Rebecca Tushnet

insurer can’t use “promotional event” exclusion to avoid coverage for recurring club nights

Posted on August 11, 2026 by rtushnet

Acosta v. Clear Blue Specialty Ins. Co., 2026 WL 2093910,
No. CV-24-03681-PHX-DJH (D. Ariz. Jul. 21, 2026)

Plaintiffs are models trying to recover for claims resolved
by consent judgment in their underlying lawsuit, one of the many against adult
clubs around the country.

In various social media posts, the insured used plaintiffs’
images to advertise club events, such as “Champagne Saturdays,” “Latin Ladies
Night,” “Working Man Specials,” and “2 por 1 Martes.” Plaintiffs claim that
their injury constituted a “personal and advertising injury” under the policy.

But the Policy excludes coverage of “personal and
advertising injury” that arises out of “exhibitions and related marketing,”
defined as:

(a) The creation, production,
publication, performance, exhibition, distribution or exploitation of motion
pictures, television programs, commercials, web or internet productions,
theatrical shows, sporting events, music, promotional events, celebrity image
or likeness, literary works, and similar productions or work, in any medium
including videos, phonographic recordings, tapes, compact discs, DVDs, memory
cards, electronic software or media, books, magazines, social media, webcasts
and web sites.

(b) The conduct of individuals in
shows, theatrical productions, concerts, sporting events, or any other form of
exhibition.

(c) Merchandising, advertising or
publicity programs or material for the operations and material described in (a)
or (b) above.

Plaintiffs argued that a “promotional event” is not “a party
at a nightclub but rather an ‘event’ thrown in furtherance of promoting
something…”

The insurance company responded contested images were
advertisements for “promotional events” as the events advertised “were not
ordinary nightclub evenings.” They touted “drink specials, free admission for
women, reduced dance pricing, and other deals.”

The policy didn’t further define “promotional event,” so the
court analyzed the terms of the policy as written and from the “viewpoint of
one untrained in law or in the insurance business.” Sampedro v. Clear Blue
Specialty Insurance Company, 2026 WL 1291919 (M.D. Fla. May 12, 2026), held
that the same exclusion unambiguously excused the insurer from defending the
nightclub in a similar case involving ads for “the ‘Pretty Chicks & Kicks’
and ‘Tastee Tuesday’ events.” The court reasoned that, even under such a
definition, “[the nightclub’s] promotional events promoted the nightclub itself
through alcohol sales and DJ appearances.”

Nobriga v. Clear Blue Specialty Insurance Company, 2026 WL
1998727 (D. Conn. July 10, 2026), used dictionary definitions to define a
“promotional event” as “a noteworthy happening or social occasion or activity
serving the means of furthering the growth or development of something,
particularly the acceptance and sale of merchandise through advertising,
publicity, or discounting.” Based on this definition, ads for the café’s “Cinco
de Mayo Party,” “Halloween and St. Patrick’s Day parties,” and “Baseball Night”
constituted advertisements for “promotional events.” “[E]ach advertisement
offered discounts on food and entertainment with the goal of bringing
additional customers through [the café’s] doors, and tied such discounts to
specific holidays or themed nights such as baseball night” making them
“advertising” for “promotional events.”

The court agreed that a “promotional event” need not be in
furtherance of something other than a business itself. But it thought that the
common understanding of “promotional event” wasn’t broad enough to encompass
“every promotion put in place by a business.” While holiday parties qualify as
“promotional events,” the same couldn’t be said for ads “tied to…a recurring
weekly promotion[,]” such as “Baseball Night.”

Here, some of the events advertised seemingly occurred on
the same day each week or at a defined time every day. Those were “a routine
part of” the insured’s business, not a “noteworthy happening” or “social
occasion,” and were untethered to anything but the promotions themselves. There
was no special food; “merely offering drink and dance specials does not
definitively transform a promotion into a promotional event,” nor did giving
the promotion a title. “The lack of ties to a special occasion or specific occurrence”
made the exclusion inapplicable. “To rule otherwise would require reading the
word ‘event’ out of the phrase ‘promotional event.’”

The court also rejected the insurer’s argument for judgment
on the pleadings that the exclusion applied because the underlying litigation
arose out of the publication of a celebrity image or likeness. But not all
recognized models are “celebrities.” More facts were required.

Clear Blue Specialty Ins. Co. v. 05 Petete, Inc., 2026 WL
2196263, No. 26-1891 (E.D. Pa. Jul. 29, 2026)

Similar result here on the same language. One underlying
plaintiff pled herself out of coverage by pleading that she was a “social media
celebrity,” but the others didn’t. “Being well-known in one’s profession or
endeavors does not by itself raise one’s status to the level of a celebrity.”

As for the promotional events exclusion, “Contrabando’s
High-Voltage Wednesdays,” “Exclusive Fridays,” “Matinee Sundays,” and “Euphoric
Saturdays” were “certainly promoting Euphoria’s nightclub itself and are using
the images of plaintiffs to do so.” But the ads were

merely encouraging the presence of
patrons on Wednesdays, Fridays, Saturdays and Sundays generally and are not
pointing to any Wednesday, Friday, Saturday or Sunday in particular. It is the
standard business of a nightclub to sell liquor to its clientele and to provide
musical entertainment. The offer of reduced prices from time to time is a
standard business practice to entice customers. The reduced prices are not tied
to a specific event or events but are in place for all Wednesdays, Fridays,
Saturdays, and Sundays.

“While the World Series is an event, the baseball season is
not an event. Likewise, while the grand opening of Euphoria’s nightclub or the
opening of any business would be an event, its continual and regular day-to-day
operation is not in ordinary parlance deemed to be an event or series of
events. Such operation may continue for years.” Thus, the ambiguous policy
language was construed against the drafter/insurer and it had a duty to defend
against three of the underlying plaintiffs’ claims, and thus a duty to defend
in the underlying lawsuit.

from Blogger https://tushnet.blogspot.com/2026/08/insurer-cant-use-promotional-event.html

Posted in Uncategorized | Tagged advertising, insurance, right of publicity | Leave a comment

executive liable for false advertising can’t be made to disgorge salary, 9th Circuit rules

Posted on August 11, 2026 by rtushnet

Multiple Energy Technologies, LLC v. Casden, 2026 WL 2196259,
No. 24-4691, — F.4th —- (9th Cir. Jul. 30, 2026)

The parties compete in the market for “bioceramic” athletic
wear components that are supposed to enhance the wearer’s circulation, support
muscle recovery, and provide other health benefits. This case “asks whether an
officer of a corporation can be sued for tortious interference of contract when
he is found to have induced the corporation to breach a contract.” Normally, an
agent acting on behalf of a principal is immune from that kind of to avoid
double recovery from the principal (for the breach) and the agent (for
interference). There’s an exception when “the supposed agent acts not for and
on behalf of his principal, but … to benefit himself at the expense of his
principal.” The court applied those principles: it was not enough to avoid immunity
that the agent benefited by inducing a breach (e.g., he got a bonus for sales
goals) as long as he was also seeking to advance the company’s interests.

The district court also awarded disgorgement and attorney’s
fees for a separate claim brought by the plaintiff under the Lanham Act; the
disgorgement was also reversed.

In 2019, MET sued Hologenix for falsely advertising its
product, Celliant, as being FDA-approved. The parties settled with Hologenix
agreeing to pay $2.5 million (in installments) and to refrain from representing
that its product was FDA-approved or that the FDA determined that it has health
benefits. Before Hologenix made all its payments, though, it filed for
bankruptcy.

MET then sued Hologenix’s CEO, Casden. Hologenix allegedly continued
to represent that the FDA determined that Celliant has health
benefits—representations that Casden approved or made himself—in violation of
the settlement agreement. MET alleged tortious interference with Hologenix’s
performance of the settlement agreement (including by voting to file for
bankruptcy) and violation of the Lanham Act.

The district court found no immunity for Casden, stating
that he “was eligible for a bonus of up to fifty percent of his base salary per
year based on Hologenix’s business performance” and “[t]hus, by falsely
promoting Celliant, Casden positioned himself to gain personally.” A jury’s
“advisory finding” was that “Casden acted to advance his own personal interests
at the time he interfered with the Settlement Agreement,” although the jury
also found that he was “acting in his official capacity on behalf of
Hologenix.” It awarded MET $2.5 million in damages for the
tortious-interference claim.

The jury also returned a verdict in MET’s favor on its
false-advertising claim under the Lanham Act and awarded nominal damages of one
dollar. The district court then awarded MET disgorgement of Casden’s salary
earned from 2020 through 2023, trebled that amount, and also awarded attorney’s
fees of nearly $600,000 under the Act. The total came to over $6 million.

