Trump loses motion to dismiss Electric Avenue case on fair use grounds

Grant v. Trump, No. 20-cv-7103 (JGK) (S.D.N.Y. Sept. 28,
2021)

Eddy Grant sued Trump and his campaign for retweeting a
pro-Trump video that used Grant’s famous “Electric Avenue” without authorization.
Although the motion to dismiss was far better argued than the average Trump filing,
it still failed—in the process signaling that the effects of Warhol may
not be limited to visual art, as many had hoped.

The animated video was 55 seconds long. It begins with a
depiction of a high-speed red train that displays “Trump Pence KAG [Keep
America Great] 2020.”

After the red train passes, the
beginning of Electric Avenue can be heard clearly, along with an excerpt of a
speech by President Biden. Around the same time, a slow-moving handcar,
operated by an animated likeness of President Biden, comes into view bearing
the words “Biden President: Your Hair Smells Terrific.” The video—in
particular the contrast between the trains and the unflattering nature of the
excerpted language from President Biden—appears intended to criticize President
Biden and depict the strength of former President Trump’s campaign.

Grant’s song appears throughout the last 40 seconds of the
video.

Fair use can rarely be decided on a motion to dismiss, the
court said, and this wasn’t one of those cases.

Transformativeness: Just because the video and song served
different purposes didn’t make the video transformative. “While it is true that
the animation is partisan political commentary and the song apparently is not,
the inquiry does not focus exclusively on the character of the animation;
rather, it focuses on the character of the animation’s use of Grant’s song.”
Under Warhol, when there isn’t “obvious[]” comment or relation back, or
use of the original “for a purpose other than that for which it was created,”
then “the bare assertion of a ‘higher or different artistic use[]’ is
insufficient to render a work transformative.” Here, “the video’s overarching
political purpose does not automatically render its use of any non-political
work transformative.”

The use of the song itself in the video was “best described
as a wholesale copying of music to accompany a political campaign ad.” Compared
to other political cases like the Don Henley/Running on Empty case, “the use here
does far less—if anything—to modify the song or to comment on the song or its
author,” whereas in Henley defendants changed lyrics and provided their
own vocals, and supposedly poked fun at Henley’s own liberalism, and
still that wasn’t transformative because the ad took too much in relation to
any legitimate parodic purpose. Here, there was no editing of the “lyrics,
vocals, or instrumentals at all.” Further, “the animation does not use Electric
Avenue as a vehicle to deliver its satirical message, and it makes no effort to
poke fun at the song or Grant.” This was less-favored satire rather than
parody, and “defendants have offered no justification for their extensive
borrowing.”

Cariou, by contrast, involved fair uses where works were
“obscured and altered to the point that [they were] barely recognizable.” The
non-fair-use-as-a-matter-of-law works in Cariou “superimposed other
elements that did not obscure the original [work,] and … the original [work]
remained …     a major if not dominant
component of the impression created by the allegedly infringing work.” Likewise,
in Warhol, there was no fair use because the secondary work “retain[ed]
the essential elements of the [original work] without significantly adding to
or altering those elements.”

So too here. Electric Avenue wasn’t edited at all and was “instantly
recognizable”; the additional audio of President Biden’s speech did nothing to
obscure the song; and the song, which lasted over 2/3 of the video was, “a
major component of the impression created by the animation, even though it
appears that the video’s creator could have chosen nearly any other music to
serve the same entertaining purpose.”

Brown v. Netflix, Inc., 462 F. Supp. 3d 453 (S.D.N.Y. 2020),
aff’d, 855 F. App’x 61 (2d Cir. 2021), found a documentary’s unauthorized use
of a song to be transformative and fair, but that case was readily
distinguishable. That film used 8 seconds of a song as part of the film’s “commentary
on the burlesque art form and its resurgence in Portland, Oregon.” The film
combined the burlesque performances “with cultural commentary on topics such as
gender, sexuality, and the artistic process,” and incidentally captured a dancer’s
use of the song as background for her performance. “The use here is different
in magnitude and kind: the song plays for more than two-thirds of the animation
and plays no discernible role in communicating the video’s overarching
political commentary.” Brown, by contrast, used the brief excerpt as
part of a performance about which the documentary was commenting, and the
content of the song “substantively contributed to the burlesque act.”

Also, the use here was commercial because “commercial” in
§107 doesn’t mean commercial, but “whether the user stands to profit from
exploitation of the copyrighted material without paying the customary price.”
[Really sad that GvO didn’t address this—there seems to me no chance
that the current textualist Court would accept this conflation of a factor one consideration
with factor four’s market inquiry.] The use in Henley was commercial because
defendants “stood to gain publicity and campaign donations from their use of
Henley’s music.” Here, “the possibility of commercial advantage cannot be
excluded at this point, especially in light of the instruction from the Second
Circuit Court of Appeals that ‘the profit/non-profit distinction is context
specific, not dollar dominated.’”

Another SDNY case, MasterCard Int’l Inc. v. Nader 2000 Primary
Comm., Inc., No. 00-cv-6068, 2004 WL 434404 (S.D.N.Y. Mar. 8, 2004), held that
a political advertisement’s parody of a popular MasterCard commercial was a
noncommercial use because the candidate used the original work “as part of his
communicative message, in the context of expressing political speech.” But that
wasn’t the same as the use here. “Nothing about the song was integral to the
video’s political message,” and in their arguments, “the defendants explicitly
disclaim any overlap between the purposes of the song and the video.” [Note the
move here from whether the defendant’s overall product was commercial to whether
the use of the plaintiff’s work was commercial—I am not sure that’s supported
by the statute; I am sure that carving works up this way is going to make fair
use harder to litigate and resolve, and will require inquiry into meaning that
contrasts sharply with Warhol’s disavowal of any such inquiry—a sort of
heads I win, tails you lose effect. FWIW, I think the use here is plausibly
nontransformative but noncommercial, and that market effect can make
noncommercial uses unfair.] Confirming that the court is making its commerciality
finding dependent on its transformativeness finding, the court reiterates that
the video wasn’t parodying the song or using it for commentary, unlike the Nader
ad. “Moreover, there is a well-established market for music licensing, but the
defendants sought to gain an advantage by using Grant’s popular song without
paying Grant the customary licensing fee.”

