reasonable consumers of ovulation test kits understand details of hormone signalling

Posted on May 10, 2024 by rtushnet

La Rosa v. Abbott
Laboratories, No. 22-CV-5435 (RER) (JRC), 2024 WL 2022297 (E.D.N.Y. May 7, 2024)

Plaintiffs alleged
that defendants’ at-home ovulation test kits were deceptive because they
advertised “ovulation test kits” alongside the front-of-package statement “99%
ACCURATE,” which conveyed that that the tests are 99% accurate at testing for
ovulation, when in fact, the products detect a surge in luteinizing hormone (LH),
and not actual ovulation. “All the kits state in small writing on the side or
back of the packaging that they are 99% accurate at detecting LH levels.” Some kits
include an asterisk next to the claim “99% ACCURATE”;  others include statements on the front of the
packaging that they detect “LH Surge” or “No LH Surge.”

As alleged, the kits
detect a rise in urinary LH levels, which typically precedes ovulation by
twenty-four to thirty-six hours. But LH surges may occur at other times in a
person’s menstrual cycle; body mass index, age, contraceptive use, sports
activity, and smoking may affect urinary LH levels; when a person has an
irregular cycle, the test could inaccurately indicate that no ovulation occurred;
and more than ten percent of menstrual cycles are subject to a condition known
as “Luteinized Unruptured Follicle Syndrome,” during which there is a normal LH
surge and menstruation, but no egg releases. LH surges may also be detected in
women who are infertile. The only current method for predicting ovulation with
“a high degree of accuracy” is an invasive transvaginal ultrasound.

The court found that
plaintiffs failed to state a claim under NY and California consumer protection
law. Courts sometimes demand a lot of “reasonable” consumers—here, the court reasoned
that reasonable consumers know the scientific details of fertility and should
know the difference between LH surges and ovulation, especially given the
package disclosures:

First, a key contextual inference arises from the products themselves:
it is impossible to test for actual ovulation. A reasonable consumer does not
expect to purchase a product that is impossible to find in the marketplace. …
The FDA explains that at-home ovulation urine tests measure LH to detect
ovulation and are successful at doing so “reliably about 9 times out of 10[.]”
This explains that tests that reveal actual ovulation do not exist. Although a
reasonable consumer is not expected to have medical expertise, in the context
of a niche, specialty product, purchasers exhibit a higher degree of care. And
indeed, Defendants’ products are a specialty item targeted to a class of
informed consumers to aid in their attempts to become pregnant. Many buyers of
ovulation test kits have had trouble getting pregnant in the past, and as such,
seek help from various sources. According to Plaintiffs, “[a]s of 2015, an
estimated 7.3 million women had received some sort of infertility service[.]” In
turn, many ovulation test kit consumers would be expected to have at least some
information leading up to their purchase, and therefore know what to expect to
find in the marketplace—they do not expect to find at-home test kits that
indicate actual ovulation.

This does not seem
to me—as someone who has indeed been in the general market for this type of
product—to be a description of reasonable consumers of specialized medical
services, who tend to outsource a lot of the details to presumed experts.

In addition, the
court reasoned,

a reasonable purchaser of Defendants’ products necessarily looks to the
side and back of the box to understand how to use the products. Alongside these
directions, the boxes for all the products in question clarify that the
products test for LH, not for ovulation itself, and that an LH surge typically
precedes ovulation. By contrast, a consumer of something such as a basic food
item is not expected to flip over the packaging to look for clarification or
disclaimers.

Read together,
“Ovulation Test Kit” and “99% Accurate” could imply 99% accuracy at
testing for ovulation, but the two phrases could also be read separately. And,
true, some products include phrases on the front like, “Predicts Your 2 Most
Fertile Days” and “Early ovulation test … tells you the best 2 days to
conceive.” Nonetheless, “regardless of where the front package falls on the
spectrum, the product requires a standard of care that necessitates looking at
the complete package.” And it wasn’t alleged that the tests didn’t reliably
predict ovulation, even if not at the 99% accuracy level. Thus, “the clarifying
language on the side or back of the packaging dispels any confusion.”

from Blogger http://tushnet.blogspot.com/2024/05/reasonable-consumers-of-ovulation-test.html

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online ingredients list can’t avoid deception claim, at least where survey suggests deception

Posted on May 7, 2024 by rtushnet

Duncan v. Kahala
Franchising, L.L.C., — F.Supp.3d —-, CV 22-7841 (GRB)(AYS), 2024 WL 1936053
(E.D.N.Y. May 2, 2024)

Lots of ice cream
jokes/quotes in here, but the basic question is: “should consumers ordering
pistachio ice cream at one of [Cold Stone Creamery’s] establishments expect
that that product will contain actual pistachios?” Because it doesn’t, the
consumer protection claim survives.

To bolster the plausibility
of her claims, plaintiff alleged that industry practice was to the contrary: Häagen-Dazs
Pistachio Ice Cream and Ben and Jerry’s Pistachio Ice Cream both include actual
pistachios, as does Thrifty brand ice cream, disparagingly described as “a less
premium brand than Cold Stone Creamery.” And Cold Stone Creamery’s “strawberry
ice cream contains strawberry, banana ice cream contains banana, and its
chocolate hazelnut ice cream contains chocolate and hazelnut.”  Duncan also surveyed more than 400 U.S.
consumers, each of whom had purchased ice cream within the preceding three
months. Respondents asked “When viewing the image above, what ingredients do
you believe would be included in the Pistachio ice cream? Select all that
apply.” There was a list of ten potential ingredients, including pistachio and
flavor agents, as well as the option “none of the above.” About 85% of the
respondents believed that pistachio would be included; likewise, 88.6% of
respondents expected that the Mint ice cream contains “mint.” (Plaintiff also
challenged the absence of mango, coconut, mint and orange in those respective
flavors, and the absence of butter in butter pecan, but there was no survey on
anything but pistachio and mint.)

Given that the “vanilla”
cases often dismiss claims at the pleading stage, should the court do so here?
The court identified relevant factors in previous cases:

[T]he presence or absence of express representations regarding the
ingredients used, such as “made with”; the availability of an ingredients list
to the purchasing consumer; whether the flavor designation employed finds use
as both a noun and an adjective; and the availability and significance of
consumer survey evidence.

In addition, the
court considered “allegations concerning competitor products giving rise to an
inference about consumer expectations.”

There was no express
“made with pistachio” representation here, but that wasn’t dispositive. Context
includes the ingredients list and the visual appearance of the product. The
fact that the ingredient list was available online was not helpful to
defendant. While back-of-package ingredients lists can clarify any ambiguity,
the analogy to online ingredients lists “fail[ed] spectacularly.”

