Allegedly outdated comparison not enough to justify TRO in sophisticated industry

NEXTracker, Inc. v. Array Technologies, Inc., 2017 WL
5625926, No. 17-cv-06582 (N.D. Cal. Nov. 22, 2017)
The parties (NX and ATI) compete in the market for solar
tracking devices, which “adjust the positioning of solar panels…to increase
the efficiency of their solar power capture.” In September 2017, TUV, “which
appears to be a non-governmental testing and assessment organization,” issued a
report comparing the operational costs of two different solar tracking
architectures and concluding that “Architecture 1” — a tracker “driven by a
single motor linked by a rotating driveline to multiple tracker rows” — is
associated with lower lifetime operational costs than “Architecture 2” — “a
system where each row operates as a self-contained unit with…dedicated
tracker system components.” NX alleged that “Architecture 1” is ATI’s
technology and that “Architecture 2” shows an NX product.
Apparently in response to NX’s objections, TUV retracted the
report, but NX alleged that ATI widely disseminated the report both before and
after the retraction.  NX sought a TRO
based on its false advertising, trade libel, and defamation claims, which the
court denied.
First, NX didn’t show falsity or misleadingness; the TUV
report didn’t mention NX or its products by name, and though it showed an NX
product, NX didn’t provide evidence that the relevant claimed trade dress (NX’s
“signature gold-colored paint” and “distinctive curve-shaped tube”) had
acquired secondary meaning such that consumers would perceive a reference to NX
systems in particular, rather than “Architecture 2” systems in general.  
Even assuming that the association existed, NX still failed
to show likely success on the merits.  NX
argued that the report was false or misleading because “Architecture 2” was a
three-year-old NX design, whereas the system described as “Architecture 1” was
ATI’s latest tracker.  But the report
didn’t purport to compare systems of the same generation or age, and it wasn’t
false or misleading just because it compared systems of two different
vintages.  “Such a comparison may even be
useful in the solar industry because, as NX itself argues, ‘Solar trackers are
a long-term investment — they can remain operational for many decades.’ It
also seems possible that solar industry participants savvy enough to identify ‘Architecture
2’ as an NX system might also recognize that the featured device was not
necessarily the latest model.”  Nor did
the record justify a finding that the report falsely described the NX system,
as NX alleged. NX claimed that the report made false statements about its
gears, its positioning of solar modules, and its use of struts, but never
clarified whether those statements were false only as to current NX products or
as to the prior ones too.  ATI argued in
opposition that the statements were true for the tested NX products, which was uncontested
in NX’s reply brief.
Although TUV retracted the report, the evidence showed that
NX’s objections, rather than independent concerns about the veracity of the
report, drove the retraction, stating that TUV  “did not subjectively entertain any serious
doubt about the truth of the statements in the report,” but still believed that
it was “in the best interest of all parties to retract the Report and conduct a
diligent investigation of NEXTracker’s allegations about the Report.”

The court also declined to find irreparable harm likely;
much of the harm alleged by NX likely already occurred because of the report’s
alleged wide dissemination.  Although NX
argued that a TRO could help at the margins, NX “fail[ed] to quantify the
reputational injuries it will suffer if ATI continues to distribute the report”
and thus failed to show irreparable injury.

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Another court declines to apply GNC where plaintiff alleges only negative studies

