Rebecca Tushnet

“wasabi peas” can be made with horseradish without injuring consumers given widespread use

Posted on September 9, 2020 by rtushnet

Yothers v. JFC Int’l, Inc., No. 20-cv-01657-RS, 2020 WL
5015262 (N.D. Cal. May 14, 2020)

Defendants sell “wasabi peas,” which, “allegedly like 95–99%
of ‘wasabi’ products sold in North America, contains not Wasabia japonica but
Amoracia rusticana, more commonly known as horseradish.” Plaintiffs alleged
that they wouldn’t have bought the product if they’d known it didn’t contain
wasabi. Wasabi allegedly “is the most expensive crop in the world to grow
because it is very difficult to cultivate.” While fresh wasabi can cost as much
as $113 a pound, horseradish has a similar taste but costs only about $6 a
pound. Thus, plaintiffs alleged, “95–99% of the wasabi products sold in North
America substitute horseradish and green dye for authentic wasabi.” Defendants’
product is labeled as “wasabi coated green peas,” but the ingredients list
includes not wasabi but horseradish and green food coloring.

The court found that plaintiffs failed to show statutory
standing. They couldn’t show they paid a premium when the product they bought
was not, apparently, priced differently from other similar products. “Importantly,
plaintiffs have not alleged why they selected defendants’ product, as compared
to other products which are labelled and priced almost identically,” but
instead alleged that almost all other products on the market had the same
defect (and didn’t specify whether they knew that at the time of purchase). “Unless that fact has recently become known to
them, ‘wasabi coated’ must have implied ‘horseradish coated’ to plaintiffs at
the time of purchase.” Plus, they alleged they reviewed the “labelling,
packaging, and marketing materials” before purchasing, and the package as a
whole clearly discloses that the product contains not wasabi but horseradish.
Williams v. Gerber Product Co., 552 F.3d 934 (9th Cir. 2008), which held that reasonable
consumers don’t have to “look beyond misleading representations on the front of
the box to discover the truth from the ingredient list in small print on the
side of the box,” was inapposite because that was about a Rule 12(b)(6) motion,
not a jurisdictional motion under Rule 12(b)(1). “The analysis in the present
case involves not what a ‘reasonable consumer’ would do, but what [plaintiffs]
actually did do.” Further, plaintiffs alleged that they wouldn’t have bought
this product “on the same terms” if they’d known the truth, but they didn’t
allege whether they would have bought another competing horseradish product
instead or a more expensive wasabi product. “Whether plaintiffs would have
spent the same amount of, more, or less money had they known about the
substitution determines whether they suffered an economic injury.”

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seller’s private definition of “Made in USA” fails; disgorgement appropriate

Posted on September 9, 2020 by rtushnet

Newborn Bros. Co. v. Albion Engineering Co., 2020 WL 5015571,
No. 12-2999 (NLH/KMW)

After a bench trial, the court found Albion liable for
falsely advertising its caulk dispensing guns as “Made in the USA” (a bit
ironic given the name, no?).

There are different kinds of dispensing guns. Manual guns have two key components: a material containment unit (“MCU”) and a handle
assembly. Some tasks require additional parts, including caulking knives or
spatulas.

Newborn imports dispensing guns, parts, and accessories from
China and Taiwan in finished condition. Its current president, Lee, testified
that the industrial/professional market tends to purchase more “heavy duty
caulking guns,” including bulk and sausage guns, while the paint and hardware
market tends to focus on less durable products like “inexpensive cartridge
guns.” Newborn introduced two new manual bulk dispensing guns, designed to
compete with Albion’s bulk guns. Newborn was trying to create “something as
similar to the Albion gun as possible,” but priced at $32, $6 less than
Albion’s models. Despite this lower price, Newborn had limited success. Lee
investigated the reasons, and “a salesperson told him that while the salesman
believed Newborn created a superior and less expensive product, Newborn had
trouble competing in the industrial/professional market because Albion,
Newborn’s competitor, manufactured its products in America.” Lee testified that
one of Newborn’s independent sales representatives “confirmed that many
customers had inquired whether Newborn products were made in America like
Albion products.” Upon investigation, Lee determined that at least some of
Albion’s products were in fact made overseas. He visited distributors in a
number of states; some Albion displays stated that the products were made in
America.

A 2010 internet post says the author bought a $30 Albion
caulking gun and found a hang tag that says, “Made in Taiwan.” The post says
that, when the author called, Albion stated that “the page on their website is
incorrect. They import most of their guns from Taiwan.” The post encouraged
others to “be wary of anyone claiming to make products in the U.S.” and said “Albion
refused to update their website and they are still actively deceiving customers
into buying foreign made products with a Made in U.S.A. label.”

By the end of 2011, Lee sought help from Customs; a customs
agent recommended a private lawsuit. In 2012, he used a SurveyMonkey survey
that posed both multiple choice and open-ended questions to distributors about
what Newborn products they buy; their reasons for not purchasing from Newborn;
their thoughts about the quality of Newborn’s products; and their preferences
on discounts. He received fifteen responses showing a variety of factors. “Seven
out of fifteen respondents answered that the reason they do not buy all or more
from Newborn is that Newborn’s products are not made in the USA.”

Another witness testified about attempts to sell to a
specific purchaser, where there was “a kind of firewall” and that he “couldn’t
get past the fact that we were not made in the U.S.A.” [More testimony of this
type omitted.] A West Coast distributor similarly transitioned away from
Newborn to Albion in 2010 because “Mark Schneider [of Albion] is always talking
about how his products are made in the U.S.A. at the SEAL meeting, in his
presentations, and in sales calls and I have to support that.”

Newborn sued in 2012 (yikes) and issued a press release,
after which Albion made some changes.

Evidence of materiality/harm. Among other things,
Newborn’s sales to Canada increased because Albion was no longer issuing NAFTA
certificates that entitled customers to a 6.5% tariff savings for products made
in America. Sales to one company increased from $6,600 in 2011 to $44,000 in
2015. An independent sales representative testified that following this suit,
he was able to sell to distributors that had previously been exclusive to
Albion, doubling his commissions between 2012 and 2017, despite only small
adjustments to Newborn’s prices and sales force. He testified that the highest
increase in sales was in accessories, but he also saw an uptick in sausage and
cartridge guns. When he informed another company that Albion’s spatulas were
not in fact made in America, it confirmed that fact and then began ordering
spatulas from Newborn. Etc.

The actual country of origin situation. Albion is a
New Jersey corporation established in 1929. In recognition of the founding Schneider
family’s continued control over Albion, Albion described itself as a
“third-generation American manufacturer.” Until 2000, Albion manufactured all its guns
and accessories in its Philadelphia plant. Its original guns were stamped with
the phrase “ALBION ENG. CO. PHILA. PA U.S.A.” starting in the 1930s “and
continued to be labeled this way into the twenty-first century.” But in the new
millennium, the board pushed for low-cost overseas manufacturing alternatives,
and in 2001, Albion begain using a Taiwanese company to make four models. Later,
it began sending handle components made in Philadelphia for partial assembly in
Taiwan, then final assembly back in Philadelphia, and it also began
“supplementing” its barrels with barrels made in Taiwan. It expanded the handle
export/re-import practice and began importing caulking knives from Taiwan. Then
it began importing spatulas. By 2008, it was importing more “loosely assembled
guns” that were complete other than adjustment and lubrication when imported.
Some Albion guns still included handle assemblies that were made only in
Albion’s U.S. plant without any imported components.

Labeling and marketing. “Schneider testified that it
was his belief that it was appropriate to identify products as being ‘Made in
America’ if over fifty percent of the cost of the tool were incurred within the
United States.” He didn’t explain where
this formula came from or why it was justified. He used a formula (calculations
not disclosed at trial) for calculating production costs including labor,
overhead at the manufacturing plant, items made in the United States, and
post-production packaging. Using this formula, Albion decided to stop applying the
“Made in the U.S.A.” label to its guns with imported subassemblies in 2008.
Given the absence of hard evidence of how the formula was applied to particular
products or lines, the court characterized it as “either an ad hoc, or worse
post-hoc, attempt to create the illusion that Albion’s imprecise and at times
indiscriminate use of ‘Made in America’ was a good faith mistake.”

Ultimately, at least until the case was filed, and, for
export certificates, up through trial, “Albion lacked any systematic or
disciplined program designed to insure that its products met Department of
Homeland Security marking requirements, that its export certificates were
truthful, or that its website and product literature regarding foreign-made
products sold domestically adequately and accurately revealed the country of
origin.” Albion “deliberately kept its head in the sand content to free-ride
on, and at times promote, the false illusion that it was a purely ‘Made in the
USA’ company.” Concerns expressed within the company supported this conclusion.

Among other details, Albion produced a line (B-line) that
was initially marked with a gold and black sticker reading “Made in Taiwan” on
the recoil plate. Schneider testified that a distributor told him that the gold
sticker was “loud” and Albion switched to using a no-contrast stamp which
Schneider described as “out of the way, difficult to see” and speculated that
he thought the distributor “would be pleased.”

In 2004, Albion instructed its Taiwanese manufacturer to
print “75 Year History – USA Manufacturer and Designer” on one line of guns.
This statement was updated in 2011 to read “80 Year History – USA Manufacturer
and Designer.” It was removed in 2012.

Albion also switched for some guns to a hang tag with a
Taiwan mark and asked its Taiwanese manufacturer to remove its information from
the products. The hang tag would likely be removed before use; nothing left on
the gun identified it as originating overseas. “Anyone examining the tool in
such a condition post-sale and examining the banner sticker … would easily be
misled into believing the product was domestically produced.” Now, Albion uses
a metal stamp on the recoil plate of these tools to indicate Taiwanese origin.

In 2004, Albion’s website contained a page entitled “The
Albion Difference,” which included the claim: “All our dispensing products and
accessories are designed and manufactured in the USA, from our location in
Philadelphia, Pennsylvania.” In 2007, it was updated to read: “all of our
dispensing gun products and accessories are designed and manufactured in the
USA, from our location in Philadelphia, Pennsylvania.” (US manufacturing was
actually in New Jersey by then.) In 2010: “All of our dispensing gun products
and accessories are designed in the USA, from our location near Philadelphia,
Pennsylvania.” There were other publications, such as a catalog stating “All
Albion Products are Made in America” in the bottom right-hand corner of its
cover. A later catalog omitted that statement and said that the B-line was “USA
engineered with the savings of an import” and that “Albion is a third
generation American manufacturer.” Old catalogs continued to circulate widely.

The Albion’s Owner’s Guide includes the statement “All
Albion products are made in America.” This guide provides instructions for
users on how to use Albion’s cartridge and bulk guns. But because these
instructions do not apply to B-line users, the Owner’s Guide was generally not
distributed with B-line guns.

