Trademark overprotection panel, Suffolk

Posted on October 30, 2019 by rtushnet

Second Annual Intellectual Property & Innovation
Conference Suffolk University Law School
NCSG
The State of Trademark “Overprotection” by Courts and the
PTO. What Happens When Institutions Overprotect Trademark Rights?
Moderator: Leah Chan Grinvald, Associate Dean for Academic
Affairs and Professor of Law, Suffolk University Law School
Panelists:
Alexandra Roberts, Associate Professor of Law, University of
New Hampshire School of Law
Overprotection. One type is granting protection to matter
that hasn’t earned protection—doesn’t actually function as a mark; aren’t used
in a TM way. Second, scope: matter that does qualify for protection but maybe
narrowly so.  Rule of doubt is a way to
wear PTO down.  Many examples: Apple
store layout; many Trump marks that are ornamental/informational.
Validity takes over in the courts: applicants and the PTO
spend a lot of time crafting an exquisite origami crane, and courts then ask “is
this paper folded?” They don’t ask what the mark is for, whether it’s a
design/word mark, etc.   Roberts calls it “rounding up” in terms of
rights, broadening the registered matter unwarrantedly.  Famous cases: Park ‘n Fly case: that was a design
mark, not a word mark. TM lawyers know the secret: if a mark is borderline, it’s
easier to register as a stylized mark—in blue and cursive when the word alone
is unregistrable.  By the time courts
look at it, they say the mark is Park ‘n Fly, which it is not: it is a design
mark including Park ‘n Fly.
Problems: deadwood on the register; chills competition;
chills competitor and consumer speech; bad litigation/TTAB outcomes that don’t
serve TM’s goal of protecting consumers and competition; bullying/things done
in the shadow of the law. Olympics has said that only official sponsors are
allowed to use #olympics. Overprotection + incontestability in particular is a really
good way to bully.
Rebecca Curtin, Associate Professor of Law, Suffolk
University Law School
Stakes for consumers/creators: focusing on a couple of
recent/pending cases in the doll industry. Artisan dollmaker/embroiderer on
Etsy who focuses on folk art dolls, including those depicting Frida Kahlo
(sometimes as she depicted herself in self-portraits). One showing her w/spinal
injury was taken down b/c of takedown from Frida Kahlo rights-claiming company.
If it was ©, we could discuss transformativeness, but that’s not the issue b/c
the corp doesn’t hold any © or right of publicity interests; what it does claim
is a TM for Frida Kahlo for games, playthings, and dolls, assigned by Kahlo’s
niece.  Repeated takedowns can get her
banned from Etsy; she filed a declaratory judgment. This artist isn’t alone in
depicting Kahlo in multiple media, including dolls; enforcement efforts
threaten diversity.  Ironically (?), the corp
licensed the creation of Frida Kahlo Barbie, which outraged the family b/c it
depicted her as lightskinned, and erased her unibrow and mustache and
prosthetic limb. They successfully enjoined sale of the doll in Mexico. Meanwhile,
the artist is forced to bear the expense of litigating to use Kahlo’s name to
accurately describe her works. 
Overreach both of existence of protection and its scope.
Names of historical figures/public domain characters are descriptive at best
for dolls that depict them. Secondary meaning? Unlikely where the figure looms
large in the public imagination, but there are complications about how to
describe descriptiveness and also incontestability limits the ability to use
descriptiveness to cancel a mark. Also, approaching this as distinctiveness is
unsatisfying, b/c it fails to consider cultural value of name in relation to
the goods—it’s not just a semantic Q of name’s relationship to the good.  Failure to function as a mark, genericism are
other alternatives. The dolls embody the character: I bought my daughter a Cinderella
last Christmas.  Also descriptive fair
use: this is a Frida Kahlo doll.
If there are so many doctrines preventing the
granting/enforcement of such rights, why is there a case here?  The toy industry is where art and merchandise
collide forcefully—sometimes the merchandise comes first and often generates
more revenue than the sale of the underlying expressive works, b/c the industry
has learned that toys with a backstory sell better. 
In the middle of opposing “Rapunzel” for dolls/toy
figures.  Fairy tale appropriation
strategy: has tried this with Snow Maiden, which was issued w/o an Office
Action even though it’s a Russian folktale; Snow Queen for dolls likewise (Hans
Christian Anderson); Little Mermaid for dolls, though that was refused as
descriptive and TTAB affirmed.  TMEP now
cites the Little Mermaid case to say that public domain character names are at
best descriptive of dolls depicting the character.
The key here is consumer interest in receiving expression.  Giving one company a monopoly on Rapunzel
makes it harder for others to interpret the fairy tale’s legacy.  A registration is a powerful tool.
Rebecca Tushnet, Frank Stanton Professor of First Amendment
Law, Harvard Law School
Empirical work: are we running out of trademarks?  Jeanne Fromer & Barton Beebe have shown