Yeldo v. MusclePharm Corp., 2017 WL 5499588, Case No.
17-11011 (E.D. Mich. Nov. 16, 2017)
Yeldo brought a putative class action alleging that
MusclePharm used misleading marketing practices to promote its glutamine dietary
supplement, whose label and online ads indicate that it “enhances muscle growth
and recovery, supports rebuilding and recovery from the toughest workouts,
reduces catabolism and supports an anabolic environment, aids in muscle growth,
causes faster recovery, and helps consumers rehydrate, rebuild, and recover
faster and more efficiently.” Although glutamine naturally found within the
body plays a role in muscle growth, recovery, and immunity support, Yeldo
alleged that “glutamine supplementation has been found to be completely
ineffective at mimicking these physiological responses.” Yeldo based his claims
on nine scientific studies finding no benefit from glutamine.
The court found that Yeldo plausibly alleged falsity.  Although the court accepted that a plaintiff
must plead the existence of a study that tests the combination of ingredients
used in a given product, that means the active ingredient/s in
combination.  Here, the product at issue
relied only on one active ingredient. The studies alleged “support the
proposition that glutamine supplementation has no effect on muscle performance
or strength, muscle growth, recovery, or performance during exercise,” even if
they didn’t test MusclePharm’s specific products or dosages. 
MusclePharm argued that some of the studies supported its
claims, making the case more like In re GNC Corp., 789 F.3d 505 (4th Cir. 2015),
which (wrongly) held that literal falsity is impossible unless all reasonable
experts disagree with the advertising claim. Here, the complaint didn’t concede
that any scientists found glutamine effective, and MusclePharm merely
“cherry-pick[ed] sentences from the papers’ introduction sections, which
summarize the findings of other studies or hypothesize conditions where
supplemental glutamine may create the represented effects.”  Because the conclusions supported Yeldo’s
argument, he stated a claim.  Weighing
the merits of these scientific findings to determine which is most credible
wasn’t appropriate on a motion to dismiss. [Which is why GNC is wrong.]
Nor did Yeldo need to plead how and when he consumed the product
or whether he experienced the advertised benefits; he alleged that he bought
and consumed the product and either would not have done so or would not have
paid as much for the product if he’d known defendant’s representations were
false. That monetary harm was sufficient. However, his negligent
misrepresentation claim was barred by the economic loss doctrine.
Yeldo also had Article III standing to seek injunctive
relief, because consumer protection statues, which provide for injunctive
relief, could never be invoked to enjoin deceptive practices if the complaining
consumer’s standing dissipated the moment she discovered the alleged deception
and could no longer be fooled.
Yeldo’s claims weren’t preempted by the FDCA, since that
statute deems food misbranded when the label contains a statement that is “false
or misleading in any particular,” and so Yeldo’s claims paralleled the FDCA’s
requirements; the conduct at issue would also give rise to liability under
Michigan common law even if the FDCA had never been enacted. Nor did the doctrine
of primary jurisdiction bar these claims.

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To the spoliator does not go the victory in corporate betrayal case