Interactions with customers. Albion’s customers
requested a NAFTA certificate of origin from Albion between fifteen and twenty times
per year. These certificates read “Meets FTC all or virtually all made in
U.S.A. eligibility requirements.” The responsible employee testified that she
did not know what the FTC is or what it requires in terms of product labeling. A
certificate of origin introduced into evidence indicated that she had (falsely)
certified to 3M that Albion’s product met the FTC’s “all or virtually all” made
in U.S.A. standard.

Among the specific events: In 2004, an adhesives retailer in
the roofing industry asked to return guns stamped with “Taiwan” on the body
because they “need[ed] applicators that we can sell as being made in the
U.S.A.” Albion replied that it would “replace quote, made in Taiwan recoil
plates with a no-labeled recoil plate.” Albion did so, using unstamped recoil
plates that were made in Taiwan. Albion did not seek legal counsel before it
did this. For another adhesive manufacturer, Albion customized guns and acceded
to its request that the “Made in Taiwan” mark be “move[d] to an obscure segment
of the box.”

In 2009, Albion told ABC Supply, a distributor with around
900 retail locations, that it could place “Made in USA” labels on all Albion’s
tools. Schneider told ABC that one model was the only tool with significant
overseas costs, and that he would want an additional $3.96 if ABC elected to
put “Made in USA” on it.

Post-suit actions. Albion contended that it stopped
most if not all of this once Newborn sued, and that it prioritized asking
distributors to take products labeled “Made in U.S.A.” down. Its witness
testified that “some [distributors] comply, others do not.” In June 2012, the
U.S. Customs and Border Protection Agency issued a “Notice to Mark” that the
hang tag on the B-line was “not in close proximity to line stating USA
Manufacturer and Designer.” Albion began putting a white with black lettering
“Made in Taiwan” sticker on the handle of its B-line product.

Still, in September 2015, Albion’s Amazon listings for its
imported accessories included the claim “Made in U.S.A.” There was testimony
that a seller doesn’t always control what Amazon’s listing says.

Non-parties. Various non-party testimony came in
about the structure of the market and why Albion and Newborn were more direct
competitors than other market participants. Testimony also covered demand for
American-made products: although durability and price are important to many,
USA orgin is also often preferred, though there was also some testimony that
origin wasn’t the overriding consumer concern. Other parties testified that
they believed the products were made in the USA.

Experts. Newborn’s marketing expert, Wallace, prepared
an expert report on the impact of the “Made in America” claim based on a number
of third party surveys in which a significant number of respondents identified
“Made in USA” as a factor in their purchasing decisions, if not one of the most
important factors. Albion’s expert, Nowlis, rebutted this report but also
didn’t conduct a survey. He criticized existing surveys’ aided questions, lack
of control group and peer review, and reliance on a market different from the
one at issue here. “Nowlis expressed skepticism about the FTC’s statements that
consumers take into consider whether a product was ‘made in America,’ noting
that ‘[t]he FTC does surveys sometimes and sometimes it doesn’t, so I don’t
know where they’re getting this recommendation from.’” He further stated: “we
could all agree that sometime ‘Made in the USA’ is material to some people, but
sometimes it isn’t.” People say they care, but it isn’t clear that they follow
through on this purported commitment.

Albion commissioned a marketing consultant to help Albion
decide whether to begin producing and selling an imported line of tools between
1989 and 1991. The relevant witness testified that he recalled that the expert
reported that “all other things being equal, that at the point of purchase, if
a buyer was comparing a USA versus a foreign product, that somewhere around ten
or eleven percent premium price was about as much as the average end user of a
caulking gun would pay.”

Housekeeping elements for liability: “actionable statements
must be made by the defendant,” but a defendant can be liable for statements by
third parties, for example, when the speech was “created, sponsored, and
presented by the defendant” or when there is contributory false advertising. Also,
some courts have held that “statements made inside the product’s packaging,
available only to consumers after the purchase has been made, do not affect the
choice to purchase” and therefore are not actionable under the Lanham Act.

Albion made several false statements, even though it didn’t
have a duty to disclose country of origin under the Lanham Act. [Given the
legal requirement to label foreign origin, this might be a case where
nondisclosure necessarily implies US origin as well, but that’s not super
important here.] Statements such as “All Albion products are Made In America,”
and “All our dispensing products and accessories are designed and manufactured
in the USA, from our location in Philadelphia, Pennsylvania” were false.
Statements made (or disseminated, really) by the distributors were attributable
to Albion, which “created, sponsored, and presented this information.”

These statements were factual and deceptive; third parties’
reliance on them to sell Albion’s products to end consumers were “evidence that
the third parties themselves were deceived by Albion’s false origin claims and
evidence that Albion has never corrected the false perception it created about
the origin of its products.”

Even the statements available after purchase were
actionable. Although statements in instruction manuals might not be made to
influence consumers in product choice, the statement “All Albion Products are
Made in America” “brands Albion falsely as a manufacturer of products made
entirely in the United States” and Albion specifically lists other Albion
products available for purchase in the catalog it includes in product boxes, “supporting
a finding that these materials were meant to influence future purchasing
decisions.” Also, these materials were available on Albion’s website before
purchase.

In its introductory discussion, the court concluded that “Made
in America” also wasn’t puffery. America is a specific location, and “Made in
America” is “a specific standard defined by Government agencies.” [Notably, it
doesn’t matter whether consumers know the details of the definition; they rely
on there being such a definition. You can see the tension between cases like
this one and the cases rejecting, say, the US government’s definition of
“butter.”] Newborn’s own research confirmed that the claim was measurable and
falsifiable: comparative research could establish its empirical truth or
falsity. The evidence also showed
materiality.

Then, in its later discussion, the court noted that another
decision found that a “Made in USA” claim was ambiguous, Honeywell Intern. Inc.
v. ICM Controls Corp., 45 F. Supp.3d 969 (D. Minn. 2014), because of different
definitions of “made” in FTC guidelines and policies, other federal regulations
and dictionary definitions. The mere fact a statement does not conform with a
federal agency’s guidelines is usually “insufficient evidence that a claim is
literally false or misleading.” Yet “customs and FTC standards remain relevant
for the Court to consider in its decision-making process, especially when the
agency has developed an expertise in the area.”

Here, Albion made both literally false and ambiguous,
misleading statements. Literally false: certificates of origin falsely stating
that Albion’s products met the FTC’s standard. Albion argued that these weren’t
“advertising or promotion,” but that argument failed. The court is somewhat
confusing in its discussion here: the claim to meet the FTC’s standard could
readily be treated as a separate claim from “made in the USA,” just as “X is
clinically proven” is a separate “tests prove” claim from “X is true.” This
would be particularly appropriate given customers’ apparent demand for the
certificates of origin referencing the FTC standard over and above their demand
for simple “made in the USA” labeling. But it’s not clear that’s how the court
reasoned.

Some of the labeling was also literally false, when Albion
allowed special orders to bear labels that claimed Albion products were made in
the United States. However, “Albion’s practice of replacing recoil plates and
relocating country of origin claims is not literally false because these
messages are ambiguous and rely on the viewer to integrate information to
interpret this message.”

Also literally false: Website claims that “All our
dispensing products and accessories are designed and manufactured in the USA,
from our location in Philadelphia, Pennsylvania” and catalog statements that “All
Albion products are made in America.”

Misleadingness: Stamping products that were made at least
partially abroad with “ALBION ENG. CO. PHILA. PA. U.S.A.” was not just merely
an address or a “piece of legacy information.” Also misleading: Printing “75
[later 80] Year History – USA Manufacturer and Designer” on B-line guns; “third
generation American manufacturer”; a new product announcement for the B-line identifying
Albion’s products lines as “U.S. manufactured professional tools as well as
commodity guns”; comparison of the B-line to Asian and European imports without
acknowledging that the B-line is also imported; and advertising models as “Made
in the USA” when significant portions of these guns were manufactured in
Taiwan.

Some of the statements were even false by necessary
implication. In context, statements such as “third generation American
manufacturer” and “USA manufacturer” claims, “when considered in the context of
Albion’s blanket statement, its other marketing, and its employees’ emphasis on
country of origins, convey by necessary implication that Albion products are
made in America. These statements do not rely on consumers to integrate
separate components and draw a conclusion.”

However, the comparison to other imports did require
inference, as did Albion’s statement that it manufactures “professional tools
as well as commodity guns.” These ambiguous statements were shown to be likely
to deceive.

Were the catalogs merely outdated? No. [It’s not clear this
matters; most cases to reach the issue hold that falsity is falsity, even if
the falsity is created by subsequent developments.] Albion began producing its
B-line in Taiwan in 2001 but engaged in “continual distribution of outdated
literature containing statements that had not been true for years as part of a
pattern of deception in the marketplace.” Albion also said its “general
statements” in small font were corrected by specific literature that
acknowledges that the B-line was built overseas. But “these occasional acts of
candor” were insufficient.

Albion argued that no reasonable consumer could be misled by
these claims because Albion used a factually accurate, unambiguous statement of
the geographic origin of the B-line guns, as in the Pernod Ricard case.
But in that case, both the name “Havana Club” and “Made in Puerto Rico” appear
on the same label, so consumers could see the true geographic origin when they
saw the name. Here, “there is no guarantee that a customer reading a catalog or
a section of Albion’s website would also encounter Albion’s blog post, press
release, or a B-line gun itself.” In the “entire context,” the statements were
literally false or misleading. The court pointed out that the statement “All
Albion Products are Made in America” was not often coupled with the caveat that
Albion’s B-line guns were manufactured in Taiwan, and Albion apparently never
disclosed its self-administered lesser standard for Made in America.

Nor did the Honeywell case mean that “Made in
America” could never be literally false:

Honeywell did not involve
products made entirely abroad, nor did it involve end products that were
required by law to be marked legibly, permanently, and conspicuously with their
foreign country of origin pursuant to specific decisions thereon by U.S.
Customs and Border protection. Honeywell also did not present a blanket
statement regarding a country of origin. Under any of the thresholds discussed
in Honeywell, Albion’s B-line guns do not meet the standard for being
“Made in America” as they are wholly manufactured in Taiwan.

The customs rulings were relevant to falsity even if not
binding: Customs held that certain Albion guns should not be labeled “Made in
America.” Likewise, by Albion’s own admission, Albion’s products didn’t meet
the FTC standard. Its claims were literally false.

As for proof of deception/harm to the plaintiff, “there is
no quantitative measure of the degree to which an advertisement must mislead or
deceive consumers to prevail.” A qualitative approach suffices.

However, since Newborn sought monetary damages and relied in
part on misleading, not just literally false, statements, it had to show actual
deception. It did so. Newborn didn’t need a survey given the evidence it did
have, and the court refused to draw an adverse inference based on Newborn’s
decision not to introduce a survey. The existing surveys about “Made in the
USA” and related expert testimony were admissible, helpful, and at least
“suggestive” of consumer deception. And even without the expert, Newborn showed
several instances of actual consumer deception, including “a number of
conversations with Albion customers.” One, for example, testified that he
believed Albion products were made in America because it was “printed right on
the side of the box.”

