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

Wexler v. Dorsey & Whitney, LLP, — F.Supp.3d —-,
2019 WL 5485265, No. 18-CV-3066-SJB (E.D.N.Y. Oct. 25, 2019)
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

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

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

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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TRO against insurer to provide information during open enrollment

PeaceHealth v. Health Net Health Plan, Inc., 2019 WL 5386474,
No. 6:19-cv-01648-MK (D. Ore. Oct. 21, 2019)
Here, the court worries about granting a TRO as compelled
speech even though the speech is quintessentially commercial and the need to
protect consumers great. And then the court goes into great, and perhaps counterproductive, detail about the specifics of the disclosure, go figure.
PeaceHealth “operates hospitals and other healthcare
services in the Northwest, including Oregon and Washington.” It’s “the largest
health care provider in Lane County, Oregon and Clark County, Washington.” Defendants
offer Medicare Advantage (MA) plans to eligible consumers and made statements
that PeaceHealth would be an in-plan provider on defendants’ 2020 MA plans,
which it will not be. On this record, and because it’s open enrollment now and
the information is vital to consumers now but will soon be unhelpful for a
year, the court granted a TRO. (Side note: the state law claim might be better than the Lanham Act claim here, given that it’s not super clear how the conduct at issue affects PeaceHealth’s commercial interest in sales/reputation, but maybe there is mileage in the idea that being wrongly labeled as being in-network is like disparagement in its effects on reputation.)
The parties did have agreements for PeaceHealth to be
in-network for MA enrollees from 2004; in April 2019, Kimberly Hodgkinson,
PeaceHealth’s Executive VP and CFO, informed defendants’ president that PeaceHealth
would terminate the agreements effective January 1, 2020. Similar conversations
in June and July 2019 confirmed this. On September 30, 2019 and again on
October 1, 2019, Hodgkinson called defendants’ newly appointed President and
“reiterated that PeaceHealth would not be an in-network provider under the 2020
MA Plans. I expressed concern that Health Net and Trillium appeared to be
representing to brokers that PeaceHealth would be in-network under the 2020 MA
Plans.” PeaceHealth also sent letters to defendants on Oct. 1 telling them to
stop listing PeaceHealth as in-network on their websites and telling brokers
that PeaceHealth was in-network. “With open enrollment beginning October 15,
2019, time is of the essence.” They met again on October 8, 2019, and
Hodgkinson testifed that, after that, defendants “could not have reasonably
believed that there was any possibility that PeaceHealth would contract with
Health Net or Trillium for the 2020 MA Plans.” [The Lanham Act usually gives no
solace to reasonable but wrong beliefs, but I understand why PeaceHealth is
taking this tack, especially since predictions about the future have a liminal
status.]
The accused statements to brokers “generally acknowledged
that the parties were in negotiations, but implied defendants would remain ‘in-plan’
on January 1, 2020. … At this stage, especially as the two sides continued to
meet until October 8, 2019, it is difficult to find that defendants made false
or misleading statements to the brokers.” [This is how being conciliatory can
backfire—possibly declining the meeting would’ve been more persuasive to the
court?]
The court was far more concerned with statements to the
public. Portions of defendants’ webpages, up to oral argument, indicated that
PeaceHealth hospitals and providers were “in plan” for defendants’ 2020 plans.
When searching for “PeaceHealth” in the 2020 provider search portal, the
results displayed “Inactive after 12/31/2019 in multiple networks” under each
result. But a consumer searching for a specific PeaceHealth doctor wouldn’t see
that notice. A consumer seeking to confirm whether a specific doctor was “in
plan” for Health Net’s 2020 offering was likely to be misled.
Especially considering the plans at
issue cover society’s most vulnerable (i.e., disabled and elderly individuals),
the confusion noted above is quite concerning. Additionally, when open
enrollment closes in another month or so, any deceived consumers will be stuck
until the following year’s open enrollment. Consumers misled by Health Net’s
2020 provider search function would arrive at a PeaceHealth provider in 2020
only to then realize PeaceHealth is no longer “in plan.” This confusion will
likely lead to increased administrative costs to PeaceHealth, in addition to
reputational damage in the form of lost goodwill. Additionally, the Court
presumes the misleading statements would cause some consumers who would have
switched plans to instead remain with defendants’ plans. When those consumers
are not covered—and likely unable to afford out-of-pocket costs to see an
out-of-plan provider—PeaceHealth will experience the loss of providing care to
those consumers.
The grave risks to individuals and the temporary nature of
open enrollment made injunctive relief necessary. The court ordered that
defendants had to post notices on their websites and send email notification to
brokers. Example:
IMPORTANT NOTICE – PEACEHEALTH NOT
IN-NETWORK AS OF 1/1/2020
HEALTH NET HEALTH PLAN OF OREGON,
INC. WILL NOT HAVE A CONTRACT WITH PEACEHEALTH BEGINNING JANUARY 1, 2020. AS A
RESULT, PEACEHEALTH IS NON-CONTRACTED AND WILL NOT BE IN-NETWORK WITH ANY
HEALTH NET HEALTH PLAN OF OREGON MEDICARE ADVANTAGE PLANS. NON- CONTRACTED
PROVIDERS MAY NOT ACCEPT HEALTH NET INSURANCE.
[My understanding of all caps notices is that they don’t
necessarily work any better, and may be worse, than alternatives. At the least,
I would’ve stopped the all caps after the first line.]
The court further directed: “On each URL, all text must be
in banner format, CAPITALIZED and in 18-point Arial font. The banner must
include a red background with the text of the message in white lettering. The
headline must be in bold font. The notice must be inserted between one and two
inches below the top of the screen.” [Ed. note: which screens? Mobile, desktop,
both?  I also expect some accessibility
fail.] The text was to go where the words “Sample Company Post Employee Homepage
Notice” appear here:

Emailed notices were to be the same.
The court acknowledged “First Amendment issues,” but the
compelled speech here was “purely factual and not in dispute. The public has a
right to know that the largest provider in the regions at issue will no longer
be ‘in plan,’ and the time to be so informed is during open enrollment.” But
given the constrained time period, defendants could brief the issue further.

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putative falsity about medical test not material to labs, but maybe to doctors

Quidel Corp. v. Siemens Medical Solutions USA, Inc., No.
16-cv-3059-BAS-AGS, 2019 WL 5320390 (S.D. Cal. Oct. 21, 2019)
A pair of opinions shows the importance of (1) defining the
market and (2) being able to show materiality.
The parties compete in the market for 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: (1) TSH
receptor antibody (TRAb) assays, which detect both stimulating and blocking
thyroid immunoglobins (TSI and TBI) and (2) TSI only assays.  Quidel entered the market first with Thyretain,
advertised as a “TSI only” assay that produces a positive (qualitative) result
if TSI is detected. Siemens entered with Immulite, using Thyretain as the
predicate device for their 510(k) application to the FDA.
While Thyretain is a bioassay, Immulite is an immunoassay
that Siemens says may be measured “in a ‘semi-quantitative’ manner, depicting
the concentration of TSI in a sample, rather than just a binary ‘qualitative’
result.”
Quidel argued that, as an immunoassay, Immulite didn’t
distinguish between stimulating or blocking antibodies, and thus detects TBI as
well as TSI. After Quidel’s protest, Siemens dropped the “TSI only” claim, but
Quidel argued it suffered damages: out of four US laboratories, two switched to
Immulite.
The court found that “TSI only” was not ambiguous,
especially in context and given the advertising targeted to sophisticated
consumers. Siemens argued that it wasn’t false because its statements were
always made in conjunction with a claim of 98% specificity (where the remaining
2% apparently might come from detecting TBI). Given conflicting expert
testimony over whether Immulite actually detected TSI only, there was a
question of fact.
However, there was no question of fact on materiality to
laboratories. The evidence showed that the two labs that switched didn’t rely
on Siemens’s advertising.  A
representative for one lab testified that the decision about whether or not to
adopt the new assay “involved months of discussion and deliberation,” including
“a review of the relevant literature” and “a validation study” after FDA
approval. Ultimately, the lab concluded that Immulite “was a superior assay for
use in the laboratory.” The witness testified that he didn’t remember any press
releases or statements on Siemens’s website; his lab “is not guided by
manufactures’ sales and marketing collaterals on a website.”  The other lab rep testified similarly. He
testified that he understands that when vendors give him papers regarding the
product, “they’re likely to provide [him] only papers that are positive for
their test.” He found this lawsuit to be “frivolous” and “personally offensive”
because it assumes that his lab doesn’t “do a very, very rigorous job of
vetting our assays and that we can be swayed by marketing.” Based on this
testimony, the court found that it wasn’t enough to show that the labs reviewed
the allegedly false statements; that didn’t show that the statements “had any
material impact on their decision-making process.”
The fact that the labs now believed that Immulite detects
TSI only (and advertised same on their own websites) didn’t mean that the false
advertising drove that belief, which could have come from internal testing. Nor
did the fact that TSI-only capability was an inherent/core chracteristic of the
product make it material given the other evidence. “No matter what the false
advertising pertains to, if the customer is not likely to be influenced by the
statement, it is not material.”
Matters were different with respect to doctors. A jury could
find that doctors were relevant purchasers; there was evidence on both sides.
Siemens’s employee testified that it previously contracted a marketing agency
to conduct a marketing campaign aimed at clinicians because “it’s really
important to educate the physicians…[b]ecause if they don’t order the test,
then there’s…no point of having it in the laboratory.” A lab director also
testified that the clinicians are “substantially” in charge of deciding which
type of assay to run. testified the clinicians “have the capability of and ask
for [the assay] by name…and in some circumstances they will specify.” And a
Siemens representative received an email from a doctor who asked if IMMULITE
“is specific to TSI or if it potentially can detect TBI’s directed towards the
N-terminal part of the thyroid receptor.” “This shows the physicians are aware
of the details of the test, and therefore may be interested in how the product
is marketed.”  However, a different
Quidel expert stated that at her institution, “when a TSI is ordered [by a
clinician], there is no indication on the report of which assay (Roche,
Thyretain, Immulite, etc.) was utilized” and the physician only receives the
results from the test, i.e. the measurement of TSI.
The court also partially rejected Siemens’s unclean hands
defense.  That Quidel was allegedly
billing the tests wrongly was unrelated to the misconduct here now that the
labs were out of the case. However, that Quidel’s Thyretain also allegedly
detected TBI and that the presence of TBI could “interfere with Thyretain’s
measurement of TSI, and result in a false ‘negative’ reading” was related, and
there was a genuine issue of material fact on the question. Even if the
misconduct occurred and was related, it had to be balanced against the wrong at
issue, which couldn’t be done at this stage of the case.
Quidel Corp. v. Siemens Medical Solutions USA, Inc., No.
16-cv-3059-BAS-AGS, 2019 WL 5328730 (S.D. Cal. Oct. 21, 2019)
Here, the court denies Siemens’s motion to exclude
plaintiff’s survey expert’s report/testimony. Mr. Ezell surveyed “physicians
that specialize in endocrinology and who, as part of their practice, order
assay tests to assist in patient diagnosis.” He showed test and control
materials:

They were asked screening questions and then about whether
Immulite does or doesn’t detect TSI only, in both closed- and open-ended
questions. They were then asked whether they were likely to order both a TSI
only and TRAb assay, and why. The expert concluded that approximately 67.42% of
the relevant universe was likely to be misled or deceived by the message that IMMULITE
is a TSI assay, detects TSI only, or is not a TRAb assay (assuming, as he
should given his role in the litigation, that these statements are false).
As noted above, doctors could be relevant purchasers. “This
is not a situation where all physicians blindly use whatever assay the
laboratory happens to carry, with no input into what assay they use on
patients. Given the conflicting testimony, it is possible the physicians’
opinions regarding the products are relevant and their opinions could be
influenced by marketing or website information.”
Criticisms of the questions as ambiguous also failed—it was
for the jury to decide whether it was troubling that Ezell used the terms “TSI
only” and “TRAb assay” in the survey without defining the terms. So too for
whether the questions led and biased the respondents, which goes weight rather
than admissibility. “Surveys can be admitted even if they contain ‘highly
suggestive’ questions, as long as the survey is ‘conducted according to
accepted principles and [is] relevant.’”  Nor was the control group excerpt biased
because it used “gratuitous language.” The differences between test and control
stimulus were “not so great that they predetermined the result of the survey,”
and this argument was for the jury.  (To
me, very much a nonexpert, the control statement seems self-contradictory: a
test that does not differentiate, but nonetheless detects TSI only at 98.5%
specificity?)  Nor did it matter that
counsel drafted the control statement; Ezell reviewed it and agreed it was
appropriate. That differs from surveys “entirely designed and conducted by
counsel ‘who is not qualified to design or interpret surveys.’” (Citing McCarthy:
“Attorney cooperation with the survey professional in designing the survey is
essential to produce relevant and usable data.”).  Disputes over whether control group answers
were properly coded as not confused, allegedly resulting in nearly 25%
confusion in the control group, were also for the jury.

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Amicus in Dr. Seuss v. ComicMix

Here. With Mark Lemley, Jessica Litman, Lydia Loren, Pam Samuelson, and Erik Stallman. 

