resale is not a misrepresentation of being an authorized seller under false advertising law

FB Select, LLC v. Ocean Blue Trading, LLC, No. 24-cv-8425
(PKC), 2025 WL 2172653 (S.D.N.Y. Jul. 31, 2025)

Finding cases where TM and false advertising law give
different outputs on the same facts because of lack of harm/materiality/falsity
is my niche! Here’s another one: being an unauthorized seller isn’t false
advertising because there’s no false statement of fact.

FB, the exclusive distributor of Klaire Labs supplements on
Amazon, sued Ocean Blue for Lanham Act false advertising and tortious
interference with contract or prospective business advantages (the court asked
for briefing on its supplemental jurisdiction once it kicked out the false
advertising claim). FB alleged that Ocean Blue “willfully resell[s] illegally
and fraudulently sourced Klaire Products on Amazon without any authorization
from SFI.” There was no allegation that the products were counterfeit or nongenuine.
FSB alleged instead that “[t]he only plausible way Defendants could be
obtaining the volume of products they are reselling is by purchasing them from
one or more Authorized Sellers.” (That’s the basis for tortious interference.)

FB didn’t challenge any particular statement about the
product or its origins, but instead argued that the act of selling the product
on Amazon was an impliedly false statement because it failed to affirmatively
disclose that Ocean Blue had acquired the product from authorized sellers of
the product who did not have the contractual right to resell it to Ocean Blue. But
an act of selling the product “did not impliedly represent anything about the
identity of the party selling the product to Ocean Blue or of that seller’s
contractual responsibilities.” FB argued that there was an implied
representation that Klaire Labs guaranteed or warranted the product, but Ocean
Blue didn’t say anything about it, and there was no allegation of a deceptive
material omission.

from Blogger http://tushnet.blogspot.com/2025/08/resale-is-not-misrepresentation-of.html

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court upholds nine-figure verdict in false advertising case

Guardant Health, Inc. v. Natera,
Inc., 2025 WL 2106522, No. 21-cv-04062-EMC (N.D. Cal. Jul. 28, 2025)

Previous opinion discussed here.
Guardant sued Natera for falsely advertising a clinical test; after the court
denied a PI, it conducted a trial at which Natera was held liable for willful false
advertising under the Lanham Act and California law. The jury awarded $75
million in damages, awarded $175 million in punitive damages under California law,
and issued an advisory verdict recommending $42 million in disgorgement. It
also rejected Natera’s false advertising counterclaims. The court here resolves
post-trial motions, including some discussion of the jury instructions.

The jury found
Natera’s advertisements were false by necessary implication. The ads compared
specific performance metrics of Signatera and Reveal, the parties’ competing
products, from two separate studies. “[M]issing from the side-by-side
advertisement was adequate context of the differences in the studies that could
lead to further explanation why specific key metrics were not actually
comparable on an apples-to-apples basis.” The comparisons, in context, were “statistically
invalid and
misleading” because of differences in the underlying data
sources. This wasn’t puffery. Natera’s advertisements presented “specific and
measurable” claims of superiority of Signatera over Reveal.

not an apples to apples comparison

Advertisements using an “ ‘apples-to-oranges’ theory of
falsity” are literally false by necessary implication “where non-comparable
products are portrayed as otherwise equivalent (except for the superior or
inferior aspect being illustrated in the advertisement).” Interestingly, the
court actually gave this as part of its instructions, which stated in part:

A statement is literally false by
necessary implication when it does not explicitly state something that is
untrue, but considering the advertisement in its entirety, the only reasonable
interpretation of the statement is that it is untrue. Advertisements using an “apples
to oranges” comparison are literally false by necessary implication where
things that are non comparable are portrayed as otherwise equivalent.

The jury could properly find that Natera’s advertising
statement was false because it “omits differences which would have been
material to recipients.” And the metrics in the ad, as the ad itself said, were
“key” to the products’ functions and therefore to purchase decisions. “Indeed,
the fact that Natera highlighted these metrics in its advertising campaign
against Reveal suggests Natera is being a bit disingenuous in now asserting
their metrics are not really material.”

Consistent with the amount of money at stake, Guardant also
provided a survey to show that the ads affected respondents’ perception of product
quality (69.7% of oncologists “understood the main message of Natera’s email
advertisement to be that Signatera is superior to Guardant’s Reveal”), as well
as evidence that ads of this type affect doctors’ purchasing decisions. The
accuracy of tests like these ones “undoubtedly” concerned an inherent quality or
characteristic of the product.

Commercial advertising: Natera argued that it was just
disseminating educational materials, not ads. But the evidence at trial showed
that their purpose was to influence consumers. The comparison chart was
“provided to the sales force” and “used by the sales force in meetings with
oncologists and physicians for the purpose of influencing customers
(oncologists and physicians) to buy its tests.” The ads were widely
disseminated in the relevant market, through thousands of emails. And Guardant
presented evidence that Natera made its false claims with the express economic
motive to advance the sale of Natera’s test over Guardant’s. “The ‘education’
here was intended to drive sales.”

First Amendment: A false ad is not protected speech. Natera
argued that, because the comparison advertisement consisted of results from two
scientific studies, ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d
Cir. 2013), precluded liability and required treating the ad as a statement of
opinion in a scientific debate. “ONY does not categorically immunize
false statements about peer-reviewed studies.”  Instead, “[s]tatements in peer-reviewed,
published scientific articles are entitled to protection against Lanham Act
liability” because, per ONY, they’re opinion rather than fact.  Specifically, for peer-reviewed scientific
studies, “conclusions from non-fraudulent data, based on accurate descriptions
of the data and methodology underlying those conclusions, [and] on subjects
about which there is legitimate ongoing scientific disagreement … are not
grounds for a claim of false advertising under the Lanham Act.”

However, “statements made within the academic literature and
directed at the scientific community” are distinguishable from advertising
“statements made in commercial advertisements and directed at customers.” [The
difference here from the Fifth Circuit’s Plastipure decision, on which
the court (I think correctly) relies, is that the ads in Plastipure were
not directed to doctors. But they were directed to specialist consumers, and
neither doctors nor other highly trained professionals are necessarily good at
spotting problems in ads that don’t give the full context of a study. (I don’t
think they’re necessarily good at spotting problems in full studies either, but
the Second Circuit’s holding really does need to be confined to that scenario
or, as everyone recognizes, advertising regulation would collapse.)]

Here, there was substantial trial
evidence that Natera did not merely reproduce and then accurately describe the
results of a scientific article. Instead, Natera (not scientists in a
peer-reviewed, published scientific article) placed, what the jury found to be
misleading, apples-to-oranges comparisons of the studies into a side-by-side
format.

The instruction on this point included:

Statements in a commercial
advertisement or promotion which are based on test results from a
peer-reviewed, published scientific study cannot be literally false unless that
party challenging the advertisement proves that:

1. The statement in the
advertisement of promotion is not, on its face, supported by the peer-reviewed,
published science study. In other words, even if the study is reliable, it does
not establish the statement at issue in the advertisement; or

2. The statement conveys a false
message that is beyond the scope of the peer-reviewed, published scientific
study, such as comparing test results from a different study when the results
are not actually comparable; or

3. The statement is supported by
the peer-reviewed, published scientific study but the results of the study were
fabricated or fraudulently created.

A party also may show that a
commercial advertisement or promotion that relies on a peer reviewed, published
scientific study is misleading if it reports results from the study in a way
that is deceptive and that deceived a significant portion of the commercial
audience.

The court also found that the jury was properly instructed
on awarding corrective damages. As a direct competitor (in fact, the other player
in a two-player market), Guardant was entitled to a presumption of commercial
injury once the jury found material misleadingness. And it also presented “substantial
evidence that Natera’s advertisements affected Reveal’s sales and that Guardant
needed prospective corrective damages to remedy the past wrong.” Even though Guardant’s
test at the time of the ads was a version no longer on the market, the ads targeted
Guardant’s products in general as “tumor-naïve” tests, and the next generation
was also “tumor-naïve.” Given that it was the immediate successor to the
targeted test and “reasonably proximate in time” to the ads, harm was
plausible.