Courts have rejected defense arguments based on ingredients lists that
are difficult for a consumer to access. [Citing cases rejecting reliance on
small-print or hard-to-find disclosures.] These typographic barriers pale in
comparison to the physical segregation presented in this case: defendant is not
attempting to rely on an ingredients list on the package or in small print on a
sign, which might require a consumer to inspect a side panel or reach for a
pair of reading glasses. Rather, examining defendant’s ingredients list
requires access to an Internet-capable device and conducting a web search to
locate it. If “a reasonable consumer should not be expected to consult the
Nutrition Facts panel on the side of the box to correct misleading information
set forth in large bold type on the front of the box,” it seems inconceivable
that such a consumer should have to search online to find the relevant web page
while waiting in line to order a scoop of ice cream.

 

In addition,
requiring consumers to check online “also seems antithetical to the experience
offered by defendant to the public, as described on another section of its
website:… We like to think we’re really in the business of making people happy
… It’s all about what we call the 10-Minute Vacation® … that 10-minute
getaway you deserve from the world outside our doors. Just head inside any Cold
Stone Creamery, and that’s what you’ll get.” That was inconsistent with a duty
to locate, read, and analyze online ingredient statements.

Defendant also
argued that the visual appearance of the ice cream—smooth and without apparent
chunks of pistachio—avoided any deception, but that wasn’t apparent from the
face of the complaint.

Adjectival use as a
flavor name favored the defendant, but that too wasn’t enough for pistachio; it
was weightier for mint, because “as an ingredient descriptor, it is highly
unspecific [as to spearmint, peppermint, etc.], whereas it commonly finds use
as a flavor descriptor without any reasonable expectation that the leaves of a
particular mint plant will be involved.”

Use of actual
pistachios in competitive products favored the plaintiff, again only as to
pistachio.

The survey was the
most helpful. “Defendant attempts to quarrel with the survey methodology, an
effort which proves both unpersuasive and misplaced at this juncture, as the
open-ended questioning here stands in stark contrast to leading questions asked
in other cases.” The nearly 90% results were also significant, though not as
persuasive for mint.

While 88% of the respondents indicated that they expected to find “mint”
among the included ingredients, it is impossible to say what this means. Did
they believe that the ice cream contained mint leaves or the extract of a mint
plant? As “mint” encompasses an entire family of plants as well as common
candies that bear the flavor of mint, this result proves far less compelling.
Perhaps, after all, some respondents expected to find “chunks of red and green
mint candy,” the advertised feature of Hershey’s Premium Peppermint Stick ice
cream ….

Thus, the false
advertising consumer protection claim was plausible as to pistachio, not as to
the other flavors. It’s always so interesting seeing what generalizations about
consumer beliefs courts are willing to make. I guess they have to re-run the
survey with each flavor, and also with a list of mint plants? Would “mint from
a mint plant such as spearmint or peppermint” be an acceptable category?

from Blogger http://tushnet.blogspot.com/2024/05/online-ingredients-list-cant-avoid.html

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Tiktok’s other, smaller legal problem

Posted on April 29, 2024 by rtushnet

Beijing Meishe
Network Technology Co. v. Tiktok Inc., 2024 WL 1772833, No. 23-cv-06012-SI (N.D.
Cal. Apr. 23, 2024)

Skipping the
copyright and trade secrets part of the case. (In brief: Meishe argued that Tiktok
copied its code via an employee who departed. The court found aspects of the
copyright/§1202 claims claim insufficiently specifically pled and granted leave
to amend, including to add sufficient detail to establish that the works at issue
were not US works and thus exempt from the pre-suit registration requirement.
The trade secret claims were likewise dismissed with leave to amend, including
to specify what acts in furtherance of the offense were committed in the US.)

False designation of
origin: Meishe alleged that “TikTok informs users that it owns and has proper
rights to the code it uses in its applications”; defendants “have represented
that they value intellectual property and would not infringe others’
intellectual property, but have done so as described in this Complaint” and
defendants “willfully continued to represent the software as their own, not
credited Meishe with being the owners or author of portions of Defendants’
products or code, and not stopped distributing infringing and misappropriated
code.” This was classic Dastar. As stated in Luxul Technology Inc. v.
Nectarlux, LLC, 78 F. Supp. 3d 1156 (N.D. Cal. 2015) “in this circuit, a
reverse passing off claim requires the alteration of a product and a subsequent
sale.”

False advertising:
Meishe pointed to statements defendants made in their copyright notice at
tiktok.com, in the ByteDance Code of Conduct, in TikTok’s Intellectual Property
Policy, and in TikTok’s terms of service. But it wasn’t clear that any of these
statements were made on the context of “commercial advertising or promotion” or
how these statements were likely to influence purchasing decisions by
consumers. The court granted leave to amend, but it’s hard to imagine how this
gets plausible under the Lanham Act.

 

 

from Blogger http://tushnet.blogspot.com/2024/04/tiktoks-other-smaller-legal-problem.html

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Hetronic remand: the continued rise of “use”

Posted on April 29, 2024 by rtushnet

Hetronic International, Inc. v. Hetronic Germany GmbH, — F.4th —-, Nos.
20-6057 & 20-6100, 2024 WL 1724995 (10th Cir. Apr. 23, 2024)

Hetronic has US
registrations; Abitron sold Hetronic-branded products without permission to
customers around the world, including in the United States. The Supreme Court
remanded for the court of appeals to revisit its decision that Lanham Act
penalties extended to Abitron’s foreign sales to foreign customers because the
foreign sales substantially affected U.S. commerce. The court of appeals
remands, after a discussion of what the district court is to do on remand. Look for the cross-issue use of the idea of “use in commerce,” including the cited cases.

Hetronic makes radio
remote controls used to operate large industrial equipment. It executed
licensing and distribution agreements for the remotes with two European
companies, collectively Abitron. Abitron decided that it owned some of
Hetronic’s IP under a years-old research-and-development agreement. Abitron
began assembling Hetronic-branded remotes with parts that it sourced from
unauthorized suppliers, in violation of its agreements with Hetronic, and sold
the remotes to foreign and American customers. Hetronic terminated its
licensing and distribution agreements with Abitron, but Abitron continued to
sell Hetronic-branded remotes without Hetronic’s authorization.

The products
circulate worldwide; “a product manufactured in Germany is often destined for
another country, like the United States.” Abitron usually sold remotes to OEMs,
like manufacturers of cranes. A crane manufacturer would install the remotes in
its cranes, and then send the cranes around the world, including to the US.
Knowing this, Abitron secured the required FCC certifications and hired a
U.S.-based distributor to service Abitron’s U.S. products and to market them at
U.S. tradeshows.

Hetronic understandably
sued Abitron; a jury found for Hetronic on all its claims, including that
Abitron had willfully infringed the Hetronic trademarks, and awarded Hetronic
about $96 million in damages related to the Lanham Act violations, along with
compensatory and punitive damages for the state-law claims. The district court enjoined
further infringing uses of Hetronic trademarks “within and outside of the
United States.”

After Abitron,
the keystone for liability is the “specific action” that the alleged infringer
took in the United States, and whether that action contravened the Act’s
focus. Footnote: The concurrence for four Justices would have regarded domestic
confusion as the key, not domestic conduct. Ultimately, a domestic, infringing
“ ‘use in commerce’ of a trademark” draws “the dividing line between foreign
and domestic applications” of the Lanham Act.