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incentivized reviews/targeted upvoting can be false advertising, court reiterates

Vitamins Online, Inc. v. HeartWise, Inc., No. 13-CV-982 (D.
Utah Sept. 24, 2019)
Supplement industry behavior is wild.  
Vitamins Online sells dietary supplements online, including
on Amazon, using the name NutriGold. HeartWise, aka NatureWise, competes with
NutriGold, including on Amazon, with products that contain an extract of
garcinia cambogia and green coffee. NatureWise had its employees upvote
positive reviews on its product pages and downvote negative reviews, increasing
the likelihood that potential customers would see positive reviews of its
products first and negative reviews last. “NatureWise also encouraged customers
to post or repost their positive reviews on Amazon by offering them free
products or gifts cards.  NatureWise
would review and, in some cases, make minor edits to the reviews before asking
the customers to post them on Amazon.” Such reviews could affect NatureWise’s
placement in results. Vitamins Online sued NatureWise for false advertising
based on: (1) manipulating Amazon’s customer review system and (2) falsely
advertising and misrepresenting the content and characteristics of its green
coffee and garcinia cambogia products.
NatureWise counterclaimed, alleging among other things that
VO’s principal bought over one thousand bottles of one of its garcinia cambogia
products and then resold those bottles with an insert that was entitled “AS IS”:
The insert cautioned purchasers to
read it before opening the bottle or else the purchaser would unable to return
it for a refund. The insert then explained that the product did “not contain
inside the bottle what is claimed on the outside label,” that a third-party
laboratory had tested and concluded that the label did not entirely match the
content of the bottle, and that NatureWise’s online product reviews were not
genuine. The insert also claimed that the manufacturer was being sued for its
scams and purported fraudulent practices.
Review claims: Rather than taking the relatively more simple
path of saying that manipulating reviews can imply false facts and thus constitute
a false or misleading representation of fact, the court instead (and
ahistorically) seized on the word “device” in §43(a) to say that review
manipulation could be a misleading “device.” 
(As Graeme Dinwoodie has extensively documented, “device” to the Lanham
Act’s drafters meant essentially “badge/logo.” I think the court’s holding is
right but its statutory construction is both unnecessary and overelaborate.)
Could review manipulation be falsifiable instead of
puffery?  The court pointed to a “well-established
exception [to the rule that only factual claims are actionable:] that an
opinion by a speaker who lacks a good faith belief in the truth of the
statement is actionable.” And an intent to deceive can be presumed to have
succeeded even for implied claims.  There
was a genuine factual issue about whether NatureWise acted with the intent to
deceive consumers. The evidence showed that NatureWise discussed contracting
with individuals in the Philippines “to use a rotating IP service and multiple
accounts to reduce the effect” of their competitor’s attempts to lower their
market share, which could be effective because the conduct was “not connected
to NatureWise.” A NatureWise employee expressed that he was “wary of tipping
our hand to our customers that we have anything to do with interfering with
reviews.” In response, NatureWise’s principal stated that his “only concern”
was that Amazon would investigate the positive changes in NatureWise’s product
reviews and realize that the accounts voting up NatureWise’s products may not
belong to real people. He also expressed the importance of having more
third-party sellers so that it would be impossible for Amazon to know which
company was behind the up and down voting of reviews.
Second, even without a presumption of deception, Vitamins
Online produced a survey that supported its claims. It showed that that a
majority of consumers: read reviews when shopping for weight loss products; rely
upon those reviews; and believe that product reviews are genuine and done by
real customers. A review’s number of stars and its helpfulness rating play
influential roles in a consumer’s purchasing decision.
NatureWise argued that these were all just opinions. But
there was extrinsic evidence that the reviews mattered, and also some of the
reviews might not have been from “real people,” making them literally false.
Injury: this wasn’t a comparative advertising case where
injury could be presumed even though there was some evidence of NatureWise
targeting VO and even though the parties’ products could appear against each
other on Amazon. “[I]t would be unjust and improper for the court to apply a
presumption of injury based on a third party’s conduct instead of the
defendant’s. The comparison captions found on Vitamins Online’s and
NatureWise’s Amazon product pages are a function of Amazon’s website—not a
result of NatureWise’s conduct.” VO argued that a presumption of injury was
appropriate because the parties dominated the market: one of its witnesses
found 17 market participants on Amazon for the products at issue, but approximately
92% of the reviews appear on Vitamins Online’s and NatureWise’s product pages. That
wasn’t enough to show market domination.
Although this issue is presently before the Supreme Court,
the Tenth Circuit presently holds that either actual damages or willfulness must
be shown for disgorgement; VO thus argued that it didn’t need to show actual damages
to establish injury. But that conflates injury with entitlement to disgorgement,
which only matters once liability has already been established.  That leaves the puzzling question: what is
the burden for showing injury when the plaintiff seeks disgorgement? “Bearing
in mind that there is a higher burden for seeking money damages and a lower
burden for seeking injunctive relief, the court concludes that the standard for
disgorgement is somewhere between the two.”
VO introduced evidence that sales plummeted after NatureWise
entered the Amazon market, and argued that its survey showed injury.  There were genuine issues of material fact,
but VO wasn’t entitled to summary judgment on injury. Outside a two-player
market and in the absence of comparative advertising, the parties weren’t
necessarily taking each other’s sales; this was better left for the finder of
fact (though how the finder of fact is supposed to sort that out is a bit of a
mystery).
Inredient claims: VO argued that NatureWise made various
false statements about its ingredients/efficacy/etc. Some of the products no longer
had existing samples to test; the court concluded that NatureWise had destroyed
those products; that VO was prejudiced by that destruction; and that NatureWise
acted in bad faith. VO was thus entitled to an adverse inference instruction
that this product subset bore all of the allegedly false ingredient claims and
that they were false.