Because Newborn sought monetary damages, the court refused
to presume materiality even from literal falsity, but again there was both
direct and circumstantial evidence of materiality, along with evidence that
Albion and Newborn products were “reasonable substitutes” for one another. “Newborn
was not required to demonstrate that customers were purchasing Albion products
only because they were made in America.” It sufficed that “many customers
consider it a relevant factor.”

Injunctive relief: Newborn showed irreparable injury by
showing that, “[d]espite Newborn’s best efforts to emphasize its added features
and lower prices, Newborn has struggled to compete with Albion in the
professional/industrial market. Newborn’s evidence demonstrates that its
competitive advantages were undercut by Albion’s claims that its products were
made in America.”

Monetary relief: Newborn showed that it was entitled to
disgorgement. It showed prior diverted sales by showing that, once the truth
about Albion began to penetrate the market, its own sales increased. Newborn
saw the greatest growth in products that compete directly with Albion products,
without any changes in pricing or sales force at Newborn. Albion argued that
Newborn’s growth was attributable to Newborn’s innovations and the rebounding
of the market following the global recession in 2008 and 2009 and that it also
experienced growth in all business segments during this time period, but
Newborn argued that it hadn’t suffered greatly in the downturn. This chronology
alone might not have been enough, but Newborn also provided evidence of sales
it never made because they were diverted to Albion based on false beliefs about
Albion’s lack of foreign content.

Equity weighed in favor of disgorgement, since “Albion
intended to distinguish itself from Newborn by stating that all of its products
were made in the United States to the detriment of its customers understanding
of where Albion products were made,” and made the statements for years. Albion argued
that Newborn’s delay in filing suit weighed against disgorgement, but the court
wouldn’t “penalize Lee and Newborn for conducting an investigation into the
origin of Albion products, assessing its own market position, and consulting
with the U.S. Customs and Border Patrol Agency before filing this suit.”

After considering Albion’s affirmative defenses not resolved
here, the court would consider the amount of disgorgement if necessary.

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Dastar no bar to claims that using images of P’s product is deceptive where D’s product differs

Posted on September 9, 2020 by rtushnet

Primesource Building Products, Inc. v. Lee Gp. Int’l, Inc.,
No. 3:19-CV-02878-X, 2020 WL 5038176 (N.D. Tex. Aug. 25, 2020)

PrimeSource alleged that Lee Group wrongly used images and
product descriptions of PrimeSource’s concrete curing blanket to sell its own
competing product. It brought a §43(a)(1)(B) false advertising claim, which the
court agreed wasn’t barred by Dastar.

PrimeSource alleged that Lee Group used PrimeSource’s
product descriptions and images, including depictions of PrimeSource’s “innovative
edge overlay,” but that the descriptions and images didn’t accurately describe
Lee Group’s products. This was plausibly misleading and deceptive. It was
plausibly material because “claiming a technologically innovative advantage … will
likely influence consumers’ decision-making.”

This was not a barred attempt to recast a copyright claim or
inventorship claim as a trademark claim. No mention of copyright or inventorship would be necessary to
prove the claim. This seems exactly right and consistent with the Dastar Court’s suggestion that false advertising claims could still survive under appropriate circumstances.

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social media posts using models’ images could be false advertising etc.

Posted on September 9, 2020 by rtushnet

Two cases in this burgeoning genre, with different results on conversion claims but otherwise similarly highly favorable for the plaintiffs, including on statute of limitations/single publication rulings.

Moreland v. Beso Lounge & Restaurant LLC, 2020 WL
5302312, No. 19-cv-00958 (VLB) (D. Conn. Sept. 4, 2020)

Plaintiffs, professional models, plausibly stated a false
advertising claim for unauthorized use of their images by alleging that their
reputations required selectivity about the companies/brands for which they
modeled. The court accepted the failure to pay them as injury in fact (though
it’s not Lanham Act injury) and also accepted the allegation that “any improper
or unauthorized use of their [i]mages substantially injures their careers …
insofar as each of Plaintiffs’ [i]mages have been associated with a night club,
and the implication of Defendants’ use of Plaintiffs’ [i]mages is that they are
employees, endorse a night club, or are otherwise associated or affiliated with
a night club.”

False light claims also survived; damage isn’t an element of
the claim, and false perceptions that plaintiffs work at or endorse a night
club could be highly offensive to a reasonable person because plaintiffs
alleged that clients might refuse to hire them as a result.

CUTPA (state consumer protection law) claims similarly
survived; plaintiffs alleged an “ascertainable” loss. In what can only be
described as cause-of-action stampeding, the court also refused to dismiss
conversion claims based on copying photos, even though (a) that’s clearly
preempted by copyright law, and (b) conversion doesn’t make sense for copies
anyway. Relying on very different cases (e.g., misappropriation of domain
names, which are exclusive under the DNS), the court ruled that, “to the extent
that embodiment of intangible rights in a document is required, Plaintiffs have
alleged that their intangible rights were reduced to documents, namely, their
photographs” and “Defendants allegedly deprived Plaintiffs of the right to
choose how their images would be used and of the value of their use,” conflating
“image” with the digital copies. Urgh.

On statute of limitations issues, the court declined to find
a presumption of laches for the Lanham Act claim despite some of the initial
publication dates being more than 3 years before suit (3 years being the most
analogous state limitations period, borrowed by the Lanham Act). It wasn’t
clear when plaintiffs knew or had reason to know of the injury.

For the appropriation/false light claims, the court declined
to apply the single publication rule and instead found that the continuing
course of conduct doctrine allowed the claims to persist, given the allegations
that the uses occurred “over time” and that the images were “republicized … so
as to reach a new audience and/or promote a different product.” Given the allegations that the posts were hard
for the plaintiffs to find because they were “pushed down” by new social media
posts from defendants, one wonders what damages could be shown over time/within
the limitations period, but in its CUTPA discussion the court highlighted the
fact-intensive nature of that query.

Souza v. Algoo Realty, LLC, 2020 WL 5300925, No. 19-cv-00863
(MPS) (D. Conn. Sept. 4, 2020)

Another models v. restaurant/nightclub case with very
favorable rulings for the plaintiffs (at the motion to dismiss stage). This one
seems potentially stronger as a false endorsement claim than some others given
the allegations that their images were altered/combined with actual images of
patrons or performers at the restaurant. Notably, the court accepts allegations
of harm to their reputations, including for false light claims, even though the
defendant doesn’t offer nude or semi-nude performances. The offensiveness was
in the alleged alteration of plaintiffs’ images “so as to reach a new audience
and/or promote a different product,” and the allegation that their
“[a]ffiliation with a night club could lead to significant potential career and
personal damage to a professional model because it could lead other clients to
refuse to work with her or drop her as a model.” The court found this a “close
call,” but ok for a motion to dismiss to allege that a reasonable person “would
be highly offended by such an implied connection.”

Here, the conversion claim failed because plaintiffs didn’t
plead how defendants’ use excluded them from their ownership rights. “The
Plaintiffs do not allege that they are unable to use their images as a result
of the Defendants’ alleged conversion.”

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I can’t believe it’s not (vegan) butter: First Amendment invalidates standard of identity for butter as applied to vegan product

Posted on September 8, 2020 by rtushnet

Miyoko’s Kitchen v. Ross, No. 20-cv-00893-RS (N.D. Cal. Aug.
21, 2020)

Eric Goldman’s far
more anti-regulatory take is here.

The California Department of Food and Agriculture told
Miyoko’s not to call its “vegan butter” product “butter” (it challenged certain
other aspects of the marketing but some of those challenges have been
abandoned). Miyoko’s sued and won a ruling that California law—and thus the
federal law that it adopts—violates the First Amendment insofar as the standard
of identity for butter prevents the use of “vegan butter” as a name for food
that clearly signals its nondairy status. “Lactose free” and “cruelty free”
also were literally true and could not be regulated on this record. However,
Miyoko’s did not receive a preliminary injunction against enforcement that
challenged its use of “hormone free” and
“revolutionizing dairy with plants,” both of which the court thought
were likely misleading.

“For nearly a century, the standard of identity for butter
has required a product ‘made exclusively from milk or cream, or both . . . and
containing not less than 80 per centum by weight of milk fat.’”

Both parties agreed that Central Hudson applied. If
the speech at issue is false or misleading, it can simply be banned under part
1 of the original CH test, which was the result for “hormone free” and “revolutionizing dairy with plants.”

First, “because plants contain naturally-occurring hormones,
and because Miyoko’s vegan butter is made of plants, it necessarily contains
hormones as well. That the claim is literally false places it beyond the bounds
of protected commercial speech, fatally undermining Miyoko’s right to use it
without fear of reprisal.” Miyoko’s argued that consumers would understand the
phrase, in context, to mean that it didn’t contain “the artificial hormones
that are sometimes added to animal-based dairy products.” [The last I saw,
though there may be new evidence, the artificial hormones given to cattle have
not been shown to exist—much less be “added”—n the resulting dairy products.]
The court was unpersuaded. “Central Hudson insists, at the threshold,
that commercial speech be true, and provides no exception for falsities made
true by the target consumer’s supposed contextual awareness. … [N]o court has
ever repudiated a regulator’s authority to demand that products claiming to
lack hormones actually lack hormones.” It wouldn’t be illogical for any
consumer to believe that a product labelled “hormone free” does not contain
hormones.

“Lactose free” and “cruelty free” were literally true, but
also had to be analyzed in the context of their “quasi-close” proximity to
“vegan butter” in case they helped create or maintain deception. Miyoko’s highlighted the “numerous phrases on
its label that point in an unmistakably non-dairy direction”: “vegan,” “made
from plants,” “cashew cream fermented with live cultures,” and “cashew &
coconut oil spread.” Without more, the state’s evidence of deceptiveness
(discussed in greater detail below) wasn’t enough to show deception.

However, “revolutionizing dairy with plants” was false
enough to regulate. Using the dictionary definition of “revolutionize,” the
phrase “denotes direct interaction with animal-based milk products in a way
that leaves them ‘fundamentally’ different than they were before.” But dairy
replacements do not revolutionize dairy; they leave it behind. Similarly, you
can’t “revolutionize leather with cotton,” or “revolutionize whiskey with
seltzer.” This claim was “plainly misleading,” relying purely on dictionary
definitions. [Which we all
know are always uncontroversial and relevant.]