What to do here?  

The relevant conduct
is use of a trademark “in commerce” “in connection with any goods or services,”
specifically “the sale, offering for sale, distribution, or advertising,” in a
manner “likely to cause confusion.” So (?), the court first looked at which Abitron’s
allegedly infringing activities amounted to an infringing use of Hetronic
trademarks. Once there was an infringing use, the court
then considered where that use occurred—domestically or overseas—to determine
whether the Lanham Act applied. (Citation: 15 U.S.C. § 1117;  see also 1-800 Contacts, Inc. v. WhenU.Com,
Inc., 414 F.3d 400, 412 (2d Cir. 2005) [a resurrected blast from the past; why
“use as a mark” may be a very interesting doctrine going forward].

Direct sales to US
customers: obviously covered. But Abitron contested the amount of those sales
that could have caused confusion—all but about €1500 of sales went to Hetronic’s
US-based affiliates, and Abitron argued that they had to have known what they
were buying and that any confusion stemmed from confusion about “whether [the
goods] were constructed with the parts Hetronic requested,” which goes to the
“contractual obligations” between Abitron and Hetronic, not to “the goods’
source.” The court wasn’t going to touch the jury finding of likely confusion. And
the confusion posited by Abitron was sponsorship/affiliation confusion, anyway.
“[E]ven if Hetronic’s affiliates knew that Abitron sourced the remotes, part of
a mark’s core function is to help consumers ‘quickly and easily’ identify that ‘this
item—the item with this mark—is made by the same producer as other similarly
marked items that he or she liked (or disliked) in the past.’” That quality
assurance was gone if Abitron sold products under Hetronic trademarks that “varied
substantively” from those affiliated with the Hetronic brand, as the evidence
showed.

What about foreign sales?

In the initial appeal, this panel held that some of Abitron’s foreign
sales triggered a domestic application of the Lanham Act either because the
goods wound up in the United States or the foreign sales diverted customers
from Hetronic, costing Hetronic tens of millions of dollars in sales that
“would have flowed into the U.S. economy but for [Abitron’s] conduct infringing
a U.S. trademark.” But neither theory works under the Supreme Court’s new
framework.

€1.7 million of
Abitron’s foreign sales “ended up” in the United States, but “the ultimate
destination of the infringing goods” lacked significance compared to “the
location of the conduct relevant to the focus” of the Lanham Act. Because that focus
is “the punishment of illegal trademark uses in U.S. commerce detrimental to
U.S. businesses and consumers,” foreign sales don’t trigger Lanham Act
liability, even if they cause losses in the US. “[P]urely foreign conduct—that
is, foreign sales to foreign customers”—can’t be the basis for Lanham Act
liability.

There was other
domestic conduct than direct US sales, though. “Use in commerce” covers “the
sale, offering for sale, distributing, or advertising of any goods or services
… which … is likely to cause confusion, or to cause mistake, or to
deceive.” Thus, any marketing, advertising, and distributing activities that
Abitron undertook in the United States were also “uses in commerce.”

What about
downstream sales from OEMs to end-users? Justice Jackson thinks they’re
infringing, and Hetronic relied on her concurrence to argue that these “goods
[were] intended to be sold downstream” and that Abitron “took … steps to
facilitate downstream sales in the United States,” making those sales
“sufficiently domestic” for Lanham Act purposes.

Abitron pointed out
that, even if that happened, the uses would be uses by the OEM, not by Abitron.
Anyway, Justice Jackson joined the majority in full, and also she was making a
different point: She argued that use in commerce occurs “wherever the mark
serves its source-identifying function.” But she also reasoned
that, in the panel’s words, “infringing goods do not offend the Lanham Act
merely by their presence in the United States.” Only resale would trigger
Justice Jackson’s definition of “use.” Hetronic didn’t show that remotes
originally sold abroad were then resold in the US; only then would the
goods have begun “serving a source-identifying function in the way Congress
described.” Hetronic didn’t introduce evidence that U.S. end-users ever resold
Abitron products in U.S. commerce. And allegedly infringing uses in the US by
other entities weren’t Abitron’s domestic infringing uses. “Hetronic’s
downstream-sales theory strikes us as the sort of ‘repackag[ing]’ [of foreign
conduct as domestic] the majority sought to prevent. Hetronic needs to keep its
eye on the prize: Abitron’s infringement of Hetronic trademarks in U.S.
commerce.”

What about the steps
Abitron took to facilitate US sales: obtaining FCC licenses and hiring a
U.S.-based distributor? Hetronic argued that these were “essential steps” towards
US sales, as in Steele v. Bulova Watch Co. But Steele is “outdated”
and the new test gives no weight to Steele’s considerations. “[T]he majority eschewed everything Steele
stood for: that any ‘essential steps’ taken domestically to facilitate
trademark infringement abroad subject infringers to Lanham Act liability.”
(Presumably contributory infringement is still available.)  Thus, Abitron’s
acquiring FCC licenses, hiring a U.S. distributor, or repairing a broken part didn’t
count as infringing domestic conduct because “none of those actions require
using Hetronic trademarks in commerce.” Citing U.S. Surgical Corp. v. Orris,
Inc., 5 F. Supp. 2d 1201, 1208–09 (D. Kan. 1998) (rejecting the plaintiff’s
claim that defendant’s “conduct in receiving, reprocessing, and returning the
instruments” constituted uses in commerce under the Lanham Act); Soc. Techs.
LLC v. Apple Inc., 4 F.4th 811, 817 (9th Cir. 2021) (“[U]se in commerce within
the meaning of the Lanham Act requires use of a genuine character,” meaning a
use “sufficiently public to identify or distinguish the marked goods in an
appropriate segment of the public mind.” (citation omitted)). “[T]hese
behaviors strike us as merely intermediary or incidental to Abitron’s foreign
infringement because none involve affixing Hetronic’s trademark to goods and
introducing those goods into U.S. commerce by selling, advertising, marketing,
or distributing them to American consumers.”

However, the U.S.
distributor’s advertising at U.S. tradeshows or marketing Abitron’s infringing
products online to U.S. customers would qualify as domestic infringing uses in
commerce under Abitron. “[A]ny activities that Abitron engaged in through its
U.S. distributor to sell, market, advertise, or distribute infringing goods to
U.S. consumers do violate the Lanham Act.” (Why is this direct liability? Is it
a vicarious liability analysis?)

Turning now to
disgorgement:  Any portion of the
disgorgement award based on Abitron’s foreign sales was improper, assuming
those sales were unconnected to any infringing use of Hetronic trademarks in
domestic commerce. Disgorgement should account for Abitron’s foreign sales that
flowed from its domestic infringing conduct, like advertising, but Abitron
argued that the record was insufficient to tether its foreign sales to its
infringing domestic conduct. “Hetronic bears the burden of proving the
connection between Abitron’s domestic infringing conduct and its foreign sales.”
(The court of appeals proceeded in ignorance of Romag, but since the
jury found willfulness, that didn’t matter.)\

The plaintiff’s
burden is to identify the “total sales” that resulted “from the [defendant’s]
infringing activity with reasonable certainty.” That requires more than showing
the defendant’s gross revenues, though an estimation of infringed profits based
on gross revenues is sufficient. “Above all,” the
plaintiff needs to “show some connection between the identified ‘sales’ and the
alleged infringement.” This is a proximate cause requirement (citing Lexmark).