OmniGen Research, LLC v. Wang, No. 16-cv-268, 2017 WL
5505041 (D. Or. Nov. 16, 2017)
After OmniGen successfully moved for a default judgment in
its favor due to spoliation of evidence, the court awarded damages on OmniGen’s
trade secret, false advertising, and related claims.  Default means that the factual allegations of
the complaint, other than those about damages, will be taken as true.
While working for OmniGen, which makes feed addditives that
improve the health of dairy cows and other animals, defendant Wang breached his
contracts by secretly creating an OmniGen-clone Chinese business based on
stolen OmniGen research and information, forming at least two entities, Bioshen
and Mirigen.  He also applied for a
Chinese patent that covers a knockoff of an OmniGen product, and had fellow
individual defendant Zheng—who is Wang’s wife and … does not have a
background in biological sciences—listed as an inventor in his place, and
employed similar tactics with the contact information for Bioshen and Mirigen.  He presented an OmniGen Research slide
presentation (whose copyright OmniGen registered) as if it was his own at a
large scientific conference in China, with many slides altered only to add the
Mirigen logo.  At the conference, which
was attended by over a thousand people, including academics, government
officials, and business leaders, defendants’ marketing materials claimed to
employ “the most advanced modern green agricultural technology from the United
States.”  Wang represented the material
copied from OmniGen’s slides as Mirigen’s and Bioshen’s, as well the
innovations described therein.  [This
seems to be Dastar-barred at least as
a §43(a)(1)(A) claim, but in a default situation, don’t expect that to
matter.]  His acts also led to the
dissemination of confidential OmniGen research notes at the conference and
elsewhere.  Bioshen and Mirigen also
submitted a paper falsely describing research as part of their participation in
the conference: the paper described a study conducted with pigs by Bioshen and
Mirigen using their feed additive, when in fact the studies were conducted by
OmniGen on sheep and dairy cattle using its
feed additive. 
Unsurprisingly, the court found for OmniGen on its breach of
contract, intentional interference with economic relations, and trade secret
misappropriation claims.  As for false
advertising, the court also found for OmniGen, including for stating that
OmniGen’s slides were defendants’ work, for falsely describing the study, and
for falsely claiming that Mirigen and Bioshen were affiliated with a
‘professor’ at Oregon State University.” The court accepted the complaint’s
allegations that these statements were material because “they lend credibility
to Wang, Bioshen, and Mirigen, giving them the appearance of relying on
original scientific research and thinking.” The court further accepted that the
statements were made in commercial advertising or promotion, and that the
parties competed around the world, including in China.  Finally, and perhaps of greatest interest,
the court accepted that defendants’ conduct affected interstate commerce
because “Bioshen promotes itself as a U.S. company, attendees at the conference
included people who do business in the U.S. and who represent companies that do
business in the U.S., and people who review and comment on U.S. scientific
The court also found that Wang breached his fiduciary duties
to OmniGen, including, along with the above acts, intentionally sabotaging an
OmniGen study he was assigned to work on, and fabricating or falsifying
data.  OmniGen therefore repeated the
work he was assigned to do.
As to damages, they must be proved to a reasonable degree of
certainty, but where a defendant’s conduct makes damages difficult to
determine, courts allow “broad latitude” in quantifying damages. Defendants’ $821,000 initial investment in Mirigen reflected OmniGen’s
expectation interest under its agreements with Wang: if Wang had fully
performed, “the Chinese patent would have been assigned to OmniGen and the
investment garnered by that patent and other confidential information would
have accrued to Plaintiffs rather than Wang’s competing business entity. These
are concrete, certain, and quantifiable injuries under a contractual theory of
recovery.” OmniGen didn’t seek a separate award for the intentional interference
with economic relations.
On the trade secret claim, $821,000 was likewise reasonably certain
and a conservative valuation of what was misappropriated.  OmniGen was also entitled to punitive damages
due to Wang’s willful and malicious misappropriation, to a maximum of twice
actual damages; the court determined that this was warranted, resulting in a total
award of $2,463,000.  For copyright
infringement, the court accepted that infringement occurred post-registration,
entitling OmniGen to statutory damages. 
Although the court was required to accept that infringement occurred
post-registration, it wasn’t required to accept that the infringement was
willful, as this wasn’t alleged in the complaint, and thus the court awarded
the statutory minimum of $750.
Under the Lanham Act, OmniGen was entitled to damages,
including profits, but defendants’ discovery abuse and spoliation of evidence
related to damages prevented a precise calculation of Defendants’ profits.  The court found it equitable to award OmniGen
the $821,000 as the value of Mirigen. Treble damages could be awarded “if the
allegations in the complaint support it.” 
OmniGen was harmed by defendants’ knowingly false statements, and “[a]s
is common in such false advertising cases, quantifying damages is difficult
(especially where evidence has been systematically destroyed by the defendant).”  The court nonetheless declined to award
OmniGen an estimated $80,000 based on defendants’ head start/avoided costs of
conducting its own studies, finding them an improper measure of actual damages,
and one that would be punitive rather than compensatory. Nonetheless, the
$821,000 was a conservative proxy of damages, and so the court enhanced it to $2,463,000,
as justified by defendants’ intentional/willful conduct, especially in
destroying evidence.  Enhancing damages
would capture otherwise evanescent measures of goodwill, as well as deter
defendants and others similarly situated from engaging in unfair and deceptive
Damages from Wang’s breaches of fiduciary duty were the
costs to re-create or repeat research projects because of Wang’s breaches of
fiduciary duty, or $252,000, as well as the recovery of all compensation paid during
his period of disloyalty as damages, or $92,000.
Because OmniGen was limited to a single recovery, the total
was $821,000 for breach of contract, misappropriation of trade secrets, and
false advertising; $344,000 for Wang’s breach of fiduciary duty;  $750 for copyright infringement; and $1,642,000
for enhanced damages under the Lanham Act/punitive damages under state trade
secret law.  [The language of the Lanham
Act that enhanced damages can’t be punitive seems not to do a lot of work,
given how the cases come out.]
The court likewise granted a permanent injunction.  The disclosure or threatened disclosure of
trade secrets or even non-trade secret confidential information was sufficient
to meet the irreparable injury requirement for a preliminary injunction, as was
the consumer confusion, loss of good will, and increased market place barriers
which can result, and, in this case, did result, from false advertising.  [Not clear whether this is entirely
consistent with Herb Reed.]  Damages/legal remedies were also inadequate
because the injuries were difficult to quantify, and they were also ongoing and
could worsen without an injunction.
However, the court would not enjoin
defendants from working for certain types of feed industry businesses; that was
too much of a restraint on trade, as well as unfairly limiting defendants’
ability to satisfy the judgment in this case. The defendants were enjoined against further use of confidential information and false advertising, and also required to assign to OmniGen all their interest in the
Chinese patent and application, as well as register the assignment with the
Chinese government.
The court’s injunction was worldwide, given that defendants’
wrongful actions included conduct in China.

