Statement that advertiser is “2.0” version of competitor is puffery

Posted on August 8, 2019 by rtushnet

GeoMetWatch Corp. v. Hall, 2019 WL 3537297, No. 1:14-cv-60
(D. Utah Aug. 2, 2019)
GeoMet and Advanced Weather Systems Foundation (AWSF) negotiated
to create a joint venture for the purpose of constructing and deploying a
satellite-hosted weather sensor system and commercially exploiting the data
derived therefrom, but the incipient agreement collapsed. Defendant Tempus, and
associated individuals and entities, allegedly colluded with AWSF and others to
deprive GeoMet of its business opportunity. The court here gets rid of a false advertising claim.
The alleged falsities included: (1) In response to a question
from a representative of a prominent American defense contractor about whether
Tempus would be “assum[ing] the role of [GeoMet]” in the STORM project, Alan
Hall (an owner of Tempus) stated that “yes we are replacing the roles and
duties of [GeoMet]. We will own and manage the relationships of all entities in
the consortium.” Copies were sent to representatives of AWSF—the putative
manufacturer of the proposed sensor.  The
court thought it wasn’t clear that a statement to a single defense contractor could
be “commercial advertising or promotion” in the absence of facts about how many
entities were in the relevant market. 
But even setting that side, with the arguable exception of the statement
“we are replacing the roles and duties of [GeoMet],” “the statements are all
clearly forward-looking” and weren’t literally false: the court found that
Tempus had a plan to do these things. 
And they couldn’t be misleading to a reasonable business development
executive at a multi-billion-dollar defense contractor, who “would not
interpret these statements of future intent as ‘representations of fact.’” As
for “replacing the roles and duties,” that indicated an ongoing activity, which
was true—Tempus was preparing to do this.
Emails among Tempus- and AWSF-associated people also couldn’t
ground a Lanham Act claim. Statements to co-venturers aren’t “commercial
advertising or promotion.” 
GeoMet challenged Tempus’s website representations that it “designs,
manufactures and operates environmental and weather monitoring instruments,
known as STORM … on a global scale…. From our sensors we gather the most
sophisticated weather data ever produced and sell it to sovereign governments
and commercial entities.” When this was published on the website, Tempus allegedly
“had no means of gathering, producing, [or] selling weather data.”  This was thus a literally false
statement.  But there was no evidence
that this false statement ever confused anyone. 
Although Tempus proved that, at the relevant time, “some individuals in
the aerospace defense contractor space were confused about whether GeoMet or
Tempus would be partnering with AWSF to construct and launch STORM, this
confusion is wholly disconnected from Tempus’s false statement that, in April
of 2014, Tempus had the ability to gather and sell weather data derived from an
operational STORM sensor.”
In a demonstration of how much more rigorous false
advertising doctrine is than trademark doctrine, statements that Tempus was “GeoMetWatch
2.0” were also not actionable. Given that the statement was made to a member of
Congress—and Mark
Twain’s quip on that topic notwithstanding—it wasn’t false or misleading.
It didn’t convey the message that Tempus was literally “GeoMetWatch 2.0.” “Rather,
any reasonable person—and certainly any reasonable member of the defense,
satellite, or meteorological industries—would interpret this statement to mean
that Tempus was a newer, better version of GeoMetWatch. In other words, this
statement was mere puffery ….”  GeoMet
argued that the statement falsely implied that GeoMet was out of the venture,
but it didn’t; to the extent that the statement indicated that GeoMet couldn’t
compete with Tempus, “that implication is likely to have been expressed and
received as mere puffery.”

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pharma databases as commercial speech? court says maybe