Nature of the work: creative and published, but “the fact
that a work is published does not mean that the scope of fair use is per se
broader.” But factor two has limited weight.

Amount/substantiality: Quantity and quality favored
plaintiffs. “The introductory portion of the song that is used in the animation
is immediately recognizable. The excerpted portion of the song also includes
the chorus, which … is of central importance to the original work.” While the
excerpt was only 17.5% of the song’s total length, it played for 72.7% of the ad’s
duration. The quantity and value were plainly not reasonable in relation to the
purpose of the copying. “

Market effect: Market analysis “embraces both the primary
market for the work and any derivative markets that exist or that its author
might reasonably license others to develop, regardless of whether the
particular author claiming infringement has elected to develop such markets.”
And it was “plain that widespread, uncompensated use of Grant’s music in
promotional videos—political or otherwise—would embolden would­be infringers
and undermine Grant’s ability to obtain compensation in exchange for licensing
his music.” Grant didn’t need to show that he intended to enter the market for
licensing music to promotional videos, especially on a motion to dismiss, given
the defendants’ burden to show lack of market harm.

The fourth factor also, per GvO, “take[s] into
account the public benefits the copying will likely produce.” Though political
speech, and in particular “[t]he act of ridiculing and lampooning public
figures[,] is a rich part of our First Amendment tradition,” denying fair use—especially
denying a motion to dismiss on fair use—won’t chill “legitimate political
satire. Creators of satirical videos like the one at issue here must simply
conform any use of copyrighted music with copyright law by, for example: paying
for a license; obtaining the copyright owner’s permission; or ‘transforming’
the chosen song by altering it with new expression, meaning, or message.” Defendants
could reassert fair use at the summary judgment stage on a more developed
factual record.

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over dissent, 9th Cir. denies injury presumption to false advertising claimant

Quidel Corp. v. Siemens Medical Solutions USA, Inc., 2021 WL
4622504, No. 20-55933, No. 3:16-cv-03059-BAS-AGS (9th Cir. Oct. 7,
2021)

Quidel appealed the
grant of summary judgment to Siemens
on Quidel’s Lanham Act false
advertising claims and related state claims. The case is about tests that
detect thyroid stimulating immunoglobulins for management of Graves’ disease. There
are two kinds of assays: (1) TSH receptor antibody (TRAb) assays, which detect
both stimulating and blocking thyroid immunoglobins (TSI and TBI) and which are
therefore apparently less useful and (2) TSI only assays. Quidel alleged that
Siemens advertised (1) but provided (2).

First, the majority found that even if Siemens falsely
advertised its assay, that wasn’t material to labs’ decision to purchase
Siemens’ product over Quidel’s. Testimony from the relevant labs showed they
didn’t rely on the relevant advertising materials, e.g., testimony that a lab engaged
in its own internal validation process. Inferences to the contrary would be
unreasonable under the circumstances:

At most, statements reflecting the
lab representatives’ reliance on information in the package insert and internal
debate by the laboratories’ decision-makers pertain to the required element of
deception, not materiality. The extensive vetting completed by these
sophisticated experts leading to their eventual purchase of Siemens’ assay
overcomes Quidel’s position that the challenged statements amount to
conflicting evidence on materiality. In other words, the nature of the
audience—highly-skilled and credentialed professionals—is such that
representations about the type and quality of an assay are not reasonably likely
to influence their purchasing decisions even if it attracted the labs’ primary
interest.

And there was no triable issue on actual injury based on
allegedly false advertising to the physicians. Quoting the district court:
“Quidel cannot claim that its damages are caused by the lab carrying the
product which in turn leads to the physicians ordering the product from the
lab,” because it is “the labs [that] decided which product to carry on their
own, not as a result of Siemens.” And Quidel didn’t follow the FRCP in trying
to present an alternative damages theory.

Disgorgement without proof of harm is appropriate in false
comparative advertising cases, but any such presumption of harm was inapplicable
when, as here, the “advertising does not directly compare defendant’s and
plaintiff’s products.”

Also, and weird to present it this way, Siemens didn’t
engage in false advertising to doctors. It said that its Immulite assay detects
stimulating antibody “preferentially” —i.e., with bias—in favor of stimulating
over blocking antibodies. “Had Siemens informed the physicians that Immulite
detects stimulating antibody ‘only,’ as it represented elsewhere, then the
statement would be false.” And although the ad specifically referenced Quidel’s
product, the ad wasn’t comparative as to the challenged element.  Quidel didn’t dispute the actual comparative
statement about the assays’ performance data—on clinical sensitivity and
specificity—which was FDA-approved. In context, there wasn’t a false
comparative ad.

Footnote: To be sure, “a competitor need not prove injury
when suing to enjoin conduct that violates section 43(a). But Quidel has not
met the elements for a permanent injunction. See eBay, Inc. v. MercExchange,
L.L.C., 547 U.S. 388, 391 (2006).” [Not in the majority opinion: Overruled as applied to
§43(a) by the TMA. So does false advertising have an injury requirement or not?]

Judge Bennett dissented, noting among other things that the
TMA brought in a presumption of irreparable injury. The dissent would find
triable issues on materiality and injury for both labs and doctors.

Materiality is about significance to the consumer’s decision.
“Drawing all reasonable inferences in Quidel’s favor, Siemens’s statements that
expressly or impliedly communicated that Immulite is a TSI assay and not a TRAb
assay were material to the laboratories’ decision to switch from Thyretain to
Immulite.” One lab’s representative testified that whether Immulite was a TSI
assay was an important factor to the lab and that the lab wanted to replace
Thyretain with another TSI assay, not with a TRAb assay. The other lab’s representative
testified that it wanted a TSI assay and would not have been interested in
Immulite if it were a TRAb assay. “Quidel also submitted evidence that
scientists within LabCorp did not want to switch to Immulite because it
appeared to be a TRAb assay. And in advertising Immulite, Siemens repeatedly
highlighted the distinction between TSI and TRAb.”

