Commercial Speech & the First Amendment

Posted on June 4, 2019 by rtushnet

From Yale Law School’s Abrams Institute for Freedom of
Speech: Commercial Speech and the First Amendment
Floyd Abrams: does commercial speech protection affect
non-commercial speech law, for example by decreasing protection for political
speech?  We’ve found that political
speech proponents now cite commercial speech cases given how robust the
protection is.  So the concern about
defining scrutiny downwards for noncommercial speech hasn’t materialized.  SCt now believes that commercial speech is
more important than some thought, and that limitations on nonfraudulent speech
are more threatening than many thought.
Commercial Speech Post-NIFLA v. Becerra:  Legitimate Check on Compelled Speech or
Weaponization of the First Amendment?
Moderator: Joel Kurtzberg – Partner, Cahill Gordon &
Reindel LLP
Calls to overturn Central Hudson at least for
truthful/nonmisleading speech. Sorrell v. INS Health applied “heightened”
scrutiny. What does that mean?  Our part
of the bar argued for strict scrutiny. Sorrell went on to invalidate the law at
issue under Central Hudson, so it wasn’t clear. Content-based: not subject to
Central Hudson intermediate scrutiny? 
But what does that mean, given that commercial speech as a category is
content based?  Breyer issued the first
of many dissents: opened the floodgates to dangerous litigation.  Regulatory programs necessarily draw
distinctions based on content. 
Electricity regulators oversee company statements about electricity:
specific to content. The Federal Reserve regulates interest rate disclosures,
but only by financial institutions. The FDA oversees labeling and advertising
for drugs, but not furniture. It’s all content based. 
Reed v. Town of Gilbert: Reed found everything to be content
based and everything content based subject to strict scrutiny?  If law applies b/c of topic discussed, then
it’s content based according to Reed regardless of gov’t motive and content
neutrality of justification. Breyer concurred in judgment but warned again, you
can’t possibly mean this is true.  [It
just means the distinctions will be less predictable and more subject to
judicial reevaluation of the facts.]  The
entire regulatory state is built on laws that target specific content. [Which
is pretty much the point for some: they don’t like the regulatory state and
think that common law is enough.]
NIFLA: compelled speech case.  He litigated the graphic cigarette warning
cases.  Zauderer: rational basis,
essentially.  If Zauderer doesn’t apply
(purely factual/uncontroversial—calories on menus) what is the standard?  Strict scrutiny? Central Hudson? NIFLA
answers that question by saying Zauderer doesn’t apply when it’s content based
and it’s strict scrutiny. [This wouldn’t be my summary, but ok.]  Struck down California’s disclosures required
for anti-abortion clinics (licensed clinics had to post disclosures about
California’s own services for pregnant people; unlicensed clinics had to post
disclosure that it wasn’t a licensed medical clinic).  Court struck down both provisions: altered
the content of clinics’ speech and was therefore content based.  Rejected professional speech concept as to
the clinics b/c failed under intermediate scrutiny; no traditional exception of
lesser protection for professional speech. 
However, Court said it wasn’t calling into question legality of health
and safety warnings long considered permissible.
Panelists: Jane Bambauer, Professor of Law, James E. Rogers
College of Law, The University of Arizona: Zauderer apparently survives, but
strict scrutiny for everything else, and it’s an acidic test.  Any error of over or underinclusion will lead
to flunking even intermediate scrutiny. She’s more ok with that than others
are.
Two big limits of NIFLA: Zauderer. Not totally unambigous in
the opinion, but looks largely intact. The first thing the majority does is
acknowledge that these statements, while factual, are not uncontroversial.
Doesn’t explain why it’s not uncontroversial, but everything to do with
abortion is controversial.  [If it’s litigated,
it’s controversial in a trivial sense.] Court probably isn’t ready to define
controversial—her own work has begun to look at how this might be done.  This is probably not the right set of facts.
