and Uber by the Public Utilities Commission” identified by Tyler were “fees collected by a private company but that are passed to and retained by the government.” By contrast, the complaint alleged that Tyler retained the fees at issue. “Whether DPR set and ordered the reservation fee is a factual dispute that the Court will not resolve on a motion to dismiss.”

However, the court dismissed the unjust enrichment claim for failure to allege that Tyler received a benefit through “mistake, fraud, coercion, or request.” Plaintiffs challenged only the advertising, not the fee itself.

from Blogger http://tushnet.blogspot.com/2025/12/paying-late-disclosed-drip-pricing-fee.html

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Lack of evidence on lost goodwill leads to remittitur (but also proposed doubling of lost profits)

Posted on December 5, 2025 by rtushnet

Sterilite Corp. v. Olivet International, Inc., No.
1:22-cv-10327-JEK, 2025 WL 3460553 (D. Mass. Dec. 2, 2025)

A jury awarded Sterilite $11 million in damages for Olivet’s
willful infringement of the trade dress in Sterilite’s storage cabinets and
drawers: $2,656,711 in lost profit damages and an additional $8,343,289 in
damages for loss of goodwill. The jury also found that Olivet tortiously
interfered with Sterilite’s business relationship with Walmart and awarded
Sterilite an additional $5.2 million in lost profits for its wastebasket lids.

The court granted Olivet’s motion for remittitur with
respect to the loss of goodwill damages but denied as to the lost profits for
Sterilite’s cabinets and drawers. The Court reserved judgment on Sterilite’s
motion for enhanced damages: If Sterilite opted for a new trial, its motion for
enhanced damages would be denied without prejudice. But if Sterilite accepted
remittitur, Sterilite’s motion for enhanced damages would be granted and
Sterilite’s damage award in lost profits for its cabinets and drawers would be
doubled to account for the difficult-to-quantify reputational harms caused by
Olivet’s trade dress infringement.

The standard: The court must view the evidence in the light
most favorable to the verdict, and it may not upset the jury’s assessment of
damages unless that assessment “is ‘grossly excessive, inordinate, shocking to
the conscience of the court, or so high that it would be a denial of justice to
permit it to stand.’ ”

Lost profits: To demonstrate causation under the Lanham Act,
Sterilite “must demonstrate that the [infringement] actually harmed its
business.” While Sterilite “must prove the profits [it] would have made but for
[Olivet’s] infringement,” it need not “ ‘negate every conceivable intervening
factor which might have caused a decline in sales.’ ” Olivet argued that,
during the COVID-19 pandemic, Sterilite was unable to fulfill its customers’
orders and therefore decided to allocate its stock of cabinets and drawers
among different customers. It thus supplied only 63% of the cabinets and
drawers that Walmart demanded, and Walmart decided to look to other suppliers
of cabinets and drawers. An email from Walmart stated that it had decided “to
exit the Sterilite business in plastic shelving” “[a]s a result of
[Sterilite’s] inability to keep pace with customer demand,” “poor instock, not
accepting [fines] due to loss sales, and poor communications as a business
partner.” But the jury heard this evidence and rejected Olivet’s theory of
causation. There was evidence that Olivet sought “to follow [Sterilite’s] spec
detail exactly” in order “to replace Sterilite” at Walmart, and Olivet replaced
Sterilite only three months after that notification; a Sterilite witness wrote
that, “in [his] 30 years’ experience it takes longer than 60 days to design,
engineer, build molds, prepare with inventory, to put yourself into position to
serve Walmart well for a program of this magnitude.” The jury could have
accepted that “had Olivet not agreed to replicate Sterilite’s products for
Walmart (and at a lower price), Walmart would not have terminated Sterilite’s
business on those products and Sterilite would not have lost the associated
profits.”