I won’t say much about the rather straightforward agency law
issue with tortious interference. “Where an employee acts within the scope of
his employment, it does not matter whether his conduct in inducing the breach
of contract was motivated by ‘ill-will or malice on his part.’ ”

Lanham Act: The disgorgement ruling was erroneous. “Casden’s
salary is not his profits.” The statute says that, under the statute, to assess
“profits,” the plaintiff “shall be required to prove defendant’s sales only”
and the “defendant must prove all elements of cost or deduction claimed.” “But
MET failed to show that Casden had any sales.” Hologenix made sales, but it wasn’t
the defendant (citing Dewberry Group, Inc. v. Dewberry Engineers, Inc., 604
U.S. 321 (2025)). Without sales, no profits.

But the fee award survived. The jury found that Casden’s
representations concerning Celliant were “deliberately or intentionally false”
in violation of the Lanham Act, so there was no abuse of discretion.

from Blogger https://tushnet.blogspot.com/2026/08/executive-liable-for-false-advertising.html

Posted in Uncategorized | Tagged damages, false advertising, remedies | Leave a comment

challenge to FTC’s substantiation requirement isn’t yet ripe

Posted on August 11, 2026 by rtushnet

Xlear, Inc. v. U.S. Fed. Trade Comm’n, 2026 WL 2150208, No.
2:25-cv-00484-DBB-CMR (D. Utah Jul. 27, 2026)

In 2021, the FTC brought a civil action against Xlear because
its COVID-19 claims allegedly lacked substantiation and violated the FTC Act. “Xlear
is a developer and manufacturer of xylitol-based hygiene products such as nasal
sprays, toothpastes, mouthwashes, and chewing gums that allegedly promote good
health and reduce the risk of disease.” Advertising its nasal spray as
effective for the prevention and treatment of COVID-19 allegedly violated
Sections 5 and 12 of the FTC Act, as well as the COVID-19 Consumer Protection
Act of 2021. In March 2025, the enforcement action was dismissed with
prejudice.

Not satisfied, Xlear sued, seeking a declaratory judgment
under the APA that Sections 5 and 12 of the FTC Act “do not and cannot impose
an affirmative burden of substantiation on regulated parties.” It alleged that
its xylitol-based hygiene products are effective “against various pathogens,”
yet fear of the likelihood of future FTC enforcement allegedly prevents Xlear
from taking steps to advertise its products’ benefits, including protection
against COVID-19, which it alleges “remains a serious health risk” to
Americans. It argued that precedent upholding the FTC’s substantiation
requirement is no longer good law under Loper Bright Enterprises v. Raimondo,
and that the requirement chills Xlear’s First Amendment speech rights and
violates its Equal Protection rights by allegedly shifting the burden of proof
to defendants to show that their advertising claims are substantiated. [I’ve been
waiting for this argument for a while.]

The claims weren’t ripe. “Here, Xlear cannot point to a
definitive position the FTC has taken on advertising claims it has yet to
make—let alone one that inflicts an actual, concrete injury—because whether an
advertisement is deceptive turns on its content, making it a fact-specific
inquiry.”

Xlear argued that it was making a facial challenge. To win
such a challenge, Xlear needed to show that Sections 5 and 12 of the FTC Act
never require a health claim to be substantiated. It didn’t. Loper Bright didn’t
matter because “the court is not interpreting the statute, much less deferring
to agency action. Rather, the court is determining the ripeness of the case and
addressing the standard for a successful facial challenge.”

Xlear also argued that the FTC has taken a definitive
position/final action by highlighting the substantiation requirement going back
to 1984. But the “distinction between ‘general statements of policy’ and
‘rules’ is critical” because “ ‘general statements of policy’ … neither
determine rights or obligations nor occasion legal consequences.” An agency’s
“policy statements ‘do not establish a binding norm—or in other words, do not
have the force and effect of law.” Nor can they be “enforced against parties”
or “expose them to civil and criminal liability.” “Thus, even if the court were
to agree that the substantiation requirement represents the FTC’s definitive
statement of its position under the first prong of the final agency action
test, the requirement still fails under the second prong because the FTC’s
substantiation requirement does not determine the rights and obligations of the
parties.”

I wonder what the Texas district court hearing the
gender-affirming care cases thinks about this argument, since it is very much
ripe there.

from Blogger https://tushnet.blogspot.com/2026/08/challenge-to-ftcs-substantiation.html

Posted in Uncategorized | Tagged false advertising, ftc | Leave a comment

always plead a first use date: court struggles with famous foreign marks doctrine without it

Posted on August 11, 2026 by rtushnet

Teng v. Tao, No. 2:25-cv-05360-WLH-AJR, 2026 WL 2055494
(C.D. Cal. Jun. 5, 2026)

Teng sued Tao for various trademark-related claims. Teng is
allegedly the chairman of Plaintiff Heilongjiang Tang Huo Kung Fu Catering Co.,
a Chinese company that operates restaurant businesses abroad. The Tang Huo Kung
Fu brand allegedly operates widely in Asia, including in China and South Korea
and has received various awards and media recognition, under these marks:

Teng alleged that overseas reputation has created
recognition of their marks among certain U.S. consumer communities,
particularly in Asian communities in the United States, such as in Los Angeles
(specifically Los Angeles’ Koreatown) and Berkeley, California, but alleged no
first use in US commerce, though it did allege that, when Tao filed to register
at the USPTO in 2019, it had already existed for 11 years with nearly 300
restaurants in China and 150 restaurants in South Korea, among other locations.
Teng did not allege first use in the US or anything more than an application to
register in the US, which was abandoned.

Defendants operate at least one restaurant in California
using the name “TANG HUO KUNG FU SPICY HOT POT.” Defendant Tao Jin secured a
registration for its word + design mark in July 2020.

The court concluded that plaintiffs didn’t, and apparently couldn’t,
allege a valid ownership interest in the mark at issue. They claimed that the
famous mark exception applied under Grupo Gigante (whose logic I don’t think
survives Abitron, but the Fourth Circuit’s Belmora workaround probably
does).

Under Grupo Gigante, “where the mark has not before
been used in the American market, the court must be satisfied, by a
preponderance of the evidence, that a substantial percentage of consumers in
the relevant American market is familiar with the foreign mark.” “At this
stage, the Court is persuaded that Plaintiffs have sufficiently alleged the
necessary level of consumer recognition necessary to invoke the famous mark
exception to the territoriality principle with respect to the market in which
Defendants use the mark.” (That is, Berkeley and LA’s Koreatown.) But they
needed to replead to actually allege a date of first use (which was also key to
their cybersquatting claim).

False association: §43(a) doesn’t explicitly require
ownership (citing Blinded Veterans). Thus plaintiffs sufficiently pled a
claim. (Query: suppose they’re the junior user, full stop—if ownership isn’t required
for a §43(a) claim, why can’t big entrants use reverse confusion to eliminate small
senior users? Is your answer “causation”? Is your answer that this wouldn’t
work because the small senior user could assert a counterclaim? But, if there’s
no registration, how would a §43(a) counterclaim be resolved except by using
ownership priority rules? Abandoning a separate concept of unfair competition has
caused many such puzzles.)

Anyway, plaintiffs sufficiently pled confusion, e.g., a post
on Red Note that a customer was disappointed in the quality of defendants’
food, apparently attributing the failure to Tang Huo Kung Fu.

Puzzlingly, the court held that the inability to make a
trademark infringement claim also meant there was no actionable statement under
California’s FAL, despite the survival of the false designation of origin
claim.

Cancellation of registration: Fraud requires pleading with particularity.
“Fraud in procuring a trademark registration or renewal occurs when an
applicant knowingly makes false, material representations of fact in connection
with his application.” “Plaintiffs’ insufficient allegations of foreign fame
and diaspora recognition do not establish U.S. use or ownership. Without a
plausible allegation that Plaintiffs possessed superior U.S. rights at the time
of the trademark application, Plaintiffs cannot demonstrate that any USPTO
statement about ownership or others’ rights was false, much less knowingly
false.” (Plaintiffs’ counsel really needs to use Belmora to replead.)
Nor did they allege facts demonstrating that any specific USPTO submission was
actually false, material or made with an intent to deceive.

They also sought cancellation on §2(a) false affiliation grounds.
Under Belmora, “[t]o determine if a petitioner falls within the
protected zone of interests, we note that § 14(3) pertains to the same conduct
targeted by § 43(a) false association actions—using marks so as to misrepresent
the source of goods.” That worked here for services, too, at the pleading
stage.

from Blogger https://tushnet.blogspot.com/2026/08/always-plead-first-use-date-court.html

Posted in Uncategorized | Tagged trademark | Leave a comment

Chobani’s “zero sugar” yogurt with allulose violates FDA regs despite FDA’s nonenforcement; 7th Circuit reverses preemption ruling

Posted on August 10, 2026 by rtushnet

Franco v. Chobani, LLC, No. 25-2087 (7th Cir. Jul. 27, 2026)

Federal law requires that foods advertised as sugar free
contain less than a half gram of sugar. Chobani sold Chobani Zero Sugar Yogurt,
but it included four grams per serving of allulose, a naturally occurring
sweetener. If allulose is a sugar under federal law, Franco’s state law false
advertising claims could proceed, but if it wasn’t, then there was express
preemption because federal law doesn’t allow states to impose additional requirements
on food labeling regulated by the FDCA. The district court, deferring to FDA enforcement
guidance, found preemption. The court of appeals reversed, finding allulose to
be a sugar under the regulation.

