failure to disclose influencer payment/review connections is misleading

Posted on December 7, 2020 by rtushnet

EIS, Inc. v. Wow Tech Int’l GMBH, 2020 WL 7027528, No.
19-1227-LPS (D. Del. Nov. 30, 2020)

The parties make vibrators. EIS sued defendants for
violations of the Lanham Act, Delaware common law on unfair competition, the
Delaware Deceptive Trade Practices Act, Delaware tortious interference laws, the
Colorado Consumer Protection Act, and patent-related claims.  

Defendants argued that the state and federal false advertising
claims were preempted by patent law. One of the defendants allegedly told one
of EIC’s customers that the customer was infringing its patent rights by
distributing and/or re-selling EIC’s product. “[T]o avoid preemption, bad faith
must be alleged and ultimately proven, even if bad faith is not otherwise an
element of the tort claim.” “In general, a threshold showing of incorrectness
or falsity, or disregard for either, is required in order to find bad faith in
the communication of information about the existence or pendency of patent
rights.” However, EIC sufficiently alleged bad faith: Taking the allegations of
the complaint as true, the defendant’s first US patent didn’t issue until after
it contacted the customer. “That Defendants made a representation about patent
rights when it knew no such patent rights existed in the United States is sufficient
(if proven) to establish bad faith under Federal Circuit law.” Even if it had
(as it argued) a German patent when it contacted the customer, and even if that
product infringed the German patent, a German patent is unenforceable in the US.

Lanham Act commercial advertising or promotion: The
statements forming the basis for the claim were (1) Instagram posts by the
owner of a sex toy boutique about EIS’s products and (2) negative Amazon
reviews of EIS’s products from an account displaying defendants’ We-Vibe logo. Defendants
argued that, even if (as the complaint alleged) they paid the owner to post
“false and misleading reviews,” that didn’t constitute commercial speech, and
likewise the reviews didn’t propose commercial transactions. Although some
courts have gotten this wrong, the court correctly held that the complaint sufficiently
pled commerciality. The shop owner was allegedly “an industry insider and
Instagram influencer” with nearly 70,000 subscribers, and her Instagram story
referred to the parties’ competing products with an economic motivation.
Likewise, as to the reviews specifically targeting EIS’s products, defendants,
as competitors, had an economic motivation for deterring customers from purchasing
competing products. It didn’t matter that there was no explicit reference in
the reviews to defendants or their products. Anyway, the complaint alleged that
“any potential purchaser of Plaintiff’s products who read the reviews could
have clicked on the username of the reviewer and found the link to Defendants’
website on the associated account page. Hence, even without an explicit
reference to Defendants, the review could lead the potential purchaser to
Defendants’ website, where the purchaser could purchase competing products.”

EIC also sufficiently alleged falsity. It alleged that the
Instagram influencer was being paid to share her story, but didn’t disclose her
financial relationships with defendants. “That she did not disclose her
financial relationship makes her story at least misleading, and establishes
falsity for purposes of a Lanham Act claim, even if [she] actually held the
beliefs she expressed.” Likewise, the complaint sufficiently alleged that the
reviews were posted by defendants, and not by (as they purported to be) bona fide
purchasers.

Similar reasoning also sustained the Delaware Deceptive
Trade Practices Act and common law unfair competition claim.

Tortious interference with business relations also survived
because plaintiffs didn’t need to identify a specific lost customer. The
complaint alleged that defendants knew of EIC’s ongoing business relationships
with its distributors and retailers; demanded that retailers stop selling its
products; and threatened to raise prices or cease sales if retailers did not
give in to that demand; EIC also alleged damages.

However, the Colorado CPA claim based on alleged
misrepresentations about patent rights was dismissed with leave to amend for
failure to satisfy Rule 9(b); the who/what/when of the misrepresentations weren’t
sufficiently identified.

from Blogger https://ift.tt/3gm2RzY

Posted in Uncategorized | Tagged , , | Leave a comment

false designation of origin that fools Customs, not consumers, is not actionable

Posted on December 7, 2020 by rtushnet

Diamond Sawblades Manufacturers’ Coalition v. Diamond Tools
Tech., LLC, 2020 WL 7028029, No. 1:19-cv-04674-TWP-TAB (S.D. Ind. Nov. 30, 2020)

Plaintiffs sued defendants for RICO and Lanham Act
violations and for prohibited predatory pricing, tortious interference, and
civil conspiracy under state law.  

In May 2005, DSMC petitioned the Commerce Department and the
ITC “asserting that certain foreign manufacturers of diamond sawblades were
selling their products in the United States at dumped prices.” In 2009, Commerce
published an “Antidumping Order” on diamond sawblades and parts thereof from China,
having determined that imports from China were being “dumped” at prices below
fair value and that this actually threatened the U.S. industry for diamond
sawblades with material injury. Commerce thus halted imports. The order was
reissued five years later after a review.