The court also awarded attorneys’ fees and costs pursuant to
the Lanham Act, the Oregon Trade Secrets Act, and Fed. R. Civ. P. 37(b)(2)(C)
(relating to spoliation of evidence).  As
for the Lanham Act, the complaint’s allegation of intentional and willful false
advertising was, “on its own, sufficient to establish the substantive weakness
of Defendants’ litigation position.” 
Defendants also litigated in an unreasonable manner, including Wang’s
attempt to evade service by lying to the process server, an initial default,
discovery violations, and a destruction of evidence “beyond anything previously
witnessed by this Court.” The award of attorneys’ fees pursuant to the Oregon
Trade Secrets Act and Lanham Act applied to the entire action and not just the
individual claims under which the fees are authorized, because the claims all
involved a common core of facts and were interrelated. Fees awarded were nearly

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We got the empire, now as then: Rogers precludes record label suit against Fox show

Twentieth Century
Fox Television v. Empire Distribution, Inc., No. 16-55577 (9th Cir. Nov. 16,
Distribution, founded in 2010, is a well-known and respected record label that
records and releases albums in the urban music genre.”  Then came Fox’s TV show Empire, “which
portrays a fictional hip hop music label named ‘Empire Enterprises’ that is
based in New York” and “features songs in every episode, including some
original music.” Columbia Records releases music from the show, and Fox
promotes the show and its music through live musical performances, radio play,
and consumer goods such as shirts and champagne glasses bearing the show’s “Empire”
brand.  Fox sought a declaratory judgment
of noninfringement and Empire counterclaimed for infringement and dilution. The
district court granted summary judgment to Fox, relying on Rogers v. Grimaldi, and the court of appeals affirmed.
Empire argued that
at least some of Fox’s uses weren’t part of expressive works and thus outside Rogers: Fox allegedly used the “Empire”
mark “as an umbrella brand to promote and sell music and other commercial
products.” The court of appeals found that these were only “technically”
outside the title or body of an expressive work: works protected by Rogers “may be advertised and marketed
by name.”  There was no reason to think
the TV show was a pretextual expressive work “meant only to disguise a business
profiting from another’s trademark”; Fox’s promotional activities, “including
those that generate revenue, are auxiliary to the television show and music releases,
which lie at the heart of its ‘Empire’ brand.”