Neither side
requested a new trial, but the parties on remand could put on “limited opinion
evidence as necessary for the district court to interpret which of Abitron’s
domestic activities meet the infringing ‘uses in commerce’ threshold.” Hetronic
argued that the district court should take into account that it declined to
pursue attorney’s fees and treble damages; the court of appeals expressed no
opinion on this (which is weird since it held a bunch of other arguments waived)
and just said the district court has discretionary authority under the statute
(which isn’t even fully accurate, since treble damages have to be compensatory
and not a penalty).

Injunctive relief:  Can only cover domestic conduct.

Abitron sought a new
trial on the state law claims, arguing that they were tainted by the now-irrelevant
foreign conduct evidence, but that was waived.

 

from Blogger http://tushnet.blogspot.com/2024/04/hetronic-remand-continued-rise-of-use.html

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Measuring device (c)able under Star Athletica; ignoring Dastar, court also allows false advertising claim

Posted on April 29, 2024 by rtushnet

Leszczynski v. Kitchen
Cube LLC, 2024 WL 1829620, No. 8-23-cv-01698-MEMF-ADS (C.D. Cal. Apr. 17, 2024)

Leszczynski invented
a measuring cube that combines various measuring volumes into a single cubical
structure. He posted the Cube design and 3D print files on Thingiverse.com, the
largest site for 3D print objects. The Cube file was provided under a Creative
Commons, non-commercial, no derivatives license.

Thingiverse cube

Kitchen Cube made and sold copies
of the Cube. It advertised “This device was one of the most popular items on a
popular 3D printing website with over 20,000 unique downloads” on its website,
at a time when Leszczynski’s Thingiverse page displayed that his Cube had been
downloaded 20,000 times. Kitchen Cube also stated on its website that “we
designed and manufactured every kitchen measuring device in one easy to use
gadget.” Kitchen Cube filed a patent application for the Cube. Other defendants
manufactured and sold the Cube with their unique branding through Kitchen Cube’s
affiliate program.

Kitchen Cube cube

Leszczynski sued for
(1) copyright infringement; (2) violation of Creative Commons license terms;
and (3) false advertising and misrepresentation.

After dealing with
jurisdiction/proof of service, the court dismissed the copyright infringement
claim because no registration had yet been received.

The breach of
contract claim survived. Kitchen Cube argued that mutual consent and
consideration were missing, but defendants’ act of downloading or utilizing the
Cube file from Leszczynski’s Thingiverse page could constitute acceptance. Consideration
was also alleged because the design conferred benefits to defendants, and
Leszczynski received reputational benefits as a result of making the design
available.

Even though the
copyright was unregistered, Leszczynski could still have one. The court also
found, at this stage, separability under Star Athletica, essentially because it
was a 3D object (and thus could be made at a scale that would make it useless
as a measuring device). I still don’t think that can be the test; that isn’t in
fact imagining the design separately from the useful article, just imagining
the useful article at a useless scale, like a skyscraper-sized shovel.

At this stage,
Leszczynski sufficiently alleged that manufacturing and selling the Cube
constituted commercial use of the Cube, and was prohibited under the Creative
Commons license. He pled that his actual damages from the breach and/or the
copyright infringement can be measured by multiplying the number of units sold
by each defendant by $10 per unit, which sufficed. He could seek a remedy other
than termination of the license, since the license didn’t exclude the right to
seek damages.

False advertising:
Only ok against Kitchen Cube. At this stage, Leszczynski sufficiently alleged
that “Kitchen Cube’s behavior misleads the public regarding the Cube’s origin
which affects Leszczynski’s market.” This claim of reputational injury seems to
require secondary meaning, which seems like it would only be allowed under §(a)(1)(A),
which would then generate a pretty significant Dastar problem—even
under (B), the “origin” here is not physical origin.

The alleged
falsehoods: (1) that Kitchen Cube “designed and manufactured” the Cube; and (2)
that Kitchen Cube filed a patent application on the Cube. Kitchen Cube argued that
Leszczynski admits that the alleged first false statements are true, as his
copyright infringement claim is about Kitchen Cube’s manufacturing of the Cube,
and that Kitchen Cube made a change to the original Cube design.

But he clearly
alleged that the statement Kitchen Cube “designed and manufactured [the Cube]” was
misleading because Kitchen Cube did not design it, but rather used
Leszczynski’s design without authorization, even if it also made changes.
(Somebody really needs to mention Dastar.) He also properly alleged a
misstatement in the patent application because Kitchen Cube falsely claimed to
have invented the Cube (which is not in “commercial advertising or promotion”).
The court also didn’t discuss materiality (further suggesting this is really a
§43(a)(1)(A) claim).

from Blogger http://tushnet.blogspot.com/2024/04/measuring-device-cable-under-star.html

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Use of competitor’s photo in comparative ads caused no (c) damage, appeals court holds

Posted on April 15, 2024 by rtushnet

I Dig Texas, LLC v.
Creager, — F.4th —-, 2024 WL 1590590, No. 23-5046 (10th Cir. Apr. 12, 2024)

The district court
found that use of a competitor’s photos in comparative
advertising was fair use; the court of appeals affirms on the alternative
ground that no copyright damages can be traced to the use of the photos,
holding that a plaintiff seeking defendant’s profits must show a nexus between
the use of the copyrighted works and the profits. It also affirms the
conclusion that it was not literally false to claim that machinery was American-made
when it was assembled in the US from materials including foreign-sourced components.

Appellee I Dig Texas
tried to appeal to consumers’ preference for American-made products; it used
Creager’s photographs of its China-made Montana Post Drivers as part of its
advertising.

Rather than ruling
on fair use, the court reached the alternative ground of lack of any nexus to damage,
which was fully briefed below.

Profits can be either
direct or indirect; indirect profits would include “enhance[ing] operations by
infringing on a copyright or “add[ing] sales because [defendant’s]
advertisements included copyrighted images. Appellant Creager “bore the initial
burden to show a nexus between I Dig Texas’s infringement and making of a
profit.” Once the nexus has been established, the burden would be on defendant to
show which profits didn’t come from infringement, but that first step still
exists. Showing a nexus requires more than speculation.  

Although the photos
depicted Creager’s products, “there’s no evidence that I Dig Texas sold any
more products because the advertisements had included these photographs.” [I
will note there’s a subterranean fair use rationale, still, since if the photos
hadn’t been used for critical purposes but to show the appeal of defendant’s
lookalike products no one would have failed to infer a nexus. This might be
another knock-on effect of Goldsmith: courts now afraid to say that
anything is transformative, even straight-up criticism.] There was no showing
that I Dig Texas “made any money from the advertisements bearing the
copyrighted images.” The existence of the ads wasn’t “evidence that anyone had
bought something from I Dig Texas because of these advertisements. And even if
someone had bought something from I Dig Texas based on these advertisements,
there’s no reason to believe that the two photographs would have made a difference
to any consumers.”