Guardant’s evidence also reasonably supported the jury’s
finding of willfulness. I didn’t go back to see when these statements were
made, but apparently one doctor told Natera that the comparison between the two
studies would be “unfair” and characterized it as “a bit like comparing apples
and pears.” In addition, general competitive statements supported the willfulness
finding with statements such as: “We need to be laser focused … or we will lose
to Guardant. We need to put more intensity – this is a war we are entering,” “we
need to go to the mat here” and “[s]pend whatever is necessary to salt
[Guardant’s] launch” of Reveal. Testimony indicated that Natera sent about 10
emails to each oncologist.

Punitive damages were available on the California claims. The
$175 million in punitive damages worked out to a 2.3x multiplier for the damages,
“well within the range of an appropriate ratio.”

The court also declined to grant remittitur of the damages
award; the jury accepted Guardant’s expert’s 3x multiplier for $75 million in prospective
corrective damages based on the $24.8 million Natera spent on its anti-Reveal
campaign.

The court unsurprisingly also granted a permanent
injunction, though it refused Guardant’s request to require Natera to notify
customers that a jury unanimously found its advertising comparing the
performance of Signatera and Natera was false. “The jury’s award of prospective
corrective damages is an adequate legal remedy for this request, thus no
further equitable remedies will be entered.” But Natera was enjoined from
comparing the tests in terms of the advertised qualities “based, in whole or in
part,” on the two studies at issue.

The jury recommended $42 million in disgorgement, which was
about 44% of Guardant’s request. The court crunched the numbers on its own, as
is appropriate, and found attributing 50% of Natera’s sales of Signatera to the
false advertising to be reasonable, given that Natera exceeded its projected
sales by about 40-60% and Guardant’s projections were short by about 50%. That
led to disgorgement of a bit over $37 million. Disgorgement was appropriate to
prevent Natera’s unjust enrichment; willfulness supported disgorgement as well.

Guardant also sought a 1.5x multiplier for the actual
damages of $75 million. The Lanham Act allows a court to adjust a Lanham Act
award if it finds “that the amount of the recovery based on profits is either
inadequate or excessive” up to 3x. But actual damages should “constitute
compensation and not a penalty.” How to square these dueling goals? “Courts
sometimes award treble damages because economic harm is hard to prove, where
there is loss to reputation and goodwill, and to deter future infringing
conduct.” Here, though, there was only vague testimony about “the damages that
have been done to the reputation of this product,” and Guardant’s damages
expert testified that $75 million was “necessary in order to put [Guardant]
back in the position they should have been, level the playing field,” and
“correct the impressions that have been left in the market.” The jury
apparently accepted this testimony. “[A]n assertion by a CEO that additional
damages should be awarded for e.g. loss of goodwill, without any further
evidence, does not warrant an additional enhancement of the jury’s award of $75
million for corrective advertising.” This was especially true given the
punitive damages award under state law. Willfulness alone didn’t justify a
multiplier where “the actual damages awarded already compensate for the alleged
harm.”

Prejudgment interest: Section 1117(a) doesn’t mention prejudgment
interest, but 1117(b) (treble damages for counterfeits) does. And:

In Y.Y.G.M. SA v. Redbubble, Inc.,
75 F.4th 995, 1008 (9th Cir. 2023), the Ninth Circuit explicitly noted that
there is an express provision awarding prejudgment interest in Section 1117(b),
but not in Section 1117(c) [statutory damages for counterfeits]. The Court
applied traditional statutory interpretation tools to find this omission was
intentional by Congress, and thus prejudgment interest was not available under
Section 1117(c).

[Ah, if only the Supreme Court had noticed a similar issue
with the noncommercial use exception to dilution’s lack of a “use as a mark”
limitation! Anyway.] Expressio unius est exclusio alterius: “When Congress
includes particular language in one section of a statute but omits it from a
neighbor, we normally understand that difference in language to convey a
difference in meaning.” The same logic applies to regular infringement damages/profits.
Also, prejudgment interest is supposed to make plaintiffs whole, but the
damages here were for prospective corrective advertising. And disgorgement also
doesn’t need prejudgment interest to make a plaintiff whole. “Guardant was not
awarded monetary damages for past lost profits, profits that it ‘lost [the]
opportunity to invest.’”

The court also denied Guardant’s motion for $22 million in
attorneys’ fees. Although the jury found the false advertising willful, this
wasn’t an exceptional case. The key factors are (A) frivolousness; (B)
objective unreasonableness; and (C) considerations of compensation and
deterrence. “Natera’s litigation positions were not so unreasonable as to
render this case exceptional.” Summary judgment was granted to Natera in some
parts of the case, to Guardant on others, and mostly the case went to trial on
disputed issues. “[A] well-fought case where one side wins on all claims does
not transform a Lanham Act case into one that is exceptional. Were that the
case, attorneys’ fees would be awarded in almost all Lanham Act cases…. Success
at a jury trial does not deem the opposing party’s positions weak or frivolous.”

As for litigation conduct, Natera got sanctioned already for
certain conduct, and no further sanctions were warranted. Nor was it
exceptional to keep advertising after Guardant sent a cease-and-desist letter; Guardant
sued six days later.

from Blogger http://tushnet.blogspot.com/2025/08/court-upholds-nine-figure-verdict-in.html

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I write letters

To Alan Garber & John Manning:

As
a member of the law faculty (and, not for nothing, a professor of the
First Amendment), I am writing you to express my strong opposition to
any “settlement” with the Trump Administration. Harvard has been a
beacon for academic freedom, and that means that even if Harvard’s
administration believes that it is getting a “good” deal, any “deal”
will be used to extort more concessions and destroy academic freedom
elsewhere. This is not how the leading US university should behave.
Moreover,
as every trade partner has seen—as Columbia University has seen—as the
recission package passed by Congress despite promises to the contrary
has shown–there are no “deals” with authoritarians of this stripe. This
administration is both unwilling and unable to keep its word. Russ
Vought and his ilk are not going to release money, and even if the money
previously owed is released without a court order, there will be more
demands and less money next time.
Instead,
the administration’s acts against George Mason’s faculty suggests that
individual professors are next, and our students are already at risk.
Protecting Harvard requires protecting its faculty and students from
government thought control. This cannot be accomplished merely by saying
in a statement that the university has retained academic freedom, if it
is accompanied by concessions to people who hate higher education and
want to destroy it. If you sign an agreement with these people, will
appointments and admissions be actually free to follow the pursuit of
academic excellence according to the law on the books? Or will a threat
hang over every decision? If you sign an agreement, will it still be
likely that you’ll wake up to find that we can’t have international
students any more until we do just one more thing to root out whatever
they’ve decided is too “woke”?
I
understand you must be under a huge amount of pressure. If the US does
not retain its democratic institutions, let it be without your consent
and with your resistance. If the US does survive as a democracy, we will
all remember what side Harvard was on.

from Blogger http://tushnet.blogspot.com/2025/07/i-write-letters.html

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9th Circuit affirms class status based on materiality of claim in product name

Noohi v. Johnson & Johnson Consumer Inc., — F.4th
—-, 2025 WL 2089582, No. 23-55190 (9th Cir. Jul. 25, 2025)

J&J sells Neutrogena Oil-Free Face Moisturizer for
Sensitive Skin. The district court certified a class in a consumer protection
case brought by Noohi, who alleges that, despite the name, Neutrogena Oil-Free
Face Moisturizer for Sensitive Skin contains oils and oil-based ingredients (ethylhexyl
palmitate and soybean sterols). The court of appeals affirmed the
certification.

Noohi’s expert Hickner, a professor of materials science and
engineering, opined that, although “oil” lacks a standard scientific
definition, the term generally refers to a “naturally-derived, chemically
synthesized, or petrochemically-refined slippery … substance” that is
hydrophobic—meaning that it does not mix with water—and more viscous than
water, but less dense. Dr. Hickner opined that, based on their chemical
structures and physical properties, ethylhexyl palmitate and soybean sterols
are oils with oil-like physical properties.

Her expert Roberts, an econometrics expert, described his
proposed process for measuring class members’ damages by calculating the
economic value to consumers of the “oil-free” statement: qualitative market
research designed to uncover consumers’ understanding of and response to the
“oil-free” label, plus quantitative surveying and market analysis to measure
the economic value to consumers of the “oil-free” statement.