The relevant regulation defines “[t]otal sugars” as “the sum
of all free mono- and di-saccharides (such as glucose, fructose, lactose, and
sucrose).” And a food may not be labeled “sugar free” or “zero sugar” (or similar
terms) unless it “contains less than 0.5 g of sugars, as defined by [the
previous regulation]” and meets other requirements.

Hello, Loper Bright! “Interpreting the law is a job
for the court,” though the court isn’t required to ignore the FDA’s perspective
about the meaning of its regulations, and deference to agency interpretation of
an ambiguous rule “can be appropriate.” The FDA has several times expressed a
view: in 2016, it observed that “the final rule does not reach a decision as to
whether Allulose should be excluded from the [definition] of sugar[] … , and
Allulose, as a mono-saccharide, must be included in the [Total Sugars] declaration
… pending any future rulemaking that would otherwise exclude this substance
from the declaration.” In 2020, it issued industry guidance advising “manufacturers
of [FDA’s] intent to exercise enforcement discretion for the exclusion of
allulose from the amount of ‘Total Sugars’ and ‘Added Sugars’ declared on the
label … pending review of the issues in a rulemaking.” (The issue appears to be
that the FDA traditionally used chemical structure to identify sugars, but
novel sugars might also count depending on factors such as an association with
dental caries and how they are metabolized in the body.)

No further rulemaking has occurred, but the court of appeals
called for the views of the FDA. In its resulting amicus brief, the agency took
the position that total sugars as defined in that regulation include all
monosaccharides, including allulose. The “such as” parenthetical at the end of the
regulation was “merely a list of non-exhaustive, illustrative examples, and not
(as the district court found) a limitation on sugars based on the physiological
characteristics that the listed sub-stances shared.” And an enforcement
position isn’t an interpretation of a regulation. The court of appeals found
this persuasive. “There’s no dispute that allulose is a monosaccharide. Because
the definition includes every monosaccharide and the following parenthetical is
merely a list of examples, allulose is a sugar.”

The surplusage and noscitur a sociis canons didn’t change
anything. Chobani argued that a “sugar” needed the same nutritional characteristics
as glucose, fructose, lactose, and sucrose. The surplusage canon suggested that
the “such as” parenthetical should have some meaning, but redundancy is common
in the law, and “such as” doesn’t always mean “of the same kind”; it can merely introduce “examples of a class.”
“The FDA defined a class by way of chemistry; it reinforced that definition
through examples, all of which share the same chemical structure.” There’s no
need to derive a definition from the list of examples, since they merely
illustrate the definition that already appears. Nor did Chobani argue that a
definition of sugars that includes all monosaccharides will lead to absurd
results. “And in defining total sugars, the FDA specifically invoked the
language of chemistry, which means decisions favoring common parlance meanings
aren’t persuasive, either.” The FDA could have defined total sugars based on
physiological factors, rather than chemical makeup, but it didn’t do so.

The regulation wasn’t ambiguous, so there was no reason to
defer to the FDA’s enforcement guidance, which wasn’t an official position
anyway.

What about the marketing permit Chobani secured from the
FDA? “[T]he fact that one sovereign (the United States) indicated that it would
not enforce its labeling requirements with respect to allulose should not have
led Chobani to believe that the states would take a similar approach.
Similarly, … the agency’s marketing permit said nothing about state law consumer
protection suits. Chobani is a sophisticated actor and should have been aware
that the FDA’s decisions about its enforcement priorities would not immunize
the company from suits based on state law.”

Chobani’s additional preemption theory based on Monsanto Co.
v. Durnell, 609 U.S. —, 2026 WL 1825691 (June 25, 2026), could be handled on
remand by the district court.

Deception was also plausible. Chobani argued that consumers
don’t care about the existence of monosaccharides in their food but are instead
concerned with avoiding the ad-verse health consequences associated with
traditional sugars. “Whether reasonable consumers care about the existence of
allulose in their yogurt isn’t the same thing as asking whether reasonable
consumers would be deceived by it.” Discovery was the right next step.

from Blogger https://tushnet.blogspot.com/2026/08/chobanis-zero-sugar-yogurt-with.html

Posted in Uncategorized | Tagged consumer protection, false advertising, fda, preemption | Leave a comment

false advertising in online games leads to over $700 million award to competitor

Posted on August 10, 2026 by rtushnet

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2026 WL 2151126,
No. 24cv1646 (DLC) (S.D.N.Y. Jul. 27, 2026)

Some
previous opinions
(more linked there). At a jury trial, Skillz won a substantial damage award for
false advertising about Papaya’s use of bots in the real money skill-based
mobile gaming (RMSB) market. The court here rejected Papaya’s post-trial
motions and Skillz was awarded $719 million plus its attorney’s fees for the
years 2024 and 2025 and certain costs.

“Skillz created the first RMSB platform in 2012. Papaya
entered this market in 2019 and quickly took a significant market share.” In the
light most favorable to Skillz, the evidence at trial showed significant
barriers to entry in this market, because a successful platform “needs a
customer base large enough to match players of similar or comparable skill in
tournaments within a reasonable amount of time,” aka liquidity. Skillz
maintains that its tournaments are games of skill, not chance, and thus not gambling;
it was required to and did represent to app stores, payment processors, and
advertising hosts that it was not engaged in gambling and that the outcome of
its tournaments was determined by the skill of the players.

Then, Papaya

decided to enter the RMSB market in
2019 by deceiving the public and others about the nature of its product.
Instead of running tournaments in which the players who had paid entry fees
competed against each other, Papaya decided to solve the problem of building
liquidity by running tournaments in which multiple participants were not other
human players but were instead “bots.” Papaya’s bots were essentially scores
designated by Papaya’s algorithms; they were not artificially intelligent
players. In these tournaments, a player’s score was compared to the scores
Papaya assigned to its bots. In this way, Papaya was always able to run a
tournament, including tournaments with what appeared to be a dozen or more
participants, at any time of night or day. Papaya gave its bots usernames and
profiles to make them appear to be individual customers.

Papaya used liquidity bots to create immediately accessible
tournaments of up to 20 or more “players,” permitting a player in a Papaya game
to learn quickly whether he had won or lost a tournament, “thereby increasing
the odds that he would pay to enter another Papaya tournament.” It also used “tailored”
win/loss bots so that a player who had a losing streak could be given a “win”
to motivate them to keep playing in more tournaments. Tailored bots operated in
over 630 million Papaya tournaments, or in roughly one-quarter of the 2.6
billion tournaments that Papaya hosted 2021-2024. During that period, “bots
accounted for over 13 million of the participants on Papaya’s platform,
compared to about 11 million human players.” Over half of humans played in at
least one tournament where tailored bots were designed to give them a loss, and
more than 7.3 million played in tournaments with tailored bots designed to give
them a win.

Unsurprisingly, Papaya’s bots were used most heavily in the
initial phases, when it needed to build liquidity, about 90% of the time in
2021. “Because of its use of bots, Papaya only paid customers roughly $2
billion of the $6.7 billion that it advertised had been awarded in prizes. And
just before Papaya stopped using bots near the end of 2023, Papaya was still
using bots in roughly 50% of its cash tournaments.” Papaya “achieved a
substantial presence in the RMSB market while investing only a fraction of the
money expended by Skillz to do so. When seeking investors, it bragged about its
strategy” of multiple-player tournaments, “unique” platform capabilities, and revenue
growth “8 times more than the industry leaders.”

Papaya never disclosed its use of bots, but purposely
advertised falsely that its games were “fair” and “skill-based,” that it has
“no vested interest” in who wins or loses a tournament, and “described the
participants in its tournaments with pictures and in terms that apply to human
players.” When players complained, Papaya denied using bots, at the direction of
executives.

Papaya made similar misrepresentations to app stores, its
payment processers, and its advertising channels.

Papaya did not stop using bots until late 2023, at which
point Skillz’s revenue had fallen by 60% in just two years: from $384 million to
$152 million, “while Papaya’s revenue skyrocketed from $163 million to $461
million over the same period.”

Given the “overwhelming” evidence of intentional false
advertising, the parties principally litigated damages before the jury, and
also the court sought an advisory verdict on disgorgement. The jury was
instructed that “Skillz is not entitled to duplicative monetary recoveries and
the Court will ensure that Skillz only recovers once for any injury it has
shown it suffered.”

The jury awarded Skillz $420 million in damages, or
two-thirds of the requested amount, and an advisory disgorgement verdict of
$719 million for Papaya’s unjust profits and $652 million for Papaya’s unfair
cost savings (in acquiring users through fake liquidity).