Defendants allegedly circumvented the Antidumping Order,
opening “shell facilities in Thailand and Canada—countries that are not subject
to the Antidumping Order—through which to fraudulently ship Chinese goods to
the United States as ‘Thai’ or ‘Canadian’ goods” after relabeling, and at
times, minor labor on the sawblades. Commerce and DHS therefore “issued
anticircumvention decisions and findings of wrongful evasion of the Antidumping
Order.” Despite the Antidumping Order, domestic consumption of subject imports
was even higher than during the original period of investigation; many domestic
producers were simply forced to leave the industry. “Indeed, of the original
nine members of the domestic Diamond Sawblades Manufacturers’ Coalition, only
two remain.”

The RICO claims failed because they were RICO claims.

False designation of origin: the court indicated that this
had to be a false advertising claim because §43(a) requires confusion over
affiliation with/approval by another party. The claim failed because
the allegedly fraudulent relabeling of origin deceived Customs, not consumers. (I
don’t see why the precedents saying that deception doesn’t have to be of end
consumers to count shouldn’t extend here, given a strong but-for causation
argument that the end consumers could never have bought the products without
the deception.)  The court reasoned that the
complaint failed to allege “that any mislabeling regarding national origin
would likely dupe the consuming public into buying the products of Defendants
instead of those of its members.” This wasn’t a case of false US origin
labeling—false designation as products of Thailand or Canada wasn’t relevant to
consumers. The arguments that the materiality of literal falsity could be
presumed, and that Chinese products might be especially unattractive to US
consumers, failed, as did the argument that the “false labels enabled them to
sell the products at issue well below fair value—i.e., at much cheaper
prices—which plainly influences consumers’ purchasing decisions.” The complaint
simply didn’t allege how these labels would materially affect a consumer’s purchase,
even if the briefs argued for something special about Chinese origin labeling.

from Blogger https://ift.tt/37JVHSs

Posted in Uncategorized | Tagged , , | Leave a comment

allegedly false warranty letter not material, but could still be TM infringement

Posted on December 7, 2020 by rtushnet

Window World Int’l, LLC v. O’Toole, 2020 WL 7041814, No.
4:19-cv-2363-SEP (E.D. Mo. Nov. 30, 2020)

Plaintiff WW sells exterior home remodeling products, and
licenses independently owned/operated franchises to distribute them. Defendants
are franchisees/related people. They sued WW in North Carolina state court for,
inter alia, breach of contract and fraud, seeking reformation to enforce an
unlimited right to use WW’s marks. The North Carolina case was still pending,
but discovery had closed.

In April 2019, one defendant prepared and sent a letter using
WW trademarks in order to collect information from past customers of the
franchises and specifically those who purchased their products from “previous
ownership teams.” It requested that customers call to confirm “proper contact
and product information.” The letter also included a warning: “If you want to
retain the warranty on your products, you need to call us by April 12, 2019.”  

In fact, warranties for WW products would not expire if
customers failed to contact the defendants.

False advertising: WW came within the Lanham Act’s zone of
interests because defendants allegedly presented WW’s warranties as inferior to
their actual coverage. Customers allegedly believed the letter and called
defendants. Proximate cause: Causing customers to believe that they had been misled
about their product warranties “constitutes damage to the reputation of Window
World products.”

However, WW failed to plead materiality: that the deception,
even if it worked, was “likely to influence [a] purchasing decision.” The
letter itself didn’t provide any information about WW products or warranties,
and it was directed to past customers. Even if defendants “received telephone
calls from recipients of the Warranty Letter shortly after it was sent,” the
complaint didn’t plead— even upon information and belief—that any of those
calls suggested that the letter did, or would likely, affect future purchases. “The
bare allegation that the statement satisfies the legal standard for materiality
is insufficient.”

Trademark infringement claims, which don’t require
materiality, survived. The court rejected defendants’ argument that “whenever a
party is authorized to use a mark to sell that mark holder’s products, confusion
is impossible,” because “confusion can be created by a licensee.”  But confusion about what? The court basically
resurrected the false advertising claim, without materiality: “Sending a letter
using another entity’s protected marks urging customers to return communication
citing a false prospect of losing warranty coverage” was enough to plausibly
cause confusion about … something.

Dilution: Not plausible because WW alleged confusion, not
lack of confusion, and there can be no tarnishment because the parties’ windows
are the same products.