J&J contested the evidentiary value of both experts’
proposed testimony and submitted competing expert declarations for both.

First, the district court could properly accept the proposed
damages model of Noohi’s economic expert. The Ninth Circuit has held that
“class action plaintiffs may rely on a reliable though not-yet-executed damages
model to demonstrate that damages are susceptible to common proof so long as
the district court finds that the model is reliable and, if applied to the
proposed class, will be able to calculate damages in a manner common to the
class at trial.” The district court did not abuse its discretion in finding the
proposed damages model fit Noohi’s theory of harm and was sufficient for
purposes of class certification.

For measuring the price premium, Dr. Roberts proposed to
show survey participants the product and ask at what prices they would find it
“too inexpensive to be considered, a good value, expensive but still worth
considering, and finally, too expensive to be considered.” Dr. Roberts would
introduce information “challenging the ‘oil-free’ claim,” e.g. by telling
participants that the ingredients contained extracts of soybean and palm oil.
Then the survey would ask the price question again. He proposed to use regression
analysis to determine the percent of the product’s overall price associated
with the phrase “oil-free.” Courts have approved of similar
“benefit-of-the-bargain” damages models in deceptive marketing cases under
California law.

Dr. Roberts also proposed to measure “softer” kinds of harms
consumers might experience, such as changes to “overall consumer satisfaction,
brand loyalty, willingness to recommend [the Product], and repurchase intent.”
He proposed questions about their attitudes towards and impressions of the
product before and after the “exposure.” He would use “multivariate
statistic[al]” analysis to quantify the changes in respondents’ perceptions of
the Product. That would include damages beyond a price premium. But that didn’t
make the problem unusable. The problem only comes when a model proposes to
measure damages not associated with the plaintiffs’ theory of harm that can’t
be separated from damages tied to the plaintiff’s theory. So all Roberts had to
do to solve the problem was … not ask those questions.

J&J also argued that rather than comparing what
consumers are willing to pay before and after they learn that the Product is
not “oil-fee,” Roberts should compare “what consumers paid for ‘Neutrogena’s
Oil-Free Face Moisturizer for Sensitive Skin’ and what they would have been
willing to pay for ‘Neutrogena’s Face Moisturizer for Sensitive Skin,’ holding
everything else about the product’s performance and packaging (other than the
‘oil-free’ claim) constant.” Dr. Roberts’ model, J&J argued, would
improperly include the “emotional value” that consumers associate with learning
that the “Product’s label contains a lie.” 
But “California law does not prescribe any specific means of measuring a
price premium for purposes of actual damages or restitution. In fact, ‘[c]lass
wide damages calculations under the UCL, FAL, and CLRA are particularly
forgiving.’” All that was required was “some reasonable basis of computation.”

“There is no talismanic means of measuring damages for
deceptive marketing claims under California consumer protection law.” Conjoint
analysis is ok, as is “contingent valuation analysis,” which is similar to Dr.
Roberts’ proposed methodology in that it varies the features of a single
product by presenting new information about the product and asks survey
participants to “directly report what they are willing to pay for it.”

True, surveys might be badly done and inflate damages or
fail to replicate purchase conditions. But Dr. Roberts recognized those risks
in his deposition and rejected telling survey participants “you were lied to.”
“Should Dr. Roberts’ execution of the survey fall short of that mark, [J&J]
may explore that failure at summary judgment, in a renewed Daubert
motion, or during cross-examination at trial.” At the class certification
stage, the key inquiry was simply whether Noohi has “demonstrated the nexus
between [her] legal theory … and [her] damages model.” Whether the proposed
calculation of the price premium would be accurate was a “merits inquir[y]
unrelated to class certification.”

Second, materiality and reliance were susceptible to common
proof. “Materiality, and therefore an inference of reliance, can be established
by reference to an objective, reasonable consumer standard, and so in this case
may be proven in a way common to the class.” It is for this reason that class
actions asserting the
usual California claims
are generally “ideal for class certification.”

The presumption was rebuttable, but the district court
didn’t abuse its discretion in finding the presumption to be unrebutted. “If
the misrepresentation or omission is not material as to all class members, the
issue of reliance ‘would vary from consumer to consumer’ and the class should
not be certified.” Here, the district court also relied on the undisputed
evidence of classwide exposure to the “oil-free” language prominently displayed
on the front of the packaging. In determining material misleadingness under
California law, “the primary evidence … is the advertising itself.” The court
was quite plaintiff-favorable here, as its understanding of California law
required:

It is hard to imagine that
consumers would purchase a product labeled “Oil-Free Moisture” without regard
to whether the product was free from oil. If, somehow, the evidence later shows
that a reasonable consumer would not have found the product’s name to be
material to their purchase decision, “the failure of proof on the element of
materiality would end the case for one and for all; no claim would remain in
which individual reliance issues could potentially predominate.” 

Given the objective standard for
materiality and the undisputed evidence of classwide exposure, Noohi is
entitled to the inference that reliance can be shown via common proof.

J&J argued that “oil-free” might have multiple different
interpretations: doesn’t contain oils, doesn’t contain ingredients derived from
oils, or doesn’t perform in a way consumers consider “oily.” But J&J didn’t
offer persuasive evidence of this variance, only Noohi’s testimony as to her
motivations for purchasing and the expert report of a dermatologist as to the
dermatologic uses of oil-free products. That didn’t show variance within the
class.

Second, even if understanding of “oil-free” varies across
the class, J&J didn’t explain why that would undermine the commonality of
materiality based on a reasonable consumer standard, or rebut the inference of
reliance. In cases reaching the opposite conclusion, “a sizable portion of the
class either were not misled by the statements or would not have found the
misrepresentations to be material had they known the truth.” As opposed to
showing that “oil-free” didn’t affect the purchase decision, J&J’s evidence
at most showed that it “affected the purchase decision of class members—and so
was material—for different reasons.” J&J offered no evidence that “a
consumer who thought ‘oil-free’ meant ‘without oils’ was any more or less
likely to be affected in their purchase decision than someone who thought it
meant ‘without oil derivatives’ or not tactilely ‘oily.’” Thus, J&J’s
argument didn’t undermine the idea that materiality was susceptible to common
proof:

The baseline inquiry is whether the
statement was material to a reasonable person. An affirmative answer to that
question gives rise to an inference of reliance. A showing that for some
portion of a class that statement was not in fact material upsets that
inference. But a showing that a statement was material to different class
members in different ways does not.

In California, “a plaintiff need not establish at the class
certification stage that class members share a uniform understanding of the
contested term.”

J&J also argued that it defeated the inference of
reliance by showing that 30% of purchases were repeat purchases. (One thing
that could be useful in a false advertising case would be to know
whether that was a low percentage for a personal care product, or a high
one.) “The existence of repeat purchasers does not defeat the inference of
reliance. There is no indication that the repeat purchasers knew that the
Product was not oil-free and purchased it anyway.” Plus, for reliance under
California law, a misrepresentation need not be “the sole or even the decisive
cause of the injury-producing conduct.”

from Blogger http://tushnet.blogspot.com/2025/07/9th-circuit-affirms-class-status-based.html

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court finds advertising injury insurance coverage in false association case despite consumer fraud and other exclusions

Illinois Casualty Co. v. Kladek, Inc., No. 22-3214 (DWF/DJF),
2025 WL 2071043 (D. Minn. Jul. 23, 2025)

ICC sought declaratory judgment that it didn’t have to defend
(or indemnify) its insured in a Lanham Act false association lawsuit brought by
models, and failed, at least as to defense.

In the underlying lawsuit, the models sued over a “Gentlemen’s
Club” that used photos of them in social media ads. They alleged 43(a) false
endorsement, unfair competition, and false advertising; right of publicity
violations; negligence; violation of Minnesota’s Uniform Deceptive Trade
Practices Act; and unjust enrichment.

ICC issued Kladek business liability coverage that included
advertising injury and also issued an additional cyber protection endorsement. An
arbitration panel concluded that the cyber protection endorsement created a
duty to defend (but did not resolve the duty to indemnify), but the business
liability coverage is broader and so still relevant.

Advertising injury covers, inter alia,

(4) Oral or written publication, in
any manner, or material that slanders or libels a person or organization or
disparages a person’s or organization’s good, products or services;

(5) The use of another’s
advertising idea in your “advertisement”; or

(6) Infringing upon another’s
copyright, trade dress or slogan in your “advertisement.”