Miyoko’s, however, succeeded in its core aim: “vegan butter”
was not inherently misleading. California pointed to the federal definition of
butter as being made “exclusively” from milk and cream, in place since 1923,
which the court found “circular”; Miyoko’s pointed to the long history of
apple, nut, and similar butters. Neither party’s use of definitions was itself
dispositive, so the court turned to other evidence, focusing on whether Miyoko’s
specific use of the word “butter,” “in immediate or close proximity” to terms
like “vegan,” “made from plants,” “cashew cream fermented with live cultures,”
and “cashew & coconut oil spread,” was misleading.

“Butter” was the most prominent word on the front of the
label, preceded by the smaller “European style cultured vegan” and directly
followed by the smaller “made from plants.” “Cashew cream fermented with live
cultures” was in even smaller text on the middle of the label’s bottom-left
quadrant, and “cashew & coconut oil spread” was tinier still.

The state didn’t meet its burden of showing misleadingness. As
to precedents: Courts have found that soymilk and almond milk aren’t deceptive,
and “even the least sophisticated consumer[] does not think soymilk comes from
a cow.” [This is empirically untrue, by the way, but then again there is a
tranche of consumers who say that peanut butter has dairy in it.] And
plant-based “meat” products have
also been allowed to use “meat” terms when framed with “ample terminology
to indicate [their] vegan or vegetarian nature . . . .” Nor was it convincing
to argue that butter was different because “[n]either milk nor meat has a
plant-based analog as well-known as margarine” given the current prevalence of
products like “soymilk,” “almond milk,” and “coconut milk.” Although eggless
“mayonnaise” might be deceptive, Duran v. Hampton Creek, 2016 WL 1191685 (N.D.
Cal. Mar. 28, 2016), that case involved an “uniquely unrepresentative label,” which
was “Just Mayo” and the picture of an egg, without any accompanying qualifiers
such as “vegan” or “made from plants.”

As to consumer evidence: the state’s showing of confusion
around plant-based dairy alternatives was “empirically underwhelming.” Although
some research exists—I used some for my advertising law midterm last year—the
state didn’t submit any. Miyoko’s submitted a study indicating, in relevant
part, that the public “accurately identifie[s] the source of animal-based milk
products 84% of the time, plant-based milk-products 88% of the time,
animal-based cheese products 81% of the time, and plant-based cheese products
74% of the time.” Even if 26% of the participants were confused by plant-based
cheeses, 19% were confused by animal-based cheeses; while 12% misidentified
plant-based milks, 16% misidentified animal-based milks. At most, consumers are
“perhaps a bit better at identifying traditional cheeses than vegan cheeses,”
and perhaps the opposite for vegan v. traditional milks. This “modest” result “hardly cuts in favor of finding Miyoko’s use
of ‘butter’ inherently misleading.”

Finally, the court found “using the government-issued
dictionary” to be “troublingly self-fulfilling.” I find this objection
overblown. Especially where there is no clear definition or where consumers
might just not know the technical details, government definitions can
consolidate consumer expectations and, more importantly, insufficiently
signaled deviations can be deceptive. Suppose Miyoko’s just called its product
“just butter” and only explained what was going on in the ingredients list—as
in Just Mayo. Is there any question but that the government definition,
enforced for nearly a century, would be helpful in figuring out whether
consumers were likely to be deceived?

But the court found that the federal standards—which
distinguish between “butter” (dairy), “margarine” (which Miyoko’s product would
have to be called if it was slightly fattier), and “spreads”—have to reflect
“identifiable linguistic norms” to justify regulatory power over commercial
speech. But: Where are such norms to come from? Why wouldn’t they plausibly
come from nearly 100 years of regulation? What happens when a margarine producer
wants to call its product “butter” and argues—quite plausibly—that no
reasonable consumer knows the exact legal definition of butter or margarine?
Maybe the answer is that this is really about labeling, and vegan butter
labeling is cost-justified (helps more people than it hurts) while labeling
margarine as butter would not be. But those are usually considered to be
ordinary regulatory judgments, which is why First Amendment commercial speech
doctrine has latterly been accused of Lochnerism. Anyway, the court didn’t
credit the state’s “opinion” of what “butter” was.

Without misleadingness, CH factors two through four
also favored Miyoko’s. Although the court thought that, in the abstract,
government definition of terms might not be “more extensive than is necessary
to serve [the state’s] interest” in consumer protection, this restriction
didn’t directly advance the state’s interest. “In the narrow context of an
as-applied constitutional challenge, the State might satisfy this requirement
with a moderate showing of the ban’s tendency to redress harms caused by
Miyoko’s vegan butter in particular, if not the dairy-alternative market writ
large.” But the state didn’t show that this label had tricked anyone or
otherwise show a “unique[]” threat from the label. [Unique can’t possibly be
the right standard. Ordinary deceivers—which I’m not saying Miyoko’s is—are far
from unique. I think the court has to mean “something about the label’s use of
‘butter’ increases deception potential more than other uses of ‘vegan butter.’”]

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T-shirts as noncommercial speech (and an issue-spotter fact pattern)

Posted on September 8, 2020 by rtushnet

Cornette v. Graver, 2020 WL 4059589, No. 19-cv-219 (W.D. Pa.
Jul. 20, 2020)

Cornette is a professional wrestling commentator and “personality”
who sued defendants for infringing his trademark rights and right of publicity
by selling disparaging t-shirts bearing his name and likeness. The court denied
a TRO on First Amendment and related grounds.

Among other things, Cornette currently hosts two popular
wrestling-themed podcasts. His podcast videos on YouTube use “thumbnail images
that depict people he discusses in each segment,” and he doesn’t seek
permission from those people first. He
sells merchandise on his website, including t-shirt sales in 2019 of
approximately $40,000 (about 15% of merchandise revenue). One such shirt uses
Cornette’s catchphrase or personal motto: “Thank you, Fuck you, Bye.”

Graver is a professional wrestler and tattoo artist, who
wrestles under the ring name of “G-Raver.” He does “deathmatch” wrestling, which involves
“hitting each other with improvised weapons, such as light tubes, barbed wire,
thumbtacks, panes of glass, and weed whackers, among other things; Graver’s
signature weapons are tattoo needles.” Blood and injury routinely accompany
such matches. Cornette is a vocal opponent of
deathmatch wrestling because of the risk of injury to imitators.

In one video that Cornette retweeted, “Graver lacerated an
artery in his arm and nearly bled to death as a result of his injury.” Cornette
commented, inter alia, that “if fans were lucky[, the organizers] probably
stopped the show so everyone could watch [Graver] bleed out.” Graver objected.
Cornette replied that Graver and his opponent were both “stupid dumb fucks
doing something stupid [you] shouldn’t have been doing.” Cornette then dubbed
Graver “Grover”—a reference to the Sesame Street character—created a thumbnail
of Graver as Grover for his podcast videos, and used the thumbnail for an
animated game of Whack-A-Mole.

Graver then used the
Indy Connection, “a counterculture e-commerce store that sells merchandise such
as t-shirts, key chains, dolls, stickers, and other similar items for the
wrestling and entertainment industries,” where he has a storefront, to respond. One of his friends got a graphic artist, Shaygan, to create “parody” or
“caricature” images of Cornette with his “mouth and eyes crossed out in red and
[with] tattoo needles sticking out of his head.” The T-shirt added “Fuck Jim
Cornette” around the image, and there were some other modifications (we will
mainly discuss the FJC shirt; there’s also a shirt known as the MF shirt); the
artist didn’t like the modifications and there was a falling-out. The artist then
executed a contract with Cornette granting Cornette a nonexclusive license to
use the images he created. [Further details omitted, but would definitely add issue spotting detail.]

Individual defendant Lombardo (who also played a role in
some of the events above) added another shirt, which “removed the tattoo
needles, duct tape, Xs, and blood, replaced them with clown makeup, stubble,
and a prop red, ball nose — depicting Cornette as a clown—and added the word ‘Clownette.’”
He did this because he “believed that the dispute between Graver, The Indy
Connection, and Cornette was ‘just so asinine, it had become a circus upon
itself, [so] now [it was] just time to bring in the clowns’” and he believed
that Cornette was a clown.

Lombardo also registered the domain name http://www.fuckjimcornette.com and used it to redirect to the page on which the Indy Connection sold the FJC
shirt. The Indy Connection filed an application for a trademark on the
phrase “Fuck Jim Cornette,” to be used for clothing. The PTO rejected the application and the Indy Connection
abandoned it. “Lombardo never approached Cornette or Cornette’s counsel with an
offer to sell the domain name …, nor did Lombardo
intend to register the domain name in an effort to hold it hostage over
Cornette.”

After the FJC shirt had been available for a day or two,
Cornette objected to Shopify, which hosts The Indy Connection, that the shirt
was an unauthorized use of his name and likeness and Shopify removed the (page
offering the) shirt. The Indy Connection tried again, describing the FJC Shirt as
a “Plain Black Tee”; though the image was a plain black t-shirt, any purchasers
would receive the FJC Shirt. Cornette again complained and Shopify again
removed the page.

Cornette then (before receiving the license from Shaygan)
began selling copies of the FJC shirt on his own website because “if somebody
is going to be selling a shirt with my name and face on it, and money is going
somewhere, it should come to me and/or a good cause” because he “couldn’t
really sell it as a serious piece of merchandise.” You might think this could
in theory be important to the confusion analysis, but the court (rightly)
doesn’t care. Many years ago, I wrote (with Bruce
Keller) about this scenario; just as with copyright, a trademark owner
can’t increase its rights by creating its own critical/parodic merchandise.

After Cornette sued, The Indy Connection issued a press
release detailing its version of the events leading up to the lawsuit and
stating that it had released the FJC and MF shirts to depict an “alternative
commentary” on Cornette’s dispute with Graver. It then began selling the
Clownette shirt; if potential purchasers accessed http://www.clownette.com, they’d get
redirected to the Indy Connection site. The Indy Connection made approximately
$1,500 in profit from sales of the shirts. At least 32 websites currently offer
knockoff versions.

The Indy Connection didn’t engage in active marketing of the
shirts; didn’t intend to market to Cornette’s fans but to fans of deathmatch
wrestling; and “actively did not want Cornette’s fans to purchase the Shirts.”
There was no evidence of confusion about origin or endorsement in the record. Cornette
also had no evidence of sales diversion.

Trademark infringement: Cornette has no registration for his
name, “Clownette,” or “Fuck Jim Cornette,” so he proceeded under §43(a)(1)(A)
(and state trademark law, of which no more need be said).

Despite the fact that courts regularly apply the trademark
provisions of the Lanham Act to religious orders, and occasionally to political
parties (United We Stand), precedent outside those cases often maintains
that “the Lanham Act regulates only commercial speech.” The court here thus
decided that its first task was to determine whether the challenged activity
was commercial speech.