that yes, we appear to be, across pretty much all classes of goods and services.  You can’t have your cake and eat it too: you
can’t have over 100,000 new registrations a year and have broad rights for them
too, but the system has too long pretended that’s not the case.  PTO has seemingly gotten more attentive to some
of the use questions Professor Roberts has focused on. TM lawyers are unhappy
with the trend and I get why they feel “why are our clients being asked to provide
better specimens of use and proof of use as a mark when it didn’t happen to
clients 10 years ago?” but I don’t think the answer is to stay with the old
standards.
A couple of additional points: Amazon/ICANN and private rights
are having the same sets of struggles, including rounding up for domain names.  Abuse is already happening—rounding up for
design marks in ICANN; manipulation of Amazon. 
Legitimate businesses should not celebrate the existence of these new
mechanisms if they aren’t going to be transparent and provide procedural protections.
Second, legal doctrine tends to get more complicated over
time, developing what I call epicycles. 
This is bad for people who don’t have much money: it means they are less
able to assert valid claims and less able to defend against invalid claims.
My poster child: Gordon v. Drape Creative: Honey Badger Don’t
Care
Problem of granting rights too readily in the first place:
it’s not a trademark, it’s a punchline, it doesn’t serve a trademark function
Use as a mark
But also, because the court rounded up and accepted the validity
of the mark, a problem of adding complexity to doctrines designed to protect
free speech: it decided that because the defendant’s use was also use as a
punchline, it might not be protected by the First Amendment as an expressive
use; maybe it was explicitly misleading.
Grinvald: what do you do?
RT: We have tools for giving the benefit of the doubt to one
side if we care about the social interest at stake. Qualified immunity;
defamation doctrine. We can do the same thing for nonadvertising uses.
Curtin: a number of principles as suggested in the
discussion of dolls.
Roberts: failure to function at the PTO could be handled better;
abolish incontestability; eliminate the rule of doubt/reverse it. Wait for a
showing of secondary meaning, don’t publish it. Close scrutiny of statement of
use: more than ½ of applications are ITUs and the PTO doesn’t seem to pay as
much attention to the specimen of use. 
Give the PTO the chance to indicate explicitly in the file wrapper the
contours of the mark, and courts should pay attention to those limits. Remember
that the presumption of validity is rebuttable; courts think that failure to
function and descriptiveness are moot if marks have been in use for a while but
that’s not true.
Grinvald: is there real change now?
RT: I think the PTO’s official policy on some of this has
clearly changed and examiners are picking up on it but right now the system is
so big that you need big data analysis to be sure, w/500,000 applications
pending at any given time.
Grinvald: how (if at all) can we help small businesses like
the Etsy artist?
Roberts: Student clinics. 
Every school could have a small business clinic, which is a good fit for
TM law b/c the timing works.
Curtin: organizations like Volunteer Lawyers for America.
RT: Nothing in the TM space is going to solve the problem of
vast resource disparities between large and small. That said, rules offer
different paths to exploitation than standards.
Curtin: relevant Q: can we expect large corporations to do
the work of vindicating interests?  Why
didn’t Disney oppose the Rapunzel application? Probably because Disney
reasonably expects not to be sued by the TM claimant, and so it’s not worth the
opposition.
Grinvald: is it really grant of registration or
overenforcement?  [It’s both.]
Q: is there systematic underprotection of TM owners?  11th Cir. case: Savannah College
of Art & Design v. Sportswear Inc. 
If you put Suffolk Univ. on T-shirts, you get their apparel store.  It’s a good business model—they stay away
from big schools like Harvard or MIT, but not from small schools. Before this
case, SCAD sent C&Ds; they sell t-shirts w/ the name of the school,
sometimes with the color of the school, sometimes w/info like established 1989
or whatever.  They generally last out the
schools/settle w/them.
RT: I think it’s not TM confusion: consumers generally think
they’re showing their own commitments when they buy the merchandise; they don’t
generally think they’re buying authorized stuff, but they do think it’s morally
right to give the school some of the money. I don’t hold the view that the
school should morally get paid, but one can; I just don’t think it’s a
confusion issue.  Where I do think TM
owners are underprotected is phishing, though I couldn’t off the cuff write a
rule that would be limited to phishing and not easily abused.
Curtin: what matters is if they think the website is authorized/they’re
pretending to be authorized by SCAD.  [I
don’t think that’s what matters unless it’s material to consumers—and it may be,
though the empirics of this aren’t strong.]