But ICC contended that exclusions applied. Under Minnesota
law, courts read policies in favor of finding coverage, construing words of
inclusion broadly and words of exclusion narrowly.

First, ICC argued that it excluded coverage with the “law
exclusion,” which covered liability “arising directly or indirectly out of any
action or omission that violates or is alleged to violate … (12) Any federal,
state, county, municipal or local consumer fraud protection law, regulation,
ordinance, order, or directive barring fraud, unfair competition, and/or
deceptive business practices.”

The court agreed with Kladek that the Lanham Act and MDTPA
claims apply to various types of conduct, not all of which can be labeled
“consumer fraud.” The exclusion does not apply to the statutory claims insofar
as they do not implicate consumer fraud conduct:

Notably, the Models have not
alleged that any “consumer” has been defrauded. Instead, the Models allege that
they were wronged because their images were used without their authorization or
compensation. These claims are not “consumer fraud” claims at their core, but
rather commercial claims involving advertising injury.

“Because the core of the Models’ Lanham Act claim alleges an
injury caused by the unauthorized use of their images without compensation by
the Club, and not a consumer fraud claim, ICC has not demonstrated that the Law
Exclusion applies to the Models’ Lanham Act claim.” Of course, injury to
consumers is the method by which the harms of false advertising are inflicted,
and courts have rejected models’ Lanham Act claims merely based on failure to
pay, but that I suppose is a matter for the merits.

In a footnote, the court said that the duty to defend even
one claim triggered the duty to defend in its entirety unless an additional
exclusion applied, and that, in the alternative, ICC’s interpretation would
render any insurance illusory. “[W]hen policy exclusions appear to be broader
than the coverage, so as to ‘swallow up’ the coverage, rendering the insuring
promise illusory, a court will avoid that unreasonable result.” The court found
that logic compelling, “as it appears that the ICC’s broad interpretation of
the policy exclusions would preclude coverage in most factual scenarios.”

Electronic chatroom exclusion: this excluded advertising
injury “[a]rising out of any electronic chat room, bulletin board, or blog the
insured hosts, owns, or over which any insured exercises control.” ICC argued
that Facebook, Instagram, and Twitter, the platforms on which the models’
images were used, “all allow users to post or read messages and control or host
their own bulletin boards” and therefore qualified for the exclusion. But the
policy didn’t define “bulletin board” or “electronic chat room,” so the plain
meanings of those terms applied. Chat rooms involve realtime communication, and
a bulletin board is an “online communication system[ ] where one can share,
request, or discuss information on just about any subject.” “In contrast, as
commonly understood, Facebook, Instagram, and Twitter are social media
platforms.” Kladek didn’t host, own, or exercise control over Facebook,
Instagram, and Twitter, but rather used them to promote its business. “There is
no evidence that it did so with any intention to generate any discussion among
viewers. Indeed, the use of the Models’ images did not occur in a chat room, on
a bulletin board, or on a blog.” The best description of where these images
were was that they were on Kladek’s “social media accounts.”

ICC had one final try: its exclusion for “multimedia peril,”
“the release or display of any ‘electronic media’ on your ‘internet’ site or ‘print
media’ for which you are solely responsible, which directly results in any of
the following”:

a. Any form of defamation or other
tort related to the disparagement or harm to the reputation or character of any
person or organization, including libel, slander, product disparagement, or
trade libel;

b. Invasion, infringement or
interference with an individual’s right of privacy including false light,
intrusion upon seclusion, commercial misappropriation of name, person, or
likeness, and public disclosure of private facts;

c. Plagiarism, piracy, or
misappropriation of ideas under an implied contract ….

This exclusion applied unless the cyber endorsement applied—or
maybe it did so if the cyber endorsement applied. “In essence, ICC
appears to argue that because the ICC has a duty to defend claims under the
Cyber Endorsement (as determined by the arbitration panel), all of the Models’
claims are now excluded from coverage under the Policy.” The court disagreed. The
arbitration panel didn’t decide indemnification, or which claims in the
underlying suit triggered the cyber endorsement duty to defend. Also, the cyber
endorsement created several ambiguities, and was unclear on its relationship
with the main liability policy. Basically, the endorsement was inconsistent
about whether it amended or supplemented the main policy and stated that its coverage
was “in addition to, and will not erode, the limits of insurance provided
elsewhere under your Policy.” And the main form was written on a traditional
“occurrence” basis, while the cyber endorsement was a claims made policy. Finally,
“the wording of the Multimedia Exclusion is, itself, circular and facially
contradictory” by excluding multimedia liability for advertising injury “except
to the extent that coverage may be provided under the Cyber Endorsement.” The
court found the language confusing, but one reading was that, once coverage exists
under the cyber endorsement, it also exists under the basic liability policy. “Ambiguities
are construed against the insurer and in favor of coverage.”

from Blogger http://tushnet.blogspot.com/2025/07/court-finds-advertising-injury.html

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amicus in Prevagen v. FTC appeal

 Led by Truth in Advertising; I was happy to sign on.

from Blogger http://tushnet.blogspot.com/2025/07/amicus-in-prevagen-v-ftc-appeal.html

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alleged use of competitor’s corporate “persona” didn’t cause actionable confusion

SME Steel Contractors, Inc. v. Seismic Bracing Co., LLC, No.
2023-2426, 2025 WL 2057365 (Fed. Cir. Jul. 23, 2025)

Discussion
of previous district court opinion here.
Because a patent is involved, the
appeal on all issues goes to the Federal Circuit, but the Federal Circuit is
supposed to apply home circuit precedent to the non-patent claims. Once again
we see the powerful discontinuity between TM and false advertising claims produced
by the normal absence of any damage requirement in TM.

The parties compete in the design of buckling-restrained
braces (BRB), which are structural devices that help buildings withstand
seismic activity. SME sued Seismic for patent infringement, false advertising
and false association under the Lanham Act, unfair competition and certain
deceptive trade practices under Utah state law, and copyright infringement.
Seismic secured summary judgment, which the court of appeals affirms. Patent discussion
omitted.

The false advertising-related claims centered on
representations made by Seismic in a Design Manual that it sent to prospective clients.
Its 90 pages included the statements “Produce capacity of over 5000 BRBs per
year” and “These patented methods have now been tested and qualified for use on
projects in accordance with governing building codes (AISC 341).” The Design
Manual further included a report from the University of Utah, testing five of
Seismic’s BRBs and concluding that three of those BRBs satisfied AISC 341-10
requirements and two did not. SME argued that these statements were false and
that Seismic used SME’s “persona,” including proprietary technical drawings and
a similar logo, in the Design Manual. (It didn’t bring a conventional
infringement claim.) SME further alleged that it lost business to Seismic
because of these misrepresentations.

The copyright claims alleged that Seismic used several of
SME’s copyrighted technical drawings of BRB designs in the Design Manual. The
district court granted summary judgment to Seismic, concluding that SME had
“not presented sufficient evidence of a causal connection” between the alleged
copyright infringement and alleged profits; SME sought only disgorgement. (The
court of appeals could have pulled a Davis v. Gap move and remanded to
assess damages, but there doesn’t seem to be a licensing market here, making
that much less attractive.)

Even if there was Lanham Act standing, there was no genuine
issue of material fact on injury. No reasonable jury could find a causal
connection between misrepresentations by Seismic and SME’s injuries. SME only
showed that the Design Manual was sent to several potential customers and that
Seismic successfully bid on projects that involved those customers while SME also
(unsuccessfully) submitted competing bids on most of those projects. “SME Steel
did not present any evidence that the Design Manual—let alone the handful of
representations alleged to be misleading within this ninety-page
document—played any role in SME Steel’s loss of bids.”

SME argued that it was entitled to a presumption of injury
because the parties compete in a sparsely populated market. Under Tenth Circuit
law, where “the plaintiff and defendant are the only two significant
participants” in a two-player market, “injury may be presumed if the plaintiff
shows the defendant made literally false statements or made statements that
were literally true but were likely to mislead or confuse customers.” But the
two key alleged misrepresentations weren’t shown to be literally false.