NatureWise sought summary judgment on certain challenged statements.
“100% Pure” and “Sourced, Formulated, . . . and Guaranteed
to be the Highest Quality Available”: “Particularly in the context of health
supplements, a claim that something is ‘100% Pure’ is a measurable statement of
fact…. It seems likely that a reasonable consumer viewing such a phrase would
expect exactly what the phrase suggests—an unadulterated product consisting
purely of the listed ingredients.”  The “sourced
etc.” claim was a closer call. In context, however, it immediately followed
NatureWise’s label claim that its garcinia cambogia consisted of “Vegetarian
Capsules and Absolutely Nothing Else! ZERO Fillers, ZERO Binders, and ZERO
Artificial Ingredients.” And there were genuine issues of material fact about
whether NatureWise’s products had fillers, binders, and artificial ingredients.
So too with other challenged claims: “For each remaining
statement, NatureWise employs an exercise of identifying specific words within
each statement that it claims can be interpreted or defined, by dictionary or
otherwise, in multiple ways thus rendering the entire statement ambiguous.” The
court found that this ignored the requirement of considering the ad context.
Combined with the other label statements, “the alleged ambiguities dissipate.”
Moreover, “NatureWise’s exercise of suggesting that several
of its own statements are ambiguous seemingly cuts against what a corporation
would want when promoting and advertising its health supplement products. That
a company deliberately markets its products in an ambiguous and
difficult-to-understand manner is anomalous to say the least ….”
The court also found that NatureWise wasn’t entitled to
summary judgment on VO’s request for disgorgement.  NatureWise argued that VO didn’t show what
sales were attributable to false advertising. But “[t]he language of the Lanham
Act is clear: ‘In assessing profits the plaintiff shall be required to prove
defendant’s sales only; defendant must prove all elements of cost or deduction
claimed.’” “To require Vitamins Online to not only distinguish all sales based
on false advertising from all sales based on legitimate conduct, but also
require it to apportion its sales among all the various categories and subsets
of its claims, would be to violate the plain terms of the statute.”  VO had provided evidence of NatureWise’s
sales, as well as some evidence of willfulness, as discussed above, and evidence
that NatureWise “discussed stealing the design of Vitamins Online’s labels.”
NatureWise relied on Retractable Techs., Inc. v. Becton
Dickinson & Co., 842 F.3d 883, 901 (5th Cir. 2016), but even that case
accepted the district court’s finding that some of the defendant’s profits were
attributable to its false advertising. The appropriate rule: “a plaintiff need
only demonstrate that the defendant has benefitted from the alleged false
advertising (which Vitamins Online has done), then the defendant has the burden
to reduce its profits by the elements of cost and deduction, which will result
in the plaintiff recovering only those profits attributable to the false
advertising.”  That’s a pretty generous
reading of Becton Dickinson, but ok. 
NatureWise argued that disgorgement would result in a penalty instead of
compensation, but the defendant “has the power to ensure that the plaintiff
does not recover any profits that are not attributable to the false advertising”
by meeting its burden; the alternative gives a windfall to the wrongdoer. And the
court in its equitable discretion can further protect against bad outcomes.  False advertising cases should be treated no differently
than trademark infringement cases for purposes of disgorgement.
By contrast, NatureWise wasn’t entitled to disgorgement on
the counterclaims because it neglected to produce evidence of VO’s sales. It
also failed to show that it could get injunctive relief. On irreparable injury,
although its sales of garcinia cambogia fell after VO sent out the “AS IS”
flyer, “NatureWise returned to the top sales ranking on Amazon for garcinia
cambogia within only a few months.”  Money
damages might well have been sufficient, but for NatureWise’s choice to
withdraw its claim for actual damages. Without evidence relating to the only
remaining remedies it sought, the counterclaims were dismissed.
The court also struck VO’s jury demand because the only
remedies left in the case, disgorgement and injunctive relief, were equitable
in nature. VO argued that disgorgement was a surrogate for damages and thereby
a legal remedy, but that’s not what the cases say. But even if damages and profits
are related, they have distinct purposes and natures; disgorgement focuses on
unjust enrichment/deterrence, while damages redress an injury.
Some courts have held that “an accounting of profits can act
as a proxy for a legal claim in some circumstances.” The idea is that, “because
proving actual damages is difficult, trademark law creates an alternative form
of relief—profits as a proxy for damages— which is governed by a less
challenging evidentiary regime.”  Under
this theory, a plaintiff may be entitled to a jury trial if “1) the case
involves similar products, 2) there is no adequate remedy at law and 3) the
products compete directly.” The court was unpersuaded.  Anyway, even under this theory, the market
would have to be such that a loss for one party was almost automatically a gain
for the other, and the market here wasn’t a two-player market.