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ThermoLife continues mixed record in pleading competitive injury from other supplements

Posted on October 29, 2019 by rtushnet

ThermoLife International LLC v. Compound Solutions Inc., No.
CV-19-01473-PHX-SMM, 2019 WL 5448804 (D. Ariz. Jul. 30, 2019)
ThermoLife develops “amino acid nitrates used in dietary
supplements to increase vasodilation,” and alleged that vasodilators are
“included in nearly every pre-workout product on the market.” ThermoLife has
over 16 patents that protect its use of amino acid nitrates, and one involves
Creatine Nitrate for use in dietary supplements to promote vasodilation. Compound
Solutions sells a patented green tea extract called VASO6 as a vasodilator. It
allegedly falsely marked and advertised VASO6 as patented, because the patent
with which VASO6 is marked is not being practiced, according to independent
testing.
The court dismissed the complaint: the false patent marking
claim didn’t properly allege competitive injury, and the false advertising
claims failed Lexmark. 
Specifically, ThermoLife didn’t identify any specific licensees of
ThermoLife’s patents or allege that it “actually manufactures, markets or sells
any dietary supplements or any ingredients” that compete with VASO6. Allegations
that VASO6 is “in direct competition with ThermoLife’s patented ingredients and
products that license ThermoLife’s patented ingredients,” that “numerous
ThermoLife customers and potential customers have been fooled by Compound
Solutions’ lies, having included VASO6 in their products and/or inquired with
ThermoLife about VASO6 and how this ingredient compares to ThermoLife’s
nitrates,” and that Compound Solutions’ false advertising “is likely to
discourage or deter persons and companies from commercializing competing
products or pursing research and development…which injures ThermoLife and the
public by stifling competition and increasing the costs of goods” were no more than
conclusory, showing again that Twiqbal is what you make it. 
Although ThermoLife alleged that the products had “at least
one” similar purpose, ThermoLife failed to allege decreased sales due to
competition with VASO6, or harm to its reputation, or harm to sales of specific
nitrates, and failed to identify any licenses to a specific manufacturer who
sells a competing product. “Generally alleging that ThermoLife and Compound
Solutions are in the same industry is insufficient. To support a cognizable
legal claim, ThermoLife must identify products that use Creatine Nitrate or
identify sublicensees who use Creatine Nitrate in their products that compete
with VASO6.”
For the same reasons, the state law claims were
insufficiently pleaded. Although the shorthand is that Lanham Act and state law
claims require the same elements, I think that’s potentially misleading, especially
when it comes to doctrine from Lexmark, which relied very much on
principles about federal statutory interpretation and applied them to a
statute, the Lanham Act, that is worded very differently from the average state
consumer protection law.  With that
caveat, the court is certainly on solid precedential ground to say this (because
so many federal courts before it have not been interested in doing a separate
state law analysis, before or after Lexmark):  “Under Arizona law, an unfair competition
claim requires a plaintiff to ‘either show that it was engaged in competitive
business with [the defendant] … or that [the defendant’s] actions were likely
to produce public confusion.’ In the Ninth Circuit, common law unfair
competition claims are ‘substantially congruent’ to Lanham Act claims and thus
share the same analysis.”

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DuraBlend leather-ish label not misleading

Posted on October 29, 2019 by rtushnet

Razo v. Ashley Furniture Indus., Inc., No. 17-56770, 2019 WL
5543849, — Fed.Appx. —- (9th Cir. Oct. 28, 2019)
Ashley preserved its summary judgment win in this putative
class action asserting the usual California claims against furniture with
leather-ish components.  Under the reasonable
consumer test, representations must be viewed “reasonably and in context” to
determine whether the material as a whole is misleading. A court presumes that
consumers will read “qualifying language [that] appears immediately next to the
representations it qualifies.” However, consumers are not required to “look
beyond misleading representations on the front of the [tag] to discover the
truth … in small print on the side of the [tag].”
 

front: “contents 57% polyurethane, 26% poly/cotton and 17% leather”

back: Durablend is a material that contains ground, pulverized, shredded, reconstituted,or bonded leather [ed. note: sounds delightful!] and is not wholly the hide of an animal and should not be represented as being 100% leather.

Here, the disclosures were “unambiguous and truthful” and on
the front and back of Ashley’s DuraBlend hangtag. Neither of these disclosures was
“hidden or unreadably small,” and the one on the front was “immediately next
to” a list of DuraBlend’s features. [I would have said “immediately below” based on this picture but I doubt that makes any difference.] “A reasonable consumer reading that list of
features would also read those disclosures and discover that DuraBlend is not
genuine leather.” And the disclosures themselves were truthful and not deceptive
(though that was also true of the ingredients list in Williams—the key point
seems to be that the initial message was not “deceptive but arguably corrected
by the disclosures”; rather the initial message was not deceptive in need of
correction at all). The disclosures truthfully stated that DuraBlend (unlike
other imitation products) “contains … leather” “without deceptively
suggesting that DuraBlend contains intact animal hides like genuine leather.
The DuraBlend hangtag explicitly states that DuraBlend is not and should not be
represented as 100% leather. No consumer, reading this disclosure reasonably
and in context, would conclude that DuraBlend is genuine leather.”
Further, Ashley was not responsible for representations made
by a furniture store salesperson about DuraBlend. Claims under California
consumer protection law “cannot be predicated on vicarious liability.” Instead,
only Ashley’s “personal participation in the unlawful practices and unbridled
control” over those deceptive practices could produce liability; this wasn’t
shown.