“Produce capacity of over 5000 BRBs per year” on its face refers
to future capacity. SME argued that this was false because Seismic Bracing uses
third-party fabrication shops and did not have such a manufacturing capacity
itself. But “produce” can have multiple definitions and may be defined as “to
make available for public exhibition or dissemination: such as … to oversee
the making of.” Thus the claim was “ambiguous, precluding literal falsity.”

What about the “tested and qualified” claim given that two
of Seismic’s five tested BRBs failed testing? Again, the statement that Seismic’s
“patented methods have now been tested and qualified for use on projects in
accordance with governing building codes (AISC 341)” was ambiguous, “as the
statement could have referred to the BRBs that satisfied the testing
requirements, not all of Seismic’s BRBs.”

What about using intent to deceive to presume deception and
thus injury? Some Circuits have said so, but, even assuming that the Tenth
Circuit would agree, no reasonable jury could conclude that Seismic acted with
intent to deceive. Mere awareness of what factors a potential customer might
consider important in buying a BRB did not create a genuine dispute.

False association: The district court analysis here was
deeply confused. The Federal Circuit noted
that “it is not clear what the basis for SME Steel’s false association claim
is. SME Steel concedes that ‘this case does not involve a mark,’ but instead,
it appears to contend that it has a particular corporate persona, akin to an
individual celebrity, and Seismic Bracing appropriated that persona in its
Design Manual.” Nonetheless, the Federal Circuit proceeded to affirm the
district court’s likely confusion analysis rather than just saying no. It didn’t
mention the weirdest parts of that analysis flowing from the conceptual
mismatch, just holding that, “[g]iven the admitted care that customers will
exercise in reviewing materials related to the bids and selecting BRBs, as well
as the absence of evidence of actual confusion, we agree that no reasonable
jury could conclude that there was a likelihood of confusion.”

Copyright: SME didn’t show a causal connection between the
alleged infringement and any subsequent purchases of Seismic’s BRBs. To show
indirect profits, the copyright holder bears “the initial burden to show a
nexus between [the alleged] infringement and making of a profit,” and [t]hat
showing must go beyond speculation.” That didn’t happen.

from Blogger http://tushnet.blogspot.com/2025/07/alleged-use-of-competitors-corporate.html

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no initial interest confusion from a deactivated product page that list zero results

Alsa Refinish LLC v. The Home Depot, Inc., 2025 WL 2014281, No.
2:23-cv-09965-SVW (C.D. Cal. Mar. 18, 2025)

Previous
discussion
of related case by same plaintiff. The Home Depot “sells home
improvement products, including a wide assortment of paints and paint products,
at brick-and-motor locations and through its website.” It sells products,
including paint, from third parties.  

Alsa also sells paint and claimed to own trademarks in “Alsa,”
“Alsa Chrome Paint,” “Alsa Easy Chrome,” “Easy Chrome,” and “Alsa Refinish.” Between
2013 and 2019, Alsa sold its products on Home Depot website as a third-party
vendor, authorizing Home Depot to use its marks on the “landing pages” for Alsa’s
products. When the relationship ended, Home Depot deactivated all the landing
pages for Alsa’s products. Thus, a search on HomeDepot.com for “Alsa Easy
Chrome” wouldn’t return any products. But, for at least some time, someone
using Google or a similar third-party search engine who searched for “Home
Depot” plus the name of one of Alsa’s products, would get a result that
included the inactive landing pages. Clicking on those links would show results
like this:

Screenshot showing zero results for Alsa on Home Depot’s site

Alsa alleged that it “never intended to sell products
through Defendant’s website or stores” and that it “believes that Defendant has
never sold Plaintiff’s products on Defendant’s websites or stores.”

The court initially denied Home Depot’s motion to dismiss
because, “taking Plaintiff’s allegation that it never had a vendor relationship
with Defendant as true, Defendant’s use of Plaintiff’s mark in inactive product
pages could confuse consumers into thinking Defendant and Plaintiff had a past
affiliation.” (Why would that be actionable? Why would that cause harm
sufficient to trigger Article III standing? Ugh.)

Now, on summary judgment, the court found confusion
unlikely. Sleekcraft isn’t well suited for internet search results; this
isn’t exactly a pure internet search case, but it’s closer to that than to the Sleekcraft
inquiry into “whether two competing brands’ marks are sufficiently similar to
cause consumer confusion.” Thus, the court used the two-factor test outlined in
Multi Time Machine v. Amazon, which asks courts to consider: “(1)
Who is the relevant consumer; and (2) What would he reasonably believe based on
what he saw on the screen?”

The relevant reasonable consumer in this case is “a
reasonably prudent consumer accustomed to shopping online” who is of moderate
sophistication. This factor “weighs against a likelihood of confusion, but only
slightly.”

For (2):

A reasonable consumer viewing
Defendant’s inactive product landing pages would believe that Defendant does
not sell Plaintiff’s products. That is, after all, exactly what the webpage
says: “Sony, there are no products available online or in your local store.”
This is not confusing or deceptive, as it is true. Defendant no longer sells
Plaintiff’s products.

There were some context clues that “may” lead consumers to believe that Home Depot sold Alsa products in the past: (1) an option to refine search results to include “Alsa Refinish,” because “[s]tores like Defendant typically do not provide an option to refine search results by a given brand unless they actually sell products from that brand,” and (2) “that there even is a product page for Plaintiff’s products, albeit inactive, suggests that Defendant at one point sold those products.” The court relied on (2) to deny the motion to dismiss. (I note that, among other things, this is really more of a false advertising theory, since it’s clear that they don’t sell Alsa products now, which is why the truth of the past relationship matters.) However, the summary judgment record was uncontested: Alsa did sell products with Home Depot for six years.

Also, Alsa had no evidence of actual confusion. “Plaintiff
supplies several posts from online forums for vehicle enthusiasts discussing
whether Plaintiff’s products were available on Defendant’s website. But these
posts were made during the Vendor Period, when Defendant had Plaintiff’s
permission to use the Alsa Marks on its website.”

And there was no initial interest confusion:

Here, it may certainly be the case
that, after reaching the inactive landing product pages, consumers move on from
that page to Home Depot’s website overall, where they may purchase competing
products. But at most this is evidence of diversion, not confusion. There is no
reason to think that consumers would be confused as to the source of any of the
goods on Defendant’s webpage, as each product on Defendant’s page is clearly
labeled.

Because the false allegation that Alsa never sold on Home
Depot was the only reason that the court denied the motion to dismiss, the
court ordered its lawyers to show cause why they didn’t violate Rule 11.

from Blogger http://tushnet.blogspot.com/2025/07/no-initial-interest-confusion-from.html

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XL BBL and Petite BBL are generic for what you think they’re generic for

Andre P. Marshall, M.D. Inc. v. Squlpt Management, LLC, 2025
WL 2025000, No. 2:24-cv-01784-SB-AS (C.D. Cal. Jul. 14, 2025)

The interesting false advertising component of this case
doesn’t get resolved on summary judgment, but we do get a finding that XL BBL
and Petite BBL are generic terms for Brazilian butt lifts,” cosmetic surgical
procedures that enhance the size and shape of the buttocks by transferring fat
from other areas of the body, as applied to procedures that move more or less
fat than average. Defendants (SML) had a registered trademark for “XL BBL” for
medical procedures and applications for “Petite BBL” published for opposition
(plaintiff APM opposed). APM sought cancellation of the XL registration and
rejection of the Petite applications (now ok in the 9th Circuit) and
also asserted false advertising claims; defendants counterclaimed for
infringement.

Defendants claimed first use of Petite BBL in September 2020
and XL BBL in February 2021. The parties offer cosmetic surgery services in the
Los Angeles area. APM began using the term Petite BBL on Instagram in June
2019, before SML applied to register it as a mark. After the USPTO approved the
Petite BBL mark for publication, one defendant, “mistakenly believing the mark
had been registered,” sent cease and desist messages to APM’s owner requesting
that APM stop using “Petite BBL.” This suit followed.

The false advertising allegations were that defendants digitally
altered before-and-after photographs of patients in a way that misleads
consumers. Initially, defendants only produced one photo in discovery, arguing
that they hadn’t edited any others; later, after the court said that wasn’t
good enough, they produced over 86,000, in no particular order/unconnected with
any ads; this also wasn’t good enough. Plaintiffs got fees connected to this dispute.