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incentivized reviews/targeted upvoting can be false advertising, court reiterates

Vitamins Online, Inc. v. HeartWise, Inc., No. 13-CV-982 (D.
Utah Sept. 24, 2019)
Supplement industry behavior is wild.  
Vitamins Online sells dietary supplements online, including
on Amazon, using the name NutriGold. HeartWise, aka NatureWise, competes with
NutriGold, including on Amazon, with products that contain an extract of
garcinia cambogia and green coffee. NatureWise had its employees upvote
positive reviews on its product pages and downvote negative reviews, increasing
the likelihood that potential customers would see positive reviews of its
products first and negative reviews last. “NatureWise also encouraged customers
to post or repost their positive reviews on Amazon by offering them free
products or gifts cards.  NatureWise
would review and, in some cases, make minor edits to the reviews before asking
the customers to post them on Amazon.” Such reviews could affect NatureWise’s
placement in results. Vitamins Online sued NatureWise for false advertising
based on: (1) manipulating Amazon’s customer review system and (2) falsely
advertising and misrepresenting the content and characteristics of its green
coffee and garcinia cambogia products.
NatureWise counterclaimed, alleging among other things that
VO’s principal bought over one thousand bottles of one of its garcinia cambogia
products and then resold those bottles with an insert that was entitled “AS IS”:
The insert cautioned purchasers to
read it before opening the bottle or else the purchaser would unable to return
it for a refund. The insert then explained that the product did “not contain
inside the bottle what is claimed on the outside label,” that a third-party
laboratory had tested and concluded that the label did not entirely match the
content of the bottle, and that NatureWise’s online product reviews were not
genuine. The insert also claimed that the manufacturer was being sued for its
scams and purported fraudulent practices.
Review claims: Rather than taking the relatively more simple
path of saying that manipulating reviews can imply false facts and thus constitute
a false or misleading representation of fact, the court instead (and
ahistorically) seized on the word “device” in §43(a) to say that review
manipulation could be a misleading “device.” 
(As Graeme Dinwoodie has extensively documented, “device” to the Lanham
Act’s drafters meant essentially “badge/logo.” I think the court’s holding is
right but its statutory construction is both unnecessary and overelaborate.)
Could review manipulation be falsifiable instead of
puffery?  The court pointed to a “well-established
exception [to the rule that only factual claims are actionable:] that an
opinion by a speaker who lacks a good faith belief in the truth of the
statement is actionable.” And an intent to deceive can be presumed to have
succeeded even for implied claims.  There
was a genuine factual issue about whether NatureWise acted with the intent to
deceive consumers. The evidence showed that NatureWise discussed contracting
with individuals in the Philippines “to use a rotating IP service and multiple
accounts to reduce the effect” of their competitor’s attempts to lower their
market share, which could be effective because the conduct was “not connected
to NatureWise.” A NatureWise employee expressed that he was “wary of tipping
our hand to our customers that we have anything to do with interfering with
reviews.” In response, NatureWise’s principal stated that his “only concern”
was that Amazon would investigate the positive changes in NatureWise’s product
reviews and realize that the accounts voting up NatureWise’s products may not
belong to real people. He also expressed the importance of having more
third-party sellers so that it would be impossible for Amazon to know which
company was behind the up and down voting of reviews.
Second, even without a presumption of deception, Vitamins
Online produced a survey that supported its claims. It showed that that a
majority of consumers: read reviews when shopping for weight loss products; rely
upon those reviews; and believe that product reviews are genuine and done by
real customers. A review’s number of stars and its helpfulness rating play
influential roles in a consumer’s purchasing decision.
NatureWise argued that these were all just opinions. But
there was extrinsic evidence that the reviews mattered, and also some of the
reviews might not have been from “real people,” making them literally false.
Injury: this wasn’t a comparative advertising case where
injury could be presumed even though there was some evidence of NatureWise
targeting VO and even though the parties’ products could appear against each
other on Amazon. “[I]t would be unjust and improper for the court to apply a
presumption of injury based on a third party’s conduct instead of the
defendant’s. The comparison captions found on Vitamins Online’s and
NatureWise’s Amazon product pages are a function of Amazon’s website—not a
result of NatureWise’s conduct.” VO argued that a presumption of injury was
appropriate because the parties dominated the market: one of its witnesses
found 17 market participants on Amazon for the products at issue, but approximately
92% of the reviews appear on Vitamins Online’s and NatureWise’s product pages. That
wasn’t enough to show market domination.
Although this issue is presently before the Supreme Court,
the Tenth Circuit presently holds that either actual damages or willfulness must
be shown for disgorgement; VO thus argued that it didn’t need to show actual damages
to establish injury. But that conflates injury with entitlement to disgorgement,
which only matters once liability has already been established.  That leaves the puzzling question: what is
the burden for showing injury when the plaintiff seeks disgorgement? “Bearing
in mind that there is a higher burden for seeking money damages and a lower
burden for seeking injunctive relief, the court concludes that the standard for
disgorgement is somewhere between the two.”
VO introduced evidence that sales plummeted after NatureWise
entered the Amazon market, and argued that its survey showed injury.  There were genuine issues of material fact,
but VO wasn’t entitled to summary judgment on injury. Outside a two-player
market and in the absence of comparative advertising, the parties weren’t
necessarily taking each other’s sales; this was better left for the finder of
fact (though how the finder of fact is supposed to sort that out is a bit of a
mystery).
Inredient claims: VO argued that NatureWise made various
false statements about its ingredients/efficacy/etc. Some of the products no longer
had existing samples to test; the court concluded that NatureWise had destroyed
those products; that VO was prejudiced by that destruction; and that NatureWise
acted in bad faith. VO was thus entitled to an adverse inference instruction
that this product subset bore all of the allegedly false ingredient claims and
that they were false.