Ultimately, however, the court stayed the case so that the
North Carolina court could take a first whack at defendants’ rights to use the
WW marks.

from Blogger https://ift.tt/39OjIu2

Posted in Uncategorized | Tagged , , | Leave a comment

negligence claim v Amazon survives when 230 bars false advertising claim

Posted on December 7, 2020 by rtushnet

Brodie v. Green Spot Foods, LLC, 2020 WL 7027594, No. 20
Civ. 1178 (ER) (S.D.N.Y. Nov. 30, 2020)

Brodie sued Green Spot and Amazon for “injuries she
sustained after consuming a product known as Better than Pasta, which she
purchased on Amazon’s website.” Better than Pasta products are pasta
substitutes whose primary ingredient is a root plant called konjac. “When
consumed, konjac swells from its original size in the human digestive tract and
may become indigestible. It may also cause choking and stomach or intestinal
blockage.” Brodie pled that these dangers are “generally well-known” and have
led the FDA and similar regulatory bodies to ban certain foods containing
konjac or issue warnings about its risks. The packaging states that the food is
“made from organic Konnyaku flour, from the root of an ancient Japanese organic
plant called Konjac,” but doesn’t provide warnings about konjac’s alleged
risks.

Green Spot allegedly initially created all advertising for the
product, but Amazon also marketed and advertised the product on Amazon.com. Green
Spot participates in Fulfillment by Amazon, meaning that Amazon ships the
product to customers directly from its warehouses. Amazon designated Better
than Pasta as an “Amazon’s Choice” product on the website.

Green Spot and Amazon were allegedly made aware of the
dangers of Better than Pasta because they received numerous customer complaints
about the health issues caused by consuming the product. E.g., “I tried this
pasta for the first time last night, and today I’m having SEVERE intestinal
cramps. Buyer beware! I did a web search and discovered some Konjac root
products have been banned because they can actually cause an intestinal
blockage.” Brodie alleged that Green Spot “may have directed Amazon to remove
other negative complaints about the product,” and that it pays or incentivizes
individuals to leave “false positive reviews” with Amazon’s knowledge, which
Amazon allowed.

Negligence/breach of implied warranty by Amazon was
sufficiently alleged because the ingredient was listed and Brodie sufficiently alleged
that the ingredient’s dangers were generally known, and that the negative
reviews posted on the website made Amazon aware of konjac’s potential to cause
digestion issues and other injuries, and retailers have a duty to know that which
can be known by ordinary inspection.

“Amazon’s Choice,” however, wasn’t an express warranty because
it didn’t make a specific factual representation.

NY GBL §§349 & 350: The CDA protected Amazon from
liability for republishing content created by Green Spot. “There is
insufficient factual pleading supporting the plausible inference that Amazon
itself created or edited any of the Better than Pasta advertising content.” As
for the consumer review-based allegations, they were insufficient. “Although
Brodie alleges that it is common for third-party sellers to pay for false
positive reviews, this fact does not lead to a plausible inference that Amazon
itself knows about this practice or permits false reviews to be posted.”

 

from Blogger https://ift.tt/3ovzNcf

Posted in Uncategorized | Tagged , | Leave a comment

Comments on DMCA reform

Posted on December 2, 2020 by rtushnet

Senator Tillis has been soliciting suggestions for DMCA reform (including 512, 1201, and 1202). With Jessica Litman, Pam Samuelson, and Jennifer Urban, I submitted responses. The Organization for Transformative Works, on whose legal committee I serve, also submitted responses. 

from Blogger https://ift.tt/39C3a8M

Posted in Uncategorized | Tagged , , , | Leave a comment

advertiser can amend complaint against Facebook for click fraud claims

Posted on November 12, 2020 by rtushnet

DotStrategy Co. v. Facebook Inc., No. C 20-00170 WHA, 2020
WL 6591366 (N.D. Cal. Nov. 11, 2020)

The court grants plaintiff’s motion for leave to amend its
complaint in this putative class action alleging that FB’s statements about advertising
on FB violated the UCL. “The main issue presented here is whether or not a
reasonable advertiser would understand Facebook’s representation that it would
not charge advertisers for ‘clicks that are determined to be invalid’ to mean
that Facebook would not charge — or refund — advertisers for clicks made by
fake accounts, if at all, which Facebook identifies and removes from its
platform for violating its authenticity policies.” Plaintiff pled sufficient
facts to support this theory.

FB’s agreement said:

When serving your ad, we use best
efforts to deliver the ads to the audience you specify or to achieve the
outcome you select, though we cannot guarantee in every instance that your ad
will reach its intended target or achieve the outcome you select[.]

We do not guarantee the reach or
performance that your ads will receive, such as the number of people who will
see your ads or the number of clicks your ads will get.

* * *

We cannot control how clicks are
generated on your ads. We have systems that attempt to detect and filter
certain click activity, but we are not responsible for click fraud,
technological issues, or other potentially invalid click activity that may
affect the cost of running ads.

However, from 2013 through the present, FB’s Business Help
Center page represented that advertisers would “not be charged for clicks that
are determined to be invalid”: “If we detect or are alerted to suspicious or
potentially invalid click activity, a manual review is performed to determine
the nature of the activity. You will not be charged for clicks that are determined
to be invalid.” Facebook defines “invalid clicks” as “[c]licks from people that
do not indicate a genuine interest in the ad or show signs of ad testing. This
includes repetitive or accidental clicks or visits from the Facebook corporate
network” and “[c]licks generated through prohibited means, such as fake
accounts, bots, scrapers, browser add-ons or other methods that don’t follow
Facebook’s Terms.” FB’s terms of service and authenticity policy requires users
to use their “real identities,” so fake accounts violate Facebook’s policies.