A rational juror could easily infer
from this evidence that whether Immulite was a TSI assay was an important
factor to the laboratories—one likely to influence their decisions—and that
Siemens made the representations it did because it knew the distinction between
TSI and TRAb was important to the purchasers. Indeed, that the laboratories
were only interested in a TSI assay to replace Thyretain supports that the
laboratories would not have even considered Immulite had Siemens advertised it
as a TRAb assay. Put another way, a juror could easily find that Siemens’s
statements were likely to influence the laboratories’ purchasing decision
because its statements attracted the laboratories and prompted them to conduct
their own tests before ultimately purchasing Immulite.Siemens’s alleged false
statements were the catalyst that led to the purchasing decision and therefore
likely influenced the purchasing decision. Thus, I would find a triable issue
on materiality.

This relates to a key but underlitigated issue: since
materiality is often supposed to be an objective test, in theory you can infer
that the element was satisfied without even hearing from the consumers. As the
dissent puts it:

Even if a jury were to determine
(were the question relevant) that the laboratories ultimately purchased based
on their own tests, that doesn’t matter to whether the representations were
likely to influence the purchasing decisions. Indeed, even in the light most
favorable to the moving party, it would be difficult for anyone to seriously
claim that the purchasing decisions would have been the same had Siemens
represented what Quidel claims is the truth (even with puffery): “Immulite—An
exceptional TRAb assay!”

This is a more sensible approach given the fact that people
who have already made a purchase are particularly likely to insist that they
would have made it anyway (so as not to feel like suckers) and in general
people aren’t great at telling you why they did things. Here there’s more of a
paper trail than there usually is, but (as the dissent notes) that doesn’t
defeat these dynamics. The dissent would have held that “even if the
laboratories’ purchasing decision may have been partly influenced by their own
testing, that fact would not preclude a juror from concluding that Siemens’s
statements were likely to (and did, at least in part) influence their
purchasing decision.”

The dissent would not have fully credited the testimony that
internal testing was the driver of the decision for purposes of summary
judgment:

[A] reasonable juror could reject
this testimony given that the laboratories’ witnesses had strong incentives to
give testimony validating their prior decisions. The laboratories’
sophisticated experts would be reluctant to admit that they had been deceived
and had incorrectly recommended switching to Immulite.

What about injury? A presumption of injury could apply
either if (1) Quidel and Siemens operate in a two-player market, or (2) Siemens
engaged in false comparative advertising. But the majority neglected to address
the two-player market scenario, and the evidence supported that
characterization of the market. The labs wanted to replace Thyretain with Immulate,
not a TRAb assay. “Because the laboratories considered only Immulite and not
TRAb assays, a factfinder could reasonably infer that Quidel and Siemens
operate in a two-player market—the TSI player market.” Quidel’s survey evidence
supported that inference by showing that a majority of the physicians surveyed
are likely to order both a TSI assay and a TRAb assay for a patient, indicating
that they aren’t competitors.  

The dissent would also have found a triable issue on whether
the advertising to doctors was false comparative advertisement. The advertising
contained statements that allegedly communicated that Immulite was a TSI assay
and not a TRAb assay: “TRAb tests are not designed to discriminate stimulating,
blocking, and neutral antibodies often present in [Graves’ disease] patients.
The Immulite … assay is specifically engineered to preferentially detect
stimulating antibody.” And it expressly compared Immulite to Thyretain:
“[Immulite’s] [s]uperior clinical sensitivity for diagnosis of Graves’ disease
(98.6%) vs. Thyretain bioassay (92%).” “[A] factfinder could conclude that it
was a false comparative advertisement because it falsely communicated that
Immulite, like Thyretain, is a TSI assay (not a TRAb assay), and Immulite is
better than Thyretain. The majority errs by failing to construe the DocAlert as
a whole and in favor of Quidel.” [I’m more sympathetic to the dissent’s
argument here: if you make a claim that you are in a particular class of tests—“not
TRAb,” here—and then compare yourself to the other member of that class, that’s
a comparison about membership in the class.]

Also, because a presumption of injury could apply, Quidel
could establish harm sufficient for a permanent injunction. Cite to TMA: “Quidel,
if successful on its Lanham Act claims, might obtain permanent injunctive
relief without affirmative proof that it suffered irreparable harm.” [But,
unlike a TM plaintiff, it does still need to provide reson to believe that it
suffered some kind of harm in its prima facie case; here that role would
be played by the two-player market/false comparative advertising presumption of
harm.]

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if it’s on the label, courts can presume consumers saw it

Bailey v. Rite Aid Corp., 2021 WL 4469638, No. 4:18-cv-06926
YGR (N.D. Cal. May 26, 2021)

Rite Aid moved to reconsider a previous ruling denying a
motion to dismiss Bailey’s claim against Rite Aid’s marketing of its
over-the-counter acetaminophen gelcaps as “rapid release.” The court declined. “According
to Rite Aid, Bailey failed to show that the members of the proposed class were
exposed to Rite Aid’s allegedly deceptive conduct.” That exposure was dependent
on class members seeing both gelcaps and tablet/caplet forms and comparing them,
Rite Aid argued, but Bailey didn’t show that consumers did compare them. Rite Aid
also argued that it survey showed that “there is a high likelihood that
significant numbers of consumers do not make the product comparison on which
Plaintiff’s deception theory is predicated and upon which the Court granted
certification.”

But there was no meaningful dispute that the members of the
proposed class were exposed to the labels and prices of Rite Aid gelcaps and
tablets “because such prices and labels were placed within eye-view of
consumers as a result of Rite Aid’s product-placement policies.” Bailey wasn’t
required to show that the proposed class members who were exposed to these
prices and labels were likely to have compared them. “Courts find that exposure
exists where a court reasonably can infer that the class members would be able
to see the misrepresentation at issue.” Being on the label routinely satisfies
that standard.

The court also found Bailey’s advertising expert’s evidence
to be persuasive; that went to whether consumers were deceived into thinking
that Rite Aid gelcaps are faster acting than Rite Aid tablets after comparing them
and relied on that. And Rite Aid’s survey wasn’t enough to avert any factual
issues given its own flaws, which included limited images.

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defendant moots claim by ending activity in a way that would require gov’t consent to restart

Snarr v. HRB Tax Gp., Inc., 2021 WL 4499416, No.
19-cv-03610-SK (N.D. Cal. Aug. 24, 2021)

Snarr alleged that HRB violated the usual California
statutes by creating a “bait and switch” program to lure customers into paying
for defendants’ services to file tax returns. Unfortunately, instead of
creating its own free file system, the IRS engaged with private, for-profit
companies to develop online tax services and to make them available for free to
certain taxpayers. Defendants are part of Free File, Inc., a company formed to
offer those services; FFI entered into agreements with the IRS about the
services.  The then-current agreement
(just expired) provided specific guidelines for members’ services.