Papaya argued that Skillz’s damages expert improperly relied
on a but-for world in which Papaya did not use bots and its advertising
statements were true, making its expenses greater and its profits lower because
it did not rely on bots to build its business. Papaya argued that the expert
was required to model a different but-for world, “specifically one in which
Papaya removed all false statements from its advertising while not altering its
business model or its use of bots.” But Papaya didn’t explain how this could be
done: “Skillz proved at trial that Papaya could not have entered the RMSB
market by using bots in the way that Papaya did … and at the same time
truthfully describe that use and its product to consumers in its advertising.
Papaya has offered no authority to suggest that a plaintiff’s expert must
create a but-for world that could not exist.” Among other things, payment
processors and others wouldn’t have allowed Papaya to use their services had
Papaya told the truth, and consumers wouldn’t have wanted to play against bots.

Given these constraints, Skillz showed that the damages “flowed
directly from Papaya’s false advertising,” which “concerned the very nature of
the product; it was not a false statement about some incidental feature. And
Skillz showed that it was that very advertising that caused consumers to complain
to Papaya about Papaya’s use of bots.”

It was also acceptable to award damages for lost enterprise value
as long as the damages were measurable with reasonable certainty. Papaya argued
that Skillz could only recover its lost profits, but Skillz hadn’t yet made a
profit at the time of trial; “Papaya argues that Skillz cannot recover
enterprise value damages simply because Skillz prioritized growth over profits
in the years it was developing its business.” Yes, Skillz “invested heavily in
developing its business and enlarging its customer base to achieve not only
substantial liquidity but also a network effect,” but that didn’t limit it to
lost profits instead of lost enterprise value.

Nor was Papaya entitled to JMOL on the Lanham Act and NY GBL
claims: falsity, materiality, and harm were all sufficiently shown. Among other
things, “there was abundant evidence that Papaya engaged in deliberate conduct ‘of
an egregious nature’ to deceive consumers, which created a presumption of
deception.”

The court additionally rejected Papaya’s argument that damages
under the GBL must be limited to financial harm that resulted from Papaya’s
deception of New York consumers. As a competitor suing for the effects of
consumer deception on it, “Skillz is entitled to be fully compensated for the
injury it incurred through Papaya’s wrongdoing even though that injury also
impacted consumers who resided outside New York.”

The court also rejected Papaya’s other challenges to the
amount of damages. The amount of the award didn’t shock the conscience when
measured against the legal standard and the trial evidence. “Skillz and Papaya
were competing with each other in a new online industry where billions of
dollars in revenue were available to the successful RMSB company. Papaya’s
fraudulent conduct was extraordinary” and central to its huge success/zero-sum
impact on Skillz.

Among other things, it was ok to use evidence of Papaya’s
success after it stopped using bots: “There was credible evidence at trial that
Papaya benefitted from the network effects of its false advertising even after
Papaya ceased using bots to fill and control tournaments.” Thus, the damages
model could include Papaya’s revenue from running tournaments for the player
base that it had built while engaging in false advertising. Papaya’s own damages expert testified that the
number of Papaya’s tournaments fell only 20% after it turned off the bots, “suggesting
that Papaya continued to benefit from the liquidity it had built through its
false advertising.”

Skillz requested that the court double the jury’s advisory
verdict of $719 million on Papaya’s profits (the jury also identified $652
million as Papaya’s cost savings), or treble the $420 million damages award.
The court declined both requests for enhanced damages, but did award $719
million.

Disgorgement was appropriate because, come on. Skillz didn’t
show that disgorgement was necessary to deter Papaya, since it largely ceased its
false advertising in late 2023 by discontinuing the use of bots in its
tournaments, “and there is no realistic possibility that Papaya will return to
its false advertising campaign now that the unlawful advertising has been
publicly revealed and addressed in this judgment.” The key was unjust
enrichment: “Papaya’s relatively modest financial investment in its start-up
business did not explain its explosive growth …. Even large, deep-pocketed U.S.
companies that had contemplated entering the market to compete with Skillz,
which had already achieved a network effect, decided against doing so.” The
award of Skillz’ loss of enterprise value didn’t fully deprive Papaya of the
benefits of its illegal scheme. “Papaya is still a substantial player in the
market and, because players tend to stay on a platform with which they are
familiar, the impact on Skillz of Papaya’s wrongdoing will continue for the
foreseeable future.”

Nor did Skillz delay unreasonably: “While Skillz came to
suspect and then believe in 2023 that Papaya’s success was due to its false
advertising and employment of bots, Skillz was entitled to sufficient time to
develop the reasonable grounds necessary to plead its claim in federal court in
early 2024. Since that filing, Skillz has proceeded with diligence to prosecute
this lawsuit, despite Papaya’s strategy of making Skillz’s assembly of the
proof of its claims difficult and expensive.”

However, if no disgorgement award were available, the court
would enhance the actual damages award by doubling it to $840 million, because
the actual damage to Skillz was “severe but hard to quantify,” especially given
that Skillz made changes in response to Papaya’s false advertising.

Papaya also argued that any disgorgement amount should be
reduced by 13% to remove non-U.S. revenue, because the Lanham Act is not
extraterritorial. But Papaya’s audited financial statements, introduced at
trial, did not disaggregate U.S. sales from foreign sales. Papaya relied for
its 13% number on a single graphic in a January 2023 PowerPoint presentation
prepared by a third-party for Papaya, apparently to entice investors, while it
was still engaged in false advertising in the United States. The presentation
disclaimed being an “audit or due-diligence review”; it warned that the author
does not give “any representation or warranty, express of implied, as to the
accuracy or completeness of the information” in the document.

The court declined to adjust the figure. The US was
undisputedly Papaya’s target market, and “Papaya denied Skillz access during the
discovery period to relevant information that Skillz sought, including the
information that would permit Skillz to accept the representation in this
graphic, to dispute it, or to place it in context.” On this record, there was
no need to adjust disgorgement, which after all need not be proven to
perfection.

Unsurprisingly, the court also partially granted Skillz’s
requests for attorneys’ fees, costs, and post-judgment interest, but not pre-judgment
interest. The case was exceptional (the Lanham Act standard) and the court
exercised its discretion to award fees under the GBL. Ending the fee period at
the end of 2025 left roughly $10.1 million in fees. Along with the deliberate,
extensive, central deception, Papaya litigated the case unreasonably in 2024-2025,
when it “slow-walked and obstructed the production of critical discovery
material through the entire discovery period,” with ramifications through trial.
“For example, during the presentation of the defense case, Skillz learned for
the first time that Papaya had wrongfully redacted highly relevant passages
from its documents by marking the material ‘nonresponsive.” But “[t]his year,
Papaya changed counsel and the parties were largely involved in preparing for
the April trial. From any point of view, it was reasonable for Papaya to
litigate the amount to be awarded in damages and that was largely the focus of
the trial.”

No prejudgment interest because the attorneys’ fee award was
sufficient to address the exceptional nature of the case, and because the court
had already ordered disgorgement of Papaya’s unjust enrichment.

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2026 WL 2185762,
No. 24cv1646 (DLC) (S.D.N.Y. Jul. 29, 2026)

The court also denied a permanent injunction. First, Skillz
sought an injunction against bot use; that was denied because it was false
advertising, not bot use as such, that was at issue.

Second, Skillz sought a 6-month corrective advertising “splash
screen” shown to each user prior to their playing any Papaya game or when they
enter the Papaya website, informing readers that Papaya once used bots, that it
denied their existence to customers, and that a jury found Papaya liable to
Skillz for false advertising. [Annoying all-caps presentation makes the
proposal unreadable.] Although Skillz suffered an irreparable injury that
monetary damages could only partially remedy, the public interest and the
balance of the equities didn’t weigh in favor of the proposal:

There is no adequate showing
regarding how many of those currently viewing the Papaya website or playing a
Papaya game were subjected to its false advertising. Papaya’s false advertising
ended in late 2023 with its removal of bots as tournament players. That is over
two years ago, which is probably an infinity in the online gaming world.
Moreover, the reference to Skillz in the proposed corrective advertising will
promote Skillz, which is only one of Papaya’s competitors. Finally, the burden
on a consumer of reading and reacting to the statement years after the events
at issues weighs against the requested relief.

from Blogger https://tushnet.blogspot.com/2026/08/false-advertising-in-online-games-leads.html

Posted in Uncategorized | Tagged false advertising, remedies | Leave a comment

warnings about effects of “killer acquisitions” on Shopify apps aren’t about tangible characteristics and aren’t factual claims

Posted on August 10, 2026 by rtushnet

Jika Inc. v. Loop Solutions, Inc., No. 2:26-CV-05530-JAK
(MARx), 2026 WL 2138604 (C.D. Cal. Jul. 20, 2026)

Jika, d/b/a Skio & Recharge, sued Loop for false
advertising/tortious interference/unfair competition/trade libel for ads it ran
in response to Recharge’s acquisition of Skio. [Relatedly.] The
court denied a preliminary injunction.