Standing as to the XL BBL term: APM didn’t use it in its
business, so did the registration cause it to suffer an injury in fact? “In
declaratory judgment actions involving trademark infringement, a plaintiff has
standing if it demonstrates ‘a real and reasonable apprehension that [it] will
be subject to liability if [it] continues with [its] course of conduct.’” APM’s
owner offered a declaration that he had intended to and was ready to use the XL
BBL mark before the complaint was filed but “held back from using the term out
of fear of litigation.” This fear was reasonable given that SML (1) sent text
messages to APM requesting that it remove “Petite BBL” from its Instagram posts;
and (2) reported APM’s alleged infringement of the Petite BBL mark to Instagram
and requested that the account be permanently removed. “It is not unreasonable
to assume that using the ‘XL BBL’ mark would have prompted a similar
response—or even a stronger one, since SML had a registration for XL BBL,
unlike for Petite BBL.”

Merits: SML argued that the terms were suggestive. They were
not. A generic mark answers the question “What are you?” whereas a distinctive,
protectable mark answers the questions, “Who are you?” “Where do you come
from?” and “Who vouches for you?”

Registration is “prima facie evidence of the mark’s validity
and entitles the registrant to a strong presumption that the mark is
protectable.” APM met its burden of showing genericity of XL BBL, while SML
didn’t prove that the unregistered Petite BBL mark was protectable.

Starting with BBL, that term on its own was “undisputedly
generic” and indeed disclaimed by SML. “The only question is whether the use of
Petite and XL—common size descriptors—before BBL render the entire descriptions
nongeneric. APM has submitted extensive evidence, both predating and postdating
SML’s application, that the size descriptors do not have this effect.” The
court noted that, when a term is “born generic,” evidence from any time period
may be relevant, but even if evidence from after APM entered the market wasn’t
relevant, APM would still prevail.

The evidence included third party doctors describing their
uses, demonstrating “that consumers, medical professionals, and Defendants
themselves use Petite and XL BBL generically to describe the amount of fat
transferred.” Defendants’ own generic use showed that the terms weren’t
suggestive; they described Petite BBL as appropriate for women with a “smaller
frame” and a “20–33 BMI” and XL BBL as appropriate for women with a “medium or
full-figured frame” and a “28–35 BMI.” “Indeed, it takes no imagination to
understand that ‘Petite’ and ‘XL’ refer to the size of the fat transfer in a
BBL procedure.”

Defendants’ only rebuttal evidence was “conclusory testimony”
that the terms were suggestive.

Even if the terms were descriptive, there wasn’t a fact
issue on secondary meaning. There was no consumer testimony (direct evidence). Defendants’
evidence was that they spent $2.5 million in advertising Petite BBLs and
received $16.7 million in revenue for Petite BBLs and $4.6 million in revenue
for XL BBLs. That didn’t create a genuine factual dispute. “Merely citing to
advertising expenditures over a period of a few years—without providing any
detail about the marketing efforts or any evidence of whether they created an
association between the marks and their services—proves little. The same is
true for sales revenues.” No reasonable juror could find protectability.

False advertising:  APM
alleged that defendants altered the “after” photographs by removing scarring
from the surgical incision points and airbrushing cellulite and stretchmarks. APM
sought only injunctive relief. But it didn’t explain which specific ads had false
alterations. Collective treatment of the ads, under the circumstances, wasn’t
appropriate. E.g., “some of the before-and-after advertisements, for example,
specifically address scarring, while others do not.” So there’d be a trial.

 

from Blogger http://tushnet.blogspot.com/2025/07/xl-bbl-and-petite-bbl-are-generic-for.html

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AI voice cloning opinion narrows claims to ROP, rejecting TM and (most) copyright theories

Lehrman v. Lovo, Inc., — F.Supp.3d —-, 2025 WL 1902547,
24-CV-3770 (JPO) (S.D.N.Y. Jul. 10, 2025)

Plaintiffs alleged that Lovo misled them about its use of
their voices, using AI to synthesize and sell unauthorized “clones” of their
voices. They sued for violations of New York civil rights and consumer
protection laws, the Lanham Act, and the Copyright Act, along with common-law
contract, fraud, conversion, unjust enrichment, and unfair competition claims.
Lovo was partially successful on its motion to dismiss, but had to deal with
the NY ROP claims, as well as consumer protection and breach of contract
claims. I might not agree with every detail of the extensive opinion,
but this is a useful map of the issues. It’s also a reminder of the hazards of
not contracting properly with people you don’t employ.

Plaintiffs Lehrman and Sage are voice-over actors. Lovo
“sells a text-to-speech subscription service that allows its clients to
generate voice-over narrations at a fraction of the cost of the traditional
model.” It claims that its software, Genny, was “created using ‘1000s of
voices.’ ” Genny is allegedly capable of creating a voice “clone,” which
“refers to a virtual copy of a real person’s voice.” It advertised its voice
cloning service by emphasizing how similar its cloned voices are to the
originals from which they are derived. In one marketing video, Lovo stated,
“you will hear five speakers whose voices have been cloned to near perfection.
Their tone, accent, and even mannerisms are fully learned by our AI voice
system.” One of Lovo’s co-founders described a cloned voice as a replacement
for “a real human voice,” allowing users of Lovo’s platform to “make that voice
say anything that you want, even if that person has never actually said that
before in their life.”

Lovo advertises the commercial use of its platform to “Save
$$ and time on voiceovers.” Allegedly, “Lovo represents to its customers that
Lovo is granting full commercial rights for all content generated using its
platform to users who subscribe to any of its paid plans,” which cover “any
monetized, business-related uses such as videos, audio books, advertising,
promotion, web page blogging, [and] product integration.”

Lovo originally solicited Lehrman and Sage for the projects
relevant to this action on an online marketplace for freelance services called
Fiverr. A Lovo employee allegedly contacted Lehrman and hired him to “provide
voice recordings for ‘research purposes,’” assuring him that the company would
use the recordings for “research purposes only,” and that such research would
be only “internal” and “academic” in nature. Lehrman wrote back, asking for a
“guarantee that these scripts will not be used for anything other than your
specific research project,” to which the employee replied: “The scripts will
not be used for anything else ….” The employee further confirmed that the
script would not be “repurposed and used in a different order.” He was paid
$1,200 for his work.

Similarly, Sage asked what the proposed recordings would be
used for, and the Lovo rep (a principal) replied: “These are test scripts for
radio ads. They will not be disclosed externally, and will only be consumed
internally, so will not require rights of any sort.” Sage asked him to to
confirm that the recordings would not be used “in broadcast,” and he again
repeated the previous statement. Lovo paid Sage $400 for her work.

Both of them ultimately (after filing suit) registered their
scripted performances with the Copyright Office.

Plaintiffs allegedly first learned that their voices had
been used in unanticipated ways when they listened to an episode of the
Deadline Strike Talk podcast narrated in part by an artificial voice produced
by Lovo’s software. They alleged that the voice used in the podcast was
“identical to Mr. Lehrman’s voice.” Allegedly, “[n]umerous people who heard the
podcast,” including “friends” and “professional colleagues” “told Mr. Lehrman
or Ms. Sage” that the “voice on the podcast was virtually identical to Mr. Lehrman’s
voice,” and that “the cloned voice would undoubtedly be mistaken for Mr.
Lehrman’s actual voice.” They also alleged, with declaration support, that
professionals “experience[d] [in] discerning and conveying small differences in
voice tone, quality, timbre, and delivery” believe that “Lovo’s cloned voice is
a replica of Mr. Lehrman’s real voice.” Lehrman allegedly found that Lovo “had
been marketing [the clone of his voice] as part of its subscription service
under the stage name ‘Kyle Snow.’ ” The Kyle Snow voice was also in
advertisements on Lovo’s website and YouTube. For example, Lovo allegedly
advertised the Kyle Snow voice as “an ideal male voice generator … for all
kinds of content” due to his “upbeat tone and slightly faster talking speed.”

Sage also allegedly discovered that Lovo had created a clone
of her voice named “Sally Coleman” that was available to Lovo’s subscribers.
This was allegedly marketed using “side-by-side” comparisons of Sage’s original
audio recordings—the ones she provided via Fiverr—and the “cloned version of
her voice,” including in an investor pitch that was posted on YouTube. 