The proposed complaint had a bunch of other FB statements
that were allegedly false and misleading, such as:

• “On Facebook, you’ll only pay to reach the right people
who’ll love your business.”

• “Facebook is a community where everyone uses the name they
go by in everyday life. This makes it so that you always know who you’re
connecting with.”

Nonetheless, FB allegedly charged for invalid clicks, which
includes “[c]licks generated through prohibited means, such as fake accounts,
bots, scrapers, browser add-ons or other methods that don’t follow Facebook
Terms.” When Facebook determined those clicks were generated through prohibited
means, it failed to provide a refund to plaintiff and the class members. Plaintiff
alleged that it reasonably believed that, because Facebook requires “everyone
to provide their real names,” it would not be charged for advertising that
interacted with fake accounts.

Plaintiff alleged that between 2013 and 2018, Facebook
charged it for clicks that were made by thirteen different fake accounts. Facebook
allegedly has since deleted eight of these thirteen accounts from its platform
“likely for violations of its ‘authenticity policy.’ ”

FB argued that no reasonable consumer could have been misled
by its allegedly false and/or misleading statements, particularly, in light of
the contractual disclaimers in the self-serve ad terms. The key issue was whether,
given FB’s statements, a reasonable advertiser would have believed that once
Facebook determines and removes an account for violating its authenticity
policies (e.g., a fake account), FB would then perform an audit to refund
advertisers for any invalid clicks that that account may have made, and for
which FB had charged advertisers for.

That is a question of fact not suitable for resolution on a
motion to dismiss. Plaintiff plausibly alleged deceptiveness to a reasonable
consumer.

The allegedly contradictory TOS stating that Facebook is not
“responsible for click fraud” was ambiguous; a reasonable advertiser could
construe that to mean that FB itself is not perpetuating any click fraud [and,
I’d add, couldn’t itself be held liable for damages—but that doesn’t mean it’s
clearly promising to hang on to the money it collected from the advertiser for
fraudulent clicks]. And the Ninth Circuit “has recognized that a UCL fraud
claim can be based on misleading representations in a solicitation even when
the plaintiff later signed a contract with provisions contradicting the earlier
falsehoods.” “The question, then, is not whether [Facebook’s] contractual terms
corrected the false statements in its advertising, but whether dotStrategy’s
reliance on the false advertising was reasonable even in light of the
contractual disclaimers.” That was properly alleged.

FB argued that none of its statements mentioned refunds, so
they couldn’t be deceptive. “But a refund is implied” for interactions FB knew
involved invalid clicks. FB tried to distinguish fake accounts from invalid
clicks, arguing that it only promised to provide manual review for “suspicious
or potentially invalid click activity,” and no charges for “clicks that are
determined to be invalid,” not audits every time a fake account was removed.

But the proposed complaint specifically alleged that
Facebook charged it and other advertisers for invalid clicks, such as clicks by
fake accounts and/or bots. “Second, a reasonable advertiser might also
reasonably believe that once Facebook determines an account is fake, Facebook
would be ‘alerted to suspicious or potentially invalid click activity’ and thus
would conduct a ‘manual review’ to determine the nature of the activity.” After
all, falsity/misleadingness “is analyzed from the perspective of a reasonable
consumer, not from the perspective of an attorney splitting hairs.”

This interpretation would not, as FB claimed, make it liable
if its platform was 100% secure against fake accounts. Rather, the advertiser’s
argument was that, once FB does stumble on fake accounts, it should then perform
an audit to refund advertisers for any invalid clicks committed by such
accounts, given what it said to advertisers.

FB then argued that, just because an account was fake in
2018 when plaintiff performed its survey, it doesn’t also follow that that
account was also fake in 2017, for example, when it clicked or engaged with
plaintiff’s ads. That was a factual issue, and the plausibility of the claims
was bolstered by various news reports suggesting that fake accounts on FB “are
rather ubiquitous.”

However, a number of the challenged statements hadn’t been
sufficiently pled to be false or even non-puffery:

• “Connect with people. Ads help
you reach the right people.”

• “Facebook can help you reach all
the people who matter most to your business.”

• “Facebook ads are optimized to
help you get more people to visit your website or increase conversion.”

• “Your business is for your
customers. Built relationships with them, reach new people and drive sales
using Facebook.”

• “Drive people to your website
with one click from the most engaging place on Facebook.”

• “Find new customers. Boost sales.
Facebook can help you meet your business goals.”

• “Meet the people who will love
your business.”