First, the shirts are speech because they convey a message.
(The better question isn’t whether the shirts are speech, but whether the cause
of action is one that regulates speech. If a Pennsylvania regulator found that
the shirts—or even the ink used to print the images on the shirts—were
impregnated with a carcinogenic chemical and sought to remove them from the
market, it would be completely irrelevant that the shirts bore speech.
Trademark law inherently regulates speech because it targets the communicative
meaning of symbols, not their noncommunicative effects in the world.)

But the shirts weren’t commercial speech, that is, “speech
that does no more than propose a commercial transaction”—roughly speaking, an
ad. Cornette argued that (1) Graver was
selling products, (2) advertising them, and (3) had an economic motivation for
the speech, but that was wordplay. An ad touts a product other than itself; the
shirts didn’t but were instead the product being sold, like a subscription to
the New York Times.

Unfortunately, instead of saying this clearly, the court
reasoned that the key problem was that Graver lacked an economic motive for
selling the shirts. “[T]o have an economic motivation for purposes of
commercial speech, the speaker must speak substantially from economic
motivation…. Speech that is primarily motivated by political, religious, or
ideological convictions, although it may benefit the speaker economically, may
not meet the economic motivation factor, and therefore not be considered
commercial speech.” Although Graver made about $200 from the shirts, “Cornette
has not shown that it was likely the primary, or even a substantial, factor
motivating those actions.”

Especially in an age of (1) corporate personhood and (2)
judicial direction not to question the sincerity of belief, this is an
unworkable and dangerous standard; the “is the speech advertising something
other than the speech itself” standard does the necessary work better. (Indeed,
the adverbs tell you that something very squishy is going on: “substantially”
from economic motivation and “primarily” noneconomic aren’t even opposites.) The
example the court borrowed from the Fifth Circuit illustrates the problem quite
well:

[A] woman operates a record store
selling Christian rock music and tells her customers that they should buy
Christian rock music because other forms of rock music are satanic. Whether the Lanham Act applies to her conduct
depends on her motivation: if she opened the bookstore because of a sincere
religious belief that Christian rock must be made available to combat the evils
of other rock music, the speech is likely noncommercial. Conversely, if she is
agnostic and opened the store after taking a business class that informed her
that a properly set up Christian rock store can be very profitable, the speech
is likely commercial and therefore subject to the Lanham Act.

That’s ridiculous. The constraints on regulating her speech
should come from falsity and materiality—a claim about satanic origins is not
falsifiable. Not only does this example turn on religious “sincerity,” which
the Supreme Court is probably right that we should not generally question, it
also creates discrimination based on religious belief—the believer gets to say
things in the marketplace, with commercial effect, that the nonbeliever
doesn’t. If a pizza place opens up and says “we’re better than the pedophile
pizza place down the block,” its owners’ sincere belief in Qanon should have
nothing to do with whether they’ve violated the Lanham Act.

Obviously, the bad reasoning didn’t start with this court,
but it’s distressing to see the reasoning here when it’s so unnecessary to the
result.

As for the Indy Connection, it made about $1500, but the
initial sale was to raise funds for Graver’s recovery, which was “arguably” an
economic motivation, but “raising money for a good cause is not a traditional ‘economic
motivation.’”

The court also said that the shirts didn’t refer to a
specific product but instead expressed messages about Cornette. There’s a
metaphysical issue here—trademark/right of publicity law is often willing to
recognize a persona as a product or service that can be monetized—but that
perhaps suggests the error of commoditizing a persona rather than a flaw in the
commercial speech analysis. The record was “replete” with testimony that the shirts were
intended to parody Cornette’s views.

As for Graver’s social media promotions of the shirts, this “was
a natural method of getting word out about the message the Shirts conveyed;
although that motivation may be economic also, Cornette has failed to show that
it is likely that G-Raver promoted the Shirts substantially for economic
reasons.” [Would have been better to apply the general rule that truthfully advertising First Amendment-protected content inherits the content’s protection.]

Because this was noncommercial speech, there was no likely
success on the merits.

The court also did a traditional belt-and-suspenders:
confusion wasn’t likely, even assuming that Cornette owned a valid mark in his
name (or likeness; the court doesn’t have to get into the substantially more
complicated question of whether Cornette could own a mark in any depiction of
his face, see ETW v. Jireh). Dissimilarity was important. “Although
G-Raver has used Cornette’s name and likeness, no consumer is likely to get the
same overall impression from either: (1) a t-shirt with Cornette depicted as a
clown—and called ‘Clownette;’ or (2) bloodied, gagged, and with tattoo needles
in his forehead—with the words ‘Fuck Jim Cornette’ surrounding his image —as
they would from a t-shirt with Cornette’s face or his face and the words ‘Thank
you, Fuck you, Bye.’” So too with http://www.fuckjimcornette.com or http://www.clownette.com versus
http://www.jimcornette.com.

Both “fuck” and “clown” were terms of contempt. Even though
Cornette himself sold copies of the FJC shirt, that didn’t make it likely that
consumers would see the shirt or the URL “and assume that Cornette endorses a
t-shirt or website that expresses contempt for himself, or that Cornette is the
source of such a website or t-shirt.”
For the same reasons, the court found that the products themselves were
not highly related, which is a bit unusual.

Intent: intent to copy is not bad, only intent to confuse by
copying. This and the lack of confusion evidence weighed for Graver, as did the
intended audience. “Although both parties target their merchandise to wrestling
fans, the record evidence demonstrates that they each target different sectors
of the professional wrestling fandom.”

Trademark dilution: no. No commercial speech. Also, no fame.
It was not enough to show a 40 year history in pro wrestling, 1.7 million
podcast downloads and 100,000 to 125,000 YouTube views each month, and 160,000
followers on Twitter, without evidence about reach among the general American
public.

There was also no blurring because of lack of similarity,
lack of intent to associate (“G-Raver, although intending to reference Cornette
in creating the Shirts, had no desire to be associated with him.”), and lack of
actual association. There was no
tarnishment because tarnishment has to arise from “similarity” to the famous
mark, and here the use was dissimilar.

ACPA: No. There was no bad faith. Defendants believed they
were making a lawful parody; they were engaged in noncommercial speech. There
was no evidence they intended to divert consumers via likely confusion, or to
sell the domain names to Cornette.

Right of publicity:
Pennsylvania law bars “the unauthorized use of the name or likeness of a
person for commercial or advertising purposes when that name or likeness has
commercial value.” Under the statute, a “commercial or advertising purpose” is
the public use of a person’s name or likeness “on or in connection with”
selling or offering a product for sale, to promote or advertise products, or
for fundraising. But if the use is through a “communications medium,” it is not
a violation when: (1) the person appears as a member of the public and is not
named or identified; (2) the use is associated with a news report; (3) the use
is an expressive work; (4) the use is an original work of fine art; (5) the use
is associated with announcing or promoting a news report, expressive work, or
work of fine art; or (6) the use is associated with identifying the person as
the creator of a work. [Pause for standard agonized reminder that ads are
expressive works, according to both First Amendment and copyright law.]

Under the statute, a “communications medium” includes, but
is not limited to, newspapers, magazines, books, billboards, telephone, radio
and television broadcasts, digital communications networks, audiovisual works,
and global communications networks. [Query: what violation of the right of
publicity could occur without use of a communications medium? Which one of the
listed exceptiosn could occur without the use of a communications medium? The
presence of this unnecessary verbiage signals that weird epicycles are
necessary to make the right of publicity seem constitutionally ok.]

While Cornette was likely to be able to show that his name
and likeness had commercial value, the challenged uses (just the shirts, not
the social media) fell within the statutory exceptions. “Cornette’s name and
likeness both appear on the Shirts, which are a product, and G-Raver’s use
facially falls under [the law’s] scope because Cornette’s name and likeness are
‘on … a product.’” But the shirts were expressive works and the use was
through a communications medium.

Pennsylvania law defines an “expressive work” as a
“literary, dramatic, fictional, historical, audiovisual, or musical work
regardless of the communications medium by which it is exhibited, displayed,
performed, or transmitted, other than when used for a commercial or advertising
purpose.” Although shirts weren’t listed, they were still included in the
exception. [It would be better to say that images/pictorial works are covered,
not “shirts,” though I have to say I’d be surprised if the omission of
pictorial works wasn’t intentional.]

According to Mr. Justice Merriam-Webster, a “work” is
“something produced or accomplished by effort, exertion, or exercise of skill,”
or “something produced by the exercise of creative talent or expenditure of
creative effort.” The shirts “and the images used in their creation” were
“works” under this definition. And they were expressive. “[O]n closer
inspection” these were “fictional” works because fiction is “something invented
by the imagination,” and the image of a bloodied and gagged Cornette, with
tattoo needles sticking out of his forehead was “invented by [Graver’s]
imagination” as a way to get back at Cornette for his comments about Graver, as
was Lombardo’s vision of Cornette as a clown. [So I guess images that read as
realistic are not covered by the exception, which is a hell of a content-based
exception.]

And the shirts are a “communications medium” because the law
“contemplates exceptions from liability for right of publicity violations when
the use of the plaintiff’s name or likeness communicates a message. Clothing is
often used to convey a message, such as when protesting government policy, and
the First Amendment protects this expression.” Indeed, it would be nonsensical
to exclude shirts, because then “had G-Raver taken out a full-page
advertisement in a newspaper with the images used for any of the Shirts, they
would not have violated Cornette’s right of publicity, but the use of t-shirts
would be prohibited.”

Even if the statutory exception didn’t exist, the shirts
would be protected by the First Amendment as transformative use that don’t
merely supersede shirts with Cornette’s face on them.

And finally, Cornette failed to show irreparable harm.
There’s no presumption of irreparable harm in Lanham Act cases, or right of
publicity claims. Nor can a plaintiff establish irreparable harm on the basis
of “bald and conclusory statements.” Harm to reputation may be irreparable, but
still has to be shown. Cornette argued that the absence of an injunction would
lead to a free-for-all on his name and likeness, but only within the First
Amendment’s protections. “Any harm caused to Cornette’s brand through parodies
or satires that fall within the First Amendment are not harms the legal system
can address.”

Cornette’s sale of knockoff FJC shirts did finally come in:
“If the Shirts were so objectionable to Cornette, he likely would not have sold
them on his website, and the fact that he did also indicates that the balance
of the equities weighs against an injunction.” And the public interest in free
expression outweighed the public interest in protection of trademarks and the
right of publicity, “particularly when the party aggrieved by alleged
infringement has failed to show a likelihood of success on the merits or that
irreparable harm is likely.”

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inhaler marketing is partly deceptive; P not required to resurvey revised material

Posted on September 8, 2020 by rtushnet

GlaxoSmithKline LLC v. Boehringer Ingelheim Pharms., Inc., 2020
WL 5258317, No. 19-5321 (E.D. Pa. Sept. 3, 2020)

GSK partially succeeded and partially failed to
preliminarily enjoin some of BI’s marketing in this case involving claims about
different inhalers. Of broader note: when GSK proved that an earlier version of
the marketing campaign included false claims, the court was willing to enjoin
similar statements in the revised campaign, to protect GSK from whack-a-mole.