Nor were the ads
literally false (again, an alternative ground: the district court found that
the components were disclosed, but the court of appeals noted that at least
some of the ads didn’t contain all the relevant information). “[A]n ambiguous
statement can’t be literally false.”

Some I Dig Texas
products were assembled in the United States, others in China. “Even for the
products that I Dig Texas had assembled in the United States, some components
had come from overseas. For example, I Dig Texas had used a nitrogen power cell
made in China. And some of the nuts and bolts had come from Canada.” The court
of appeals reasoned that “make” “could refer either to the origin of the
components or to the assembly of the product itself.” Since some of the
products were assembled in the US, the ads were ambiguous and not literally
false.

What about the ones
assembled overseas? Well, the ads didn’t say “all.”  I Dig Texas said on its website: “We Provide
100% American Made Skid Steer Attachments.” And a statement can be literally
false by necessary implication. But that 100% was still ambiguous: it could
mean “that only some of the products consist entirely of domestic components
assembled in the United States. Or 100% could refer only to assembly of the
final product rather than the origin of the components.” [Not discussed: were
either of these true?] Nor could the court rely on FTC standards in a
Lanham Act case, especially when the FTC noted that there was no bright line.

Likewise, patriotic
symbols like the American flag could imply US manufacture, but they couldn’t “objectively
be verified as true or false,” so they couldn’t be literally false. [Actually,
that suggests they couldn’t be misleading, either, but the court seems a bit
unclear about that.]

from Blogger http://tushnet.blogspot.com/2024/04/use-of-competitors-photo-in-comparative.html

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Hospital’s use of Meta’s Pixel, despite promise to keep data private, plausibly deceptive

Posted on April 15, 2024 by rtushnet

Mekhail v. North
Memorial Health Care, — F.Supp.3d —- , 2024 WL 1332260, No. 23-CV-00440
(KMM/TNL) (D. Minn. Mar. 28, 2024)

Mekhail alleged that
North’s use of a piece of hidden software on its websites (a pixel developed by
Meta) surreptitiously tracked, collected, and monetized various aspects of her
online activity, including sensitive medical information protected by law. Although
she alleged violations of the federal and Minnesota wiretap statutes and the
Minnesota health records statute (which all survived the motion to dismiss), I’ll
focus on claims under the Minnesota consumer fraud statute, the Minnesota
deceptive trade practices statute, and common law claims of invasion of privacy
and unjust enrichment.

Mekhail alleged that
North’s public-facing website, which publicly offers information about medical
issues and the health care resources provided by North, and its
password-protected “patient portal,” which contains personal medical
information, including patient records, appointment booking, and test results, both
used the pixel to surreptitiously track, collect, and transmit her online
activity, including page views, clicks, search terms, and so forth. This
information was then allegedly collated by Meta and eventually used to craft
targeted advertising to Mekhail related to her web activity.

Minnesota Consumer
Fraud Act: The MCFA prohibits the “act, use, or employment by any person of any
fraud, false pretense, false promise, misrepresentation, misleading statement
or deceptive practice, with the intent that others rely thereon in connection
with the sale of any merchandise.” Mekhail has failed to allege a
misrepresentation in connection with merchandise, as required by the statute.
The alleged misrepresentation was North’s statement that it “protect[s] health
and medical information as required by federal and state privacy law.” At oral
argument, counsel offered the theory that the “exchange of data” between Mekhail
and North represented an intangible good or commodity, but the complaint only
referred to North’s medical services. And Mekhail didn’t allege that there was
a misrepresentation made by North in connection with its provision of any
medical services. She alleged a misrepresentation related to data privacy, “but
North is not in the business of providing data privacy services.”

The Minnesota Unfair
and Deceptive Trade Practices Act  prohibits the use of “deceptive trade
practices” in the course of business, vocation, or occupation, which include
“caus[ing] likelihood of confusion or of misunderstanding as to …
certification of goods or services,” “engag[ing] in (i) unfair methods of
competition, or (ii) unfair or unconscionable acts or practices,” and
“engag[ing] in any other conduct which similarly creates a likelihood of
confusion or misunderstanding.”

North allegedly made
numerous statements that it protected patients’ medical privacy and health
data. North disputed that anything shared with Meta was protected health data
and also argued that some of allegedly deceptive statements are linked to the
Privacy Policy, which (allegedly) states that North “may disclose information
to third parties who act for us or on our behalf.” But that wasn’t enough at
the pleading stage to overcome the allegations of the complaint.

Article III
standing: MUDTPA’s only remedy was injunctive relief for a “person likely to be
damaged by a deceptive trade practice.” This showing of likely future harm that
is seemingly “indistinguishable from Article III’s threat-of-future-harm
requirement for injunctive relief.”

Mekhail alleged that
there were two likely future harms: where new data is taken from her by the
Pixel, and where the data already taken by the Pixel is used in newly harmful
ways. This first scenario was “in obvious tension” with the fact that she was,
by her own allegation, a “former patient” of North. However, she argued that
she could become a patient again, especially in an emergency situation. This
was somewhat tenuous, but nonetheless,

there are real and undeniable scenarios in which Ms. Mekhail, despite
her best efforts, becomes a patient again of North. And it is not clear to the
Court that Ms. Mekhail could ever truly quantify the likelihood of such a
scenario. After all, a medical emergency, like that contemplated in the
pleadings, can arise as real and immediately as tomorrow or, with any luck, may
never occur. It is simply not within Ms. Mekhail’s capacity to plead the kind
of concrete likelihood typically required by our standing cases.

In addition, because
she was once a patient, North allegedly has records of past treatment and
appointments. Thus, she may have to use the patient portal even if she does not
return as a patient. “If she needs to obtain or review her own medical records
from North using the portal (surely the quickest and least burdensome way) she
would once again be exposed to harm from the allegedly deceptive practices.”

But the second
theory was stronger: “her data, already collected by the Pixel, remains beyond
her control and may be used in harmful ways.” The complaint sufficiently pled a
likelihood of future harm, if not a likelihood of future deception. To find no
standing would deprive federal plaintiffs of the remedy the statute set out.
Nonetheless, she would need to do more to actually obtain injunctive relief.

Invasion of privacy
based on publication of private facts and intrusion upon seclusion: There wasn’t
a sufficiently public dissemination of her health data for the first theory. But
an intrusion by North cannot be plausibly alleged because Mekhail conceded that
it was Meta (or Meta’s Pixel), rather than North, that made the interception.