Defendants allegedly advertised Free File widely “but then
used a variety of methods to divert potential customers into Defendants’ own
programs, which charged a fee.” For example, “Defendants purposely made it
difficult to find” the free part of the system “by placing a ‘noindex’ tag on
the webpage for the free part of the system, with the result that the search
engines did not go to that page but instead to Defendants’ system which
required payment of fees”—allegedly a classic bait and switch.

Defendants mooted the case—which requested public injunctive
relief to get around an arbitration agreement—because the allegedly violative
conduct “ceased and cannot reasonably be expected to recur.” Defendants terminated
their membership in the IRS’s Free File Program. They purportedly had no
intention of seeking readmission to the Free File Program or participating in
the Free File Program in the future. To restart, they’d be required to petition
the IRS to reapply for admission and would have to agree to the IRS
requirements (though those requirements only vaguely refer to usability and not
to deceptive marketing). Because defendants couldn’t by their own choice simply
resume the complained-of conduct, the voluntary cessation exception to mootness
didn’t apply.

Although defendants allegedly continued to market other
“free” services of their own, outside the formal Free File Program with the
IRS, and would use the same bait and switch approach, the claim for public
injunctive relief was limited to the confusion that defendants created between
the Free File Program with the IRS and their own paid programs. They no longer
possessed the bait. “To the extent that Defendants now market other ‘free’
services in a misleading way, another lawsuit against them may be possible. But
the case currently before the Court is moot.”

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challenging defendant’s clinical proof claim is falsity, not lack of substantiation

Woodard v. Labrada, 2021 WL 4499184, No. EDCV 16-189 JGB
(SPx) (C.D. Cal. Aug. 31, 2021)

Woodard brought the usual California claims and some others,
including NY claims, against Labrada for its weight loss products. Some tidbits:

Labrada argues that Woodard was bringing a prohibited “lack
of substantiation” claim. “In the false advertising context, a claim lacks
substantiation when it is premised on the absence of evidence or inconclusive
evidence; a claim is provably false when evidence contradicts or conflicts with
the claim.” This was the latter.

Each Labrada label claim had asterisks leading to “references”
purporting to establish the validity of each claim.

When a defendant “puts the clinical
proof for its product at issue,” and the clinical proof does not support the
claims about the product, the claims are best characterized as false rather
than unsubstantiated. In other words, a defendant’s scientifically unsupported
representation is false if the defendant asserts it is supported by scientific
proof.

That was the situation here for Labrada’s claims: “increases
fat burning,” “curb[s] appetite and food intake,” “reduce[s] body weight,”
“helps support significant fat loss,” and serves as a “fat loss aid.” Yet one
of the studies cited by the label has been disproven and retracted. Plaintiff’s
expert further opined that many of the referenced studies were methodologically
flawed and didn’t produce results consistent with the claims on the labels. One
label recommended a smaller dosage than the dosage utilized in the referenced
studies. He concluded that “any statements that the specific papers cited on
the product labels support the efficacy statements made are, in my opinion,
false and misleading.” This created a triable issue on falsity.

In addition, plaintiff’s expert identified studies “that
could lead a reasonable trier of fact to find that the weight loss claims on
the labels are false,” such as a study that concluded that one ingredient
“failed to produce significant weight loss and fat mass loss beyond that
observed with [a] placebo.” Another recent study similarly concluded that “the
current evidence is insufficient to recommend green coffee as an adjuvant
within weight management therapy.” Although other studies had conclusions that
arguably supported the ingredients’ efficacy for weight loss, plaintiff’s
expert distinguished those studies throughout his report for failing to include
placebo groups, utilizing small sample sizes, and suffering from other
methodological issues that biased the results. Anyway, the conflict meant there
was a triable issue of falsity.

Labrada argued that the plaintiffs needed scientific studies
that its product specifically, and not the purported active ingredient, lacked
efficacy to show falsity. That’s a no. Defendants admitted that the sole active
ingredient was a proprietary version of the tested green coffee ingredients.
Scientific studies demonstrating their lack of efficacy were therefore
sufficient to create a triable issue.

What about individual defendant Mr. Labrada? In California,
“[d]irectors or officers of a corporation do not incur personal liability for
torts of the corporation merely by reason of their official position, unless
they participate in the wrong or authorize or direct that it be done.” Plaintiffs
failed to raise a triable issue as to Mr. Labrada’s personal liability for the
company’s alleged tortious conduct. Though there was evidence of Mr. Labrada’s
personal participation in the marketing, sale, and advertisement of the Labrada
Products, there was no evidence that Woodard suffered personal harm or property
damage as a result of the allegedly false label claims, as required by
California law.

However, as to Mr. Labrada’s personal liability for
Woodard’s false advertising claims under the FAL, CLRA, and UCL, summary
judgment wasn’t warranted. Personal liability could apply “based on [a
defendant’s] personal participation in the unlawful practices and unbridled
control over the practices[.]” Plaintiffs showed a triable issue of
prarticipation and control. The company’s COO testified that Mr. Labrada was
“responsible for the marketing and advertising”; he changed promotional
language on both product labels and was one of several people responsible for
the inclusion of the referenced studies on the labels. Mr. Labrada confirmed
that he “oversaw the marketing and advertising” at the company and had final
review of advertising materials. This was sufficient, though a joint venture
theory of liability failed because an employee isn’t in a joint venture with
the employer.

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counting chickens: should disgorgement be harder for false advertising than for TM?

Certified Neutraceuticals Inc. v. Clorox Co., 2021 WL
4460806, No. 18-cv-0744 W (KSC) (S.D. Cal. Sept. 29, 2021)

The Clorox defendants sell dietary supplements using the raw
materials provided by Certified’s competitor, Avicenna. Certified alleged
Lanham Act false advertising based on allegations that the Clorox defendants
and Avicenna engaged in a scheme to falsely advertise the source of chicken
collagen used in dietary supplements sold to retail consumers. Clorox allegedly
labeled their Collagen2 Joint Complex product as containing “Chicken Sternum
Collagen Type II,” but the collagen in the product is allegedly not pure
sternal collagen, but rather collagen produced by Avicenna using chicken
carcasses of inferior quality which are much more inexpensive to produce. (I am
left wondering desperately what makes chicken sternal collagen better than
other chicken collagen; Google suggests that it is the most human-collagen-like
part of the chicken, at least according to purveyors of same.)