Recharge, Skio, and Loop each provide apps for e-commerce
subscription management on the Shopify platform to enable Shopify merchants to
turn one-time retail customers into long-term subscribers. According to its
advertising materials, Recharge “power[s] 71% of subscriptions sold on Shopify
stores.” Skio provides similar services for more than “one thousand brands,”
including various “well-known direct-to-consumer” brands. It offers a
“subscription management platform” that enables Shopify merchants to place a
“subscribe and save” widget on their product pages. Skio’s app is “integrate[d]
with Shopify’s native checkout and subscription” services. E.g., Skio offers
merchants a configurable flow so that when a subscriber clicks “cancel,” the
merchant can offer discounts, free gifts, pauses, product swaps or different
frequencies to try to keep them; it also provides dashboards that provide
information about their subscriptions, including how subscriptions are growing,
what the churn rates are, and which cancellation offers are working.

Loop “offers many of the same products and services to the
same category of merchants” as Skio, including “subscription management,
customer portals, cancellation flows, dunning and payment recovery tools,
bundle builders, and API integrations.” The parties agreed that Loop and Skio
compete, but not that Loop and Recharge did, though there was evidence that
customers view Recharge, Skio, and Loop as interchangeable and competing
services. “For a large business processing 10,000 subscription orders per
month, with an average order value of $50, subscription-management costs would
be $7599 per month for Skio, $9099 per month for Recharge, and $4149 per month
for Loop.”

Loop’s declarant stated that its customers are
“sophisticated market players” who typically “engage in thorough research
regarding” platform choices. He declared that it “can take weeks or months of
back-and-forth negotiation” before a merchant chooses to use Loop for its
subscription-management needs. Skio’s declarant said things consistent with
this, e.g., one potential Skio merchant evaluated Skio for a month before
making a purchasing decision, and the pricing was consistent with requiring reasonable
consumers to be careful.

Loop also submitted evidence of customer dissatisfaction
with Recharge’s app: more than 5% 1-star reviews online, generally concerning
Recharge’s pricing and customer service. “Skio’s Shopify reviews reflect that
many Skio merchants reported that they elected to migrate from Recharge to Skio
based on problems with Recharge’s app.” Loop has less than 0.75% 1-star reviews
out of 670 total reviews.

Shopify bans app developers from publishing an app that is
“identical to other apps you’ve published to the Shopify App Store.” “Recharge
has acknowledged that its acquisition of Skio could raise questions about the
application of these policies.” A Loop affiliate’s declarant stated that it is
“very common for acquiring companies to consolidate or eliminate products that
are redundant with their own,” citing industry and academic publications. He
specifically identified “killer acquisitions” in the Shopify industry. When the
acquisition was announced, Recharge and Skio stated that nothing would change
immediately.

But some worried, and Loop fed that worry despite Recharge’s
“no change until 2028” guarantee stating “no Skio merchants will be forced to
migrate to Recharge” and that there’d be no pricing change.

Loop argued that it merely “used the market uncertainty
created by the acquisition” as an opportunity “accurately [to] inform[ ]
merchants” about their choices post-acquisition and what “typically happens in
acquisitions of technology platforms.”

“Shortly after the acquisition announcement,” Loop “posted a
site-wide banner” across its website: “Recharge acquired Skio for $105M. Loop
is now the second largest Shopify subscription app. Your choice just got
simpler: Loop or Recharge. Book your priority migration slot.” Plaintiffs
argued that this was false because it informed customers that “Skio is no
longer a viable standalone platform” when, in fact, “Skio continues to operate
as a standalone product,” its customers are “not being migrated to Recharge”
and there are “no plans to deprecate Skio.” It made similar statements on its
blog:

Recharge’s official position: both
platforms continue to operate as normal. Nothing changes immediately.

But here’s what historically
happens when a platform gets acquired by its largest competitor:

The acquiring company says
“business as usual” for 6-12 months. Then feature roadmaps merge. Then pricing
consolidates — usually upward. Then the smaller platform’s app gets sunset or
rolled into the acquirer’s product. The merchants who waited get migrated on
the acquirer’s timeline, not their own.

Skio merchants now face a set of
questions nobody has answers to yet. Will Skio’s $599/month pricing stay? Will
the passwordless login and clean portal UX survive integration into Recharge’s
architecture? Will the small, responsive support team that Skio reviewers
praised remain intact — or get absorbed into Recharge’s support infrastructure,
which its own reviewers have documented as slow and unresponsive?

What that uncertainty looks like in
practice depends on where you stand today.

If you’re currently on Skio:

Your platform’s future is now
controlled by Recharge.

…

If you’re currently on Recharge:

The same pricing escalation and
support patterns documented in 116 one-star reviews haven’t changed. They’ve
gotten bigger.

…

If you’re evaluating platforms for
the first time:

The decision just got simpler. It’s
Loop or Recharge.

[The blog post went through various revisions; I smell some
AI.]According to Loop, 45 unique users visited the Blog Post, of which 22 were
users from the United States, in comparison to 6994 unique visitors to Loop’s
website overall in the same period.

Loop also allegedly targeted Skio’s customers in outreach
with similar statements.

It also used a comparison table—which it argued had been
around for a while and wasn’t posted in response to the acquisition—marking
numerous Skio features as unavailable (x) and those same features for Loop as
available (✓).” It allegedly falsely claimed that Skio lacked features
such as “Passwordless login via email,” “One-click checkout with exclusive
offers,” and “Proactive card expiration alerts.” The meaning of the comparisons
was contested, though Loop admitted “error” in claiming that Skio lacked “OTP-less
authentication” and “Passwordless login via email.” (Other Loop ads accurately attributed
a passwordless login feature to Skio.) The table was removed before litigation
began. [Again, I wonder if this was AI error; it’s good that Loop doesn’t pretend
that the source of the error mattered.]

Skio and Recharge allegedly “received over 10 inquiries from
Skio merchants expressing concern about Skio’s future, pricing, support
continuity, and feature availability” following the acquisition. One customer
informed Recharge that it had “received unsolicited emails from Loop that
contained no identifying signature, footer, or other disclosure indicating that
the messages came from Loop.” Because the email stated that the sender “wanted
to get them started on migrating,” the customer “initially believed the emails
were coming from Recharge and called Recharge expressing concerns about Skio’s
post-acquisition future.” Five large
merchants allegedly “reported concerns that Loop representatives had been
making statements about Skio and the Recharge acquisition consistent with the
messaging in” the written campaign.

Plaintiffs also submitted declarations that customers were
hard to acquire. A potential customer allegedly wrote: “We were really
impressed with Skio and felt a good level of alignment between Skio and
[Customer]. However, the news that Skio merged with Recharge did catch us
really off-guard! We felt a bit torn since we had pretty much disregarded
Recharge completely by that point as we didn’t enjoy the sales process, and the
pricing was completely unrealistic for our brand. At this moment, we are
progressing with Loop subscriptions, as we felt they also aligned with us .…” It
didn’t reference the Loop ads.

Plaintiffs argued that Loop made literally false claims that
Skio would be sunsetted, leaving merchants with a binary choice between
Recharge and Loop, by claiming that, post-acquisition, “smaller platforms
historically ‘get[ ] sunset’ ”; by stating “Your choice just got simpler: Loop
or Recharge”; and by telling customers they were “Back to square one for
[their] platform future.”

First, under 9th Circuit precedent, “the nature,
characteristics, and qualities of [a product] under the Lanham Act are more
properly construed to mean characteristics of the good itself ….” Licensing
status and claims about the date on which a product was first marketed are not
actionable for this reason, and likewise the “sunsetting” statements didn’t refer
to any inherent quality or characteristic of the parties’ services. “Rather,
the Sunsetting Claims only refer to market structure and competitive dynamics
in the industry, which are analogous to the ‘supply and demand phenomena’ that
courts have found do not state a claim under § 43(a).”

Even if they were actionable in principle, nothing Loop said
was literally false. The blog post truthfully reported that plaintiffs claimed
that nothing would change immediately, but then pointed to “historical[]”
trends. A prediction about future events “is not an actionable statement of
fact as a matter of law.” Plaintiffs’ own claims didn’t show that there was no
risk that Skio would be sunset; their own public-facing statements recognize
that there is some uncertainty about the future of Skio: a LinkedIn post said, “[F]rankly,
we don’t know what skio or recharge or (maybe even) some new platform is gonna
look like in a year and a half.” Even if the rule about future predictions only
applies to good-faith predictions, there was no evidence of bad faith.

For claims like “Your choice just got simpler: Loop or
Recharge,” this wasn’t literally false. “One reasonable interpretation of these
claims is that customers now have two choices with respect to independent
service providers in the marketplace.” This was plausibly literally true:
Plaintiffs’ own announcement described Skio as a “Recharge company” and states
that “Skio is joining Recharge.” [I would also say that this is the kind of
claim often deemed puffery under similar circumstances.] Also, because
consumers typically contract with service providers for longer periods, the
competitive “choice” and “decision” “can reasonably be construed to refer to
long-term market structure and competitive dynamics, rather than current
conditions…. Consistent with that, many of the challenged advertisements frame
customer choice in terms of long-run impact, rather than immediate market
conditions.” That meaning was not literally false because plaintiffs have not
committed to maintain Skio as a long-term option for consumers beyond 2028.