Chronic Obstructive Pulmonary Disease (COPD) causes
obstructed airflow from the lungs. It’s the third-leading cause of death by
disease in the US, and there’s a huge market for medications to manage its
symptoms is huge ($24.3 billion globally by 2026). Most COPD medications are
delivered by inhalers: (1) Metered dose inhalers (MDIs), which release aerosol
when pressed; since the patient must inhale coordinated with the spray, they
can be difficult to use. (2) Dry powder inhalers (DPIs), which use medication
combined with dry inactive carrier particles; all that is required to use them
is inhalation, which separates the medication from the carrier particles and
delivers the medication to the lungs. Both parties offer DPIs. (3) Slow mist
inhalers (SMIs), which use spring power to generate low velocity mist into the
mouth; they require some coordination, but less than an MDI. BI makes the only
SMI on the market in the US.

To promote its SMI, BI needed to convince doctors to use it
instead of DPIs. Its solution was to focus on COPD patients’ peak inspiratory
flow (PIF or PIFR) which is measured in liters per minute (L/min). The premise of
BI’s current campaign is that a COPD patient’s ability to separate the
medication from the dry powder carriers depends on that patient’s ability to
inhale with sufficient force. BI labeled this the “COPD Paradox”: although DPIs
have an “optimal PIF” of 60 L/min, many COPD patients have “suboptimal PIF” of
less than 60 L/min. By contrast, because SMIs do not require forceful
inhalation, BI’s marketing suggests that doctors should prescribe its SMI for
patients with low PIF.

“At its base, this case comes down to whether BI has
scientific support for its various statements about PIF and DPIs.” Since this
was a “tests prove” case involving claims of empirical proof, GSK could prevail
either by showing that “the tests were not sufficiently reliable to permit a
conclusion that the product is superior” or “that the tests did not establish
the proposition for which they were cited.”

Basically, there was scientific support for the basic idea
that the optimal PIF for most DPIs was >60 L/min, that low PIF is common in
COPD patients, and (more tenuously) that patients who couldn’t achieve that
could benefit from an alternative inhaler (apparently because there was
evidence of a correlation between low PIF and worse clinical outcomes). GSK
argued that there was no clinical evidence establishing a link between low PIF
and clinical efficacy of COPD medication. But BI “consistently” acknowledged
this lack of established correlation in its marketing materials. So there was no literal falsity here. So too
with related statements; the court noted that they were directed to doctors and
appropriately qualified.

Also, this weird marketing was not false: a box labeled “Dry
Powder Inhaler” that also bore a disclaimer stating “WARNING: Suboptimal
Inhaler Included.” Inside the box was … “a plastic figurine of a COPD patient,
as well as a BI marketing pamphlet.” BI argued that the “suboptimal” reference
was to the patient, not to the DPI, and the court agreed that, while the
outside of the box alone potentially conveyed the false message that DPIs are
suboptimal, the ad as a whole conveyed that many COPD patients are suboptimal
inhalers and was thus not literally false. “Upon opening the box and seeing the
figurine, and as there is no DPI in the box, physicians likely will understand
the intended message. As BI sales representatives were instructed to ‘[p]ut the
box in the customer’s hands,’ it is unlikely that physicians will fail to open
the box.” Referring to a patient, instead of the patient’s breathing, as
suboptimal seems dehumanizing to me, but that’s not the cause of action.

GSK did show a likelihood that “[t]he efficacy of aerosol
deposition in the lungs is dependent upon the peak inspiratory flow rate (PIFR)
of the patient” was false. GSK’s evidence was that “studies have shown that a
lung deposition of as little as 10% of an emitted dose of COPD medication can
effectively treat a patient.” Thus, while BI had support for the claim that patients
with a low PIF would receive less COPD medication from a DPI, BI didn’t
support that they wouldn’t receive enough medication.

Misleadingness: GSK only provided evidence of deception for one
document, a visual aid. While surveys aren’t always required, “[c]onsidering
the complexity of the science, the sophistication of the targeted physicians,
and BI’s efforts to toe the line and only state what its cited studies support,
the Court cannot conclude that BI’s statements are misleading based only on the
marketing materials themselves.”

GSK provided a survey that showed a since-changed “COPD
Paradox” visual aid. Its expert coded 51% of the respondents’ answers as
stating that BI’s messaging conveyed that “COPD patients with suboptimal PIF
don’t get sufficient benefit from their inhalers.” In response to the question:
“What, if anything, does material convey or suggest about use of certain dry
DPIs for COPD patients with suboptimal peak inspiratory flow (PIF)?” 34% of the
responses were coded as stating that “[e]fficacy of DPI medications may be
compromised/insufficient for some patients with low/reduced PIF.” Thus, a
substantial number of physicians were deceived into believing that DPIs do not
work for COPD patients with suboptimal PIF. BI quibbled with the coding but
even excluding the disputed responses gave a deception rate of well over 15%.

BI argued that the survey was irrelevant because it used a
now-expired ad, not the current visual aid. But the old visual aid was “substantially
similar” to the current one. As BI’s Director of Respiratory Marketing stated
in a memo sent to the sales team, “[d]on’t worry, the new assets are very
similar to the old assets in terms of the overall story content and message
flow. You will see immediately that the changes are relatively minor…[w]e are
very confident that these new assets will help you continue to tell the core
story….” The court credited the conclusion of GSK’s expert, “the only
marketing expert whose opinion has been presented to the Court,” that “[o]ne
would not need to survey each and every iteration to reach the conclusion that
the message was communicated in prior pieces, and that it continues to be
communicated now.” The court pointed out, for example, that “MORE THAN HALF of
COPD patients can have suboptimal peak inspiratory flow (PIF)” evolved to “MANY
COPD patients can have suboptimal peak inspiratory flow (PIF).” The first
visual aid stated that “[y]our patients live with damaged lungs and many cannot
forcefully inhale…yet…[m]any COPD inhalers may require your patients to
forcefully inhale,” while the current one says “[m]any patients with COPD
cannot forcefully inhale because they live with damaged lungs…yet…[a]ll dry
powder inhalers (DPIs) require patients to forcefully inhale to optimally
activate.”

Takeaway: the survey was “comprehensive and compelling. BI
cannot dodge the legal consequences of that survey by making superficial tweaks
to its marketing materials, turning Lanham Act litigation into a never-ending
shell game.”

BI didn’t contest materiality (or interstate commerce or
likely injury to GSK).

Irreparable harm: Harm to reputation or goodwill can
constitute irreparable injury because it is “virtually impossible to quantify
in terms of monetary damages.” BI argued that GSK’s claim was belied by its
17-month delay in seeking injunctive relief and by data showing no competitive
harm.

Delay “may be excused where the party seeking a preliminary
injunction delays only in the reasonable belief that negotiations may resolve
the dispute.” GSK learned about BI’s marketing campaign in the summer of 2018. It
then convened an internal team to assess BI’s campaign. In September 2018, it
sent an objection letter to BI, which led to an exchange of letters that lasted
through June 2019. “Significantly, in response to GSK’s complaints, BI revised
some of its marketing materials.” In November 2019, GSK’s survey expert
submitted her report, and GSK sued and requested injunctive relief. GSK’s conduct, “which entailed an initial
resort to a consensual resolution of the controversy” and then waiting to
obtain evidence necessary to support its claim, “did not constitute
unreasonable delay.”

Harm: It was undisputed that GSK’s market share hadn’t
shrunk. But the irreparable harm was “long-term goodwill and reputation.” GSK’s expert explained: “[p]harmaceutical marketing is given structure
by campaigns that unfold over a period of years to advance a particular
strategy…[i]t takes time to make a case.” Here, because “virtually none of
the physicians in practice today have been trained in their medical education
to rely on PIF (or to think about PIF at all), it will take time, repetition,
and iteration to prime the marketplace for behavior change.” She further declared:
“[w]ith repeated exposure over time [to BI’s marketing campaign], innuendo and
suggestion are likely to take firm shape in physicians’ minds” and “physicians
can often be persuaded to act on speculation so long as they don’t feel they
are putting patients are risk.” This was especially likely here because COPD is
a “leading cause of death, but there have been no dramatic advances in
treatment therapy for years.” The survey also showed that, even though GSK’s
market share had yet to erode, the campaign was damaging GSK’s DPIs’ reputation
and goodwill. GSK sales representatives also reported that multiple hospitals
are now “testing PIF and if below 60, they are switching patients off of [GSK]
products.” GSK’s expert stated that “[t]he equity drained away through brand
reputation risk may never be recovered. It will be hard for physicians to
‘unhear’ these ideas once heard because the burden of definitively disproving
(or proving) them is too onerous for any company with a stake in this market to
entertain.”

GSK wasn’t required to wait until it lost market share,
which would be too late.

The public interest favored enjoining false or misleading
health-related statements, as BI was allowed to continue to truthfully
advertise the state of the evidence. (I wonder how easy that will be, given
that the problem is misleadingness; disclaimers alone won’t necessarily fix
that even if they avoid falsity.)

The court also ordered a $5 million bond.

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another advertiser’s Google click fraud suit is revived

Posted on September 8, 2020 by rtushnet

Singh v. Google LLC, 2020 WL 5202081, — Fed.Appx. —-,
2020 WL 5202081 (9th Cir. Sept. 1, 2020)

The court of appeals reverses the dismissal of Singh’s
California FAL/UCL claims against Google for allegedly charging for fraudulent
clicks despite its promises. While the district court found that Singh lacked
statutory standing, the economic injury requirement “demands no more than the
corresponding requirement under Article III of the U.S. Constitution.” It was
sufficient for Singh to allege that he purchased some number of clicks from
Google via its AdWords program; that Google misrepresented the general efficacy
of its fraudulent click filters; and that he would not have purchased clicks
but for his reliance on the allegedly erroneous fraud filter rate. Indeed,
Singh alleged that he hired a company to analyze some of his ad campaigns,
which showed that Google’s filters caught fewer fraudulent clicks than
advertised, and that numerous studies prior to 2016 on third-party ad campaigns
found that Google’s filters did not catch as many fraudulent clicks as Google
advertised. “At the pleading stage these allegations together are sufficient to
draw the reasonable inference that Singh’s ad campaigns prior to 2016 similarly
suffered higher-than-advertised rates of fraudulent clicks not caught by
Google’s filters, and that he accordingly paid for more fraudulent clicks than
Google advertised he would.”

Google also argued that its AdWords Agreement expressly
precluded Singh’s claims, but the court of appeals agreed with the district
court that a reasonable jury could find that Singh was reasonable in relying on
Google’s extra-contractual statements about the general effectiveness of its
click filter system, notwithstanding the “no guarantee” provision in the
AdWords Agreement.