Unjust enrichment
claims survived.

from Blogger http://tushnet.blogspot.com/2024/04/hospitals-use-of-metas-pixel-despite.html

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Good Meat is descriptive for sustainable meat-related services, plausibly deceptive for lab-grown meat

Posted on April 15, 2024 by rtushnet

Good Meat Project v.
GOOD Meat, Inc., — F.Supp.3d —- , 2024 WL 1083462,  No. 23-cv-04145-RFL (N.D. Cal. Feb. 12, 2024)

GMP is a nonprofit
focused on sustainable butchery and meat production practices. It provides
farmers, ranchers, and butchers with marketing education and technical
assistance; incubates “Meat Collectives” across the country; and educates
consumers about responsible meat production and consumption practices. GMP owns
two federally registered trademarks: the “GOOD MEAT” standard character mark
and the “GOOD MEAT BREAKDOWN” design mark.

GMI is a food
company which produces and sells cultivated, lab-grown meat from extracted
animal cells.  GMI removes embryonic
fertilized chicken eggs, minces the tissue and places the cells in culture,
grows cells in culture, and then 3D prints the cells into shapes resembling
cuts of chicken. Eat Just, GMI’s parent company, filed an ITU for a stylized
GOOD Meat mark in 2020; in 2021, defendants entered into agreements granting
their security interests in the intent-to-use application to a third party, and
also Eat Just assigned the entirety of its business having an interest in the GMI
mark to GMI. A notice of allowance issued in 2022.

The court denies a
preliminary injunction on the trademark claims based on lack of likely success
on the merits, but declines to dismiss either infringement or false advertising
claims. The false advertising claims are based on the allegation that the
defendants falsely advertise and promote their cultivated meat products as
“real meat, made without … taking a life” by “painlessly extract[ing] cells
from an egg or living animal.”

Likely success on
the merits: Strength was the sticking point. GMP was entitled to a strong but
rebuttable presumption that the GOOD MEAT mark is inherently distinctive
because the PTO registered the mark without requiring GMP to show secondary
meaning. GMI successfully rebutted this presumption by showing, by a preponderance
of the evidence, that the mark was merely descriptive, putting the burden back
on GMP to show secondary meaning.

Under both tests
used by the Ninth Circuit—the imagination test and the competitive need test—“good
meat” was descriptive of GMP’s services:

Customers do not need to exercise their imaginations to understand that
the term “GOOD MEAT,” as applied to educational services, refers to education
concerning “responsible” consumption of animal meat: that is, meat that
consumers can feel good about eating. There is little-to-no mental leap
required to understand that GOOD MEAT describes GMP’s services. Indeed, the
evidence shows that, in ordinary parlance, the term “good meat” is used
routinely to refer to the concept of sustainably sourced meat.

The court noted that
the fourth Google result for “good meat” is a book titled Good Meat: The
Complete Guide to Sourcing and Cooking Sustainable Meat. This title was
probative of how the term “good meat” is used in ordinary speech and
demonstrated the descriptive nature of the term. So too with the competitors’
needs test. GMI identified, two LinkedIn pages run by international companies
selling food products, GoodMeat and Good Meat Co.; the aforementioned book; and
USPTO records showing over 570 live registered trademarks using the term “good”
to describe meats and processed foods. Though registrations and foreign uses
aren’t use in the US, “these examples are not being used to show a crowded
trademark field or the extent of use in the term in the domestic market; they
are used to show how difficult it is to market goods and services that support
sustainably or responsibly sourced meat without using the term ‘good meat.’”

With the burden back
on GMP to show secondary meaning, it didn’t do so. There was no evidence that
consumers viewed the term “good meat” as referring a single source: that is,
GMP. This actually should have ended the inquiry: no mark, no trademark
infringement. But the court treated it as weighing against likely confusion.

GMP argued that it
had organized Meat Collectives in numerous states and has promoted its services
in various states, but didn’t offer evidence of how its efforts have been
received in the actual marketplace. Its evidence was insufficient to gauge the
mark’s commercial strength.

GMP then argued a
reverse confusion theory, but there the important question is “whether the
junior mark is so commercially strong as to overtake the senior mark.” [Again,
reverse confusion shouldn’t be available where there’s no mark, and probably
not even for a descriptive mark, given the risk that the adopter took on of
choosing a descriptive term.] But there wasn’t evidence that the “mark” had
been completely overtaken. For example, GMP was the sixth result in a Google
search for “good meat,” behind two results unrelated to either GMP or GMI. [Query
how personalization of search results affects this metric.]

Proximity of the
goods: They were similar at a high level of abstraction. But GMP offers
services, while GMI sells goods. “GMP focuses on butchering, slaughter, and the
development of Meat Collectives. It provides educational services to butchers,
ranchers, farmers, and consumers interested in sustainable meat production.
GMI, by contrast, sells a food product that explicitly avoids butchering,
ranching, and farming.” Disfavored confusion.

Mark similarity: “Visually,
the marks are similar. Aurally and semantically, they are identical.” Favored
confusion.

Actual confusion: A
GMP board member claimed to have received a LinkedIn message from students at
an Italian university who mistakenly believed they were contacting GMI. “The
Ninth Circuit has found mistakes made by a single retailer and single customer
insufficient to support a showing of actual confusion. Other courts in this
District have also found even stronger evidence of this type to be similarly
unpersuasive.” This was even weaker evidence, given that the alleged confusion
wasn’t among “industry journalists or the vendors that are GMP’s target
customers.” Moreover, the evidence was even less compelling in light of the
passage of time: if GMI had, as GMP alleged, flooded the online market with
advertising, only one example of actual confusion disfavors a finding of likely
confusion.

Marketing channels: “Merely
showing that both businesses advertise on the internet is insufficient to show
marketing channel convergence.” The marketing was otherwise quite distinct: GMP
markets principally to ranchers and farmers, while GMI markets cultivated meat
products made without ranching or farming. Disfavors confusion.

Degree of customer
care: The record was mixed.

Ranchers and farmers are likely to exercise high levels of care in
seeking out training programs and networking opportunities, but members of the
public interested in sustainable meat practices may be less discerning.
Likewise, GMI’s products are relatively cheap — its cultivated meat product is
served as part of a tasting menu that costs only $70 despite being offered by a
famous chef — but also cater to a relatively niche group of consumers who may
exercise greater care in their meat consumption.

Neutral.

GMI’s intent: There
was no evidence that GMI intentionally selected its mark to capitalize on GMP’s
goodwill or to “palm off” its goods as that of GMP, or intended to flood the
market (or that GMI should have known of the mark and disregarded the risk of
reverse confusion).  

Likely expansion of
product lines:  “Given their antithetical
targets, it seems unlikely that the GMP and GMI would expand into each other’s
marketing channels.…There is little risk that GMP will begin creating any
lab-based meat product, and it is equally unlikely that GMI will begin
providing educational services related to farmed and butchered meat.”

In essence, the same
analysis applied to the GOOD MEAT BREAKDOWN mark, except that that mark was
more dissimilar to GMI’s mark, which outweighed the greater conceptual strength
of “good meat breakdown” and design.