Posted on August 8, 2019 by rtushnet

Alfasigma USA, Inc. v. First Databank, Inc., 2019 WL 3532844,
No. 18-cv-06924-HSG (N.D. Cal. Aug. 2, 2019)
Alfasigma sued First Databank for state and federal false
advertising after it re-classified Alfasigma medical food products from Class F
(prescription) to Class O (over-the-counter) in its widely-used MedKnowledge
database. First Databank moved to strike under California’s anti-SLAPP statute
and to dismiss; it failed in the first but was partially successful in the
second.
Federal law defines a medical food as “a food which is
formulated to be consumed or administered enterally under the supervision of a
physician and which is intended for the specific dietary management of a
disease or condition for which distinctive nutritional requirements, based on
recognized scientific principles, are established by medical evaluation.” Alfasigma
markets its medical foods “directly to physicians.”
MedKnowledge is the largest and most widely used drug database,
and insurers rely on it to decide which products to cover.  It uses F and O codes to divide the products
in its database between Rx and OTC.  Subscribers
allegedly “universally understand[ ] that a product designated ‘O’ is an OTC
drug, available over-the-counter and without physician supervision.” The
Alfasigma Products were allegedly “historically and correctly” designated as
F-Class, meaning that “their cost was often covered by insurance plans that
limit coverage to prescription products,” which improved usage and compliance.
In 2016, First Databank reclassified the Alfasigma products
to Class O, allegedly “falsely representing that these products are available
OTC, when in fact they are available by prescription, and should not be taken
by a patient without physician supervision.” First Databank claimed that it
moved the Alfasigma Products from the F-Class to the O-Class to be “in alignment
with [ ] FDA standards.” But this was allegedly not based on any FDA request or
advice, and the FDA’s Medical Director for the Infant Formula and Medical Foods
Staff allegedly told it that “[m]edical foods are not OTC drugs” and that its “misinterpretation
of FDA’s position and policies on medical foods” was leading to patients losing
insurance coverage because “their insurance providers belie[ve] that the
[Alfasigma Products] are over-the-counter (OTC) drugs.” The reclassification
allegedly caused confusion in the marketplace, including causing physicians to
stop prescribing the products and pharmacies to not stock them.
In 2018, First Databank announced that it was creating a new
Q-Class for the MedKnowledge database, in order to “distinguish” medical foods “from
over-the-counter drugs and devices.” Class Q will include products “that are
neither drugs nor devices, such as dietary supplements (including prenatal and
other vitamins), medical foods, herbal preparations, and bulk flavorings or
colorants.” But Alfasigma argued that “[n]one of these products are regulated
as medical foods, and none of them carry a federal requirement that they be
used under physician supervision.” It thus alleged that putting its foods into
the Q-Class “will cause further confusion among physicians and other
prescribers, pharmaceutical wholesalers and distributors, pharmacies,
pharmacists, and insurers, to Alfasigma’s continuing injury.” [This allegation reads
like it involves some fancy footwork: is there really a “federal requirement”
in the sense that one violates the law by providing medical foods to someone
who is not currently under physician supervision?  How would one even check that this was so?]
Anti-SLAPP law: First Databank’s reclassification was a
speech act about matters in the public interest within the scope of the
anti-SLAPP statute. To survive an anti-SLAPP motion, the plaintiff must “show a
reasonable probability of prevailing in its claims,” and “the trial court does
not weigh the evidence or determine questions of credibility; instead the court
accepts as true all of the evidence favorable to the plaintiff.”
First Databank argued that the information in its database was
pure noncommercial speech and thus outside the scope of the UCL/FAL and unfair
competition common law.  But the database
was at “the heart of every pharmacist claims processing system,” and was in
fact designed and marketed to be that vital to reimbursement. First Databank
cited Dex Media West, Inc. v. City of Seattle, 696 F.3d 952 (9th Cir. 2012), in
which the Ninth Circuit held that “telephone listings and community information
contained in [a yellow pages phone book directory] constitute noncommercial
speech.” The court thought that case was sufficiently different in procedural
(and perhaps factual) posture. Nor was the database equivalent to consumer-posted
reviews. Alfasigma’s allegations, including that First Databank customers “rely
on the information drug databases provide to make decisions about which
products to prescribe, purchase, dispense, and reimburse,” created a reasonable
probability that Alfasigma would be able to show that First Databank engaged in
commercial speech. [I’m not sure that the argument that the audience uses the
speech for self-regarding commercial purposes makes the speech itself
commercial—the question of whose motives need to be commercial here is
an interesting one.]
Alfasigma also adequately alleged falsity. Misleadingness:
First Databank argued that its database was entirely accurate: “the ‘O’ Class
value explicitly includes medical foods” because “the products do not require a
prescription under federal law.” But Alfasigma sufficiently pled that
MedKnowledge database subscribers “universally understand[ ] that a product
designated ‘O’ is an OTC drug, available over-the-counter and without physician
supervision,” making the classification of the Alfasigma products as OTC drugs false
or misleading.  [This suggests that the
previous classification was also false, albeit not harmful to Alfasigma.] “Even
if First Databank has redefined Class O to expressly include medical foods, the
understanding and expectations of its subscribers based on an earlier, stable
definition may override a subtle definitional change, particularly when
Alfasigma has pled that consumers are confused.”
Alfasigma also argued that First Databank misled its
subscribers when it claimed that “the source of its information” about the
classes was Alfasigma and the FDA. “Taken at face value, the FDA’s statements,
as relayed by Alfasigma, tend to support Alfasigma’s inference that First
Databank could not be telling the truth when it said that it decided to
reclassify the Products based on information received from the FDA.” [Though
harm causation might be a problem here; the reclassification itself, and not
its source, seems like the key issue .]
Motion to dismiss: as above, commercial speech was
sufficiently pled.  But not “commercial
advertising and promotion.” The Ninth Circuit uses the Gordon & Breach
test (though the court indicated its approval of the consensus that Lexmark
deleted the competition prong).  Alfasigma
didn’t plausibly allege that First Databank’s representations were made “for
the purpose of influencing customers to purchase” First Databank’s services. Influincing
decisions that consumers made to buy Alfasigma’s goods wasn’t
enough.  Alfasigma argued at oral
argument that the second alleged falsity—claiming data came from the FDA—was made
to encourage consumers to buy subscriptions, but the complaint didn’t allege
that with respect to the false advertising causes of action. Alfasigma was
given leave to amend. 
Note: state law claims survived, as did what the court
described as “false description” claims under the Lanham Act, though I don’t
see the basis for a §43(a)(1)(A) unfair competition claim here.  It might mean just theory two of the falsity
claims? 