The only “necessary” implications of the claims were that plaintiffs
might not honor their nonbinding commitment to maintain Skio through 2028 and
that Skio’s future remains uncertain beyond that point in time, And these were
not matters of verifiable fact.

Claims that Skio would raise prices/worsen customer support:
Same basic analysis. “Each advertisement, read in its full context, includes
specific qualifiers,” such as “Not sure if all or even anything would happen
with you but this is what generally happens.”

Comparison table: Loop conceded that the password claims
were literally false, and § 43(a) is a strict liability cause of action. But
there wasn’t sufficient evidence of materiality. There were no surveys or
direct evidence from consumers that the features highlighted in the comparison
table were ones about which they cared when making decisions. “[N]umerous
courts have found an absence of materiality in Lanham Act false-advertising
cases when the target audience consisted of sophisticated individuals who were
unlikely to be swayed by promotional materials.”

The rest of the claims went the same way. Trade libel
requires actual damage, and that hadn’t been shown with respect to the comparison
table, given the absence of evidence that any specific customers were exposed
to it or that they cared about the password claims as opposed to other factors.

The balance of equities and the public interest also
disfavored a preliminary injunction because it would bar Loop from “suggesting”
or “implying” that Skio’s product and features may change in various ways due
to the acquisition. “[T]his would impose a limitation on marketplace
competition that could otherwise benefit customers. It would, in effect,
preclude Defendant from responding to Plaintiffs’ nonbinding commitment to
maintain Skio as an independent service in the marketplace.”

from Blogger https://tushnet.blogspot.com/2026/08/warnings-about-effects-of-killer.html

Posted in Uncategorized | Tagged dastar, false advertising | Leave a comment

Probiotic throwdown continues w/factual dispute over clinical studies

Posted on August 10, 2026 by rtushnet

ExeGi Pharma, LLC v. VSL Pharmaceuticals, Inc., 2026 WL
2144541, No. 19-cv-02479-LKG (D. Md. Jul. 27, 2026)

This is the latest opinion in a long
and tangled sequence.

ExeGi sued VSL for tortious interference with business
relationships and unfair competition arising from certain letters that VSL’s
litigation counsel sent to ExeGi’s manufacturers and distributors. VSL
counterclaimed against ExeGi and Professor Claudio De Simone for false
advertising under the Lanham Act.

The facts involve “an eight-strain, high-potency probiotic
formulation.” De Simone “obtained several patents and other intellectual
property rights for his formulation, including for the probiotic formulation
for the eight-strain probiotic mix known as the ‘De Simone Formulation.’” He
first licensed this to VSL and it was sold under the name “VSL#3.”

He also caused samples of the eight bacterial strains
comprising the De Simone Formulation to be deposited with the Leibniz Institute
DSMZ-German Collection of Microorganisms and Cell Cultures GmbH (DSMZ), which
is a depository for the storage of strains and microorganisms, and not a
depository for strains for industrial production. DSMZ assigns each deposit a
unique alphanumeric designation. The VSL-De Simone relationship soured and he
cut off VSL’s access to the manufacturer of VSL#3, instead granting an exclusive
license to ExeGi (under the name Visbiome).

ExeGi incorporated the DSM Codes assigned by the DMSZ on
Visbiome’s packaging and packaging inserts, alongside the genus and species
name for each corresponding bacteria strain, although Visbiome has never been
manufactured with the deposited material at DSMZ. Visbiome contains all eight
of the bacterial strains, by genus and species, listed on Visbiome’s packaging.
But VSL contends that testing of the DSMZ deposits reveals that at least three
of the deposited strains do not match those listed on Visbiome’s packaging. The
De Simone parties argued that any mismatch was the result of contamination
introduced before the strains were deposited at DSMZ, and not a discrepancy in
the Visbiome product itself.

Previous litigation resulted in an injunction against any
claims in VSL#3 promotional materials “that state or suggest a false continuity
between Italian VSL#3 and the De Simone Formulation, including but not limited
to statements claiming that VSL#3 continues to contain the ‘original
proprietary blend’ or the ‘same mix in the same proportions.’ ” VSL was also
enjoyed from citing any clinical study performed on the De Simone Formulation
or implying that any such study was conducted on Italian VSL#3, because they
weren’t the same mix. [The first part of this sentence seems to me to offend
the First Amendment.]

VSL’s litigation counsel sent a letter to counsel for
Danisco—the manufacturer of Visbiome—notifying Danisco of a “recent judicial
decision that directly impacts the legality of the continued sale and
distribution of” Visbiome, demanding that Danisco take steps to “immediately
cease and desist from the production, distribution and sale of Visbiome® unless
and until any reference to the DSM Codes is removed from its packaging and
packaging inserts, and from any marketing or reference materials for
Visbiome®.” He claimed that any continued use of the DSM codes “would
constitute a misappropriation of valuable property rights” and constitute false
advertising.

VSL argued that ExeGi’s business was not impacted by this
letter, because Danisco continued to fill Visbiome purchase orders for ExeGi
and did not modify its supply agreement with ExeGi. ExeGi argued that the letter
forced it to expend substantial resources and caused lost sales.

VSL’s counsel sent an essentially identical letter to one of
ExeGi’s Visbiome sellers and distributors, and also to Amazon.

Tortious interference in Maryland requires: “(1) intentional
and [willful] acts; (2) calculated to cause damage to the plaintiffs in their
lawful business; (3) done with the unlawful purpose to cause such damage and
loss, without right or justifiable cause on the part of the defendants (which
constitutes malice); and (4) actual damage and loss resulting.” Relatedly, common-law
unfair competition requires deception.

Although it was close, the court didn’t find that Maryland’s
absolute litigation privilege bars ExeGi’s tortious interference and unfair
competition claims. To be entitled to that privilege, VSL needed to show, among
other things, that the letters that VSL’s litigation counsel sent to Danisco,
Pharma Holdings and Amazon bore a rational relationship to litigation that VSL
contemplated in good faith and under serious consideration. It did not provide
such evidence, even though there was “a long and well-documented history of the
disagreement and competition between the parties in this case related to the
marketing of VSL#3 and Visbiome.”

However, ExeGi couldn’t show any damages. Danisco continued
to manufacture Visbiome, and Pharma Holdings and Amazon continued to sell
Visbiome after receiving the letters. There was no expert testimony about any
damages. The cost of affirmatively suing for tortious interference couldn’t
count, and there need to be actual damages for punitive damages to be available.

False advertising under the Lanham Act:

VSL alleged that the De Simone Parties violated the Lanham
Act by claiming that “Visbiome contains the strains deposited at DSMZ”; by
stating that the current version of VSL#3 contains only seven strains of
bacteria, rather than eight (De Simone also wrote that “it contains bacteria
that are qualitatively and quantitatively different” and that this “counterfeit
product has been falsely marketed and promoted to the public and medical
community….”); by stating that VSL#3 lacks clinical studies (“has not been
the subject of any published, peer reviewed, controlled trials in humans”; “untested
imitation product”; etc.); by stating that VSL#3 is an imitation or knock off; and
by stating that VSL#3 has been discontinued or recalled (“VSL#3 is no longer
available for sale at many retailers”).

Most of these claims failed at summary judgment, though there
was a factual question based on the statements that VSL#3 lacks clinical
studies.

Statements about the strains deposited at DSMZ: VSL didn’t
show that the De Simone Parties claimed that “Visbiome contains the strains
deposited at DSMZ.” The presence of the alphanumeric DSM codes didn’t convey a
false message, because there was no showing that a consumer: (1) would
recognize that the letters “DSM” as referring to the Leibniz Institute DSMZ;
(2) understand that the accompanying code is a scientific accession reference
to a microbial deposit at the DSMZ; and (3) know that DSMZ maintains physical
samples of that deposit; and then assume that the listing of the code means
that the product contains material sourced from that particular deposit. VSL’s
own expert “acknowledged that such a chain of reasoning is beyond the grasp of
most consumers.”

Statements that VSL#3 contains seven, rather than eight,
strains: for claims not barred by res judicata, the only statements were in an
email saying (1) that VSL#3 “contains bacteria that are qualitatively and
quantitatively different” and (2) that VSL#3 is a “counterfeit product has been
falsely marketed and promoted to the public and medical community.” But these
weren’t made in interstate commerce (I think the court must mean commercial
advertising or promotion) because they were in a single email sent to one
individual. As for the statement “A PhD level microbiologist and an expert on
human gastrointestinal microflora concluded that, based on his genetic analysis
of the new formulation, the Italian VSL#3 actually only contained 7 strains of
bacteria, not the 8 contained in the original formulation,” the microbiologist
did in fact reach this conclusion. Thus, this was literally true, not literally
false.