Also, the length of
time that GMP waited before seeking relief undercut any finding of imminent
harm. GMI sent a C&D to GMP in April 2022 (whoops!) but did GMP didn’t
sue until sixteen months later, then waited two more months before filing for
preliminary relief. Also, GMI recently withdrew its application to sell its
cultivated meat products in the domestic marketplace, further undercutting the
idea that harm is imminent. The court also considered GMI’s investment of millions
in its branding and advertising as weighing against relief.

Nonetheless, the
complaint sufficiently alleged infringement. For purposes of a motion to
dismiss, GMP alleged that its mark was valid and infringed.

False advertising: GMP
plausibly alleged that consumers could understand “GOOD Meat” and “real meat”
to mean meat from a once-living animal, or that consumers could believe that
GMI’s cultivated meat products are developed entirely from chemical or
plant-based sources, not from the use of an embryonic, fertilized egg. GMP also
sufficiently alleged competitive injury “as its consumers may mistakenly
believe that GMP endorses GMI’s statements and approach to food production, and
resultingly decide to stop using GMP’s services.” [Notably, while false
advertising doesn’t require competition, this particular theory of competitive
harm seems parasitic on the infringement claim, and would have to fail if there
was no likely confusion even if there was falsity.]

GMP also stated a
plausible claim for declaratory judgment that GMI’s mark was deceptively
misdescriptive. However, it didn’t plausibly allege that the mark violated the
Lanham Act’s anti-ITU-trafficking rule. Even if the ITU was used as collateral
for a loan, “[a] security interest in a mark, as collateral for a loan, does
not fall within the plain language of section 1060(a). It also does not raise
the policy concerns that underlie the Lanham Act’s anti-trafficking provision.”
With no allegation of actual default or transfer to a lender, the claim was
dismissed with leave to amend.

 

from Blogger http://tushnet.blogspot.com/2024/04/good-meat-is-descriptive-for.html

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Cal. appeals court affirms use of statistical sampling to calculate # of FAL/UCL violations in AG action

Posted on April 12, 2024 by rtushnet

People v. Ashford
University, LLC, 100 Cal.App.5th 485, 319 Cal.Rptr.3d 132, D080671 (Feb. 20,
2024)

Defendants Zovio and
Ashfort are the former owners and operators of an online university. The trial
court found that for more than a decade, defendants violated the UCL and FAL by
making false and misleading statements to prospective students for a total of
1,243,099 UCL and FAL violations. It imposed $22,375,782 in civil penalties.

The court of appeals
reduced the penalty for violations outside the FAL’s statute of limitations (a
decrease of under $1 million), but approved of the trial court’s general
approach to calculating damages, including its use of sampling and its
consideration of solicitations from California to out-of-state prospective
students.

The court explains:

Ashford University was founded in 2005, when Zovio, which had never
offered any degree programs, purchased a small campus-based religious
university located in Iowa. Zovio needed this university’s accreditation
because only students attending accredited institutions are eligible for
federal financial aid. Zovio renamed the school Ashford University (Ashford)
and transformed it into an enormous online institution that was marketed as a
traditional university. [It has now been rebranded as the University of Arizona
Global Campus.]

A typical bachelor’s degree from Ashford cost between $40,000 and
$60,000. At its peak, Ashford had more than 80,000 students and generated
hundreds of millions of dollars annually, the vast majority from
taxpayer-funded sources such as Title IV loans, income-based grants, and G.I.
Bill funds.

As Ashford knew, its
students led “complex” and “difficult lives” whose vulnerability “heighten[ed]”
the need for accurate college advising. They were typically older than
traditional college students with an average age of 35 to 37; of low income
(between 55 and 76 percent received Pell Grants); around half identified as
minorities. Of note, only a quarter of Ashford students graduated, and many
defaulted on their student loans.

Despite Ashford’s knowledge
of these facts, defendants “created a high-pressure admissions department whose
‘north star’ was enrollment numbers rather than truthful advising. Ashford
called its salespeople “admissions counselors” and trained them to build trust
and rapport with prospective students. Managers would threaten to fire those
who failed to enroll enough students. It was clear to defendants that the
boiler-room atmosphere put pressure on salespeople. “[A]dmissions counselors
succumbed to the pressure and made deceptive statements to prospective students
in order to boost their enrollment numbers and keep their jobs.”

The AG filed an
enforcement action alleging that defendants had violated the UCL and FAL by
making “myriad misrepresentations to prospective Ashford students regarding the
costs of attending Ashford, the availability of financial aid, the ability of
Ashford programs to prepare students for careers in certain professions, and
the likelihood that academic credits would transfer into and out of Ashford.”

The trial court found
in favor of the AG, relying on (1) the testimony of nine student victims who
experienced the misrepresentations and relied on them in deciding to enroll at
Ashford; (2) the testimony of former Ashford employees who explained how the
pressure to meet enrollment numbers, instructions from managers, and other
guidance led them to deceive students in order to promote enrollment; (3) the
testimony of an expert in college admissions with over 40 years of experience
setting industry standards for college advising and leading the admissions,
financial aid, and registrar departments of four major universities; and (4)
internal company documents and testimony of witnesses affiliated with
defendants.

I’m omitting infuriating
and tragic details of the misrepresentations, but to get the flavor, one woman testified
that she withdrew from a degree program at a different school that would have
led to teacher licensure because she was told Ashford’s program was equivalent
to the one she was attending. “Only after graduating did she discover this was
not the case and her Ashford education did not qualify her to take the state
teaching exam.” There were also financial misrepresentations about debt, costs
of attendance, and so on.

Defendants’
compliance department used scorecards to assess calls between employees and prospective
students; the AG’s expert found relevant deceptive statements in over 20% of
scorecards. A compliance director responsible for admissions call monitoring
observed that there were “areas where the level of negligence is astonishing.” Defendants
received “mystery shopper reports” documenting specific misrepresentations
about financial aid and transfer credits. Their response was to discontinue the
mystery shopper program. They also didn’t respond meaningfully to student complaints.
Instead, they promoted a substantial number of repeat offenders who made
relevant statements in at least half of their monitored calls, which encouraged
further noncompliance.

Between 2013 and
2020, there were 1,573,400 phone calls between defendants and California
students. The AG’s expert drew a random sample of 2,234 calls, of which 561 discussed
at least one relevant topic within this sample. Twenty-two percent contained at
least one misrepresentation. Defendants retained and produced only California
calls, but, based on the testimony in the case, the court concluded that the
total number of misleading calls placed by defendants from March 2009 through
April 2020 was 1,243,099.

Public prosecutor,
including the AG, can seek civil penalties of up to $2500 for each violation of
the UCL and FAL; the statute doesn’t specify how violations to be counted, but  “[c]ivil penalties ‘are mandatory once a
violation of [the UCL/FAL] is established, and a penalty must be imposed for
each violation.’ ” UCL and FAL penalties are cumulative. The statute specifies:
“In assessing the amount of the civil penalty, the court shall consider any one
or more of the relevant circumstances presented by any of the parties to the
case, including, but not limited to, the following: the nature and seriousness
of the misconduct, the number of violations, the persistence of the misconduct,
the length of time over which the misconduct occurred, the willfulness of the
defendant’s misconduct, and the defendant’s assets, liabilities, and net
worth.”