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7th Cir: descriptive component of distinctive slogan can be descriptive fair use

Posted on August 8, 2019 by rtushnet

SportFuel, Inc. v. PepsiCo., Inc., No. 18‐3010 (7th Cir.
Aug. 2, 2019)
SportFuel, which among other things sells dietary
supplements, sued Gatorade after Gatorade rebranded itself with the slogan, “Gatorade
The Sports Fuel Company.” The court of appeals affirmed a finding of
descriptive fair use. SportFuel has an incontestable registration for “SportFuel”
for “food nutrition consultation, nutrition counseling, and providing
information about dietary supplements and nutrition” and a registration for “goods
and services related to dietary supplements and sports drinks enhanced with
vitamins.”
“In addition to its traditional sports drinks, Gatorade now
customizes its sports drink line by selling formulas that are tailored to the
nutritional needs of individual professional athletes,” and sells other sports
nutrition products. “It began to publicly describe its products as sports fuels
in 2013” and registered “Gatorade The Sports Fuel Company” in 2016, with “The
Sports Fuel Company” disclaimed after the PTO said that was merely descriptive.
(1) Was the use other than as a mark?  SportFuel argued that Gatorade used the
slogan as an “attention getting symbol,” it placed a trademark symbol after the
slogan, and it sought to register the slogan. 
“[M]ultiple factors” are relevant to whether there was use as a
mark.  “Gatorade is Thirst Aid” was found
to be a slogan in an earlier case where Gatorade featured the term “Thirst Aid”
even more prominently on its product packaging than the Gatorade mark, and where
the term rhymed with Gatorade and was used as an “attention‐getting symbol.” The
visuals here didn’t support the claim of use as a source indicator.  Gatorade’s word mark and G Bolt logo were
more prominent, and “Gatorade rarely uses the term ‘Sports Fuel’ directly on
product packaging, except for where the company labeled a ‘Sports Fuel Drink’ with
the term. Instead, it primarily features the slogan on in‐store displays and
other advertisements—appearing almost as a subtitle to the house mark.” Also, “Sports
Fuel” “lacks the catchy, rhyming play‐on‐words at issue in Quaker Oats. Nothing
about Gatorade’s use in this context suggests that consumers would view ‘Sports
Fuel’ as a source indicator.”  [I have to admit, I don’t get why the difference should matter to the descriptive fair use analysis.  Gatorade wasn’t trying to replace its Gatorade mark with “Thirst Aid”; instead it was trying to create a catchy overall slogan that paired the two.  I think this may boil down to how source-y and distinct from the unadorned Gatorade mark the two slogans seemed to the court, but why? The distinctive weakness of Seventh Circuit opinions is that they list facts that seem like they might matter, but don’t tell you how to identify a principle that will help decide cases with different facts.]