In a prior case between Avicenna and Certified, a different
judge granted summary judgment in Avicenna’s favor on Certified’s Lanham Act
claim because “Certified brought its claims with unclean hands by engaging in
the same improper conduct for which it faulted Avicenna—publishing false
statements about a product being ‘patented’ without a patent.” But that didn’t
relate to the subject matter of this claim.

Literal falsity: The evidence showed that CJC does in fact
contain sternal chicken collagen; Avicenna claims that its process produces 90
percent sternum cartilage. “Independent testing of Avicenna’s collagen backs
this up, showing batches purchased from Avicenna contained sternal chicken
collagen in substantially similar amounts to Certified’s product. It is
therefore literally true for the Clorox Defendants and Avicenna to advertise
their products as containing sternal chicken collagen.” But Certified argued
that defendants were advertising their producst as 100% sternal chicken
cartilage. Avicenna has advertised its product as “Avian (Chicken) Sternum
Cartilage” and “Chicken (Avian) Full Frame Sternum Cartilage.” There was a
triable issue on the first product name, which was a single ingredient: it
could necessarily imply that 100% of the product was that ingredient. “By
advertising its purportedly single-ingredient product as chicken sternal
collagen, Avicenna appears to be representing that the entire product is
chicken sternal collagen.” However, the second name wasn’t literally false
because it was “an accurate depiction of Avicenna’s manufacturing process:
deriving chicken sternum collagen from the full frame of a chicken.”

Also, the Clorox defendants did not advertise their product
as comprised of only a single ingredient. They advertised that CJC contains
2,400 mg of sternal collagen among other ingredients. There was no actual
evidence that CJC did not in fact contain 2,400 mg of sternal chicken collagen.

Misleadingness: There was no evidence of likely consumer
deception. Certified’s only survey was “not representative of a population that
actually consumes the product,” but instead surveyed rheumatologists. There was
no evidence that rheumatologists actually influence buyers of the product. And
the rheumatologists reviewed the supplement label on Clorox’s product, not
Avicenna’s. “Avicenna has produced declarations of its customers stating
Avicenna never represented its product as 100% sternum and that customers
understood that it was not.”

Injury: Certified alleged monetary damages in the form of
lost customers, reduced profits, additional advertising costs, and lost market
share. It offered a list of lost customers and evidence that its profits declined
and Advertising and Promotion expenses increased over disputed time periods. However,
the list was overstated (it was just a list of past customers), and five customers
Certified purported to have lost to Avicenna testified that they did not
purchase Avicenna’s product based on the alleged misrepresentation. Certified
argued that it was nonetheless entitled to damages on an unjust enrichment
theory. The court disagreed because the advertising at issue wasn’t
comparative, and so proof of past injury or causation was required. Certified’s
evidence showed sales increased over the relevant period, though profits
decreased because of a large increase in the cost of sales. “[I]t is not
reasonable for the Court to assume the significant unaccounted for increase in
the cost of sales, which could be attributed to the cost of goods sold among
other things, is a direct result of Defendants’ product labeling.” Thus,
Certified failed to show damages.

What about disgorgement? “15 U.S.C. § 1117(a) and Lindy
[the key 9th Circuit precedent] both address damages in false
comparative advertising cases, where a defendant violates ‘any right of the
registrant of a mark registered in the Patent and Trademark Office.’” As a
reminder, §1117(a) specifically also says “a violation under section 1125(a)”
immediately after the quoted words. Romag should therefore be as good
law for false advertising under §1125(a)(1)(B) as for trademark, but I’m not
super surprised that courts are still intoning “trademark” as if that were
somehow a sufficient distinction.

The court granted summary judgment on damages, but didn’t
preclude injunctive relief: “[A] competitor need not prove injury when suing to
enjoin conduct that violates section 43(a).” [Is this still true after TransUnion?]

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Juxtaposition doesn’t necessarily mean one claim bleeds into another

Engram v. GSK Consumer Healthcare Holdings (US) Inc., 2021
WL 4502439, No. 19-CV-2886(EK)(PK) (E.D.N.Y. Sept. 30, 2021)

GSK sells “2 in 1 Lipcare” Chapstick: it provides moisturization
and sun protection … but the former lasts longer than the latter. Engram
alleged that this was misleading; the court disagreed and dismissed the
complaint under NY GBL §§ 349 and 350 (and unjust enrichment).

The front of the package and the front of the tube both
contain a circle, bisected horizontally. In the top half of the circle is the
phrase “8 HOUR MOISTURE,” written in white letters against a blue background.
In the bottom half, in blue letters on a white and gray background, is the
phrase “SPF 15.”

 

Could the proximity of these claims lead a reasonable
consumer to conflate them and think that they’d get 8 hours of SPF 15
protection? The court thought not. The back tells users to “apply liberally 15
minutes before sun exposure”; “reapply at least every 2 hours”; and “use a
water resistant sunscreen if swimming or sweating.” The amended complaint
alleged that a third-party survey showed that “259 of [respondents] (64.4%)
believed that the Product provided 8 hours of sun protection based on the
packaging.” But the respondents were shown a picture of the front of the
Chapstick tube, but not the full package — including the reverse of the
package, where the direction to “reapply at least every 2 hours” appears.

Context is key, but some context matters more than others:

Where the front of a package makes
a bold and blatant misstatement about a key element of a product, there is
little chance that clarification or context on the reverse of the package will
suffice to overcome a deception claim (especially at the motion-to-dismiss
stage). But when the front of the package is better characterized as ambiguous
than misleading, courts looking at the alleged misrepresentations in their full
context and are more likely to grant a motion to dismiss.