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implied claims of FDA approval actionable under Lanham Act

Posted on October 29, 2019 by rtushnet

Kurin, Inc. v. Magnolia Medical Technologies, Inc., 2019 WL
5422931, No.: 3:18-cv-1060-L-LL (S.D. Cal. Oct. 23, 2019)
Kurin developed the Kurin Lock, a “specimen diversion device
that reduces the risk of blood culture contamination and associated false
positive blood culture results.” Magnolia competes with Kurin, selling another
blood collection device, the Steripath, which launched before the Kurin Lock.
Kurin alleged that Magnolia’s representations that Steripath
is registered and listed as a Class I device and Steripath’s “Rx Only”
packaging falsely implied FDA review and approval.  Magnolia argued that this was a matter for the
FDA’s primary jurisdiction.
POM Wonderful explicitly noted “that analysis of
other types of labels, i.e. drug labeling, may be different than food and
beverage labeling due to statutory requirements.” And “actions in direct
conflict with an FDA policy choice are barred.” Still, consumer protection
justifies allowing Lanham Act claims in many circumstances.
The Lanham Act claim was precluded to the extent it relies
on allegations that the Steripath device was misclassified. “Congress placed
classification and re-classification of medical devices within the FDA’s
regulatory authority under the FDCA’s comprehensive regulatory scheme.”
By contrast, to the extent Kurin’s allegations merely implied
that the market or consumers has been misled by Magnolia’s representation that
the Steripath device was “listed and registered” as a Class I device, those
allegations remain.
Magnolia also argued that the FDCA requires Magnolia to
include the “Rx Only” statement on its device labeling, so it couldn’t be the
basis of a claim. The court disagreed: if the public was misled about the
implications the Lanham Act was triggered, even though “any remedial measures
involving the label [are] likely in the FDA’s domain.” However, the “Rx Only”
allegations were conclusory.

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it’s hard to frame the right cause of action for Amazon seller-on-seller misbehavior

Posted on October 28, 2019 by rtushnet

Factory Direct Wholesale, LLC v. iTouchless Housewares &
Products, Inc., 2019 WL 5423450, No. 19-CV-01228-LHK (N.D. Cal. Oct. 23, 2019)
The parties compete to sell stuff on Amazon. They agreed to the
Amazon Seller Agreement, which requires the seller to represent and warrant
that “any information provided…to Amazon…is at all times accurate and
complete.” The Amazon Code of Conduct requires that sellers “not engage in any
‘unfair behavior’ or activities that (a) intentionally damage another seller,
including its listings or ratings, or (b) manipulate or game the Amazon.com
selling or buying process, including Amazon’s search results or sales
rankings.” “Sellers are further prohibited from contributing false, misleading
or inauthentic content.”
Amazon identifies each new product  “through a unique combination of 10 letters
and numbers, referred to as an Amazon Standard Identification Number or ‘ASIN’
designation.” Factory Direct allegedly discovered “false, deceptive, and
unauthorized changes” to its product advertisements and listings, including
changing product descriptions, providing improper ASIN numbers, and changing
the product’s listing category (thereby moving the product from Amazon’s Home
& Kitchen category). A third party (allegedly iTouchless) was requesting
Amazon to make these changes, merging Factory Direct’s products’ ASINs into
other products.  Factory Direct sued in
the Northern District of Georgia, and then discovered that iTouchless was using
Factory Direct’s BESTOFFICE trademark (registered on the Supplemental Register)
to advertise a trash can.
During the pendency of the Georgia action, the listing
changes allegedly ceased, but were renewed afterwards. For example, Amazon
allegedly ended up advertising a Factory Direct trash can as an iTouchless
trash can, changing the product image, title, and description.  Factory Direct also alleged that iTouchless
falsely submitted an unfavorable review and deceptively removed Factory Direct
from Amazon’s vendor control.  [If I were
interested in increasing regulation of Amazon, I might invite a representative
of Factory Direct to testify about why a lawsuit was necessary here/what they
did and didn’t get from Amazon in the way of help.]
In the Georgia action, the court granted iTouchless’s motion
to dismiss because the Lanham Act claim didn’t allege any falsity of the
advertisements, or that the changes made by Amazon at the defendant’s request
deceived or had the capacity to deceive consumers.
The complaint here alleged additional details about Amazon’s
rules and policies. It alleged: (1) violations of the Lanham Act; (2)
intentional interference with contract; (3) intentional interference with
prospective economic advantage; (4) negligent interference with prospective
economic advantage; (5) violations of California’s UCL; and (6) trademark
infringement.
The court found no claim preclusion of the Lanham Act claim,
but claim preclusion of UCL and tortious interference claims.  Claim preclusion doesn’t apply when the
relevant conduct hadn’t occurred yet when the first suit was brought, and that
was the case with the Lanham Act false advertising claims based on post-Georgia
suit conduct. Likewise with trademark infringement.
However, the UCL claim was based on a more than that. While
California courts have allowed continuous accrual in cases of periodic,
recurring obligations like misstated rent, a  “continuing obligation to avoid
anticompetitive behavior is not a periodic, recurring obligation such as a
monthly payment or monthly bill.” Thus, the UCL claim accrued during iTouchless’s
previous course of alleged misconduct. So too with tortious interference.
What about issue preclusion?  Factory Direct previously alleged “false or
misleading statements of fact” without describing them, but provided more
specific allegations here about how changes to its listing “falsely advertised”
or misrepresented its products as products “manufactured and branded by
Defendant,” and misrepresented characteristics “including the product title,
image, brand, manufacturer, and description of the 13-gallon trash can.” These
new factual allegations weren’t actually litigated or decided in the prior
proceedings.
As for the false advertising claim under 12(b)(6), the claim
was adequately pled with respect to a specific listing for a trash can. With
literal falsity/intentional deception, actual deception is presumed; that was
appropriate here.
Allegations that iTouchless attempted to merge two more
listings, however, failed, because Factory Direct didn’t allege that the
attempts succeeded. Even if statements to Amazon were false, they weren’t made
in a commercial advertisement, and they didn’t result in a false advertisement
to the public because they failed.
There also wasn’t enough detail about allegedly false
changes to other listings/the unfavorable review/removing Factory Direct from
Amazon’s vendor control. Factory Direct didn’t explain why any of the “changes”
or “unfavorable review[s]” were “false and deceptive,” as required by Rule
9(b). The court did grant leave to amend.