A reasonable consumer “would understand that not all users
on Facebook would adhere to Facebook’s authenticity policy or would be
interested in its ads.” And even people who didn’t use “true and full names”
might have provided accurate information concerning their age, gender, and
location, among other things; “it cannot be said that such an account is
categorically unable to be interested in plaintiff’s ads.”

But these statements were plausibly false/misleading:

• “On Facebook, you’ll only pay to
reach the right people who’ll love your business.”

• “Facebook is a community where
everyone uses the name they go by in everyday life. This makes it so that you
always know who you’re connecting with.”

And the plaintiff plausibly pled economic injury: the cost
of invalid clicks.

 

from Blogger https://ift.tt/36yynWW

Posted in Uncategorized | Tagged , | Leave a comment

timeshare exit lawyer wins a round: no harm causation shown

Posted on November 12, 2020 by rtushnet

Club Exploria, LLC v. Aaronson, Austin, P.A., No. 18-cv-576-Orl-28DCI,
2020 WL 6585802 (M.D. Fla. Nov. 10, 2020)

Another timeshare v. timeshare exit lawyer case that goes
much better for the defendant than some others. Briefly, the plaintiff seems to
have relied heavily on favorable precedents without developing enough evidence
that this specific firm did the same bad things.

Defendant law firm specializes in timeshare owner grievances
against developers; its websites contain colorful statements and media aimed at
optimizing internet visibility, and clients are emailed a link to one of the
sites when their retainer agreement is sent to them. Exploria alleged that
Aaronson uses false and misleading website advertisements to convince timeshare
owners that they can easily cancel their timeshare contracts if they hire
Aaronson. Aaronson allegedly then advises owners to stop paying their loan and
fee obligations.

An example of the website statements:

Timeshare ownership often feels
like entrapment. At the Aaronson Law Firm, we know this because we hear our
Clients’ stories.

….

But chances are good that your
timeshare developer is exposed legally in ways that are relatively
straightforward and provable. You owe it to yourself to hire experienced,
competent counsel. At the Aaronson Firm, we have over 80 years of combined
legal experience. And we are willing to sue, if necessary, in the interest of
getting your timeshare cancelled….

YOUR LEGAL PROBLEMS ARE NOT
INSURMOUNTABLE!

If you need to cancel your
timeshare, the timeshare Attorneys of the Aaronson Law Firm stand ready and
able to help you!

The sites also explained that they would use formal demand
letters to “initiate” recission, with an attached proposed civil complaint in a
carrot/stick arrangement.

Its blog stated that “[q]uite often, one’s signature on a timeshare
contract is obtained by fraud.… But to address it properly, it is imperative
that you retain a licensed attorney.” Experienced counsel, it stated, “will
know how to exploit other points of vulnerability. For example, the developer
may well be perpetrating an ongoing conflict of interest. Improper handling of
trust funds are [sic] also a major issue.”

Its websites contained videos purporting to be testimonials
of Aaronson’s clients, but actors and Aaronson employees played the roles of
lawyers and owners. “In both instances, the role players read statements of
actual unhappy timeshare owners.” [Generally ok, if disclosed.] However, “[o]ne
of the websites also included two printed testimonials that were written by the
web designer and an Aaronson employee but attributed to timeshare owners.” [Not
ok.] The websites did mention some timeshare developers by name, but not Exploria,
and the court indicated that the focus of the criticism was the timeshare
industry in general.

Aaronson represented at least 22 Club Exploria owners
attempting to cancel their timeshare contracts, but Exploria sought damages for
six in particular. The court found, based on deposition testimony, that the
owners who stopped making payments did so of their own accord, without
instruction from the firm or before hiring the firm.

Tortious interference: Aaronson knew of the contract between
the parties, but Exploria didn’t show that defendants intentionally caused the
contract to be breached. Whether Aaronson’s legal theories were good ones didn’t
matter without causation. Exploria’s primary evidence was testimony given by a
different person in an unrelated litigation who testified that Aaronson advised
him to cease making payments as part of a legal strategy to terminate a
timeshare with Diamond Resorts. The fact that two of the six owners stopped
paying after hiring Aaronson wasn’t enough for a reasonable jury, especially
given the testimony of the only owners deposed that no one from the law firm told
them to stop paying, that they chose to stop paying for other reasons, and that
letters Aaronson sent to Exploria on their behalf did not lead them to believe
that they had been relieved of their payment obligations. Many Aaronson
retainer agreements stated: “To avoid the possibility of a counterclaim, it is
important that you remain current on your payments with the developer.”  Prior cases involved very different evidence,
and indeed Aaronson fixed one mess made in the unrelated Westgate
litigation.

FDUTPA prohibits “unfair or deceptive acts or practices in
the conduct of any trade or commerce.” The court concluded that, though nonconsumers
do have standing under FDUTPA, the practice of law was not “trade or commerce.”
While lawyers are not per se exempt from FDUTPA, lawyers acting to exercise a
legal remedy are typically not considered to be engaged in trade or commerce. That
was the case here with Aaronson’s website ads and representation of clients.
Aaronson actually went to litigation on a regular basis, unlike the lawyer in Westgate
who, the court there found, “actively avoid[ed] judicial involvement through
all of his work.”