There’s a spectrum of claims from absolutely true, to
ambiguous, to misleading, to outright false, and this case was at most
ambiguous. “From the front of the package itself, it is plain that the
Defendant is emphasizing the moisturizing properties of the product.”  But the package made no durational claim about
the SPF protection on the front at all. The back of the package put any
ambiguity to rest. “[I]t is not too much to expect a reasonable consumer to
review the directions on an SPF product for information on how often to reapply
it — particularly where, as here, a similar set of directions is present on all
sunscreen products pursuant to FDA regulations.” It was also relevant to the
court that the tube and packaging “both provide limited space on which to
advertise the product and publish the required Directions…. [T]he Defendant’s
ability to separate the moisture and SPF claims is limited by the amount of
packaging real estate available. This limit makes the presence of a clear
disclaimer on the reverse all the more salient.”

The survey didn’t help because “the key question was phrased
so as to put respondents in an untenable position.” It asked: “Viewing the
packaging above, how many of hours of SPF 15 sun protection do you think the
product provides?” But respondents only saw the front of the package, “which
does not contain any answer to the question posed.” Respondents were thus differently
situated from the “reasonable consumer.”

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disparagement campaign in niche jewelry market could violate Lanham Act

Roberto Coin, Inc. v. Goldstein, No. 18-CV-4045(EK)(ST), 2021
WL 4502470 (E.D.N.Y. Sept. 30, 2021)

Defendants Goldstein and his company Kings Stone supplied
plaintiff RCI with a gemstone they called “black jade.” “After RCI stopped
sourcing black jade from Kings Stone and found a new supplier, Goldstein
contacted a number of stores selling RCI jewelry and disparaged RCI’s stones.
Both sides now claim the other is liable for false advertising, among other
claims.” For example, Goldstein allegedly told one of RCI’s customers that
RCI’s stones were to real black jade as cubic zirconia is to diamond. Defendants
also allegedly infringed RCI’s trademarks by using photographs of Roberto Coin
jewelry and RCI’s logo in Kings Stone’s advertising after RCI terminated the
relationship. Kings Stone counterclaimed that RCI made false claims about (a)
the gemological content of the stones from its new supplier and (b) whether
those stones had been “certified” by a laboratory. The counterclaims/third
party claims were dismissed for failure to prosecute and the results on the
plaintiff’s claims were mixed.

When things were going well, Kings Stone provided RCI with
an analysis prepared by the National Gem Testing Center — a gemstone testing
laboratory based in China — stating that the mineral content of its stones was
“black amphibole jade.” About eighteen months after the parties split up, RCI
discovered that the Defendants were using photographs of RCI jewelry alongside
RCI’s logo, as well as the name “Roberto Coin,” on Kings Stone’s Instagram feed.
Instagram ultimately removed the posts. Goldsein also sent marketing materials
incorporating RCI images to various vendors, including in a PowerPoint
presentation. He stated that he believed RCI “knew about” and “was okay” with
this.

Goldstein solicited Borsheims, a jewelry retailer that sold
RCI products (including the Roberto Coin “Black Jade” collection), touting Kings
Stone’s black jade as “exclusively certified by the china NGTC and the
prestigious US based AGL as Black jade.” Borsheims wasn’t interested.

Goldstein emailed Borsheims again, this time pretending to
be a customer looking for a “gift for a jade connoisseur.” He expressed
interest in a specific Roberto Coin product and asked Borsheims to provide him
with “a gem certificate that verifies its authenticity as genuine black jade.” Borsheims’
employee wrote back to say that she had contacted RCI, and that “while they do
not have official certificates of authenticity for their jade gemstones, they
provided me with the attached card detailing the certification of the jade
along with further details.” The “attached card” said: “The most fascinating
black amphibole jade, 100% natural identified and certified by China’s National
Gemstone Testing Center (NGTC) is the protagonist of the homonymous ‘Black
Jade’ collection.” Goldstein responded that the product

does not come with any
certification as to its authenticity that the black jade is genuine. If there
is no certification available, then legally you cannot claim or advertise that
it is black jade, no less then [sic] claiming a cubic zirconia being a real
diamond …. My black jade comes with full certification by 3 major Gemological
Labs. When dealing with my certified black jade stones you are assured of the
highest quality and no reputational risk to your company by selling non
certifiable black jade. The real black jade jewelry companies are doing great
with our line with sales exceeding the best projections.

A followup email from Goldstein said that “[w]e have asked
Roberto Coin directly numerous times for confirmation of the black jade
authenticity and we have not received any response.” He then threatened Borsheims
with “filing for class action status on this matter to protect [his] business
and the consumers being misled by false advertising.” He said that Borsheims
needed to “take remedial action otherwise we will include your company in this
[action] since we have legally notified you…. And yes even borsheims has to
be held accountable.” Afterwards, Borsheims told RCI it was “removing the black
jade” offerings from Borsheims’ website.

Goldstein also contacted other RCI retailers (Macy’s, Neiman
Marcus, and Saks Fifth Avenue) seeking confirmation that RCI’s black jade was
certified.  He told Saks’s parent
corporation that RCI’s black jade was “not … authenticated or certified as
advertised,” and had similar exchanges with Macy’s and Neiman Marcus. He
emailed them to say he would be filing a lawsuit against RCI: “I am part of a
group of gemstone dealers selling genuine and certified black jade, that are in
the process of filing a class action lawsuit against Roberto coin for selling
non authenticated black jade.” He said he was letting the retailers know about
his lawsuit as a “courtesy” so that they could “take remedial action … and
remove any questionable product that cannot be authenticated.” At his
deposition, Goldstein acknowledged approaching “every customer that was
advertising the black jade.”  He
testified about the steps he took to identify every RCI retailer and that it
was a “huge amount of communication.”  (He
also emailed “basically industry wide” announcing his counterclaims in this
case, reaching “various jewelry-industry players: newsletters and magazines,
trade associations, and additional retailers” and analogizing the situation to an
earlier scandal about gem misclassification; there was a bribery aspect to that
situation but he testified that he wasn’t aware of the bribery part.)

Macy’s and Saks Fifth Avenue also stopped selling the Black
Jade collection. Saks, Borsheims and Bloomingdales alone returned jewelry
valued at more than $380,000 from the Black Jade collection. “At least one
jewelry retailer apparently understood Goldstein to be challenging the
authenticity of the gemstones in RCI’s Black Jade collection, as opposed to
merely questioning whether RCI had obtained an authentication from a
laboratory.”