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Creating a Facebook page for a rival and leaving fake reviews for them is a bad idea

Posted on October 28, 2019 by rtushnet

We often tell students that one risk of bringing a false advertising claim, as a competitor, is that there might be counterclaims if you don’t have your own house in order. Here, the plaintiff fails to give enough specifics of the alleged false advertising, while the defendant shows evidence of a fake review/complaint scheme. Practice tip: don’t leave fake reviews or hire anyone to leave fake reviews. The FTC is also not a fan of the practice.  Whether or not the defendant did the things it was accused of doing, this is not the way to fight back.
StoneCoat, LLC v. ProCal Stone Design, LLC, 2019 WL 5395569,
No. 4:17CV303 (E.D. Tex. Jul. 25, 2019) (magistrate) (not clear to me if there was further motion practice on these points; everyone was very focused on the trade secrets part of the case)
There is a lot of stuff going on in this case that I will
ignore, including trade secret claims. StoneCoat makes and sells spray-on stone
facing, which will probably make the McMansion Hell writer sad; ProCal competes
with it. StoneCoat alleged Lanham Act violations and ProCal counterclaimed
likewise. The counterclaims included allegations that StoneCoat falsely claimed
that its founder invented “Spray on Limestone” with a patent or patent pending
on the formula and/or process; that StoneCoat created a fake PROCAL STONE
Facebook page containing false or misleading information about ProCal and
directing customers to StoneCoat’s website; and StoneCoat directed employees
and/or representatives to submit fake complaints/reviews about ProCal to the
Better Business Bureau, RipoffReport.com and
Google Business (under the name Don Henley, no less)  and post fake positive reviews about StoneCoat.
The court found that the evidence sufficiently tied
StoneCoat to the allegedly fake customer reviews. First, the founder admitted
creating the fake ProCal Facebook page, though he denied allegations about the
content/his motives.  Second, there was
evidence that StoneCoat employees were posting positive Google reviews about
StoneCoat during the same period without disclosing their connection to
StoneCoat. Third, one Jason France, who owns a company that handles online
business marketing, posted the fake ripoffreport.com review and the fake BBB
reviews under the pseudonym “Don Henley.” (Both the BBB and Google were
apparently subpoenaed for their records.) Although this was disputed,
StoneCoat’s founder allegedly shows up in cell phone records having a 130
minute call with France two days before the fake reviews were posted. Fourth,
one BBB complaint was submitted using the name and e-mail address of a person
working at StoneCoat, and the founder had access to that person’s laptop. There
was a genuine issue of material fact on whether he submitted or directed the
submission of the Google/Ripoff Report/BBB Dallas complaints.  [This case looks like it could be a good
practical demonstration of how this kind of tracking can actually be done, with
sufficient effort.]
ProCal alleged both false designation of origin and false
advertising.  StoneCoat argued that there
was no evidence of infringement or injury, including no evidence that anyone
saw the Facebook page.  Given the
confusion factors, there was sufficient evidence of confusion, although I think
the court erred in considering the BBB/Rip Off Report fake reviews here—no one
could have been confused about affiliation with ProCal after reading those
reviews; the problem was false advertising, not trademark infringement.
The court found the Facebook page to be “confusing on its
face.” Although it purported to be the Facebook page for ProCal, in the “About”
section, it states “Stonecoat is the one and only original” and then provides a
link to StoneCoat’s website. “The fake Facebook page does not provide any
contact information for ProCal and could leave the impression that ProCal is no
longer in business or was bought out by StoneCoat.”
The alleged fake reviews were also likely to lead to
consumer confusion [about what, is the key question]. “There is evidence
indicating they falsely claim that ProCal was fired for doing a poor job and
that StoneCoat replaced ProCal and did a better job for less money.” And there
was evidence of actual confusion: the manager of construction services of
ProCal Stone Design declared personal knowledge of at least eight lost sales
caused by the “fake reviews wherein the customer requested a bid from ProCal,
specifically brought up the fake reviews, and then chose StoneCoat to do the
work.”
Unsurprisingly, because those are mostly false advertising
harms, the false advertising claim was also valid. The additional allegedly
false statements relate to StoneCoat’s claims about invention, patenting, trade
secrets, etc. That should pose a Dastar problem but that argument wasn’t
addressed here.
StoneCoat’s founder testified in other litigation that it
would be false for him to say to the public that he had acquired a patent on a
formula or a process because he did not have one at that time, but the website
did claim to have a patent. ProCal also argued that the fake reviews were
literally false because there were no such customers.  This was enough to create a genuine issue of
material fact on literal falsity.
But StoneCoat also argued that no harm had been shown. It is
possible to show liability for false advertising without being able to show
tangible harm as a result.  ProCal was
seeking disgorgement but hadn’t yet gotten StoneCoat’s financial information;
for now, the court thought ProCal’s claims shouldn’t be kicked out for failure
to show harm, especially since injunctive relief or disgorgement were possible
remedies.
Lanham Act trademark dilution via disparagement (statutorily
excluded) and the fake Facebook page (probably not diminishment in
distinctiveness because it’s confusing): laughably, the court found that there
was a genuine issue on fame (and on everything else), although understandably
it didn’t recite any evidence ProCal might’ve submitted about fame.  A victory for the idea of throwing every
possible claim in the hopper, I guess, but I disapprove.  When you’ve got really good claims (the false
advertising here) it is unnecessary and dangerous—to your credibility, to the
overall system that now has this nonsense in Westlaw—to add really unfounded
claims.
StoneCoat, LLC v. ProCal Stone Design, LLC, 2019 WL 5391178,
No. 4:17CV303 (E.D. Tex. Aug. 12, 2019) (magistrate; later adopted by district judge as to these claims)
Meanwhile, StoneCoat has some claims of its own, including
that ProCal falsely advertised that it “invented” sprayed limestone and had
been in the sprayed vertical limestone business for “over 17 years,” while in
fact ProCal wasn’t opened for business until January 2016.  But StoneCoat didn’t submit any ads for
review. StoneCoat’s founder said that he relied on “television ads made by
Defendants, YouTube advertisements, websites and printed advertisements” as
well as videos on the ProCal website in identifying false claims. But this
affidavit wasn’t enough to carry StoneCoat’s burden at the summary judgment
stage. “Importantly, Plaintiffs have not submitted a specific advertisement (or
more informal type of promotion) for the Court’s review. Thus, there is no
evidence from which the Court could apply the relevant criteria” for whether
there was a false statement in interstate commerce in commercial advertising or
promotion.