Plaintiffs brought individual claims and also sought to
represent a voice actor class and a consumer class of consumers who bought the
Lovo software and used the voices.

Breach of contract: Sufficiently pled.

Lanham Act false association: Failed for want of a mark that
was used as a mark. Plaintiffs didn’t argue that they could bring §43(a)(1)(A)
claims without a valid mark. Persona can be a “mark”—even for a noncelebrity.
But celebrity endorsement cases have involved “the unauthorized use of a
celebrity’s likeness on merchandise, implying that the celebrity approves of
the merchandise or is affiliated with the seller,” or “the explicit use of a
celebrity’s likeness in advertising or to promote goods or services.”

Plaintiffs alleged that “they are well-known and
sought-after voice actors whose voices are their recognizable calling cards,”
which was enough at this stage to make the use of their voices capable of
causing consumer confusion. The problem was that the allegations didn’t suggest
trademark use. “Because marks can take essentially any form, courts must
therefore be careful to ensure that they receive protection only when used as
contemplated by the statute—that is, as marks.” The court found celebrity
endorsement cases to be an “uneas[y]” fit with this principle, “as celebrities’
personas are also their products,” though at least for advertising cases the
service of endorsement seems like the trademark use. Citing Jennifer Rothman,
the court emphasized that “personal marks” are treated differently from other
marks—they’re harder to register, and the law “is highly skeptical of efforts
to restrict individuals from using their own identities in trade” and doesn’t
allow “transfer attributes of one’s identity—such as personal skill as an
artisan—when one transfers trademark rights in one’s name or likeness.” [My own
view is that the latter point isn’t really relevant—it’s just not possible to
do that; maybe that means that many name transfers are transfers in gross and
should fail, but that is straying pretty far from our concerns here.]

The key issue here was that this wasn’t a celebrity
endorsement case: the voices were themselves the products/services being sold.
“Plaintiffs here use their voices in ways that are clearly separable from their
identities and personalities. Their clients pay them to produce recordings of
themselves narrating scripts, which the clients then own and use to produce
content, as authorized by their contracts with Plaintiffs.” Thus, their voices
“serve dual functions as both ‘one of the most palpable ways identity is
manifested,’ and as ordinary services in the voice-over market.” Thus, even as
to the alleged false endorsement or “business affiliation” confusion,
plaintiffs’ voices were “protectable only to the extent that they function
primarily as source identifiers rather than as products themselves.” The court
analogized to trade dress product design claims, which are difficult because trademark
terminology “is unsuited for application to the product itself.”

Plaintiffs failed to show that their voices were protectable
marks. They didn’t plead secondary meaning or the relevant factors except for “a
few conclusory references to the recognizability of their voices” and the fact
that “Plaintiffs’ work has been sought out by large companies.” Regardless, “Plaintiffs
have not alleged that their voices are primarily significant as brands rather
than as services to which brands might be attached.” As the court noted, “even
extremely famous celebrities are barred from asserting Section 43(a)(1) claims
based on the use of their likenesses as products rather than as
source-identifying marks.” Product use was descriptive use, not trademark use.
An alternate rule would threaten a new voice actor “whose voice happens to
sound highly similar to either Lehrman’s or Sage’s,” especially given that
identicality isn’t required for likely confusion. The court also pointed out
that unregistered trademark rights can be assigned, with “unsettling”
consequences for voices:

To allow any artist, actor, or
other creative tradesperson to sue their doppelgangers for trademark
infringement, as Plaintiffs’ theory would allow, would “create[e] a cause of
action for, in effect, plagiarism,” and would be incompatible with the careful
ways that courts have circumscribed the Lanham Act to avoid unduly burdening
competition and free expression. [Citing Dastar.]

Lookalike cases involving ads involve “appropriating the
identity and the goodwill of the famous plaintiffs—that is, pretending to be
Woody Allen—rather than merely engaging in the same trade while happening to
look like the famous plaintiffs.” And, the court noted, Allen’s cases involved
use of identity in ads, not his lookalike’s presence as part of a good or
service. “To allow Plaintiffs to protect the downstream uses of their voices
merely because Plaintiffs originated them would disrupt the ‘carefully crafted
bargain’ struck by patent and copyright law and ‘misuse’ the Lanham Act to ‘to
reward [artisans] for their innovating in creating a particular [work or]
device.’”

What we’re seeing, post-JDI, is the further
development of a “use as a mark” doctrine to cabin trademark’s nearly unchecked
expansion, unfortunately mostly without discussion of the relevant
considerations and how they relate to the purposes of trademark law. That’s
present here, yay! It would be great for more courts to admit that this not an
entirely empirical assessment, or at least it’s only empirical at the
categorical level. (See also the pre-JDI Louboutin v. YSL case,
the standout entry in the “ipse dixit use as a mark” cases.) In addition, JDI’s
language about how even partial TM use is bad is, as has always been apparent,
complete nonsense (in the absence of a materiality requirement).

False advertising: Two theories here. First, plaintiffs
alleged that marketing their voices under the names “Kyle Snow” and “Sally
Coleman” was literally false. The court disagreed: “Plaintiffs point to
numerous examples of Lovo marketing the voices as what they truly are—synthetic
‘clones’ of real actors’ voices.” Also, Lovo falsely allegedly stated that the
cloned voices “came with all commercial rights.” But even if that’s true, “such
misrepresentations do not concern ‘the nature, characteristics, qualities, or
geographic origin’ of Plaintiffs’ cloned voices.” (Dastar.)

Second, plaintiffs alleged that Lovo “confus[ed] potential
customers … as to [Plaintiffs’] affiliation with Lovo and the ability to use
the Lovo service in place of traditional access to these actors,” and that Lovo
“misrepresent[ed] that [Plaintiffs] have partnered with Lovo.” Those were not
actionable as false advertising; they were repeats of the false affiliation
claim, and “Plaintiffs cannot avoid the requirement of a protectable mark by ‘disguis[ing]
a § 43(a)(1)(A) trademark infringement and unfair competition claim as a false
advertising § 43(a)(1)(B) claim.’”

In addition, plaintiffs failed to identify any false
implication or consumer confusion from Lovo’s advertising, “as opposed
to being confused by the similarity of the synthetic voices to Plaintiffs’
voices when heard in the wild. In fact, Plaintiffs actually allege that Lovo’s
advertising was clear on the lack of connection between Plaintiffs and Lovo’s
voice clones.”

Even if Lovo made misrepresentations, plaintiffs didn’t
plead actual injury. Where “the defendant and plaintiffs are competitors in the
same market,” materiality and injury usually blend together, but plaintiffs
didn’t allege that their losses were related to actionable false claims in
Lovo’s advertising. Instead, their losses were allegedly due to the existence
of Lovo’s product: “Put differently, Lovo’s services are more desirable to some
customers because they are cheaper and more accessible. While Plaintiffs might
have a different cause of action for such competitive harm, it does not sound
in Lanham Act false advertising.”

Copyright: Four claims, only one of which goes forward. The
court approved of the sequence (1) complaint filed without any copyright
claims, (2) registration secured, (3) complaint amended to add copyright claims
as consistent with Fourth Estate, and I think I agree, since (1) was far
from a sham complaint. The discovery rule applied for statute of limitations
purposes,

Contractual defenses couldn’t be resolved on a motion to
dismiss, even without taking into consideration the chat messages exchanged by
the parties. Turns out, Fiverr’s TOS provide special rules for “Voice Over
Gigs” “that are inconsistent with a transfer of unrestricted copyrights.”
Despite a general work for hire clause, the TOS stated that buyers of
voice-over recordings are only “purchasing basic rights, … allowing them to
use the work forever and for any purpose except for commercials, radio, television
and internet commercial spots.” Buyers need to purchase higher-tier packages of
either “Commercial Rights,” in order to “promote a product and/or service,” or
“Full Broadcast Rights,” in order to use the recordings “in radio, television
and internet commercials.” Lovo didn’t do that.

First, Sage successfully pled a direct infringement claim
based on Lovo’s use of her actual voice recording in an investor presentation,
pitches to investors, at a conference, and in Lovo’s external marketing
materials. (Although this is for later, the fair use defense for comparative
advertising is a distinct subset of copyright fair use cases where defendants
generally win. How else are they supposed to substantiate their claim of being
as good as a human?)

