confusion over confusion: court holds that disparagement can be infringing

Nutreance LLC v. Primark, LLC, 2020 WL 3892995, No.
4:18-cv-00098-SRC (E.D. Mo. Jul. 10, 2020)

“This is a trademark infringement/false advertising case involving
competitors in the nutritional-supplements market.” The court holds that
the alleged bad conduct is actionable, but unfortunately considers some of it
(disparaging the plaintiffs at a webpage reached using keywords) as possibly
trademark-infringing without actually setting out how consumers could be confused
about the link between the plaintiffs and the criticism or about the relationship of the two explicit
competitors. 

Plaintiffs alleged that defendants “orchestrate a scheme to
publish sham reviews of Plaintiffs’ products online, on websites purporting to
be independent and unbiased, but actually controlled by Defendants.” The sites
rank products, invariably ranking plaintiffs’ products as superior and
defendants’ competing products as the top choice. They allegedly buy keyword
ads using plaintiffs’ trademarks to steer potential customers to the fake
review sites. 

Some of the defendants (Admark) contracted with non-party
review site hosts to conduct “affiliate marketing.” Admark agreed to pay the hosts
a 20% commission on all sales of Admark products referred by the review websites,
which agreed to place banner ads for Admark products on their sites. The review
hosts disclose that they may receive a commission for product sales, but an
“Advertising Disclosure” states: “We are independently owned and the opinions
expressed herein are our own. All editorial content is written without
prejudice or bias, regardless of sponsor or affiliate associations.” This was
allegedly untrue: the review sites were actually controlled by various
defendants. The hosts allegedly 

paid third-party copywriters to
prepare the reviews with an appearance of objectivity, but always concluding
that the competitors’ products were inferior. Potential customers who entered
the name of competitors’ products into search engines would see results near
the top of the list using phrases like “shocking facts,” “exposed,” “scam,” or
“warning,” and urging customers to first review the Review Hosts’
purportedly-unbiased reviews before purchasing the competitor’s product.
Prospective customers who clicked on these links would see the Review Hosts’
sham review, including false and disparaging information about the competitor’s
product. 

Trademark infringement under §32: because plaintiffs conceded
they hadn’t shown source confusion, they were only claiming “affiliation,
connection, or association” confusion under §43(a), so the §32 claim was
dismissed. [Intriguing, given current doctrine that assimilates all confusion to 32, but wait for it.] 

False advertising: survived defendants’ motion for summary
judgment (except as to some specific defendants whose involvement wasn’t
supported by evidence). Plaintiffs offered evidence that certain defendants “exercised
considerable or complete control over the content” on the review sites, and
that those sites published false representations of independence and lack of
bias. There was also evidence that the reviews of plaintiffs’ products included
literally false statements, “including the false representation that no
clinical studies were done on any of Plaintiffs’ products.” Even without
evidence of consumer reaction, literal falsity allows a court to grant relief.  [Are all the alleged falsities literally
false?] 

A jury could also reasonably conclude that “sham reviews,
purporting to be unbiased, that consistently ranked Plaintiffs’ products as
inferior to Defendants’ competing products” were material. There were affidavits
from plaintiffs’ principals about quantifiable losses and expert testimony to
quantify those losses. 

§43(a) unfair competition: A jury could reasonably find
likelihood of confusion regarding, at least, “the affiliation, connection, or
association” of defendants with the Review Hosts [clearly yes] and Plaintiffs’
trademarks. [Clearly no. If the reviews are disparaging and suggest defendants’
products instead, it is hard to see how there could be confusion over either
the review sites’ affiliation with plaintiffs or plaintiffs’ affiliation with
defendants.] In so holding, the court gave “significant weight” to the evidence
that relevant defendants “deliberately concealed—and in fact materially
misrepresented—their affiliation” with the review hosts and websites. [That
suggests false advertising, not a false suggestion of affiliation with
plaintiffs
.] Also, defendants used plaintiffs’ marks marks as paid search
terms on search engines “to steer customers to the sham review pages hosted by
the Review Hosts and, in turn, to Defendants’ competing products.” The parties’
products directly competed, which favored plaintiffs in the multifactor
confusion test. A jury could reasonably find likelihood of confusion. [Yes, but
about what?] 

Commercial disparagement: “One who publishes a false statement
harmful to the interests of another is subject to liability for pecuniary loss
resulting to the other if (a) he intends for publication of the statement to
result in harm to interest of the other having a pecuniary value, or either
recognizes or should recognize that it is likely to do so, and (b) he knows
that the statement is false or acts in reckless disregard of its truth or
falsity.” A jury could find in plaintiffs’ favor based on the evidence above—even
without apparent evidence of specific people from whom sales were lost. So too
with defamation claims. [As with the Lanham Act claims, the court is not being
super careful about the distinction between defamation and product
disparagement; it doesn’t explain why “not clinically tested” would harm the
reputation of the seller, as opposed to the seller’s product.] 

On tortious interference, by contrast, there was no evidence
that defendants knew that the plaintiffs had an existing relationship with
customers that was disrupted. “[A] mere assertion of interference with
prospective customers fails to raise a right to relief above the speculative
level.”

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