NatureWise sought summary judgment on certain challenged statements.
“100% Pure” and “Sourced, Formulated, . . . and Guaranteed
to be the Highest Quality Available”: “Particularly in the context of health
supplements, a claim that something is ‘100% Pure’ is a measurable statement of
fact…. It seems likely that a reasonable consumer viewing such a phrase would
expect exactly what the phrase suggests—an unadulterated product consisting
purely of the listed ingredients.”  The “sourced
etc.” claim was a closer call. In context, however, it immediately followed
NatureWise’s label claim that its garcinia cambogia consisted of “Vegetarian
Capsules and Absolutely Nothing Else! ZERO Fillers, ZERO Binders, and ZERO
Artificial Ingredients.” And there were genuine issues of material fact about
whether NatureWise’s products had fillers, binders, and artificial ingredients.
So too with other challenged claims: “For each remaining
statement, NatureWise employs an exercise of identifying specific words within
each statement that it claims can be interpreted or defined, by dictionary or
otherwise, in multiple ways thus rendering the entire statement ambiguous.” The
court found that this ignored the requirement of considering the ad context.
Combined with the other label statements, “the alleged ambiguities dissipate.”
Moreover, “NatureWise’s exercise of suggesting that several
of its own statements are ambiguous seemingly cuts against what a corporation
would want when promoting and advertising its health supplement products. That
a company deliberately markets its products in an ambiguous and
difficult-to-understand manner is anomalous to say the least ….”
The court also found that NatureWise wasn’t entitled to
summary judgment on VO’s request for disgorgement.  NatureWise argued that VO didn’t show what
sales were attributable to false advertising. But “[t]he language of the Lanham
Act is clear: ‘In assessing profits the plaintiff shall be required to prove
defendant’s sales only; defendant must prove all elements of cost or deduction
claimed.’” “To require Vitamins Online to not only distinguish all sales based
on false advertising from all sales based on legitimate conduct, but also
require it to apportion its sales among all the various categories and subsets
of its claims, would be to violate the plain terms of the statute.”  VO had provided evidence of NatureWise’s
sales, as well as some evidence of willfulness, as discussed above, and evidence
that NatureWise “discussed stealing the design of Vitamins Online’s labels.”
NatureWise relied on Retractable Techs., Inc. v. Becton
Dickinson & Co., 842 F.3d 883, 901 (5th Cir. 2016), but even that case
accepted the district court’s finding that some of the defendant’s profits were
attributable to its false advertising. The appropriate rule: “a plaintiff need
only demonstrate that the defendant has benefitted from the alleged false
advertising (which Vitamins Online has done), then the defendant has the burden
to reduce its profits by the elements of cost and deduction, which will result
in the plaintiff recovering only those profits attributable to the false
advertising.”  That’s a pretty generous
reading of Becton Dickinson, but ok. 
NatureWise argued that disgorgement would result in a penalty instead of
compensation, but the defendant “has the power to ensure that the plaintiff
does not recover any profits that are not attributable to the false advertising”
by meeting its burden; the alternative gives a windfall to the wrongdoer. And the
court in its equitable discretion can further protect against bad outcomes.  False advertising cases should be treated no differently
than trademark infringement cases for purposes of disgorgement.
By contrast, NatureWise wasn’t entitled to disgorgement on
the counterclaims because it neglected to produce evidence of VO’s sales. It
also failed to show that it could get injunctive relief. On irreparable injury,
although its sales of garcinia cambogia fell after VO sent out the “AS IS”
flyer, “NatureWise returned to the top sales ranking on Amazon for garcinia
cambogia within only a few months.”  Money
damages might well have been sufficient, but for NatureWise’s choice to
withdraw its claim for actual damages. Without evidence relating to the only
remaining remedies it sought, the counterclaims were dismissed.
The court also struck VO’s jury demand because the only
remedies left in the case, disgorgement and injunctive relief, were equitable
in nature. VO argued that disgorgement was a surrogate for damages and thereby
a legal remedy, but that’s not what the cases say. But even if damages and profits
are related, they have distinct purposes and natures; disgorgement focuses on
unjust enrichment/deterrence, while damages redress an injury.
Some courts have held that “an accounting of profits can act
as a proxy for a legal claim in some circumstances.” The idea is that, “because
proving actual damages is difficult, trademark law creates an alternative form
of relief—profits as a proxy for damages— which is governed by a less
challenging evidentiary regime.”  Under
this theory, a plaintiff may be entitled to a jury trial if “1) the case
involves similar products, 2) there is no adequate remedy at law and 3) the
products compete directly.” The court was unpersuaded.  Anyway, even under this theory, the market
would have to be such that a loss for one party was almost automatically a gain
for the other, and the market here wasn’t a two-player market.

