IIC decision also says some things about false advertising: materiality may not be presumed from literal falsity

Select
Comfort Corp. v. Baxter; 996 F.3d 925 (8th Cir. 2021)

You
probably know that the court of appeals sent this case back for retrial on an
initial interest confusion theory. I won’t say much about that, though I do
have a big question, but there are also false advertising aspects of the case.

The
parties compete in the market for adjustable air mattresses and related
products. Plaintiffs’ registered trademarks include “SLEEP NUMBER”, “WHAT’S
YOUR SLEEP NUMBER”, “SELECT COMFORT”, and “COMFORTAIRE.” The defendants
allegedly “compounded internet-related confusion by making fraudulent misrepresentations
and failing to dispel confusion when consumers contacted Defendants’ call
centers.” The case went to a jury only on point of sale confusion, not initial
interest confusion, and the jury found in defendants’ favor (including a
finding, untouched on appeal, that Select Comfort did not have trademark rights
in “Number Bed”).

TM:
The court of appeals found that, because there was a question of fact about how
sophisticated mattress consumers are, the initial interest confusion theory
should be submitted to the jury. I have practical questions: Given that a jury
already found no likely point of sale confusion, can point of sale confusion
evidence be part of the retrial? The court of appeals heavily relied on
evidence of “actual confusion” in reversing—but is that evidence of IIC? Should
the jury instructions limit the jury to deciding whether there was initial
interest confusion? The most relevant comment made by the court of appeals is
not super helpful in answering these questions: “As a practical matter, the
ability to determine the inferences the jury drew from the evidence is
substantially clouded by (1) the interrelated nature of the infringement,
dilution, and misrepresentation claims in this case, (2) the mixed verdict, and
(3) our conclusion that summary judgment and instructional error occurred.”
(The dilution claims are now out of the case because Select Comfort didn’t
meaningfully appeal the jury’s rejection thereof.) The court or appeals also
commented that relying on IIC might change the available damages and relief—how
exactly?

The
evidence of internet use:

Defendants
had used Plaintiffs’ actual trademarks as paid search terms and as identical
phrases in their own web-based advertising in text pages, combined text and
graphical pages, as terms embedded in linked internet address urls, and in
other fashions. Examples included website links that presented Plaintiffs’
trademarks as identical phrases (e.g. personalcomfortbed.com/vSleepNumber or
https://ift.tt/3lbQA40). In addition, Defendants used phrases
similar to Plaintiffs’ trademarks, often with words broken up in a
grammatically non-sensical fashion. Examples included the use of terms such as
“Sleep 55% Off Number Beds” and “Comfort Air Beds on Sale” in online
advertisements.

There
was also disputed survey evidence on actual consumer confusion, and “instances
of actual confusion, often from transcripts of call-center interactions,
messages from customers, or messages from call-center employees.”

The
transcripts and recordings of call-center interactions appeared to show that
Defendants’ call-center employees at times attempted to promote confusion and
at other times attempted to dispel confusion. Finally, evidence included
statements from Defendants’ principals in which they described confusion as
between Plaintiffs’ and Defendants’ brands as a “good thing” and, in response
to reports of confusion, indicated that their advertisements were “working.”

How
much of this is even relevant for determining whether IIC exists?

False
advertising: the jury found for Select Comfort on seven false advertising
claims and for defendants on the remaining eight, awarding about $160,000 in disgorgement
and nothing on lost profits.

The
court of appeals held that the instructions erroneously allowed the jury to
presume materiality from literal falsity. The instructions allowed a
presumption of materiality from “(1) a literally false statement; (2) a false
statement relating to the inherent quality or characteristic of a product; or
(3) a deliberately false or misleading statement that was comparative or
implicated a competitor or its product.” (1) was the error. (2) and (3) “are
essentially definitions for materiality that describe types of statements
reasonable persons would recognize as likely to influence a purchasing
decision.” But literal falsity doesn’t necessarily entail materiality. “[A]n
inference of a statement’s materiality based merely upon its falsity is neither
so clear nor direct that it might support a burden-shifting presumption in a
plaintiff’s favor.” Thus, it was error, and not harmless error, so the court of
appeals reversed and remanded for a new trial on those seven claims.

 

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