Some of the penalties
imposed were for calls beyond the statute of limitations, so the court reduced
the penalty ($9/call) by the relevant amount.

However, it was
generally appropriate to use statistical methods to estimate the number of
violations. Defendants argued that the trial court found 1,243,099 violations
by extrapolating from a “set of just 126 calls,” but “[w]hether any particular
statement was misleading is a highly individualized inquiry that should have
been evaluated in the context of the specific coursework and degree programs,
financial aid and debt issues, and professional aspirations under discussion
(not to mention the follow-up calls made and written materials provided to the
same prospective students that were never considered).” However, “[r]epresentative
testimony, surveys, and statistical analysis all are available as tools to
render manageable determinations of the extent of liability.” The court relied
on the People’s experts, a subject matter expert in college admissions and a
statistician.  It followed appellate
guidance: “If sampling is used to estimate the extent of a party’s liability,
care must be taken to ensure that the methodology produces reliable results.
With input from the parties’ experts, the court must determine that a chosen
sample size is statistically appropriate and capable of producing valid results
within a reasonable margin of error.” Defendants could have tried to develop
evidence that this extrapolation was invalid at trial; they didn’t.

Each misleading call
could be appropriately counted as a separate statutory violation, even if, as defendants
asserted, admissions counselors spoke to each victim on average “a ‘half-dozen’
times.” Counting each call was not arbitrary and capricious.  “Each phone call in the violation count was
found to contain at least one deceptive statement,” and it wasn’t even clear
that the sample included repeat encounters. Even if it did, the individualized
solicitations justified counting each call as a violation.

Nor did the trial
court wrongly apply California law “extraterritorially” when it counted
statements that caused harm outside of California. The misconduct “emanated
from California,” and it’s well-established that the UCL/FAL extend to conduct
that emanates from California even if victims reside out of state. The AG is
not (just) a representative of injured California citizens; the AG acts “under
his constitutional authority as the chief law enforcement officer of the state.”

Finally, the penalty
wasn’t constitutionally excessive. Nine dollars per violation isn’t excessive
even if they committed a lot of violations. Defendants argued that the total
was excessive in comparison to the People’s request for $222,119 in restitution
on behalf of the nine testifying student victims, and there should only be a single-digit
multiplier. This wasn’t a punitive damages case, but a civil penalty, which is
fundamentally different: it’s sought by public law enforcement, not private officials;
there’s no jury trial and thus no risk of jury passion or prejudice; and the
underlying action doesn’t require proof of actual damages. More generally, the
harm wasn’t disproportionate to the penalty, considering both monetary and
nonmonetary harm.

“The court credited
the testimony of the nine student victims, each of whom described how their
admission counselors’ misrepresentations led them to make decisions that
frustrated their goals, deprived them of years of lost time, cost them
financially, and had other detrimental consequences.” It further found
significant similarities between the deceptions identified in the sample and
the stories of the testifying victims.

Defendants also didn’t
show that Zovio was unable to pay. Among other things, “[i]n exchange for
paying $54 million to ‘sell’ Ashford to UAGC, Zovio will now receive 15.5-19.5%
of UAGC’s tuition revenue for the next 7-15 years.” Even if 10% of net worth is
a maximum for punitive damages (which wasn’t clear), that didn’t apply to civil
penalties. And, in this case, Ashford earned Zovio “hundreds of millions of
dollars … annually.” Its voluntary depletion of its assets—in order to get a
future income stream—couldn’t count in its favor.

 

from Blogger http://tushnet.blogspot.com/2024/04/cal-appeals-court-affirms-use-of.html

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RAW power: over dissent, 9th Circuit orders trial on infringement, cancellation of TM applications

Posted on April 5, 2024 by rtushnet

BBK Tobacco &
Foods LLP v. Central Coast Agriculture, Inc., — F.4th —-, 2024 WL 1356981, Nos.
22-16190, 22-16281 (9th Cir. Apr. 1, 2023)

Over a dissent, the
panel reverses the grant of summary judgment on noninfringement, reasoning that
the overlap in the use of the (descriptive) word RAW between the parties’ somewhat
related products was enough to avoid summary judgment—which should rarely be
granted in trademark cases (ugh), despite major visual differences and the lack of actual confusion evidence
and low confusion rates shown by the parties’ surveys.

plaintiff’s RAW

defendant’s Raw Garden

Also over a dissent,
the panel finds that a court can order trademark applications
cancelled, not just registrations. (The panel did affirm the refusal to cancel defendant’s
registrations on grounds of unlawful use, since they weren’t for unlawful
items.)

BBK sells smoking-related products with RAW branding; CCA
allegedly infringed by selling cannabis
products with the mark “Raw Garden.” BBK sought to cancel several of CCA’s
trademark applications for lack of bona fide intent to use the mark in
commerce. “We hold that, under 15 U.S.C. § 1119, when an action involves a
claim of infringement on a registered trademark, a district court also has
jurisdiction to consider challenges to the trademark applications of a party to
the action. We also hold that lack of bona fide intent to use a mark in
commerce is a valid basis to challenge a trademark application.”

The dissent
disagreed, given that the statutory language is:

In any action involving a registered mark the court may determine the
right to registration, order the cancelation of registrations, in whole or in
part, restore canceled registrations, and otherwise rectify the register with
respect to the registrations of any party to the action.

But, the majority
reasoned, the Lanham Act refers to an “[a]pplication for use of trademark” as a
“request [for] registration of [a] trademark on the principal register.” “A
challenge to an application thus necessarily affects the applicant’s right to a
registration…. Indeed, some of the dissent’s own examples use the term ‘right
to registration’ when adjudicating an opposition to an application.” Adjudicating
applications in a single action was good for speed and efficiency.

The dissent would
have allowed the PTO’s iterative registration process to go forward. The
dissent would have interpreted “right to registration” in the relevant
provision to mean “the court’s authority to adjudicate the ownership, scope,
priority, and use of trademarks, which may entitle a party to registration of
the mark.” That is, courts could determine who has rights to a trademark, but
that’s not the same thing as cancelling pending trademark applications, as the
use of “otherwise” in the final phrase of § 1119 indicates. “Of course, the
right to registration may affect the applications’ adjudication. But that
doesn’t alter Congress’s choice to leave decisions over trademark applications
to the PTO.” Noscitur a sociis also supported excluding the authority to cancel
trademark applications from § 1119. “Given the neighboring terms, we should
likewise read ‘right to registration’ as only a power over completed
registrations.” (The section title—“Power of court over registration”—also suggested
that federal courts lack jurisdiction to cancel pending trademark applications.
“Though a statutory title may never ‘limit the plain meaning of the text,’ a
title may sometimes be a helpful interpretative tool.”)

from Blogger http://tushnet.blogspot.com/2024/04/raw-power-over-dissent-9th-circuit.html

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