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ingredient supplier has standing against disparagement of products/false claims about competing product

ThermoLife Int’l LLC v. Vital Pharms. Inc., No.
19-cv-61380-BLOOM/Valle, 2019 WL 4954622 (S.D. Fla. Oct. 8, 2019)
ThermoLife licenses/sells a patented creatine nitrate used
in dietary supplements, which is allegedly included in many top-selling dietary
supplements. VPX allegedly attacked ThermoLife’s creatine nitrate in its own
advertising, including with false and misleading statements about VPX’s own “Super
Creatine,” because products including ThermoLife’s creatine nitrate compete
directly with VPX’s products.
The court found that Thermolife was within the zone of
interests protected by the Lanham Act: it alleged that its business,
reputation, goodwill, sales and profits were harmed “when consumers are misled
to purchase a falsely advertised product that competes with products containing
creatine nitrate sourced from Thermolife. These are the type of commercial
interests the Lanham Act seeks to protect.” 
And disparagement means that direct competition isn’t required for proximate
cause: it was plausible that disparagement of creatine nitrate would affect
sales of competing products containing creatine nitrate sourced from
Thermolife. (though here the court didn’t distinguish the disparaging parts
from the allegedly false self-promotion about VPX’s own product; I support the
result but would have appreciated more clarity that it’s not just disparagement
that can create proximate cause).
VPX next argued that the complaint didn’t satisfy FRCP 9(b)’s
heightened pleading standard. Since there was no controlling precedent, the
court declined “to expand Rule 9(b) absent instruction from the Eleventh Circuit
or persuasive guidance from its sister districts.”
Nor were the alleged misstatements clearly opinions or
nonactionable puffery: VPX allegedly advertised that creatine nitrate was “minimally
effective,” “useless,” “can be dangerous,” and “that there is ZERO scientific
evidence it can increase performance.” VPX also allegedly falsely and
misleadingly compared the solubility of “Super Creatine” to creatine nitrate; blurred
the concepts of dissolution rate and solubility; and claimed that “Super
Creatine is the world’s only water-stable creatine,” that it is “much more bioavailable
than regular creatine,” that it can “beef up your muscles and your brain,” that
it can cross the blood brain barrier “twenty times more efficiently than
regular creatine,” and that it helps with “all forms of dementia, including
Alzheimer’s, Parkinson’s, Huntington’s, and other forms of dementia.” Those
were actionable. VPX’s analysis of why its statements were true went to denials
of the alleged facts and weren’t a basis for dismissal.

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