Nor did use of the TM symbol or the registration change the
result. The slogan included Gatorade’s trademark-protected Gatorade mark, and Gatorade
specifically disclaimed “The Sports Fuel Company”; the PTO specifically told
Gatorade that “Sports Fuel” was descriptive. Gatorade’s chief marketing officer
stated in his deposition that he viewed the whole phrase as the mark.  [So, use of a descriptive term within an
overall nondescriptive mark can be nontrademark use.]
(2) Was the use descriptive, rather than suggestive?  Yes. “Descriptive phrases refer to a
characteristic of the product. But they need not be common phrases.” Both
market use and the imagination test supported this conclusion.  “First, producers of nutritional products for
athletes regularly invoke the ‘Sports Fuel’ terminology to describe the
products they sell.”  Second, no mental
leap was required to deduce that the company is really selling athletic
nutrition products. SportFuel argued that Gatorade’s consumers were mostly not
high‐performance athletes, but that didn’t mean the products weren’t designed
for athletes. “Just as the pervasive use of yoga pants and other activewear as
casual clothing does not change the athletic characteristics of those products,
the fact that Gatorade sells more sports drinks to average joes who limit their
rigorous exercise to lawn mowing does not change the athletic characteristics
of Gatorade’s products.”
(3) Was the use fair and in good faith?  The key here is subjective purpose, which is
an interesting thing for the Seventh Circuit in particular to focus on. SportFuel’s
evidence of subjective bad faith was: (1) Gatorade’s knowledge of the mark
because of a previous working relationship a SportFuel principal; (2) continued
use of the term after SportFuel sued; (3) Gatorade didn’t account in detail for
how it came up with the slogan; (4) Gatorade’s purported bad blood with the SportFuel
principal, “suggesting that Gatorade adopted the new slogan to settle an old
score.”
Knowledge of the plaintiff’s mark, without other evidence of
subjective bad faith, is insufficient, as is continued use of a term after suit
is filed, since intentional use of a term one has every right to use is not bad
faith.  Nor was SportFuel entitled to an
adverse inference based on the argument that Gatorade produced no documentation
related to high-level approval of the slogan, which must have occurred—speculation
isn’t enough on summary judgment.  Maybe
SportFuel could have pursued this argument further in discovery, but it didn’t,
and it was too late.  Likewise, there
wasn’t evidence that the falling out with SportFuel’s principal related to the
adoption of the slogan. Her relationship with Gatorade ended more than a decade
before the alleged infringement began. “And the idea that a new slogan for a
nation‐wide rebranding campaign and stale antipathy towards [her] are connected
is facially incredible when otherwise unsupported by the record.”
In addition, SportFuel argued that Gatorade acted in bad
faith by not taking the risk of reverse confusion into account.  But “intent is largely irrelevant in reverse
confusion cases because ‘the defendant by definition is not palming off or
otherwise attempting to create confusion as to the source of his product.’” Anyway,
Gatorade provided evidence of its intent: “it adopted the slogan to reflect its
various types of sports fuel products.”  Not
thinking of SportFuel’s interests isn’t bad faith.
Nor was it bad faith to incorporate a descriptive term into
a slogan that, as a whole, functioned as a mark (at least when the whole
included Gatorade’s core mark). Gatorade produced evidence of fairness and good
faith: its stated purpose was to describe its business/products better, and its
evidence showed that “the company and its employees view themselves as
producers of sports fuels.” [Such a weird formulation, no pun intended: how can
the company have a mental state distinct from that of its employees?]

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London sights for TM aficionados

Posted on August 6, 2019 by rtushnet

Pictures taken while traveling. The geographic attractiveness of the “American” carwash is enhanced by the slogan “The Cadillac of London car washes.”

Adidas/marijuana leaf in center.

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false advertising trolling, consumer protection, or both

Posted on August 3, 2019 by rtushnet

I wrote about a couple
of cases filed by a supplement maker, Outlaw, against retailers that sold
allegedly unlawful “male enhancement” supplements that the FDA has issued
warnings on—sometimes the “supplements” illegally contain pharmaceuticals like sildenafil
(active ingredient in Viagra).  Vice made
a short
film about the cases, highly sympathetic to the small business defendants.  My reaction is decidedly more mixed.  On the one hand, Outlaw’s tactics suggest a
kind of false advertising trolling—threatening a lot of small businesses and
trying to get payouts from them.  On the
other, Outlaw points out that the manufacturers of these supplements are shady
and hard to find, meaning that it’s not particularly easy to go after them
(and, not for nothing, that the retailers are themselves being rather careless
about what they stock—carrying Tiger Male Enhancement pills is really not the
same thing as carrying Diet Coke).  The
film points out that these products are often made with identical packaging but
filled with different substances by different people, so sometimes you get sildenafil
and sometimes you get random non-drug substances.  This certainly does make it difficult to show
that the stuff sold at any given bodega had pharmaceuticals in it, but at the
same time it makes the falsity of the advertising, and the danger to consumers,
even more clear.  Ultimately, it’s far
easier to conclude that Outlaw’s enforcement model is a bad one than that these
small businesses should be left alone to sell whatever they can get consumers to
buy.

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C&D to competitor’s clients can be “commercial advertising & promotion”