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Tiffany’s blues: Costco gets a trial on sales of “Tiffany” rings with Tiffany setting

Posted on August 21, 2020 by rtushnet

Tiffany & Co. v. Costco Wholesale Corp., Nos.
17-2798-cv, 19-338, 19-404, 2020 WL 4743020, — F.3d – (2d Cir. Aug. 17, 2020)

The district court found that Costco’s sales of otherwise
unbranded diamond engagement rings with the solitaire setting known as a
Tiffany setting, identified by point-of-sale signs containing the word “Tiffany,”
constituted infringement and counterfeiting. It awarded Tiffany trebled
profits, prejudgment interest, and punitive damages (under NY law) totaling over $21
million. The court of appeals held that summary judgment should not have been
granted to Tiffany on liability and remanded for trial, including on Costco’s
descriptive fair use defense.

Of note: (1) “Use as a mark” continues its wild and not
particularly coherent ride in the US. It’s not a requirement for infringement
liability in the Second Circuit but it is, we learn, a requirement for
counterfeiting liability. (2) Consistent with Booking.com, the court isn’t
particularly interested in the difference between generic and descriptive—among
other things, the court indicates that generic use can constitute descriptive
fair use. This makes sense given the justification for the defense (as well as
the historic use “common descriptive name” to identify generic terms). (3) But
on the flipside, the court seems relatively uninterested in what I would have
thought was the very important fact that, according to the facts recited, there
is no other name to identify the setting at issue other than “Tiffany
setting.” Even so, the court indicates that there could be infringement if
consumers are confused. (4) Relatedly, the court’s suggestion at the end of its
fair use discussion that the descriptive fair use defense could fail if consumers
are confused seems inconsistent with KP Permanent. Descriptive fair use, in its
current form, supposedly weighs something else against likely confusion—perhaps
whether the competitor is objectively behaving reasonably given the descriptiveness
of the term at issue, even if an ordinarily sufficient number of consumers are
confused.

Some other relevant facts: Tiffany has a number of relevant trademark
registrations. Costco used “Tiffany” only in connection with rings with Tiffany
settings; it sold several other styles identified by similar point-of-sale
signs, each of which indicated the name of the corresponding ring’s setting style
and none of which used the word “Tiffany.” Also:

At some point in the late
nineteenth century, Charles Lewis Tiffany developed and sold an engagement ring
incorporating a particular style of six-prong diamond setting. Since that time,
numerous advertisements, dictionaries, trade publications, and other documents
have referred to diamond settings reminiscent of that style as “Tiffany
settings.”

Costco used small, white point-of-sale signs that displayed information
about the rings “(ostensibly including setting style)” in uniform black text,
along with their prices in larger, bold text. “In general format, but not necessarily
in size, these signs resembled other point-of-sale signs that identified virtually
all items for sale throughout Costco stores.” Costco argued that it copied
these signs directly from descriptions supplied by its vendors. Its signs for
rings with a Tiffany setting “at times identified the ring setting using the
phrases ‘Tiffany setting,’ ‘Tiffany set,’ or ‘Tiffany style,’ and at other
times used only the word ‘Tiffany’ for that purpose,” and it “apparently
identified other setting styles in a similarly variable manner.” Tiffany purported
to challenge only the “Tiffany”-only uses, not those with “style,” “set,” or “setting.”

When Tiffany objected, Costco said that, within one week, it
voluntarily removed all uses of the word “Tiffany” from the signs in its
jewelry display cases. After Tiffany sued, Costco also sent a letter to all
customers who had purchased engagement rings with Tiffany settings to alert
them that Tiffany had sued. It explained that Costco’s point-of-sale signs had
“used the word ‘Tiffany’ to indicate that [the associated] ring had a
Tiffany-style pronged setting,” asserted that Costco “do[es] not believe [its]
signs were inaccurate,” and reminded buyers that they could return their rings
for a full refund at any time under Costco’s existing return policy. “Approximately
1.3% of customers who received this letter returned their rings to Costco.”

Infringement: A reasonable jury could find for Costco; the
district court erred in finding otherwise, based on three factors. [Footnote on
the multifactor test: “similarity of marks” is shorthand as defendant need not
use a term “as a mark,” that is, “as a symbol to attract public attention,” to
infringe.] The summary judgment standard is the same for trademark as for
anything else, and also “insofar as the determination of whether one of the
Polaroid factors favors one party or another involves a legal judgment—which it
often does—we must review that determination de novo.” Thus, “in the majority
of cases, we should review de novo both a district court’s determinations as to
each Polaroid factor and its ultimate balancing of those factors.”

The key factors: (1) Actual confusion. The district court
relied on (a) the deposition testimony of six Costco customers, each of whom
alleged that he or she was confused by Costco’s point-of-sale signs and (b) Dr.
Jacob Jacoby’s survey, which surveyed 944 people, 606 of whom identified
themselves as Costco patrons who thought that “they [or their significant
other] would consider buying a diamond engagement ring at Costco that cost at
least $2,500.” Of the 606, each of whom was shown a photo of a diamond
engagement ring alongside one of Costco’s point-of-sale signs, either in
isolation or after seeing photos of other branded items sold by Costco—“more
than two out of five … were likely confused into believing that Tiffany &
Co. was the source of the rings.” The district court found this evidence
unrebutted, but that was error.

First, Costco argued that 6 out of the 3,349 customers who
purchased Tiffany-set rings at Costco during the relevant period was only de
minimis evidence, and it submitted a report from its own expert, Dr. Russel S.
Winer, criticizing Dr. Jacoby’s survey methodology and results. Costco’s expert
opined that Jacoby should have targeted only customers with a “present purchase
interest in buying a diamond ring,” and that the survey respondents “could not
have been a group whose perceptions provided any valid or reliable predictor of
past or future Costco diamond ring purchaser beliefs.” In addition, he
contended that the survey was fatally flawed due to “artificial, contrived and
biasing” stimuli that “ignore[d] the reality of the customer purchase process.”
Rather than showing survey responders a point-of-sale sign as it would have
appeared to customers—in a display case surrounded by other rings identified by
“other tags …, some of which would have other setting and style types
indicated”—Jacoby’s survey showed them only a single ring and sign in
isolation. Indeed, Costco’s expert argued that, though both images (one with
only a single point-of-sale sign and the other with a small section of a Costco
display case) provided insufficient context, the relatively lower confusion
among respondents who saw the latter was “striking.” A jury was entitled to
consider “how the percentage [of customers identifying ‘Tiffany’ as a
descriptive word rather than a brand] might have changed had the context
provided been comparable to the real world experience.”

In addition—comment: highly relevant given the live dispute
over the genericness of “Tiffany” for the name of the setting—Costco’s expert
contended that the screening questions, which required responders to sort words
into brand names and descriptive words, “trained” those responders to “bias[ ]
the responses in favor of selecting Tiffany as a brand identifier.” To the
extent that this nudged the numbers upward, that’s relevant also to the
descriptive fair use defense, as KP Permanent says that the amount of confusion
can be relevant.

Costco’s evidence was sufficient to raise a question on actual
confusion. The district court had reasoned that Winer’s criticisms went to
weight rather than admissibility, and that he didn’t perform his own survey.
But the weight to be given to a particular piece of evidence “can be determinative
of whether the moving party is entitled to summary judgment or whether a jury
could find a material fact favorable to the non-moving party.” A reasonable
jury could find that Tiffany failed to present sufficiently persuasive evidence
to meet its burden.

(2) Good faith: The question is whether the defendant attempted
“to exploit the good will and reputation of a senior user by adopting the mark
with the intent to sow confusion between the two companies’ products.” Although
“where the allegedly infringing mark is identical to the registered mark, and
its use began subsequent to the plaintiff’s trade-mark registration, the
defendant must carry the burden of explanation and persuasion,” it is still the
case that “[p]rior knowledge of a senior user’s trade mark does not necessarily
give rise to an inference of bad faith and may [actually] be consistent with
good faith.” Indeed, “the intent to compete by imitating the successful
features of another’s product is vastly different from the intent to deceive
purchasers as to the source of [one’s own] product.” And “subjective issues
such as good faith are singularly inappropriate for determination on summary
judgment.”

The district court concluded that “no rational finder of
fact could conclude that Costco acted in good faith in adopting the Tiffany
mark.” The evidence it cited included an email from a Costco employee
indicating that Costco’s jewelry boxes should have a more “Tiffany or upscale
look”; the deposition testimony of a Costco inventory control specialist who
acknowledged that she took no action in response to two emails ostensibly
indicating customer and employee confusion over the source of Costco’s rings;
and photographs and emails that suggest efforts by Costco to “copy Tiffany’s
designs by making references to Tiffany designs and sharing links to Tiffany’s
website [in communications with vendors].”

Both Tiffany and Costco also pointed to a customer email
asking whether the word “Tiffany” on the label referred to the “Tiffany setting
or Tiffany brand.” It was consistent with good faith that a Costco employee
responded to the customer’s email that “[i]t means Tiffany setting.” And
importantly, “the jury could also consider this email as evidence of an absence
of actual customer confusion,” since inquiries about a potential relationship
are not actual confusion and arguably show lack of confusion.

Costco’s contrary evidence indicated that it had never
attempted to adopt the Tiffany mark; that its signs actually used the word
“Tiffany” as a brand-independent description of a particular style of diamond
setting; and that those signs merely reflected information provided by its own
suppliers.

The district court thought that no reasonable jury could
believe Costco, but the court of appeals disagreed. “We have consistently
recognized that intent to copy a product’s useful, nonprotected attributes should
not be equated automatically with an intent to deceive. Therefore, Costco’s
admitted intent to sell jewelry that looks like Tiffany’s—as opposed to an intent
to have its jewelry pass as Tiffany’s—cannot be enough to justify a finding
that Costco acted in bad faith.” There was “substantial” evidence favoring Costco,
including declarations from a diamond buyer and an assistant general
merchandise manager affirming that Costco inventory control personnel took the
term “Tiffany” directly from vendor descriptions, that the representatives
understood Tiffany as a “generic style name,” and that indeed it was “the only
name … used to denote [that] type of pronged setting.” There was supporting
evidence that the term “Tiffany” “has been used as a generic descriptor—both
explicitly in conjunction with a word like “setting” and implicitly by
itself—in thousands of advertisements, dictionaries, trade publications, and
other public documents since the late 1800s.”

Costco also provided evidence that its rings were not
branded with Tiffany’s mark (and indeed were branded with its supplier R.B.
Diamond’s logo instead); that the rings came in “unbranded containers bearing
no resemblance to Tiffany’s distinctive robin’s-egg blue packaging”; that
buyers received Costco-branded receipts, appraisal forms, and other sales
documents; and that Costco’s return policy permitted customers to return their
rings any time after purchase. A reasonable jury could conclude that Costco’s that
signs “were the product of a good-faith attempt to communicate to its customers
the setting style of certain rings that it sold.” A jury could also infer good
faith from Costco’s voluntary cessation and communications to purchasers.