Lanham Act: No showing of proximate causation: there wasn’t evidence
that the website ads caused owners to withhold business from Exploria.

The court nonetheless addressed other elements of the Lanham
Act claim. There were genuine issues of material fact on
falsity/misleadingness. Rather than deeming the accusations against the
timeshare industry as a whole to be puffery (“fraud,” “pack of lies,” “improper
handling of trust funds,” sociopathic sales associates, “ongoing conflicts of
interest,” and the owners “being taken for a ride”) the court found it couldn’t
determine the truth of those statements at this stage. And there was record
evidence that the sites’ claims that the timeshare developers are likely
“exposed legally in ways that are relatively straightforward and provable” and
that Aaronson’s strategies give timeshare owners “the best chance to have
[their] timeshare successfully rescinded” were false. The evidence was that, of
the 100–150 timeshare cases the lawyer has taken to litigation, the contracts
were found unenforceable roughly six times. And there was no record evidence
that any of the Affected Owners’ contracts were successfully rescinded. That
didn’t show there were no legal grounds to dispute the agreements or
that Aaronson was never successful, but a jury could find that Aaronson’s
website “falsely or misleadingly stated timeshare developers’ legal
vulnerability as well as the availability of remedies like rescission.” [There
is a line of cases about when legal claims are falsifiable v. puffery, but the
court does not cite them and might not have been directed by the parties to
them.]

Likewise, a jury might find the claims literally false; if
they found them misleading, the case would fail because Exploria had no
evidence of consumer reaction.

However, Exploria’s failure to show materiality was fatal
regardless. There was no expert testimony or other evidence that the website
advertisements were likely to be material to consumer purchasing decisions. The
record didn’t even show that every owner found Aaronson through its websites;
only one of the 6 named did so, and she wasn’t deposed. The rest were referred
by another lawyer. One had no recollection of visiting the site, and another’s
spouse told her nothing about the site. “Clearly the website statements were
not material to these owners even if they did indeed view them.”

Trade libel: also failed for want of materiality.

from Blogger https://ift.tt/3njxetj

Posted in Uncategorized | Tagged , , | Leave a comment

Peloton’s music troubles give it consumer protection troubles over “ever-growing library” claim

Posted on November 12, 2020 by rtushnet

Fishon v. Peloton Interactive, Inc., 2020 WL 6564755, No. 19-cv-11711
(LJL) (S.D.N.Y. Nov. 9, 2020)

Peloton streams live and on-demand fitness classes requiring
a monthly subscription fee. Certain Peloton ads described the library of
fitness classes as “ever-growing.” But in March of 2019, however, in response to
a lawsuit from music publishers, Peloton removed approximately 5,739 classes,
or nearly 57% of the total available classes, from its library. Plaintiffs
alleged that the “ever-growing” claim was deceptive and misleading.

The court dismissed the NYGBL claim of the Michigan
plaintiff, but not of the NY plaintiff.  

First, the terms of service, which authorized Peloton to
remove content from its library at any time, did not protect Peloton. Statements
buried in contracts can’t, in general, avoid false advertising claims. “A
reasonable consumer, having viewed Peloton’s advertisements on its website and
having decided to purchase a Peloton product based on the understanding that
the library would grow ‘should not be expected to discover the truth’ and that
such understanding was false from the Terms of Service.” Moreover, being able
to remove content at any given time was not inconsistent with a promise of an “ever-growing”
library, and so the TOS didn’t dispel the alleged falsity. “The Terms of
Service do not disclose that Peloton might remove over half of its library
without simultaneously replacing that half with even more classes.”

Puffery: “Ever-growing” was objective and testable. “The
library either increased in size or it shrunk.”

Deceptive/misleading: This was a factual question not
appropriately resolved on a motion to dismiss, despite Peloton’s argument that
it was constantly adding new content, nearly 24 hours of live content per day. “Ever-growing”
is not the same thing as “ever-changing.” “A consumer attracted to a grocery
store by its advertisement of a growing selection of foodstuffs would be
surprised to learn on each visit that the number of products on sale was
decreasing, although the store was replacing the items it removed with a
smaller number of new products…. A reasonable consumer thus would not
understand as a matter of law when he or she purchased the Peloton product
based on the representation that the library was ever-growing that the library
was shrinking in size at the same time Peloton was adding new classes.”

Plaintiffs also properly pled causation even without
alleging that they saw the misleading ads, since reliance isn’t required and
Section 349/350 claims are not fraud claims that must be pled with
particularity. “[A]n allegation that the defendant was injured because she
relied on the misleading statement to her detriment is not a ‘[t]hreadbare
recital[ ] of the elements of a cause of action,’ but rather “an allegation of
fact as to how she came to be injured that—if proven—supports the establishment
of that element…. The manner in which the plaintiff came to rely upon the
deceptive act—and whether it can be proved—is a further issue of proof and not
something that needs to be pleaded in detail for a complaint to proceed.”