A footnote in Rogers says that Rogers’ limiting construction of the Lanham
Act wouldn’t apply to titles that are confusingly similar to other titles,
because the public interest in sparing consumers this type of confusion
outweighs the slight public interest in permitting authors to use such titles.
But appellate courts haven’t cited this footnote, and even the Second Circuit
applied Rogers in the subsequent Cliffs Notes case involving conflicting
titles.  Any such exception might be “ill-advised
or unnecessary,” and was anyway inconsistent with Ninth Circuit precedent speaking
of Rogers as the test that applies
when expressive works are accused.
Applying Rogers: Empire argued that, in order for
Rogers to apply, the mark must have
attained a meaning beyond its source-identifying function.  [Which, not for nothing, “empire” does—it just
had that meaning before Empire entered the scene.] But that’s merely a
consideration—expressive uses often, but not always, occur “when a brand name
enters common parlance and comes to signify something more than the brand
itself,” and Rogers is broader. Then,
unfortunately, the court commented that “a mark that has no meaning beyond its
source-identifying function is more likelyto be used in a way that has ‘no artistic
relevance to the underlying work whatsoever,’ because the work may be “merely
borrow[ing] another’s property to get attention’” (citing Dr. Seuss Enters. v. Penguin Books, sigh)—which of course is
inconsistent; if the mark didn’t have some sort of meaning beyond source
identification, it wouldn’t make sense to use it to get attention for an
expressive work.
Here, Fox used the
common English word “Empire” for artistically relevant reasons: “the show’s
setting is New York, the Empire State, and its subject matter is a music and
entertainment conglomerate, ‘Empire Enterprises,’ which is itself a figurative
empire.”  Prong one was satisfied. There
was no additional requirement, as argued by Empire, that the junior work refer
to the senior mark. “A title may have artistic relevance by linking the work to
another mark, as with ‘Barbie Girl,’ or it may have artistic relevance by
supporting the themes and geographic setting of the work, as with Empire.”

The title wasn’t
explicitly misleading.  Empire Distribution
argued that the “relevant inquiry . . . is whether the defendant’s use of the
mark would confuse consumers as to the source, sponsorship or content of the
work.” But that’s the general likelihood-of-confusion test, which applies
outside the Rogers context of expressive works. Likely consumer confusion wasn’t
the key, but rather whether there was “an ‘explicit indication,’ ‘overt claim,’
or ‘explicit misstatement’ that caused such consumer confusion.” Fox’s Empire
show contained no overt claims or explicit references to Empire Distribution, and
thus wasn’t explicitly misleading; game over. 

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false advertising of copyright ownership of songs not preempted, court rules

Carter v. Pallante, 256 F. Supp. 3d 791 (N.D. Ill. 2017)

Tollie Carter sued, as relevant here, alleging that ARC, Fuji, and BMG infringed his copyrights in certain songs by selling unauthorized licenses to third parties, who in turn publicly performed the songs. Carter’s father, Calvin Carter, and his uncle, James Bracken, were songwriters, and Carter is their heir who allegedly recaptured rights in their works under §203 and §304.

Nonetheless, Carter alleged that the publisher defendants, “without [Carter’s] authorization or consent, represented to numerous third parties it could license—and did license to those third parties—the performance rights and other rights to [Carter’s songs].” The court found that claims for copyright infringement and contributory infringement were sufficiently pled.  Selling licenses plausibly violated Carter’s exclusive right to “distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” [Which right?  Authorization isn’t usually considered a separate right, but merely the foundation for secondary liability, which does seem adequately alleged here.] The court rejected defendants’ argument that Carter needed to state who the third parties were, which songs were licensed, or when the licenses were sold, none of which is required under Rule 8 for copyright claims. “He cannot be expected to know at this stage who the third parties were, when these sales occurred, or which of his songs were licensed. This information, if it exists, is exclusively within the Publisher Defendants’ knowledge, and Carter can obtain it only through discovery.”  So too with contributory and vicarious copyright infringement.

DMCA §1202: The claim for removing CMI also survived, even though the alleged removal here didn’t relate to “the Internet, electronic commerce, automated copyright protections or management systems, public registers, or other technological measures or processes as contemplated in the DMCA as a whole.” The plain text of the statute doesn’t require any of that.  Further, defendants argued that Carter didn’t plead that false copyright information was conveyed “with copies of the work.”  But under Rule 8 he didn’t to plead particularized facts as to how, when, and to whom the publishers communicated false information in connection with their purported licensing agreements. “In any event, Carter unmistakably alleges that false copyright information was conveyed with copies of the work by way of the licensing agreements he claims the Publisher Defendants entered into with third parties.” [That doesn’t seem right—again the court seems to be conflating authorization with actual exercise of a §106 right.]