Tiffany’s only rejoinder was that, after Costco voluntarily
stopped using the name “Tiffany,” it was still able to describe those rings’
settings as “Solitaire.” “But ‘Solitaire,’ which describes any single gem in a
simple setting, is undeniably a less descriptive term than ‘Tiffany,’ which
ostensibly describes a specific type of six-prong setting.” If a seller claimed
rights in “spoon” for a spoon, we wouldn’t think it sufficed to allow other
sellers to advertise their “utensils.”

(3) Consumer sophistication: Although sophistication may
usually be proven by direct evidence, including expert opinions or surveys, “in
some cases a court is entitled to reach a conclusion about consumer
sophistication based solely on the nature of the product or its price.” Jacoby’s
study assumed that respondents who said they “would consider buying a diamond
engagement ring at Costco” were representative of relevant customers, and
Tiffany offered no other evidence. Costco’s expert countered that the purchase
of an engagement ring is a “high involvement” transaction, and that actual
purchasers—as opposed to those who merely “would consider buying an engagement
ring”—possess substantial “subject matter knowledge and familiarity with the
relevant vocabulary.”

The district court nevertheless found no factual question,
as Costco’s evidence only went to the weight of Tiffany’s evidence and wasn’t
affirmative evidence of consumer sophistication. This wrongly shifted the
burden to Costco on Tiffany’s motion for summary judgment in its favor, and ignored
Costco’s evidence in the form of its expert’s declaration. “A jury could
reasonably conclude, by crediting Costco’s evidence and rejecting Tiffany’s,
that the relevant population of consumers would be sufficiently attentive and
discriminating as to recognize that Tiffany had nothing to do with Costco’s
diamond engagement rings.”

Overall, a jury could reasonably conclude that the relevant
consumers would know, or learn, that “Tiffany” describes a style of setting not
unique to rings manufactured by Tiffany, and recognize that Costco used the
term only in that descriptive sense. “Such consumers may also be distinctly
capable of recognizing that Costco’s rings were not manufactured by
Tiffany—based, for example, on their price, place of purchase, packaging, or
paperwork—and consequently be particularly unlikely to be confused by any
aspect of Costco’s point-of-sale signs,” especially given that they’d see “a
jewelry case full of other unbranded rings, each identified by a sign
indicating its own setting type in a similar or identical way.” Although there
was clearly a “potential for confusion” inherent in the public association
between the Tiffany brand and high-quality engagement rings, that wasn’t
enough. In light of Costco’s evidence, as well as “Tiffany’s failure to
demonstrate that actual purchasers would not recognize the word ‘Tiffany’ as
denoting a commonly used setting style,” summary judgment for Tiffany was
improper.

In addition (maybe), Costco was entitled to reach a jury on
its descriptive fair use defense “even where the challenged material is likely
to cause some confusion.” By “some” the court means “some otherwise actionable,”
otherwise KP Permanent would be pointless.

The district court’s good faith finding above led it to
reject Costco’s defense on the good faith prong; this was now reversed, and
Costco also raised factual issues on the other elements.

(1) Use as a mark: Use as a mark means use “as a symbol to
attract public attention,” or “to identify and distinguish … goods [or
services] … and to indicate [their] source.” Relevant factors include: whether
the challenged material appeared on the product “itself, on its packaging, or
in any other advertising or promotional materials related to [the] product,”
and the degree to which “defendants were trying to create, through repetition
… a[n] association between [themselves] and the [mark].”

A reasonable jury could find no use as a mark. “Tiffany’s
own evidence indicates that Costco typically identifies the trademark
associated with its branded products as the first word on the product label,” including
when it did sell genuine Tiffany merchandise, whereas Costco produced hundreds
of examples of signs for its engagement rings, “none of which began with the
word ‘Tiffany’ or any other brand name.” Instead, it used the word “in the
exact same manner (including typeface, size, color, and relative location on
the signs) that it displayed setting information for other engagement rings.” “Tiffany”
didn’t appear on any of its rings or ring packaging, and that the rings
actually bore the logo of a different manufacturer.

(2) Descriptive use: This includes “words that describe a
characteristic of the goods[ ] such as size or quality,” and also “words or images
that more abstractly identify some information about the goods in question.” A
jury could reasonably credit Costco’s evidence that “Tiffany” has a descriptive
meaning independent of Tiffany’s brand and that Costco “intended to and did
invoke that meaning when it created its point-of-sale signs.”

Tiffany argued that this result would be absurd because Tiffany
is a valid mark for jewelry, and that the court shouldn’t allow “Tiffany” to be
a source identifier for rings of other styles, but a descriptive term for rings
in the so-called “Tiffany” style. But that’s not absurd; it’s inherent in the
idea that a descriptive term can be a trademark. It’s black-letter law that
“the public’s right to use descriptive words or images in good faith in their
ordinary descriptive sense must prevail over the exclusivity claims of the
trademark owner.” It doesn’t matter that Tiffany the company and the Tiffany setting
derive their names from a common source; nor did it matter that “Tiffany” didn’t
“inherently” describe the setting. For whatever reason, Tiffany didn’t stop “Tiffany
setting” from becoming a well-known term [here again I note that the court doesn’t
seem particularly concerned that there doesn’t appear to be another name for the
setting, which I think is a pretty important issue]. “Indeed, the fact that
Tiffany does not here challenge Costco’s use of the phrase ‘Tiffany set’ or ‘Tiffany
setting’ may signal an implicit recognition that some uses of its protected
mark are indeed descriptive.”

In conclusion, however, the court suggests that the ultimate
question is whether the descriptive use worked to avoid confusion—which seems
inconsistent with KP Permanent: “To be sure, a reasonable jury could
also reject Costco’s evidence and find that customers would not recognize
the word ‘Tiffany’ as descriptive even with the context Costco provided”
(emphasis added).

The counterfeiting claim also had to be reversed and sent to
the jury. In a footnote, the court indicated that if there was no use as a mark,
there “likely” could be no counterfeiting even in the presence of infringement
liability, since a non-mark use cannot be a “spurious mark.” “We fail to see how a term can be a ‘fake’
mark if it is not actually used as a mark, or how a term can ‘deceptively
suggest an erroneous origin’ if it is not used as a means to indicate origin in
the first place,” even though terms not used as marks can still generate
confusion as to “affiliation, connection, … association[,] … sponsorship or
approval,” and thus constitute trademark infringement [court’s rather puzzling citation
to §43(a)(1)(B) as a source of trademark infringement liability omitted]. “But
because terms not used as marks are not ‘spurious,’ they cannot, as a matter of
law, be counterfeit.”

The court declined to reach whether punitive damages under NY
law would be available to Tiffany if it prevailed.

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Harm story fails where deceived doctors’ choices wouldn’t have mattered

Posted on August 21, 2020 by rtushnet

Quidel Corp. v. Siemens Medical Solutions USA, Inc., No.
16-cv-3059-BAS-AGS, 2020 WL 4747724 (S.D. Cal. Aug. 17, 2020)

Previously, the
court ruled that alleged misrepresentations, even if false, didn’t affect testing
labs’ choice of which of the parties’ tests to offer, but reserved judgment on
whether they affected physicians’ choices. Here, the court grants summary
judgment, finding that any falsity could not have caused cognizable harm
because of the ways that physicians order tests.

The parties produce competing assays (blood tests) used for
measuring thyroid stimulating immunoglobins, which can aid in the detection of
Graves’ disease. There are two relevant types of assays available: (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. In Quidel’s opinion, Siemens’s product doesn’t
distinguish between stimulating or blocking antibodies, but it was advertised
as a TSI only assay.

Physicians order tests from labs for their patients, and labs
carry one “TSI only” test at a time. Physicians’ deference to labs, versus
picking a lab because it carries a specific test, apparently varies. Labs pay Quidel
and Siemens for the tests. If a doctor requests a test from a lab without
specifying, and relies instead on the lab to picks, Quidel couldn’t be damaged
by the lab’s use of the Siemens test because, as the court already ruled, the
lab did not rely on any allegedly false advertising to cause it to carry the
Siemens test. If the doctor wanted Quidel’s product but used Siemens’s because
the lab only carried the latter, again Quidel wouldn’t have been damaged by the
false advertising. And if the doctor would only use Quidel’s product and picks
labs with that in mind, again there’s no damage.

Quidel argued that there were doctors who wanted to use
Siemens’s product because of its allegedly false advertising, and who thus
chose a Siemens-using lab. But the court found that “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.” But: if there are doctors
who did pick Siemens over Quidel, why wouldn’t that be harm causation from the allegedly
false advertising even if the labs were waiting to supply them? The court
responds: this is a previously undisclosed damages theory. Quidel originally claimed
damages based on the labs’ switching tests, not any doctors. Quidel’s
damages expert didn’t consider the
actions of individual physicians in his damages evaluation. This wasn’t a
harmless omission, since it deprived Siemens of the chance to develop
information about individual doctors. And even if the theory had been adequately
disclosed, it didn’t have supporting evidence that doctors were influenced or
that labs consider physician preference in determining which test to carry.

Quidel argued that it did have evidence that individual
clinicians were misled: Siemens and labs received inquiries from clinicians
regarding whether the Siemens product could differentiate between TSI and TBI,
and they didn’t disclose the (alleged) truth. But that still wasn’t proof that
the doctors acted on what the labs did or didn’t say.

Quidel’s evidence of its corrective advertising expenses
were also insufficient because Quidel had to show it suffered likely injury
before it could claim corrective advertising damages. “If the false statements
have no material impact, there is nothing to correct.”

Nor would the court presume injury because of the parties’
direct competition plus a likelihood of deception from comparative advertising,
as the Ninth Circuit has said can be done. The challenged advertising didn’t
compare the parties’ products; instead, it continually contrasted Siemens’
product with TRAb assays. The market isn’t a two-player market. Without comparative
advertising, “injury to a particular competitor may be a small fraction of the
defendant’s sales, profits, or advertising expenses.” In such cases, “actual
evidence of some injury resulting from the deception is an essential element of
the plaintiff’s case.” Here, “[i]f TSI only assays are substantially better than
TRAb assays, as both parties claim, then Siemens could be making sales to those
who used to use TRAb assays but switched over to using [its product].”

No presumption of injury. Also, no injunctive relief: though
proof of “injury” wasn’t required for injunctive relief, “irreparable harm” was.
And Quidel’s only claimed harm was monetary: lost sales.

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Rebecca Tushnet

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Tiffany’s blues: Costco gets a trial on sales of “Tiffany” rings with Tiffany setting

Harm story fails where deceived doctors’ choices wouldn’t have mattered

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