So too with injury: The complaint alleged that “Plaintiffs
attributed value to Peloton’s promises regarding the nature and characteristics
of its on-demand digital library and would not have purchased the hardware and
corresponding Peloton Membership, or would not have purchased it on the same
terms, if they knew the truth.” That was enough for now.

 

from Blogger https://ift.tt/3eXNFZd

Posted in Uncategorized | Tagged , | Leave a comment

misbehavior in Amazon reviews + false ingredient claims = $9.5 million award

Posted on November 12, 2020 by rtushnet

Vitamins Online, Inc. v. HeartWise, Inc. 2020 WL 6581050,
No. 13-cv-00982-DAK (D. Utah Nov. 10, 2020)

This is a long-running supplement false advertising case
involving both ingredient and “review” claims; here the district court resolves
a number of issues, finding a fair amount of falsity. The plaintiff sells
NutriGold supplements and the defendant sells NatureWise supplements.

I’m skipping a lot of detail on the ingredient specifics but
will say a bit more about the review claims.

I should also note that, due to HeartWise’s failure to
preserve evidence, the court drew a number of adverse inferences about failure
to meet label claims.

The court found that, on Amazon, the number of positive
reviews and even slight differences in star ratings are important to consumers,
and good reviews improve search results and sales; it relied in part on VO’s
survey expert and on “very extensive and consistent literature that online
reviews are an important part of almost all online purchasing decisions.”

NatureWise’s First Green Coffee product page began receiving
product reviews before the product even launched, including reviews stating
that customers had been taking it for weeks/months, and losing pounds per week.
Several of the reviews had red flags—they were from unverified purchasers,
appeared within 14 minutes of one another, and gave the product 5 stars.
Fourteen five-star unverified reviews appeared within 25 minutes of one another
and had “a similar pattern of including an exclamation point in the title of
the review.” Other NatureWise products followed the same general pattern.

VO’s statistics and computer science expert authored a joint
report with its statistics and review manipulation expert; they were both
credible. Based on this testimony, the court found that NatureWise’s unverified
reviews had higher ratings than its verified reviews; the products had higher ratings
than a random sample of similar products; the unverified reviews were
significantly higher; there were an unusually high number of new reviewers; NatureWise
reviewers had written more prior reviews than the typical reviewers; new
NatureWise reviewers gave significantly higher ratings than customers who had
previously written reviews on Amazon; NatureWise reviewers had significantly
higher similarities compared to other reviewers; and there were periods in
which the NatureWise products had an unusually large ratio of unverified
reviewers and an unusually large ratio of reviewers that were highly positive.

NatureWise also manipulated reviews by (1) block voting on
the helpfulness of reviews and (2) offering free products in exchange for
reviews. Employees, at its direction, upvoted good reviews and downvoted bad
reviews. NatureWise’s principal testified that this was only defense to attacks
by unknown third parties, but he directed employes to downvote bad reviews without
mentioning purported attacks or distinguishing between “attacking” reviews and
legitimate reviews. “NatureWise management knew that their block voting was
interfering with Amazon reviews, and they were worried about customers finding
out,” and also worried about Amazon finding out, since they knew that this
violated Amazon’s policy.

As for products in exchange for reviews: “On several
occasions, NatureWise denied having offered free product in exchange for a
review, even though that was not true.” It also asked customers “to review
other products so that their reviews of NatureWise products would have more
credibility and so Amazon would not think NatureWise reviews were fake.” The
products-for-review scheme was also a violation of Amazon policies, and the
court found that it deceived consumers because review independence is material
to them. The court further found that review manipulation benefited NatureWise
financially.

Since the parties’ products competed directly, and since for
at least some part of 2012-end of 2013 they were the two major players in the
Amazon marketplace for garcinia cambogia and green coffee products, with only “minimal”
alternatives, this all hurt VO. NutriGold took the “#1 Amazon top seller” slots
for both. By 2014, however, “the markets for green coffee and garcinia cambogia
on Amazon were inundated with competitors such that Vitamins Online and
NatureWise were no longer the two major players in the relevant marketplace.”

Falsity/ingredients: Based on the adverse inference
mentioned above, the court found that certain claims were literally false and
VO was entitled to a presumption of deception, wich was unrebutted. As for the
products in general, NatureWise “failed to keep the necessary documentation to
keep track of the Green Coffees and the Garcinias that it was selling.” At
least as to certain lots, a number of claims about ingredients, ingredient
amounts, vegetarian status, lack of fillers/binders/artificial ingredients, and
clinical proof were literally false. “For much of 2012 and 2013, NatureWise’s
claims … that (1) each ingredient it used was verified for purity through
in-house testing; (2) it had implemented a strict set of FDA compliant
manufacturing procedures; and (3) its facilities were regularly inspected by
FDA officials were literally false because NatureWise did not know who was
making those products.”