Posted on July 30, 2019 by rtushnet

Matonis v. Care Holdings Gp., L.L.C., No. 19-cv-20247-UU, 2019
WL 3386378 (S.D. Fla. Jul. 25, 2019)
The defendant Care Companies engage in healthcare management
consulting, “advising healthcare providers on, inter alia, patient intake
strategies and revenue management.” 
Plaintiff Matonis is a healthcare management consultant who provided
consulting services to the Care Companies pursuant to a consulting agreement
with a confidentiality provision and a non-solicitation provision with respect
to the Care Companies’ employees, consultants, and agents. In 2016, while still
employed with the Care companies, Matonis founded her own consulting company
(Caliber) to help health care providers track their revenue. Defendants
allegedly explicitly authorized her work with Caliber (apparently after the
fact of founding). The Care Companies then offered Matonis a W-2 employment
contract, which she declined because the proposal contained a two-year
non-competition restriction and would have required her to shut down
Caliber.  The Care Companies transitioned
her clients to other Care employees and officially terminated the relationship.
During the winding down period and after, Matonis expanded
the healthcare consulting services provided by Caliber into patient intake and
revenue management, leading to direct competition with her former employer.
Defendants allegedly informed a number of Matnois’s Care clients that she was
still affiliated with the Care Companies but was unable to work because she was
suffering from ongoing health issues and had requested time off. She allegedly
found this out after clients reached out to her to check on her health. After
one such call, the client contacted Care employees, expressing his
dissatisfaction with their dishonesty. Quirk, an employee, assured the client
that at Matonis would continue to work with the Care Companies indefinitely and
was still available to be his point person, despite the fact that Matonis had
been terminated almost a month prior.
After numerous clients terminated their relationships with
the Care Companies, in-house counsel allegedly sent cease and desist letters to
Matonis’s Care clients and to Matonis directly. The letters asserted that
Matonis was still subject to “broad confidentiality and non-solicitation
provisions” in her Consulting Agreement and threatened legal action if Matonis
continued to solicit Care clients and/or if those clients sought Matonis’
services. In addition, the Care Companies allegedly created an “out of office”
auto-response message on Mantonis’ former email account at Care, allegedly
creating the false impression that she remained affiliated with the Care
Companies and tainting her reputation as a professional who promptly returns
her client’s messages.
Finally, Matonis alleged that defendant CareOptimize’s
website falsely advertises that it serves over twenty thousand healthcare
providers nationwide, when in fact it serves closer to five thousand healthcare
providers at any given time. The website allegedly misrepresents its client
base, listing two clients even after both companies terminated their
relationship with CareOptimize.
Matonis sued for false advertising/unfair competition under
state and federal law, defamation, tortious interference, and declaratory
judgment that she wasn’t barred from working with the Care Companies’ current,
former, or prospective clients.
False advertising: defendants argued that its C&D
letters weren’t commercial speech or advertising for purposes of the Lanham Act
and the allegedly false statements on Defendants’ website didn’t directly
disparage Matonis; neither argument succeeded.
Under the Gordon & Breach test (which, as a
reminder, has a prong requiring “commercial competition” that doesn’t survive Lexmark,
though that doesn’t matter here), these particular C&Ds were commercial
speech.  “Commercial speech encompasses
not merely direct invitations to trade, but also communications designed to
advance business interests ….” Matonis alleged that defendants utilized the
cease and desist letters as a tool to disparage her as someone who ignores
contractual obligations. Defendants allegedly stood to profit from them because
Matonis’ consulting company was now in direct competition with them and the
clients to whom the letters were sent were former Care clients who were
interested in Matonis’ services.  This
sufficed to avoid dismissal.
As for the website statements, disparagement isn’t required
for false advertising.  If the argument
was that Matonis failed to allege injury, it was enough to allege that the
parties were direct competitors and that defendants falsely represent the
number of clients they represent and the scope of the representation at this
tage.
Defamation per se: allegations that defendants falsely
represented that (1) Matonis was suffering from an ongoing health problem that
affected her ability to work on their accounts; (2) she is in violation of a
non-solicitation agreement by working with the Care Companies’ former clients;
and (3) continued work with her would expose them to legal liability sufficed
to allege defamation per se, which in Florida covers falsehods that are injurious
to the target’s trade and professional reputation.

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California SCt rejects record-keeping ascertainability requirement

Posted on July 30, 2019 by rtushnet

Noel v. Thrifty Payless, Inc., — P.3d —-, 2019 WL
3403895, S246490 (Cal. Jul. 29, 2019)
Noel brought a putative class action on behalf of retail
purchasers of an inflatable outdoor pool sold in packaging that allegedly
misled buyers about the pool’s size, asserting the usual California claims
(UCL, FAL, CLRA). The district court found that the proposed class wasn’t
ascertainable, and the court of appeals agreed. Here, the California Supreme
Court rejects an ascertainability requirement that would require good written records,
either from the seller or the purchasers, of purchases.  The proposed class definition here was sufficiently
ascertainable, in that it defined the class “in terms of objective
characteristics and common transactional facts” that make “the ultimate
identification of class members possible when that identification becomes
necessary.”  This standard was satisfied here,
where the class definition would allow class members to self-identify.
The facts: the package image indicates that the pool can
handily accommodate several adults when inflated and filled:

A pool holding five people with plenty of room between them

Here’s the actual pool, as inflated and filled:
 

a pool that holds three children
Rite Aid sold over 20 thousand of these pools in California
during the class period (nearly 2500 were returned), making nearly $950,000 in
revenue.
The court surveyed its own decisions, those of the
California courts, and federal courts on ascertainability to derive its
standard.  In general, the concerns for
proper definition and identification of class members are well addressed by the
usual certification standards, which consider both the costs and benefits of
the class action device, while ascertainability pulls a few considerations out into
a vacuum.  So, for example, the court of
appeals here worried that “[i]f the identities of absent class members cannot
be ascertained, … it is unfair to bind them by the judicial proceeding.” But
certification of a class requires the provision of the best practicable notice;
due process doesn’t invariably require individual notice to absent class members.
A heightened ascertainability requirement demanding the ability to provide
individual notice would be “pyrrhic,” since it conflicts with the point of
class actions for aggregating low-value claims. Nor is a heightened
ascertainability requirement “necessary to protect the due process interests of
class action defendants by protecting them from bogus claims and
disproportionate liability.… There is no suggestion that, if the plaintiff
class ultimately prevails, Rite Aid will face any onslaught of spurious claims,
much less a bevy that could not be weeded out through a competent claims
administration process. Also, because it is known how many pools were sold and
not returned, and how much in revenue Rite Aid earned from these sales, the
overall body of claims has a functional ceiling that further marginalizes any
prospect of exaggerated liability.”
Using objective facts (rather than class members’ subjective
states of mind) to define the class thus makes it ascertainable.  This puts members of the class on sufficient notice,
and supplies “a concrete basis for determining who will and will not be bound
by (or benefit from) any judgment,” making res judicata determinations possible.   The
court also pointed out that “premising ascertainability on the existence of
official records capable of being used to identify class members might, in some
situations, incentivize potential class action defendants to destroy or refuse
to maintain useful records that could provide a basis for class treatment.”
The appropriate form of notice to satisfy due process could
be worked out as part of the broader certification process/assessment of
manageability. “[G]iven the modest amount at stake (the pool having retailed
for $59.99), the odds that any class member will bring a duplicative individual
action in the future are effectively zero. Thus the true choice in this case is
not between a single class action challenging the packaging of the Ready Set
Pool and multiple individual actions pressing similar claims; it is between a
class action and no lawsuits being brought at all. Under the circumstances, due
process may not demand personal notice to individual class members, and to
build a contrary assumption into the ascertainability requirement would be a
mistake.”
Thus, the trial court abused its discretion when it
determined that the class proposed by plaintiff wasn’t ascertainable. The
proposed definition, “All persons who purchased the Ready Set Pool at a Rite
Aid store located in California within the four years preceding the date of the
filing of this action,” was neither vague nor subjective.

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Amicus brief in Smith v. Drake fair use case

Posted on July 23, 2019 by rtushnet

With the able assistance of UCI’s IP clinic, led by Jack Lerner, I worked on an amicus brief in this case arguing that fair use should continue to be a flexible standard that accommodates various types of transformativeness. The brief is here.

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Ornamental use of pun is aesthetically functional (defendant-side functionality in the wild!)

Posted on July 23, 2019 by rtushnet

LTTB LLC v. Redbubble, Inc., No.  18-cv-00509-RS (N.D. Cal. Jul. 12, 2019)
Defendant-side functionality! This is a concept I’ve been
arguing exists for years (see, e.g., the result in Louboutin v. YSL), and now
it is no longer immanent in the caselaw but fully arrived!
Here, it serves another way to protect noncommercial speech
despite the Honey Badger case:
while a source-identifying
trademark may embody a pun, no one can claim exclusive rights to use the pun
merely by printing it on t-shirts, other ‘[w]earable garments and clothing,”
“[p]aper for wrapping and packaging,” or “tote bags,” or similar products and
calling it a “trademark.” Even if a trademark embodying a pun is otherwise
enforceable where there is a likelihood of source confusion, the trademark
holder cannot prevent others from using the pun in contexts that do not imply
source.
Plaintiff’s applications to register “LETTUCE TURNIP THE BEET”
were initially rejected as decorative/ornamental when they showed the phrase
“emblazoned” on products, but allowed after it submitted specimens using on
product labels and hang tabs—the application was rejected when plaintiff first
suggested the phrase merely would be emblazoned across those products. The
registrations became incontestable.  Although
the court didn’t apply file wrapper estoppel, it did use the PTO’s reasoning to
bolster its conclusion that plaintiff’s enforceable marks didn’t entitle it to preclude
others from making the joke on t-shirts or elsewhere.
Anyway, defendant lets artists upload designs to be printed
on products such as apparel, phone cases, stickers, bags, wall art and so on.  Products featuring the phrase “Lettuce Turnip
the Beet” or similar phrases allegedly have been offered for sale on the Redbubble
site.  Its no-secondary-liability
argument might otherwise have created a triable issue of fact, the aesthetic
functionality of the phrase when used as a phrase demanded summary judgment for
Redbubble.
Redbubble’s defense was either about the rule that “decorative
or ornamental” features are not subject to trademark protection or about the
exclusion for “aesthetic functionality.” “Case law has not always clearly
distinguished between the two concepts, which undoubtedly are related and
overlap.” However characterized, it succeeded. 
Despite Au-tomotive Gold, aesthetic functionality still exists in
the 9th Circuit, and here no reasonable trier of fact “could
conclude that consumers seek to purchase products based on LTTB’s
reputation—whether ‘genuine’ LTTB products or those produced by any
competitors. Rather, as LTTB’s evidence and argument make clear, consumers are
interested in purchasing products displaying the pun.”  [So this isn’t completely limited to defendant-side
functionality. To the extent that LTTB’s claimed rights are based on exclusive
use of the pun as the decoration for clothes, de facto secondary meaning can’t
protect that. Although the
term isn’t generic, declaring it aesthetically functional produces the same
result for what could in other circumstances (if used on clothes tags) be an
arbitrary designation.]
 