But awarding over $8.3 million for lost goodwill was “sheer
speculation,” given that “no witness or evidence attempted to quantify the
value of Sterilite’s reputation before and after Olivet’s trade dress
infringement.” Because “[r]eputational damages are often difficult to
quantify,” plaintiffs “need not prove such damages with exacting precision.” Still,
while “ ‘mathematical precision’ ” is not required, plaintiffs “ ‘must provide
sufficient evidence to take the amount of damages out of the realm of
speculation and conjecture.’ ”

“The evidence at trial supported, and Olivet does not
contest, that Olivet’s trade dress infringement harmed Sterilite’s reputation. Customer
complaints and witness testimony demonstrated that Sterilite’s brand suffered
from customer confusion over Olivet’s inferior cabinets and drawers.” Product
reviews “revealed that customers attributed Olivet’s inferior products to
Sterilite. One customer complained, for instance, about ‘how cheaply these ones
were made compared to the first set [she] bought.’”

However, not a single witness testified about the
approximate dollar amount of Sterilite’s lost goodwill or how that amount could
be calculated. “Nor did Sterilite produce any evidence of how much it spent
promoting its cabinets and drawers before Olivet’s infringing conduct, or how
much it spent or would need to spend on corrective advertising after that
infringing conduct.” The award exceeded the $7,863,871 that Sterilite sought in
total lost profits for its cabinets, drawers, and wastebasket lids, but the
wastebasket lids were not even a part of the trade dress infringement claims
presented to the jury. Thus, Olivet met its “substantial” burden to show that, viewing
the evidence in the light most favorable to Sterilite, the jury’s loss of
goodwill damages award was excessive, speculative, and unsupported by the
record.

So Sterilite could go for a new trial—with no new witnesses
or evidence, so that doesn’t seem desirable—or accept remittitur and get its
motion for enhanced damages granted. The Lanham Act provides that “[i]n
assessing damages the court may enter judgment, according to the circumstances
of the case” and “subject to the principles of equity,” “for any sum above the
amount found as actual damages, not exceeding three times such amount.” That
sum “shall constitute compensation and not a penalty.”

The court “is bound by … the jury’s finding of
willfulness, which affect[s]” its determination of the appropriate “equitable
remedy.” But willfulness alone is insufficient to justify an enhancement of
damages. “The role of deterrence must be carefully weighed in light of the
statutory prohibition on the imposition of penalties.” Sterilite argued that
Olivet engaged in “egregious” pretrial discovery misconduct that forced it to
file multiple motions to compel production. But courts are “reluctant to
approve increased damages intended solely as punishment for conduct unrelated
to the trademark infringement or to the actual damages caused by it.” “That is
particularly so where, as here, Sterilite could have requested other sanctions
for the alleged discovery violations at the time those violations occurred.”

“[T]he pertinent inquiry remains whether the jury’s award
appropriately compensates Sterilite.” To enhance an award “based on the same
conduct that established Olivet’s liability for willful infringement, without
any connection to the alleged inadequacy of the award itself, improperly ‘appear[s]
to be punitive.’”

Sterilite argued that the award missed some infringement,
but “Sterilite repeatedly represented to the jury that [its expert’s]
assessment of $2,656,711 in damages was all that it sought in lost profits for
its cabinets and drawers.” Any new post-trial theories of damages were waived
and too speculative.

What about Olivet’s allegedly improved relationship with
Walmart? The Second Circuit affirmed trebling damages “reflect[ing] the
intangible benefits that accrued to [the defendant] as a result of its false
advertising,” particularly given that the parties were “direct competitors in a
two-player market” and the defendant “usurp[ed] … [the plaintiff’s] market share.”
While Sterilite and Olivet are competitors, they are not the only two
manufacturers of plastic household products. So Sterilite was already compensated
for its losses.

Finally, though, the evidence supported the conclusion that
Olivet’s infringement damaged Sterilite’s reputation, and “damages for loss of
reputation … are inherently indeterminate” and thus difficult to quantify. “If
Sterilite were to reject remittitur and opt for a new trial, the jury could
weigh the value of that loss of goodwill and, if appropriate, award damages. In
that case, equity would not justify granting Sterilite’s request for enhanced
damages on the basis of that same loss of goodwill.” But if it accepted
remittitur, it wouldn’t have been compensated for reputational harm, and the
court would double lost profit damages.

from Blogger http://tushnet.blogspot.com/2025/12/lack-of-evidence-on-lost-goodwill-leads.html

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