Even if these claims had been only implicitly and not
explicitly false, VO would be entitled to a presumption of deception because
the court found that defendants acted with the intent to deceive consumers.

Review claims: the court found that the practice of block
voting was “the use of a device in connection with the commercial advertising
or promotion of its products.” And as a result, the number of “helpful” votes
on certain reviews were “artificially inflated and literally false.” NatureWise’s
representations that it did not offer free products in exchange for reviews
were also literally false. Even if this was only implicit falsity, again, there’d
still be a presumption of deception because of the intent to deceive.

NatureWise failed to rebut these presumptions of deception.

Materiality: The court quoted the Second Circuit’s statement
that, “in many cases the evidence and the findings by [a] court that a
plaintiff has been injured or is likely to suffer injury will satisfy the
materiality standard—especially where the defendant and plaintiff are competitors
in the same market and the falsity of the defendant’s advertising is likely to
lead consumers to prefer the defendant’s product over the plaintiff’s.” The
court concluded that both ingredient and review claims were material, and also
the court presumed materiality from literal falsity. Plus, because Vitamins
Online and NatureWise were direct competitors in a sparsely populated market,
the court presumed injury to VO. (Previously the court had declined to rely on
this rationale, but the evidence at trial showed that the market was in fact
sparsely populated during a key period.)

Injury: A “heightened level of … proof of causation and
specific injury” is required when the plaintiff is seeking money damages. And the
standard of proof required when a plaintiff is seeking disgorgement, as VO was,
is “somewhere between the standards for money damages and injunctive relief.”

For the years 2012 and 2013, VO was entitled to a
presumption of injury because of the sparsely populated market, but only of
economic injury and not of reputational injury. As to the remaining years, VO failed
to show economic or reputational injury proximately caused by NatureWise’s
misrepresentations once the market was flooded with competitors. At that point,
“a sale for NatureWise could have meant a lost sale for any of the other Amazon
competitors.”

The Utah common law unfair competition claim went the same
way.

Applying Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct.
1492 (2020), the court noted that willfulness is still “a highly important
consideration in determining whether an award of profits is appropriate.” Other
equitable considerations may include, among other things, “(1) the degree of
certainty that the defendant benefited from the unlawful conduct; (2)
availability and adequacy of other remedies; (3) the role of a particular
defendant in effectuating the infringement; (4) plaintiff’s laches; and (5)
plaintiff’s unclean hands.”

Here, disgorgement of NatureWise’s profits from 2012 and
2013 was an appropriate remedy, given the clear benefit NatureWise received: it
“quickly rose to the top of Amazon sales rankings and made millions of dollars
in a matter of months despite having no previous experience in the industry.”
And, even though VO wasn’t seeking actual damages, those are difficult to
calculate accurately in a false advertising case. VO didn’t delay, and
NatureWise’s actions were willful. Indeed, “as a result of testing, NatureWise
had knowledge that certain lots of the Products did not match their label
claims. Yet, even with that knowledge, NatureWise continued selling those
products and never issued any recalls.” NatureWise’s discovery improprieties
additionally favored disgorgement.

NatureWise’s sales from the period were over $9.5 million, and
it didn’t provide reliable evidence of cost or other deductions, so the court
awarded the entire amount plus prejudgment interest. The award was the same
(not doubled) for the Utah common law claim.

The court declined to enhance the damages/profits awarded. The
disgorgement was adequate compensation, and enhanced profits would constitute a
penalty.

The court also declined to grant VO a permanent injunction,
since the disgorgement was adequate compensation. And VO’s requested relief
that NatureWise be compelled to remove all its product reviews on Amazon would
be against the public interest because “legitimate reviews of actual consumers
would also be removed.” [What about compelling NatureWise to remove/request removal of all paid-for reviews and employee helpfulness
votes? Would Amazon do that?]

The court also awarded attorneys’ fees and costs “in light
of NatureWise’s actions in willfully deceiving consumers, failing to produce
pertinent evidence, and abusing the discovery process” and in order to deter NatureWise
from further willful conduct.

from Blogger https://ift.tt/2IwXOjC

Posted in Uncategorized | Tagged , , | Leave a comment

Amicus brief in Stouffer v. Nat’l Geographic (a title v title infringement case)

Posted on November 10, 2020 by rtushnet

With Mark Lemley, Mark McKenna, and a number of other IP professors, I submitted this amicus brief arguing that the 10th Circuit should adopt Rogers v. Grimaldi (without any exclusion for title v title claims) for assessing trademark claims against noncommercial speech such as TV shows.

from Blogger https://ift.tt/3kfc5yj

Posted in Uncategorized | Tagged , | Leave a comment