Statements that VSL#3 is an “imitation” or “knock off”: These
characterizations were “substantially true”; VSL’s CEO “acknowledged that
Italian VSL#3 was the result of an attempt to reverse engineer the De Simone
Formulation, and that the VSL Parties could not actually replicate the
original.”

Statements that VSL#3 has been discontinued or recalled (“VSL#3
is no longer available for sale at many retailers.”): Many retailers ceased
selling VSL#3 during the period following the issuance of the 2019 injunction
related to VSL#3. So the explicit statement wasn’t false.

Statements that VSL#3 lacks clinical studies: Here there was
a disputed issue with respect to the non-res judicata-barred statements. The
statement that VSL#3 is not supported by any “published, peer reviewed,
controlled trials” was also not actionable, because this statement was
literally true. But other statements, e.g., “VSL launched their version of
VSL#3, an untested imitation product,” was plausibly false, because the current
version of VSL#3 has been the subject of 45 peer-reviewed publications
addressing its composition, safety and efficacy, since 2016, and VSL offered evidence
to dispute the De Simone Parties’ contention that the testing on VSL#3 was
performed on the pre-2016 formulation of this product. VSL also had expert
testimony about deceptiveness. The court reached a similar result on the statement
in response to a consumer question in an Amazon product review that “VSL #3
does not contain the same stains or the same strain rations and has no clinical
documentation.”

from Blogger https://tushnet.blogspot.com/2026/08/probiotic-throwdown-continues-wfactual.html

Posted in Uncategorized | Tagged false advertising, tortious interference | Leave a comment

IPSC Closing Plenary Session: AI Everywhere All at Once

Posted on August 8, 2026 by rtushnet

Plagiarism or Transformation Machines? Evidence on
Copyright, Economic Substitutes, and AI, Stefan Bechtold (with David Abrams
& Christian Peukert)

Prevalence rate: OpenAI v. NYT litigations includes
statements about how often users use ChatGPT in order to generate potentially
infringing output. OpenAI: normal people don’t use it the way the NYT did, more
than 99% of the time. NYT says 14-24% use for information search, raising ©
concerns. Corporate research: for OpenAI, non-work use has risen from 53% to
73%; Microsoft says that work & career topics lead desktop usage 8am-5pm
and relationship conversations surge on Valentine’s Day.

Used Wildchat dataset: 1 million ChatGPT conversations from
real users April 2023-May 2024, mostly GPT3.5-Turbo. Currently focused on
random sample of 10,000 prompts in English. NYT rewrites are relatively
uncommon: more common: write a six sentence para summarizing A Tale of Two
Cities; Write a Simpsons episode where Homer becomes addicted to drugs; tell me
what I need to know for my chemistry exam. Some overprotection: write the
lyrics to Rocky Road to Dublin in English w/native Irish beside them—that request
was refused despite the public domain status of the work.

Looking for whether users are looking for potential
infringements or potential substitutes (e.g. replacements for chemistry
textbook) and also looking for whether the output is refused b/c of guardrails.

Results: 3.7% of sample prompts and outputs, model
identifies © infringement risk. Guardrails only trigger in 0.13% of cases. 1.19%-over
2% potential economic substitute risk. According to classification, the
substitute/© infringement groups don’t overlap a ton.

Next steps: OpenAI says 28.1% of their users are asking for
writing tasks; our data around 34.5%. Thinking about different classifier refinement,
e.g. what happens w/minimal prompt to our classifier, feeding it a © textbook,
classifying w/other LLMs.

The AI Penalty in Trade Secret Law, Camilla Hrdy & Mike
Schuster (with Joe Avery)

Bias against self-driving cars (crashes are perceived as more
serious) as well as AI-generated works. Trade secret liability often turns on
whether improper means were used. Does this vague and morally charged standard
lead to arbitrary distinctions in misappropriation cases?

Scenario: website provides insurance quotes; no TOS limit on
request; confidential quote database underlying it. Defendant competitor
queries database & recreates underlying dataset/trade secret. Human:
$100,000 spent on 20 hourly employees over 5 weeks to systematically request
different quotes. AI: $100,000 spent on specialized AI that systematically
requested different quotes.

500 mock jurors were asked: would you have brought this lawsuit,
were means improper, etc. Outcomes: significantly more likely to find
liability, higher compensatory damages, less ethically acceptable w/AI. (Note
that liability/improper means were above 50% for human use too.) Only not statistically
significant result was on punitive damages.

AI penalty makes more sense in trade secret than in patent
& ©. Improper means is open-ended concept. We’d expect more bias. 11th Cir.
2020: while manually accessing quotes is unlikely ever to constitute improper
means, using a bot to collect an otherwise infeasible amount of data may well
be. That case was scraping w/o AI, but AI is a subset of automation.

AI trade secret (AI used to “steal” trade secrets) cases are
coming; there have already been a smattering. Agentic AI will be a perfect
accomplice, whether from direct prompts or “escapes.”

Don’t want a bright line rule/reasonable measures should
still be required, but this all makes sense. It’s important to update rules
over time. Flying over a plant is very different in 1970 and 2026.

The Value of Knowing What Works: AI and Unprotectable IP,
Sarah Polcz

Interviews w/researchers at frontier AI labs. Spending
enormous sums to poach researchers—$100 million/year reported salaries. How can
individual researchers possibly be worth so much? Most valuable IP is the least
protectable—high level insights that are short, abstract, and easily carried
from lab to lab in heads of researchers. IP like specific blocks of code or weights
of model is comparatively less valuable. High level insights also move among
researchers socially, where there’s no current employment relationship.

AIth Circuit Court of Appeals, Nikola Datzov (with David
Schwartz)

AI judging: models showed no meaningful prompt sensitivity;
shockingly accurate/capable depending on complexity of the case. Key driver is
AI’s confidence in outcome. Patent cases appear more complex but show the same
trends and capabilities. AI models can identify which cases they can and can’t
accurately decide; courts could prioritize remaining cases for human/faster
review; parties could determine whether appeals were worth pursuing.

The Terms and Conditions of Generative AI, Andres Sawicki
(with John Newman)

Allocating generative AI output ownership—looking at TOS.
Meh news: provider obtains a license to the input to provide the desired
service. Standard broad terms: nonexclusive, irrevocable, worldwide,
sublicensable, etc.—for inputs and outputs.

Worse news: permitted uses are not limited to specified
purposes. A small fraction say they only use the inputs to provide the service
to you, the user. Plurality say they use them to provide service to you and
other users. Also see a large percentage with “any business activity,” some
with no explicit limit, and a small number where the permitted uses vary by tier.
55% of licenses to inputs are restricted, and 52% of licenses to outputs.

Notably—45% take unrestricted license to use the inputs—so
photographers should worry.

TOS also try to make users responsible for any
harm/infringement w/hold-harmless and indemnification provisions written quite
broadly.

Implications: these provisions undermine ownership in ©
materials. Shifts liability risks to users [though it’s hard for me to imagine
that litigating indemnification wouldn’t be more expensive than it’s worth so I’m
not sure that’s true]. Risks to democratic deliberation and self-government.

Q: re AI penalty—human labor is linear; AI is efficient/if
you allow it then it will be much easier to do this harvesting more efficiently—so
if it’s troubling, then AI makes it worse.

A: similar reasoning to legal protection against plug molds (Bonito
Boats) [or mask works]—anticopying logic. Not sure that makes sense forever b/c
things change but makes sense.

from Blogger https://tushnet.blogspot.com/2026/08/ipsc-closing-plenary-session-ai.html

Posted in Uncategorized | Tagged conferences, copyright, trade secrets, patent | Leave a comment

IPSC Breakout Session 5, IP, Politics & Identity

Posted on August 7, 2026 by rtushnet

Intellectual Property and Political Identity, Barbara
Lauriat

IP features some strange bedfellows, going back as early as
we can find about patent & ©. Project: a book on Intellectual Property
& Victorian Inquiry, examining Royal Commissions on Patent & Copyright.
Reform and even abolition were debated. Both Whigs and Tories struggled to fit
IP into their political identities—not just ideologies but how they saw
themselves.

Communism/socialism: Focus on the role of public interest
and underlying communitarian principles. Limiting © to lifetime of author was
communitarian. Also focused on personal nature of the labor—so socialists could
say that the work of the mind was different. But Herbert Spencer made the same
argument from completely opposite political beliefs.

John Stuart Mill changed his views over time a bit. Started
out very pro-patent as an exception to anti-monopoly, but in his discussion of
communism he carved out invention as a potential area where invention would
still happen b/c it’s a naturally agreeable thing to do. Cut from the next
edition of Principles of Political Economy, though.

Suffrage was also connected to property ownership. Largely
uneducated mechanic could become a voter through invention. So wide availability
of patents could be seen as democratizing, and Dickens distinguished support for
patenting from support for Chartism.

IP and free trade was also part of the discussion.