RCI’s position was that there is no industry-wide
“certification” for the “authenticity” of black jade, because “black jade” is
not a scientific category. Instead, it contended that “jade” is generally used
in the industry to describe two different but related minerals, nephrite and
jadeite, and that the term “black jade” cannot constitute false advertising. It
did, however, obtain certifications from various gemological labs, including one
certifying that RCI’s gemstones were comprised of “Natural Amphibole Material”;
another certifying “amphibole and other minerals”; an NGTC certification certifying
“Black Amphibole Jade”; and another certifying “Black Nephrite Jade.” However,
RCI obtained the latter two certifications — including the one from NGTC —
after it emailed the card promoting its stones as “[t]he most fascinating black
amphibole jade …. 100% natural identified and certified by China’s National
Gemstone Testing Center (NGTC)” — to Saks and Borsheims.  

Lanham Act false advertising: RCI alleged two overlapping
subcategories, (1) claims that RCI’s black jade was fake or inauthentic (e.g.,
Goldstein’s emails to Borsheims discussing the impact that the sale of “Fake
black jade” has on Goldstein’s business, making a cubic zirconia/diamond comparison,
and calling his company one of “the real black jade jewelry companies”) and (2)
statements that RCI’s stones lacked some form of certification or
authentication.

Falsity: RCI showed sufficient evidence of literal falsity
of (1) to continue, but (2) was murkier. The “not authenticated” statements
weren’t literally false, “as RCI did not (at the time) possess a certification
expressly confirming that its stones were ‘black jade.’” But given RCI’s
evidence that there is no established mineralogical category for “black jade,” a
jury could find implied falsity, especially since one retailer seemed to
understand the statement as questioning whether the stones were “somehow
counterfeit.” A falsity finding would be premature, since a factfinder should address
implied falsity and the parties continued to dispute which stones RCI submitted
to obtain its certifications. “The existing record does not definitively rule
out the possibility that RCI commingled stones from Goldstein and its
subsequent supplier, or definitively establish the provenance of the stones RCI
submitted for evaluation.”

Goldstein also made legal claims in his emails, e.g., “[i]f
there is no certification available, then legally you cannot claim or advertise
that it is black jade.” This wasn’t itself actionable, because “a layman’s
statements about the illegality of another party’s conduct do not violate the
Lanham Act absent a ‘clear and unambiguous ruling from a court or agency of
competent jurisdiction’ that the conduct is lawful.” However, a jury could
consider them “to the extent they imply (as a factual matter) that RCI was
misleading its retailers or other customers about the content of its stones.”

Commercial advertising or promotion: Since the statements to
retailers weren’t identical, the court had to decide whether to consider them
individually or in the aggregate when assessing the breadth of dissemination. “Goldstein’s
statements should be aggregated when assessing the breadth of dissemination,
because they were made during a compressed time period (approximately three
weeks in April 2018) and concerned similar subject matter (the authenticity and
authentication of RCI’s black jade).”  A
jury could reasonably conclude that they constituted a single “campaign.” Once
that was done, the dissemination was sufficiently broad to qualify as
advertising or promotion. The court noted, that, “[o]n the one hand, the global
market for fine jewelry is perhaps enormous.”  But “the market for name-brand, artistically
produced luxury jewels is surely a discrete subset of that industry.” RCI’s
evidence showed that the five prominent department stores that Goldstein
emailed accounted for “over 23% of RCI’s gross profits on sales from the black
jade collection” in themselves. “[O]n this record, a reasonable jury could
conclude that the relevant market is confined to higher-end jewelers like
Neiman Marcus, rather than every seller of precious stones in the world,” and
that Goldstein communicated with a sufficiently large proportion of that market—a
“huge” amount of communication in his own words.

Trademark infringement: Goldstein admitted that he posted photographs
of RCI’s jewelry on Kings Stone’s Instagram feed.  RCI’s logo — the letters “RC” with a diamond
shape beside them—was superimposed. He used these materials to promote Kings
Stone’s black-jade business, and used his PowerPoint similarly. Goldstein
argued that he had oral authorization as part of the deal to supply black jade
to RCI. (Nominative fair use would be relevant outside the Second Circuit,
though use of the logo would definitely pose a problem.) He argued that he’d
provided a discount on stones in exchange for this authorization and that such
a deal was a “common industry practice.”

The court was unconvinced: “[I]t strains credulity to think
that the parties agreed on the duration of the trademark license —
specifically, that it would exist in perpetuity — without any corresponding
agreement on the period of time for which RCI and its affiliates would purchase
stones from Goldstein (a period that, in the end, lasted only about a year).”
But more importantly, the Statute of Frauds prevented reliance on such
permission, irrespective of credibility. What he had in writing—purchase orders
memorializing a “discount price” from Kings Stone and an email from Roberto
Coin stating that the “RC brand will bring you lots of credibility in the
market”—wasn’t enough to set out the material terms of an agreement. Thus, RCI
won summary judgment on its infringement claims.

However, the court would let a jury resolve the question of
damages, including willfulness.

Defamation/trade disparagement:  There was sufficient evidence for a jury to
find special damages, based on lost customers and revenue. Otherwise, factual
questions remained, as with the Lanham Act false advertising claim. Tortious
interference: same. Specifically as to the lawsuit threats: “[A] lawsuit or the
threat of a lawsuit is wrongful [for purposes of a tortious interference claim]
if the actor has no belief in the merit of the litigation.” “It is also
wrongful if the actor, having some belief in the merit of the suit,
nevertheless institutes or threatens to institute the litigation in bad faith,
intending only to harass the third parties and not to bring his claim to
definitive adjudication.”

GBL Section 349:  The alleged
conduct was not consumer-oriented, even it wasn’t a “garden-variety” dispute
between competitors. There was no specific evidence that the “public interest
[wa]s harmed” by defendants’ actions.