State law claims, however, were mostly preempted, including tortious interference claims. The partial exception was deceptive trade practices under the Illinois Uniform Deceptive Trade Practices Act, which covers “pass[ing] off goods or services as those of another” and “caus[ing] likelihood of confusion or of misunderstanding as to the source … of goods” as deceptive trade practices. The claim that publishers passed off the copyrighted songs as their own, so that consumers would license them, “falls squarely within the Copyright Act and is therefore preempted.”  However, allegations that the defendants “misrepresented that they owned the copyrighted songs in advertising material without infringing copyrights to the songs” were sufficient, since “[m]aking misrepresentations about a copyrighted work in advertising material—short of licensing the copyrighted works at issue or taking any other action in connection with a copyright owners exclusive rights—is not among the exclusive rights enumerated in § 106 of the Copyright Act.”  This doesn’t seem right under Dastar—the interpretation of “source” is usually the same under state and federal law, and Dastar’s reasoning should justify conflict preemption of state law anyway.

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physical harm to the public isn’t irreparable harm for competitor plaintiff

Nutrition Distribution, LLC v. Enhanced Athlete, Inc., 2017
WL 5467252, No. 17-cv-2069 (E.D. Cal. Nov. 14, 2017)

Defendants allegedly falsely advertised products containing
2,4-Dinitrophenol (DNP) to body builders, gym users, and the like. Defendants allegedly
promote it as an ingestible fitness supplement that increases fat loss, despite
the health dangers it poses. The plaintiff sells its own competing supplement,
and sued for false advertising and RICO violations. The court found that there
could be no preliminary injunction because the plaintiff hadn’t shown
irreparable harm.  After eBay, the court declined to presume
irreparable harm from falsity and materiality. Health harm to the public was third-party harm, relevant to the
public interest but not to whether the plaintiff had shown irreparable harm to
itself.  The plaintiff’s claim of lost
sales since the introduction of DNP into the market didn’t show a causal
connection between the two, and anyway lost sales could be remedied by money

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Church & Dwight not protected against challenge to “Made in USA” claim for condoms

Claiborne v. Church & Dwight Co., 2017 WL 5256752, No. 17-cv-00746
(S.D. Cal. Nov. 13, 2017)
At least two lines of Trojan brand male condoms have the
words “Made in U.S.A.” printed on the packaging. This statement allegedly
violates California law because more than ten percent of the condoms’ wholesale
value allegedly derives from natural latex material produced outside of the
United States.  Claiborne alleged that
the condoms state that they contain natural latex, and that US domestic
production of natural latex is minimal, with 90% of the global supply coming
from Southeast Asia.  Further, the US is
allegedly the largest consumer of natural latex—accounting for approximately
20% of global consumption. In addition, the natural latex is allegedly the only
substantial component of the Condoms.
The court found that Claiborne plausibly alleged that more
than ten percent of the condoms’ wholesale value comes from outside of the
United States, which would make it unlawful to market as “Made in U.S.A.” in
California.  It was true that Claiborne
didn’t allege exactly what percentage of the wholesale value comes from abroad,
but all he needed to do was plausibly allege that the foreign wholesale value was
greater than ten percent, rather than an exact percentage above that.
Claiborne also plausibly alleged that he suffered damage: he
alleged that, but for the “Made in U.S.A.” representation, he would not have
purchased the condoms or he would have paid less. That’s enough under Kwikset
He also had standing to pursue injunctive relief even though he now believed
the representations were currently false (this opinion appeared to have been
drafted before the 9th Circuit’s recent
ruling on this
, because the court says there’s no binding authority;
fortunately the court’s reasoning is consistent with the current law).  “[W]here false advertising misleads a
consumer, the consumer tends to suffer continuing injury in the form of a
lessened ability to trust that any similar future representation is accurate.” Relief
“could restore the consumer’s trust, thus aiding him in making informed
purchasing decisions in the future.” 
Claiborne didn’t need a present intention to purchase a Trojan product
in the future; false advertising still injured him “because it lessens his
ability to gather all relevant information and incorporate it into his future
purchasing decisions.”
Church & Dwight argued that, even under this approach,
the allegations of the complaint established that it is not possible for a
natural latex condom to carry a lawful “Made in U.S.A.” label because of
insufficient domestic natural rubber production. That wasn’t true; it merely
alleged that, because of the current domestic supply/demand imbalance, C&D
uses imported natural latex.  If C&D
changed its sourcing, it could keep the label.

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