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law firm blog about somebody else’s case isn’t commercial speech

Posted on October 28, 2019 by rtushnet

Wexler v. Dorsey & Whitney, LLP, — F.Supp.3d —-,
2019 WL 5485265, No. 18-CV-3066-SJB (E.D.N.Y. Oct. 25, 2019)
Eric Goldman’s coverage.
Wexler, a lawyer proceeding pro se, sued Dorsey (a law firm
that does defendant-side Telephone & Consumer Protection Act work) and a
former employee, Betpera, for a blog post on Dorsey’s blog about consumer
financial services law.  The blog post
discussed a putative class action Wexler filed as counsel in the Eastern
District of New York under the TCPA against AT&T. In that case, a judge
found the putative class representative to be inadequate as a matter of law
because she was Wexler’s wife; for the case to proceed as a putative class
action, Wexler would have to withdraw as counsel and renounce any interest in a
future fee award.  Wexler v. AT&T
Corp., 323 F.R.D. 128, 129 (E.D.N.Y. 2018). (Wexler was joined by co-counsel
after the suit was filed.) Although Wexler was willing to do that, he wanted
the ability to seek fees for work up to that point based on quantum meruit. The
court thought that was still a conflict because that would come out of class
recovery, and therefore struck the class allegations.
Dorsey’s blog claims that “Dorsey’s attorneys have handled
dozens of nationwide TCPA class actions. They know the tricks used by class
action lawyers and how best to thwart them at the outset.”  After the opinion issued, Dorsey published a
“Legal Update” by Betpera, headlined “TCPA Class Certification Denial Exposes Major
Spousal Scheme.” After discussing Betpera’s own hobbies with his wife, then
summarizing the case, it concluded, “Maybe the Wexlers should try salsa dancing
instead.” A different website linked to the blog post with the title “Husband
Lawyer Tried Using His Spouse as Class Representative in TCPA Case,” and
offered, “Having read [the Dorsey article], my only question is, for how long
did they think they could get away with it?”
Defamation: “Major Spousal Scheme” can’t be defamatory; it’s
just opinion, especially in context. 
“Scheme” doesn’t necessarily mean deception or impropriety, even with
“expos[ure]” also in the headline. Overall, “major spousal scheme” “is not
capable of precise and specific meaning.” A law blog is like an editorial or op-ed
page, and thus the context “encourag[es] a freewheeling, anything-goes writing
style” “characteristic of opinion writing, not factual recitation.” Given that
the post “begins and ends with the author’s tongue-and-cheek musings about how
he would like to spend time with his wife (camping and going to Greece) and
what the Wexlers should do (try salsa dancing) …. [N]o one could reasonably
read the article and its headline as anything other than the author’s opinion
and editorial gloss on a court decision.” Nor did the headline or article imply
the existence of undisclosed facts.
Lanham Act false advertising: the blog was not “commercial advertising or promotion.”  The post was on a website titled “Consumer
Financial Services Legal Update,” “with a web address different than Dorsey’s
firm website.” It was attributed to Dorsey and used Dorsey’s logo, but the
post’s content didn’t relate to Dorsey and didn’t mention by name or
implication any services Dorsey provides. Dorsey wasn’t involved in the
underlying case, which did not mention Dorsey. “While Dorsey’s motivation in having a
blog, and publishing this particular article, may be to attract new clients,
such motivation does not transform the article—describing a court’s decision in
a case unrelated to Dorsey—into commercial speech.”