Both plaintiffs alleged direct infringement based on Lovo’s
use of their recordings to train the Genny AI model. These claims failed “for
lack of adequate explanation in the complaint.” They didn’t explain “what
training is or how it works, even at a very high level of generality. The Court
therefore cannot ascertain or reasonably infer which exclusive rights Lovo
allegedly infringed, or how.” But amendment was possible, including using
information-and-belief pleading. (On the other hand, it might be hard to plead
what was outside the scope of the license, even as modified by the chats.)

Copyright infringement by the AI outputs: Here there was
really no hope. Sound recording copyright only covers exact duplication of the
fixed sounds, which was not alleged here as even a possibility for Genny. And
we know that a voice isn’t copyrightable, since that’s what gives them their
valid ROP claims.

Contributory infringement: based on AI outputs, therefore
failed.

NY ROP: Although NY’s ROP is narrower than other states’,
and only covers uses in, essentially, advertising, there was enough here to
proceed. (Query how much of plaintiffs’ damage comes from the advertising and
not the underlying product; also, later on the incidental use
defense—advertising for a product that does not itself violate the ROP is
protected where the advertising actually relates to the product—may come into
play.)

The statute of limitations is one year, but the
republication exception can restart the limitations period, and applied here.
But are digital replicas even covered? Lovo argued that NY’s 2021 statutory
protection for digital replicas of deceased persons meant that expressio unius applied
to exclude that from the main ROP. But that reasoning ignored context. “Just
before the amendment was proposed, New York courts held that digital replicas
of living persons—at least ones with a visual component—were already covered by
the law. There is no indication in the text of Sections 50 and 50-f, or in the
legislative history, that the amendment was intended to overturn this
precedent, nor to exclude the possibility of a similar holding with respect to
audio-only voice clones.” The same could be true of voice. “If anything, the
Court views ‘voice’ as having a broader scope than a term like ‘picture,’
because it cannot plausibly be read to refer to any particular form of media or
representative device. While Section 51’s statutory ROP “is to be narrowly
read” in light of its legislative history, it is nonetheless “not to be obeyed
grudgingly by construing it narrowly and treating it as though it did not exist
for any purpose other than that embraced within the strict construction of its
words.”

As to the substance, plaintiffs sufficiently alleged
recognizability and Lovo itself allegedly represented that its creations are
“practically indistinguishable from the ‘real’ voice.” While “New York courts
have consistently dismissed Section 51 claims based on the use of a fictitious
name, even if the depiction at issue evokes some characteristics of the person
or the person is identifiable by reference to external sources,” “those cases
all involve a fictional character sharing certain discrete attributes or traits
with a Section 51 plaintiff, not the use of the plaintiff’s portrait or voice.”
“Lovo cannot escape liability merely because it appended fictitious names to
those appropriated voices. To hold otherwise would carve out a massive,
judicially created loophole in the statute with no textual or doctrinal basis.”

Plaintiffs also adequately alleged use in both advertising
and trade. “Advertising purposes has been defined as use in, or as part of, an
advertisement or solicitation for patronage of a particular product or service,
and trade purposes involves use which would draw trade to the firm,” although
the statute doesn’t reach newsworthy uses or matters of public interest. Lovo didn’t
raise a First Amendment, newsworthiness, or public interest defense.

The court is a little wobbly on whether the underlying
product itself counts as “trade” purposes, though my reading of the NY cases is
that it can’t (emphasis added to last sentence):

Whether or not the solicitation of
investors itself counts as an “advertisement,” the function of the “investor
presentation, which was later posted publicly online, is plausibly understood
as promoting Lovo’s underlying product. The same goes for the use of Lehrman’s
voice in tutorials and promotional articles posted online. Moreover, even if
the voices were not used in formal advertisements or solicitations, they were
clearly used for commercial purposes, and to draw trade to the firm. It is
plausible to infer that, by illustrating the value of the product and helping
show prospective customers how to use it, Lovo used its publicly posted
tutorials to increase the appeal of its software, acquire subscribers, and
retain subscribers it already had. Plaintiffs allege even that Lehrman’s
cloned voice was Lovo’s default product and one of its self-described “best”
voices.

NY GBL: Partially survives, raising an interesting Dastar
preemption issue. Section 349 prohibits “[d]eceptive acts or practices in
the conduct of any business, trade or commerce or in the furnishing of any
service” and Section 350 prohibits “[f]alse advertising in the conduct of any
business, trade or commerce or in the furnishing of any service.”  “To successfully assert a claim under either
section, ‘a plaintiff must allege that a defendant has engaged in (1)
consumer-oriented conduct that is (2) materially misleading and that (3)
plaintiff suffered injury as a result of the allegedly deceptive act or
practice.’ ”

Mostly, plaintiffs failed to identify material
misrepresentations to the public; they couldn’t rely on misrepresentations to
them because they were not acting as consumers in those transactions, and
Sections 349 and 350 do not reach such “narrow, private dispute[s].”

However, plaintiffs adequately alleged that Lovo materially misrepresented
the scope of the “commercial rights” that it promised to provide to its
subscribers, thereby making its offerings appear more attractive. Lovo’s
consumers thus “purchased … [but] did not receive a product with the full
value with unlimited usage rights, which would have been a product with
legitimately acquired and/or created voices.” Sections 349 and 350 aren’t
limited to “nature, characteristics, qualities, or geographic origin.”

Note: While statutory interpretation got us Dastar,
if it’s true that extending the Lanham Act to licensing claims would cause a
conflict with copyright law, it’s equally true that extending state law to
licensing claims would cause a conflict with copyright law, creating conflict
preemption. Cf. Jackson
v. Roberts
(finding preemption of a ROP claim). But the court says that
plaintiffs “could not bring a similar GBL claim based on alleged
misrepresentations about a copyright license, as such a claim would be
preempted by the Copyright Act.” I am not sure about the difference between
advertising “commercial rights” or “unrestricted use” and advertising
“properly licensed,” but ok.

“Lovo promised its subscribers that they could use Lovo’s
voice clones without legal restrictions. While Lovo was correct with respect to
federal copyright and trademark law, it was incorrect with respect to New York
law. Lovo’s consumers could, like Lovo itself, be liable under Sections 50 and
51 of the NYCRL.” [Again, the language here is open, but I would argue that the
only liability for customers would have to be for their own uses in
advertising/trade.]

Lovo’s conduct with respect to its subscribers was “consumer
oriented” in that it was “directed to consumers” and had “a broader impact on
consumers at large.” Although the mere unauthorized use of the plaintiffs’
images would not be “ ‘consumer-oriented in the sense that it potentially
affects similarly situated consumers,” reselling the voices to third-party
consumers for downstream use by those consumers was relevantly different.

And plaintiffs adequately alleged that they suffered injury
from Lovo’s misrepresentations in the form of diverted customers and lost
sales. “While it is true that Lovo offered its voice clones at lower prices
than the services of traditional voice actors, Lovo was able to poach
Plaintiffs’ customers only because it purported to offer products that its
subscribers could legally use—that is, because it engaged in misrepresentations
made unlawful by Sections 349 and 350.”

Fraud claims failed because (1) plaintiffs didn’t adequately
plead damages; although they alleged customer diversion/harm to brand value,
they didn’t quantify the “true value of the recordings they sold to Lovo, as
opposed to what Lovo paid,” which is the measure of fraud damages in NY, and
(2) their fraud claims merely restated their breach of contract claims, which
isn’t ok in NY “when the only fraud alleged is that the defendant was not
sincere when it promised to perform under the contract.”

Unjust enrichment, conversion, and common law unfair
competition claims were preempted by the New York Civil Rights law, which
preempts “all common law claims based on unauthorized use of name, image, or
personality, including unjust enrichment claims.” Relatedly, unfair competition
is like the failed Lanham Act claims (except also requires bad faith), and
there were no facts alleged “supporting an inference that Lovo acted with the
intent of generating confusion or coopting Plaintiffs’ reputations (as opposed
to the desirable characteristics of their voices).”

 

 

 

from Blogger http://tushnet.blogspot.com/2025/07/ai-voice-cloning-opinion-narrows-claims.html

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