Screenshot from plaintiff’s Etsy store, showing P’s own variable, ornamental uses
LTTB argued that this argument “would permit a t-shirt bearing
a copy or near copy of the Nike swoosh logo or some other registered design
mark,” so the fact of ornamentation can’t produce functionality. But there’s a
key difference: “Nike, Volkswagen, and Audi all developed their trademark
rights by selling goods under those brand names, and have at least arguably
gained brand loyalty for those products, as opposed to mere consumer interest
in the specific names, independent of the reputation the companies developed when
selling the products.”  International
Order of Job’s Daughters v. Lindeburg & Co., 633 F.2d 912 (9th Cir. 1980),
also supported Redbubble.  And
Redbubble’s case was stronger because LTTB wasn’t a group with which consumers
could express allegiance by buying products displaying the pun. “The products
are simply the vehicle for distributing the claimed ‘trademark,’ rather than
the other way around, where a trademark is used to identify the source of the
goods.”  Using an already-established
mark to sell t-shirts would have been a different case.
None of this was to say that LTTB’s registered marks were
“per se” invalid (though it sure sounds like a holding of limited secondary
meaning).  [Side note: secondary meaning
isn’t necessary for an arbitrary mark, though one might reasonably argue that
should change if secondary meaning failed to develop over a long time despite
the theoretical arbitrariness of the term. 
But what ornamentality/decorativeness really does is provide a way to
manage the presumptive source-indicating function of arbitrary/fanciful
symbols: in fact there are lots of ways to use many such signals that don’t
almost automatically signal trademark function. 
Ornamentality is our way of managing that reality for supposedly “inherently
distinctive” words or designs.]  Rather,
the decorativeness of the use prevented LTTB from showing a likelihood of
confusion as to source, “where the mere use of the pun on the face of various
products cannot be source-identifying.” 
“LTTB may not … recover for alleged trademark infringement based on any
competitors’ use of the very kind of designs that the PTO found not to be
eligible for trademark protection.”  As
in Job’s Daughters, a use could be confusing if it led consumers to assume
source/sponsorship, but there was no sufficient evidence “that any purchaser of
allegedly infringing items inferred from use of the pun that the product was
produced, sponsored, or endorsed by any particular person or entity, such as
LTTB.”
Incontestability didn’t matter because this wasn’t a finding
of invalidity of the marks, but a limit on the scope of LTTB’s rights, and
because incontestability doesn’t bar a functionality challenge.

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Duck, duck, noninfringement: TM and (c) claims over distinct duck designs fail

Posted on July 23, 2019 by rtushnet

Great American Duck Races Inc. v. Kangaroo Mf’g Inc., No.
CV-17-00212-PHX-ROS (D. Ariz. Jul. 19, 2019)
Despite some bad reasoning equating intent to compete with
(relevant) intent to confuse, the court rejects bad copyright and trademark
claims based on the copying of the idea of an inflatable duck wearing
sunglasses.  GAME’s duck was designed
“from scratch,” but was similar to Sesame Street’s Rubber Ducky, except with
sunglasses. GAME has a trademark registration for an image of the duck for
various goods, and a copyright registration for the inflatable itself.  Defendant Ligeri and his companies “would identify
successful products on Amazon and then make slightly different versions of
those products without apparent concern about possible intellectual property
violations.”  Nonetheless, defendants did
use a designer, and the design wasn’t a slavish copy.  Setting aside size variations and the
functional ring (D) v. flat flotation surface (P), Kangaroo’s version had a
closed orange bill, not an open red bill, and its wings and tail were drawn on
instead of inflatable. Like GAME’s duck, Kangaroo’s duck has a small crest on
its head and is wearing sunglasses, but Kangaroo’s duck’s sunglasses weren’t
completely black or inflatable, and they didn’t have a double bridge like
GAME’s.
 