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Mexican origin claims revitalized by survey

Govea v. Gruma Corp., 2021 WL 4518457, No. CV 20-8585-MWF
(JCx) (C.D. Cal. Aug. 18, 2021)

Previous
discussion
. The amended complaint fares better: the tortilla packages at
issue plausibly misrepresented Mexican origin. Plaintiffs added allegations that
“[u]n pedacito de México” translates to “a piece from Mexico,” in addition to
“a piece of Mexico.” And they alleged a consumer survey that showed 401
participants the following image: 

It then asked: “Based on the label of the product, where do
you believe the product is made?” 70.1% of participants answered Mexico. Gruma argued
that the survey was unreliable because it failed to use open-ended questions
and controls and failed to consider whether the participants actually zoomed in
on the label or read any of its text. “Even if Gruma is correct that the Survey
suffers from certain flaws, the Survey at least demonstrates that it would not
be ‘impossible for the plaintiff to prove that a reasonable consumer was likely
to be deceived.’” Thus, dismissal at this stage was unwarranted. As with another
recent case, Rodriguez v. Olé Mexican Foods Inc., 2021 WL 1731604, No. EDCV
20-2324 JGB (SPx) (C.D. Cal. Apr. 22, 2021), the packaging “evokes the spirit
of Mexico, which … may also mislead a reasonable consumer about the Tortillas’
geographic origin.”

Plaintiffs had standing to seek injunctive relief because
they desired to buy the tortillas in the future, but were currently unable to
rely on the packaging.  

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Disney’s Toy Story 4 daredevil not legally risky

K & K Prods., Inc. v. Walt Disney Studios Motion
Pictures, No. 2:20-CV-1753 JCM (NJK) (D. Nev. Sept. 23, 2021)

Evel Knievel was a famous motorcycle daredevil with an
“iconic wardrobe: a white jumpsuit embellished only by star-spangled red,
white, and blue patriotic insignia with a matching white cape and helmet and a
motorcycle adorned by red, white, and blue colors.” “In 1973, Ideal Toys
released the Evel Knievel Stunt Cycle, a toy which features a doll of Evel
Knievel in his signature…jumpsuit and matching helmet.” The toy came with a red
“energizer”, which wound up the toy to be released. K&K claimed rights
relating to Evel Knievel, including trademarks, copyrights for audio/visual
works, right to publicity, existing licenses, contracts, and common law rights.

image from complaint
EK toy and comparison to EK

EK Daredevil Stunt Set
70s TV ad (I love that the plaintiffs grabbed it off social media)

Toy Story 4 featured a new character, Duke Caboom, who rides a Canadian-flag-colored motorcycle and dresses in a white jumpsuit, helmet, and cape with Canadian insignia. His insecurities are revealed by a flashback to a 70s era scene where a child is playing with his Duke Caboom doll while watching the commercial advertisement for the “Duke Caboom Stunt Cycle.” The toy could not perform as advertised in the commercial. In his final stunt, Duke Caboom tries to jump 40 feet across an amusement park and through lights fabricated to look like a ring of fire. He fails. Disney promoted Toy Story 4 with materials featuring Duke Caboom and also sold Duke Caboom Merchandise, including a Duke Caboom doll in a white jumpsuit with a cape and belt buckle adorned by a red Canadian insignia, a matching helmet and motorcycle, and a red “launcher.” 

traumatic flashback

toy with launcher; other toy images below

“Toy Story 4 actors, directors, and producers referenced the Evel Knievel inspiration for Duke Caboom in six separate interviews.” Consumers and critics likewise noted the similarities.

side by side comparisons

K&K’s false endorsement/false description, trade dress infringement, trademark dilution, and state law claims including right of publicity claims all failed on a motion to dismiss. Rogers applies to the Lanham Act and coordinate state law claims, and this isn’t a difficult Rogers case. K&K simply failed to plead facts indicating that Toy Story 4 wasn’t an expressive work, or that associated merchandise wasn’t sufficiently attached to the “host” expressive work. “It is … well-established that advertising and the sale or licensing of consumer goods related to an expressive work like a film are incorporated into the same Rogers test analysis.”

Obviously, “the alleged allusion to Mr. Knievel bears substantial artistic relevance to the creative work.”  K&K argued that Duke Caboom wasn’t artistically relevant to the film because it does not add “any original material element” to Toy Story 4 and is used “solely to import Evel Knievel…into the film.” That’s not a way around Rogers. “The court is not willing to make the unreasonable inference on the facts that the Duke Caboom’s appearance is simply a gratuitous showing of an Evel Knievel-esque motorcycle stuntman.”

Nor was there any explicit falsity that would confuse consumers into thinking that the “celebrity is somehow behind the [the film] or that [he] sponsors the product.” The “nature of [Disney’s] behavior” and not “the impact of the use” on consumers was the key, even if there had been consumer confusion evidence. The court unnecessarily points out that the toy has “a different name, appearance, and backstory from Evel Knievel.” More to the point, the use of a mark alone is not enough to satisfy this prong of the Rogers test, otherwise “it would render Rogers a nullity.” Even if Disney’s use of Evel Knievel was “blithe,” it was nonactionable without explicit misleadingness.

ROP: The Nevada ROP statute specifically exempts uses that are an “attempt to portray, imitate, simulate, or impersonate a person in a… film” and uses “in connection with an advertisement or commercial announcement for a use permitted by this subsection.” As for the toys, the court predicted that Nevada would imitate California, as it has done in similar situations before, and adopt a transformative use defense. This could be resolved on a motion to dismiss, especially since ROP laws implicate broad free speech interests and “a speedy resolution is desirable because protracted litigation may chill the exercise of First Amendment rights.” Here, Evel Knievel was one of the raw materials for the work, not the “sum and substance” of the work; the work was primarily Disney’s own expression; Disney provided the marketability and economic value of the work because it’s Disney and people already like Disney; and Toy Story 4 wasn’t just a mere exploitation of the fame of through a conventional portrait, superseding the artist’s skill and talent. In California terms, this was more Kirby (video game with a reporter from outer space character who looked like a real singer) than Comedy III (conventional charcoal portrait).

As in Kirby, Duke Caboom was “reminiscent” of Evel Knievel, but not a literal depiction. Unlike the sports videogame cases “where the video game avatars looked the exact same outside of their name and hometown, Duke Caboom is not a carbon copy of Evel Knievel minus a few details.” 

Distortions of a celebrity figure “are not, from the celebrity fan’s viewpoint, good substitutes for conventional depictions of the celebrity and therefore do not generally threaten markets for celebrity memorabilia that the right of publicity is designed to protect.”

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