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Heart of darkness: hedonic regression damages model allows certification in flushable wipes case

Posted on October 28, 2019 by rtushnet

Kurtz v. Kimberly-Clark Corp., — F.Supp.3d —-, 2019 WL
5483510, Nos. 14-CV-1142, 14-CV-4090 (E.D.N.Y. Oct. 25, 2019)
Here, the consumer class action concerns allegedly false advertising of
“flushable” wipes that have generated municipal lawsuits around the country.
After remand to address concerns about whether plaintiffs can establish injury
and causation with common evidence, the court reaffirmed its conclusion that
plaintiffs’ damages model could provide common evidence of harm, based on
hedonic regression analysis.
Without going into too much detail, hedonic regression was
acceptable and defendants’ criticisms, while deserving of consideration, went
to weight rather than admissibility. “Regressions should not be excluded on the
ground that they fail to meet arbitrary thresholds of statistical significance.
In the current case, there are high degrees of statistical significance and any
dispute about economic conclusions goes to weight not admissibility.”
Developing a hedonic regression is “an art,” as one of defendants’ experts
said, and none of defendants’ experts developed their own hedonic regression
from scratch; “their second-guessing of [the expert’s] choices in attempting to
demonstrate that the methodology is unreliable is unpersuasive.”
Under Comcast Corporation v. Behrend, 569 U.S. 27 (2013), it
was sufficient that the model measured the damages according to plaintiffs’
theory of the case: consumers paid more because of the flushable label.
“Disagreement about … judgments in developing and performing the model, as well
as disagreement about whether [the expert’s] judgment about extrapolation of
the results of his model to certain time periods or products, are questions
answerable by admitted evidence. [The expert] made reasoned decisions about how
to actually construct and run a model testing Plaintiffs’ theory of liability.
The model fits the theory of Plaintiffs’ case.” 
Individual issues, such as variations in the understanding of the term
“flushable,” did not predominate.  [I
believe that the reasonable consumer model is normative as well as descriptive,
and a normative reasonable consumer should not think “it’s flushable if it
won’t destroy my pipes but will destroy municipal infrastructure.” I can put
pretty much anything I want into the recycling bin without suffering any
individual consequences. That doesn’t make whatever I put in the bin
“recyclable” and it would be specious for me to claim that I reasonably understood
“recyclable” to mean “you can put it in the recycling bin without doing any
harm to yourself.”]
Disputes about how many consumers bought the wipes for some
other purpose than flushing didn’t weigh against predominance. Evidence about
the average relationship between price and the flushable label was the point of
the price inflation theory. Plaintiffs argued that there was “a marketwide
inflation of price by a particular calculable percentage. For every flushable
wipe product purchased, the consumer paid more because of the flushable
misrepresentation. There is no need for individualized inquiry as to causation
or injury.” And if liability was found, statutory damages could be awarded on a
classwide basis (because of a prior Supreme Court case). “The single question
of whether plaintiffs paid more than they would have for the good because of
the deceptive practices of the defendants-sellers in labeling their products as
‘flushable’ predominates over any individualized damages inquiries.”
In closing, Judge Weinstein commented that nationwide
resolution under some sort of government supervision would be a good idea;
non-New York class claims have already been settled. A common market needs
common labeling. Moreover, the weird situation in which $50 per incident is
available classwide may well be a quirk of federal court/state procedure
interaction. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559
U.S. 393 (2010). “Complex Erie problems raising and intermingling substantive
and procedural issues will need thorough consideration as this class action
proceeds.” [Given the ruling on predominance, will they, though? Isn’t it now a
question of what plaintiffs can prove? I read this more as exhortation to
settle—in a way consistent with the non-NY settlement—than identification of
specific troubling issues.]

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company claiming rights in “overhead doors” makes little headway against challenger

Posted on October 25, 2019 by rtushnet

OGD Equipment Co. v. Overhead Door Corp., No. 17-cv-00898-ALM-KPJ,
2019 WL 5390589 (E.D. Tex. Jul. 15, 2019)
This is the magistrate judge’s R&R, subsequently adopted
by the court. OGD is a Texas “residential and commercial door repair and
installation company” with offices throughout Texas; it does business
nation-wide. Overhead “is the largest manufacturer, marketer, and distributor
of residential and commercial overhead doors and operators in the North
American market,” and defendant Overhead-Lubbock is an authorized distributor
for Overhead.
Overhead has, appallingly, a registration for OVERHEAD DOOR
for garage door openers (one reason a broad definition of genericity including generic adjectives is important–a narrow definition allows exactly the kind of foolery here, where the registration is used to claim extra rights), as well as a registration for a wordless banner.