Lessons: don’t assume the audience agrees on the fundamentals.
Adapt arguments for different audiences. People did change their minds
when arguments appealed to their political identities (forget about political
theory). Free traders who opposed patents suggested rewards/prizes; this seemed
to involve more gov’t regulation and so practical arguments pushed that faction
into further & further extreme positions that eventually failed.

Christian Nationalism and IP, Lucas Osborn

Definition: a political ideology that seeks to entangle
Christianity with political life. Heavy version: Being a Christian is very
important to being truly American; it is very important that the US president
be Christian; the Bible should have at least some influence over US law; and
when the Bible conflicts with the will of the people, the Bible should have
more influence. Only about 3% of Pew respondents endorsed all 4 propositions.
Lighter version: about ½ of Americans say laws should be influenced by Christian
morals.

What would this mean for IP? Depends on the kind of Xianity.
Looked at Biblical principles important in theories of property.

Imago Dei: Genesis—“let us make man in our image, after our
likeness.” G-d is a creator, so that’s an area of overlap. Dominion mandate: humans
have dominion over all the earth. Caretakers/stewards of creation in ways
different from other animals.

Private property: Exodus: thou shalt not steal. Dominion
mandate is consonant w/private ownership. Property rights viewed as necessary
for human flourishing and social stability—humans are bad and selfish, so
private property provides a structure to control our worst natures. The Bible
supports giving people the fruits of their labor, whether wages or property rights.

Examples: start from that foundation and yet come to pretty
different conclusions. Ruth Okediji: Is
the Public Domain Just? v. James Edwards: To Invent Is Divine.

Okediji: private property is in tension w/, though not irreconcilable
with, stewardship. Need conception of what it means to be human to shape
sustainable conditions for flourishing life. Edwards: mass flourishing
coincides w/private property rights.

IP Rights: Okediji says that optimal production of knowledge
goods is important, but so is optimal consumption. Stewardship includes private
rights and service to others. Edwards: private ownership is what you
need—leaves service to others outside bounds of legal duties.

Okediji: need ongoing assessment of IP law, including
traditional knowledge. Edwards: Founders were right, should broaden patentable
subject matter, make injunctions easier to grant, affirm that patents are
private property, not government grants.

Takeaway: Xianity doesn’t get you to a 20-year patent term
or automatic injunctions, so be careful. What would Xian IP look like? You can
imagine limiting © protections for obscene, pornographic, and potentially
blasphemous content, though they also profess respect for the First Amendment.
False witness: you could imagine strengthening attribution rights.

Patents: reintroduce/strengthen moral limits on patents.

Fred Yen: creators/inventors have unpaid debts to inventors/creators
before them. What does that mean for their rights going forward?

Rosenblatt: were our laws written by Xian nationalists to
start? [Or deists?] Tam & Brunetti seem to move away from this. In modern rhetoric,
Xian nationalism isn’t just the Xian part but also the nationalist part/white
nationalist. National treatment seems vulnerable; internationalism does seem
vulnerable too. [which would also have implications for traditional knowledge]
Do you care about theology or Xian nationalism?

RT: I don’t see why these are Xian instead of moral views w/Xian
characteristics and I say that advisedly b/c China does all these things
(limits patents on moral grounds, bars obscenity/sexual material, etc.). We can
plug in lots of moral frameworks to these propositions. Compare Pope’s recent
pronouncements which do seem to make claims about what Xianity requires in
substantive output.

Zahr Said: how much work is G-d doing in this project?
Versus self-regarding system imposing majority’s views. Musk’s tech
libertarianism is another possible comparator.

Q: human chimeras/patents on parts of humans—what perspective?

Q: could argue that injunctions should not be allowed b/c
you’re not an owner but a vessel for G-d’s creation and thus shouldn’t control.

Trans Patents, Andrew Gilden (with Sarah R. Wasserman Rajec)

Inventions that cover gender-affirming care or other inventions
with potential for trans people. Patent texts can be archival—how tech is
viewed then; as speculative visions for culture; as strategic parts of
sales/FDA approval pitches; and as political—vehicles for shifting social norms
around taboo topics, such as patents for recreational cannabis granted long
before many states legalized.

Political backlash against trans people has often focused on
denying them technology, so patents are relevant. Patents using terms that
expressly recognize trans people and sex/gender reassignment: 372 granted
patents, 3 in 1980s, 4, in 1990s, 7, in 2000s, 112 in 2010s, and 246 since
then. Even though trans people and trans-affirming care have been around for a while.
Primary focus on trans population: 21; intended users 196; remainder otherwise
incidental/cited. Topics: Hormone therapy, phalloplasty, vaginoplasty, breast augmentation,
breast concealment, genital concealment, clothing, sexual devices, other health/pharma,
AI, and data processing.

Trans people often presented as one of many populations who
benefit from claimed invention—methods for treating excess androgen skin
changes can help w/PCOS, etc. Or “there are many reasons that people bind their
breasts.”

Patentees rely on studies focused on trans people/bodies.
Even if trans people aren’t disclosed as target population, trans/cis medicine are
inextricable from each other.

Some patentees emphasize uniqueness/unique needs of trans
people, whether anatomical or social. Sets up claims limited to trans people as
point of novelty. Also nods to consumerism—an underserved marketplace (e.g.,
genital concealing underwear for trans women; shopping recommendation system
that imagines trans women looking for shoes).

So far, no noticeable drop in grants under Trump 2.0. But:
FDA warning letters to chest binder retailers, distributors, and manufacturers.
Some recipients of the letters had granted patents.

State and marketplace are vying for control over transgender
existences. Control over gender expression: property rights can be tied to
gender identity; infringement could require jury to find that user is a “trans
male.” Disconnect b/t patenting and commercialization—patentees who offer
various treatments to cisgender population but have patents for trans
populations.

Patent activity maps poorly onto history of innovation in
transgender medicine, but may reflect perceived social change or help measure
cultural anxiety—patenting activity closely matches rise in mainstream
awareness & fear/backlash. Rhetoric mirrors that in other areas of law
& politics: opponents fear experimental/off label gender-affirming care;
equal protection arguments about state denying trans people access to care
available to everyone else; due process arguments about need for access to
gender affirming care.

Said: what about coded references? E.g. medical codes can be
changed by sympathetic doctors; there might not be explicit acknowledgement.

A: yes, we are tracking a bubbling to the surface.

Rothman: look for patents in the same spaces that don’t use
the magic words.

A: Scandinavia would be a place to look there.

Rosenblatt: can this tell us anything about trans self-help
and user innovation? Medicalization is partially good but also has big
downsides.

The Value and Values of Patent Ideology, Tejas Narechania

One view: there’s a perfect number of patents that’s just
right. His view: there’s no pure vision of patent law. There are multitudes
that are incommensurable, irreducible to utils; these are necessary and
desirable outgrowth of living in a free & plural society.

Founders: innovation, national security, morality (or even
natural rights), distributional concerns—all the policy considerations were
there at the beginning.

The State Law of Federal Patent Enforcement, Paul R.
Gugliuzza

State bad-faith statutes: motivated by mass demand letter
campaigns by bottom feeder trolls against end users. Effect: reduce cost
asymmetry b/t accused infringers and NPEs. Permit finding bad faith based on inadequate
info, lack of investigation, false/misleading statements/ unreasonable
deadlines/settlement demands; some laws apply only to suits against end users
or by NPEs.

Key issues that have repeatedly arisen: who can sue and
where? Personal jurisdiction via demand letters; federal subject matter
jurisdiction over state-created claim? One of these cases has finally reached
the Fed Cir. Should courts imply a private right of action where the state laws
aren’t explicit? Otherwise it’s left to state AGs with resource &
collective action constraints.

What conduct is regulated? Core version is bad faith
assertion—but courts have disagreed over what constitutes an assertion or
demand letter—analogy to declaratory judgment standing.

Courts also differ on what will ultimately establish bad
faith—is including a claim chart evidence of good faith or should the court examine
the claim chart for misleadingness/correctiness?

The preemption overlay: objective baselessness as a prerequisite,
according to the Fed Cir. Bad faith is not enough if it’s just subjective and
the underlying infringement theory was not objectively baseless. Resembles the
Fed Cir’s tests for willful infringement and attorneys’ fees overturned by the
Supreme Court, so should this test survive?

Remedies: actual damages from assertion, statutory damages,
attorneys’ fees for the bad faith litigation (against anyone involved in the
assertion), and bonds.

What about anti-abuse measures for assertion of the statutes
used abusively? Reverse fee shifting. Doesn’t like categorical exemptions based
on patent asserter identity. Geographic gaps—California and other states don’t
have these.

from Blogger https://tushnet.blogspot.com/2026/08/ipsc-breakout-session-5-ip-politics.html

Posted in Uncategorized | Tagged conferences, copyright, patent | Leave a comment

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Rebecca Tushnet

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Probiotic throwdown continues w/factual dispute over clinical studies

IPSC Closing Plenary Session: AI Everywhere All at Once

IPSC Breakout Session 5, IP, Politics & Identity

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