Derby Duck box

Derby Duck

Registered design mark

Kangaroo duck box

Kangaroo duck

Copyright: there was copying, but not unlawful
appropriation. Under Satava v. Lowry, copyright can’t “prevent others from depicting yellow ducks, with a bill,
wings, a tail, and a crest on the head. All of those attributes are found on
ducks in nature.” In addition, the general design and color of an inflatable
rubber duck was a “stock or standard feature[].” The sunglasses were the key
protectable element of the Derby Duck, but didn’t extend to the idea of a duck wearing
sunglasses, only to the particular expression. As a result, the court had to
figure out “whether the two expressions of the sunglasses-on-a-duck idea are so
similar that ‘the ordinary observer, unless he set out to detect the
disparities, would be disposed to overlook them.’” They would not; instead,
there were “a few striking differences,” including differences in the bridge,
the color, and the sculptural features (inflatable versus painted on).  GAME could thus not pass the extrinsic test
for similarity in protected expression; even if it could, the ducks lacked
substantial similarity in total concept and feel and thus GAME couldn’t satisfy
the intrinsic test.
Trademark: sloppier analysis, which is perhaps
understandable given the conclusion of no liability, but the court doesn’t
delineate what is actually protectable about Kangaroo’s marks and thus proceeds
as if its registration might give it trade dress protection for the overall
shape of the ducks, without requiring it to show either nonfunctionality or
secondary meaning of the trade dress (as opposed to the registered specific
image). This is a classic example of abusing a registration beyond its scope,
because the US has a bad concept of the appropriate scope of a
registration.  A registration for a
specific two-dimensional image of a product shouldn’t be equated to trade dress
rights in the product itself.  The cases
tend to reject liability when fully litigated—there’s the Mardi
Gras bead dog case and the Rock +
Roll Hall of Fame case, for example—but this case went through summary
judgment, and that’s a waste of resources and a deterrent to legitimate
competition.
Anyhow, the issue was “whether a reasonable consumer seeing
Kangaroo’s marks would mistakenly conclude GAME had some association with that
product,” and the court cites but neither explicitly endorses nor rejects
GAME’s argument that Kangaroo’s “marks” were pictures of Kangaroo’s own duck
and the duck itself.  Too bad.
Conceptual strength: the court does get that there’s
a problem here.  It focuses on the
registered image of the duck, deeming it “descriptive” or “generic.” “The
trademarks are just stylized versions of the underlying products. A consumer
does not need to exercise any imagination to associate the mark with GAME’s
products.” There was “relatively little” conceptual strength, and the evidence
of secondary meaning was limited to use of the marks in advertising and
substantial sales, resulting in “limited” commercial strength.  Overall favored Kangaroo.
Relatedness of goods: neutral, because much depends on what
the Amazon listings for the products said, as in Network Automation, but
GAME didn’t preserve or submit the listings. The boxes clearly identified each
company, but “there is insufficient evidence to determine whether the manner in
which the products were presented or advertised would have caused consumers to
assume there was an association between GAME and Kangaroo.”
Similarity of marks: GAME argued that the relevant
comparison was between the pictures on Kangaroo’s box to GAME’s marks, but
there were distinct differences in the ducks wearing glasses.  “Some” similarity, slightly favoring GAME.  [If the court had been more rigorous about
the scope of the image registration, it seems likely to have found less
similarity.]
Actual confusion: no evidence, favoring Kangaroo.
Marketing channels: not very important when both parties use
the internet, or more specifically Amazon.
Degree of care: low, favoring GAME.
Intent: Sigh.  There
was “no question that Kangaroo made some visible changes to its duck in an
apparent attempt to avoid copyright infringement. In the end, however, Kangaroo
knowingly used marks similar to GAME’s in an attempt to capitalize on what was
already popular. This factor supports GAME.” 
So here the court, conflicting with its analysis of strength of the
mark, presumes that GAME’s rights extend to the product design—but doesn’t ask
whether there’s nonfunctionality or secondary meaning—by equating making a
competing product, and showing that product on the box, with “use” of a
“mark.”  I see nothing on the box that
looks like GAME’s registered mark.
Likelihood of expansion: irrelevant.
Though counting factors favored GAME, that’s not how this
game is played.  Evaluating the factors
as
a whole, and in light of all the other evidence, GAME didn’t
show likely confusion as opposed to possible confusion.
GAME also argued unfair competition under Arizona law,
apparently finding Kangaroo’s copying “unfair.” 
As Mark Lemley says, lots of businesses firmly believe that the phrase
“unfair competition” is redundant.  But
Arizona looks for consumer deception as the core of unfair competition. “Though
there was evidence of Kangaroo’s clear intent to capitalize on the popularity
of the Derby Duck, the Court would need evidence of how the public was being
cheated or deceived to conclude Kangaroo’s competitive behavior was improper.”
It was possible that the original Amazon listing of Kangaroo’s float was “designed
… to capitalize on GAME’s own success,” which might entitle GAME to relief, if,
for example, the listing “made representations that the two floats were
manufactured by the same company or if the Amazon listing contained pictures of
the Derby Duck but Kangaroo then delivered its own duck.”

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