How anyone is likely to perceive that as a mark is beyond
me.  It also claims trademark rights
in “OVERHEAD DOOR,” “OVERHEAD DOOR COMPANY,” and “OVERHEAD,” “as used without
any other words.”
Meanwhile, OGD registered its logo, prominently featuring “Overhead”
with a curved letter shape:

(Also not much there to register.)  OGD argued that the shape of the logo, and the logo’s
prominent use of the word “Overhead,” were used frequently in the garage door
industry.
OGD alleged that Overhead was unfairly using its
registration to “expand its reach from electronic controls to overhead door
products.” Among other things, Overhead uses the designation “TM” after each
use of the term “Overhead Door” on the Overhead website, regardless of whether
the term is used in its protected form, and used lawsuits, unfair business
practices, and letters to competitors to threaten them. OGD alleged that “Overhead
Door” was generic for products in the overhead door industry. Overhead
disagreed and alleged that OGD was using a deceptive name and logo to pass
itself off as an Overhead distributor. Further endearing them to me, Overhead
argued that the use of its claimed names in “unfair search engine marketing and
search optimization techniques” was deceptive, and alleged that multiple
customers have expressed confusion.
OGD previously bought over $750,000 in products and services
from Overhead and its affiliates. In April 2017, Overhead sent OGD a letter
regarding use of the Trade Names in paid internet advertisements, but didn’t
raise any concerns related to OGD’s name, trademark, or stylized logo. In July
2017, Overhead sent a C&D claiming “it held a protectable trade name and
trademark over the words ‘Overhead Door,’ ” and claiming that OGD’s uses
constituted “ ‘clear trademark infringement violations … under Texas and
Federal law,’ … as well as violations of Texas unfair competition laws.” The
letter stated that Overhead “has regularly taken legal action to prevent use by
others of OVERHEAD DOOR or OVERHEAD, as company names.”  OGD found Overhead’s claims overbroad and
sought a declaratory judgment as well as bringing affirmative claims.
The court found that there was an actual controversy between
the parties. Not only had Overhead alleged that OGD infringed, but OGD alleged
that Overhead’s actions violated the Lanham Act and the Sherman Act. The
parties’ claims about the rights to use the claimed marks were incompatible.
Overhead argued that the court couldn’t determine whether
OGD infringed Overhead’s registered marks because Overhead didn’t claim
infringement based on its registrations. The court disagreed. There was an
objective possibility of litigation, and the C&D didn’t claim rights only
under §43(a); rather, it attached the federal registration for OVERHEAD DOOR.
There was also a concrete dispute between Overhead and OGD about §43(a) and
state claims, although there wasn’t a dispute about Overhead-Lubbock’s
trademark or trade name rights, since that entity didn’t claim any such rights.
The Lanham Act claim was properly pled: Overhead allegedly
knowingly misrepresented to consumers that: (1) they, along with other Overhead
distributors, are the only companies that can lawfully use the Trade Names; (2)
OGD is using the Trade Names with the intent to trade on Defendants’ brand
names and purposefully confuse consumers; (3) OGD is not a reputable company;
(4) OGD is affiliated with a company called “GDS” or “Garage Door Services,”
which has been the subject of negative articles and lawsuits; and (5) OGD is a
deceptive company that intends to confuse consumers. OGD alleged specific
communications by defendants in online advertising and marketing and a specific
blog entry by Overhead-Lubbock, allegedly written by a person employed both by
Overhead and Overhead-Lubbock.
Texas doesn’t have a separate false advertising common law
tort, but it does have unfair competition. “Unfair competition includes a
number of types of objectionable trade practices, including trademark
infringement, dilution of good will, misappropriation of business value,
palming off, passing off, and theft of trade secrets.” “To prevail on its
unfair competition claim, OGD must show an illegal act by Overhead and
Overhead-Lubbock which interferes with OGD’s ability to conduct its business.”
The allegations here (as above, along with alleged misrepresentation that OGD doesn’t
have a physical location in Lubbock) sufficed. Although defendants argued that
this was just false advertising, the court found the allegations “akin to a
claim for dilution of good will.”  [I
would have thought trade disparagement.] And because the Lanham Act claim survived,
the unfair competition claim was properly premised on independent substantive
torts. [This seems weird. Is it an independent reason? If not, then can
trademark infringement be actionable under state common law if you don’t bring,
or for lack of interstate commerce don’t have, a §43(a) claim?]
Sherman Act claims failed (they are, after all, antitrust claims) for want of a sufficiently good market definition, though Overhead ought to look out
for 1-800-Contacts given its attempt to control internet advertising.

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TM/ad text question of the day

Posted on October 25, 2019 by rtushnet

The shorthand rule in the US is that if you don’t use the competitor’s trademark in your ad text, you’re fine. What if you do? The below ad (which you get by searching “broken Garmin mounts”) isn’t an explicit statement, but I’d argue that anyone whose ad title is “broken Garmin mounts” is probably not Garmin, which is likely to take a more circumspect approach to what appears to be a design vulnerability.

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