Second: informed consent in the medical context.  The majority treats it as so traditional that
it’s basically a mere conduct regulation. NIFLA does some damage to the work
the Court has been doing to clarify the separation between what’s speech and
what’s conduct.  “Talk therapy” as
conduct and not speech—older case.  Led
eventually to NIFLA; this Court seems to suggest you can’t take an entire
category of speakers and describe what they’re doing as conduct. At the same
time the Court characterized informed consent as regulating the conduct of
providing medical care.  Biggest internal
inconsistency is treatment of Casey:
Bambauer can’t see daylight b/t disclosures required of abortion providers
under Casey and disclosures
unconstitutional in NIFLA.  [Which is why
having courts decide what’s uncontroversial/factual is about arrogating
political power to them.]  The increased
scrutiny may turn out to be messy and subjective—a problem of epistemology:
which branch of gov’t is better at sifting messy evidence.  Often framed as whether courts are better
than legislatures; this is why Breyer cautions modesty.  Courts are interested in epistemic modesty,
but they think regulators and
legislatures [RT: but not private parties] should be more modest and
commercial speech is a case study of why this might be.  Assumptions used by regulators in 1970s were
challenged and found to be lacking—limiting optometry offices from listing
prices was bad for consumers. Gov’t will mess up even the goals it intends to
pursue.  [… and we’re at Lochner.]  Regulation shouldn’t apply to information
transmission unless two branches of gov’t have looked at the same body of
evidence and agreed it would be good for consumers. Mandatory disclosures
haven’t been good for consumers and getting rid of that style of regulation may
be good for them. 
Kurtzburg: off-label promotion of drugs: is this truthful
and nonmisleading?  [Amarin, I think.]
The judge didn’t want to have to answer that question, but he did, and found
the FDA went too far.
Robert Post – Sterling Professor of Law at Yale Law School:
Why wasn’t commercial speech protected before Central Hudson? Because we had
free speech for a reason: to make the gov’t responsive to us, as required for a
democracy.  Trying to form public
opinion=state is responsive to us. That logic gives rise to speaker rights, b/c
we want state to be responsive to people who are talking. Why not approve
content discrimination? We want public opinion to set the agenda for the gov’t,
not the other way around in choosing this not that topic.  Content discrimination ban preserves that
priority. Often described in terms of marketplace of ideas, as Thomas does in
NIFLA. Epistemological justification. 
Any institution that produces truth does not have a
marketplace of ideas. That’s not how you run a university—any institution that
produces truth makes judgments about competence and incompetence. There are
better and worse ideas.  The notion that
there’s no such thing as a false idea implies that there’s no such thing as a
true idea, which is the opposite of the idea of truth winning a competition in
the market. The equality here is political, not epistemological: politically,
we are all equal, even though there is epistemological truth.
When Court extended protection to commercial speech, it was
an audience based justification.  Right
to receive information (as it is known in Europe).  Not a subordinate set of protections: a
different kind of right for different reasons, and the Court was very clear
about that b/c it had in the back of its mind Lochner. The Court has lost this distinction, putting autonomy into
the commercial speaker and back into Lochner, second-guessing any commercial
regulation.  This is cool if you like
Lochner, not cool if you don’t. Those are the stakes.
Does NIFLA make any sense in its own terms? Thomas says
content discrimination prevents a market for ideas in which truth will prevail,
so every mandatory disclosure is subject to strict scrutiny.  Imagine: you give a lousy opinion letter and
get sued for malpractice.  Is this
subject to strict scrutiny? Why isn’t this just a marketplace of ideas?  Doctor falsely tells you you don’t have
cancer: is this subject to strict scrutiny? Professional speech is supposed to
be governed by standards of competence of the profession.  Doesn’t make sense to say all compelled
speech is subject to strict scrutiny: in commercial real estate, endless
statutes require disclosures in leases. Under NIFLA, that’s subject to strict
scrutiny?  Does it make sense to have a
court epistemologically determining the truth of these disclosures?  Mandatory disclosure of latent defects
subject to strict scrutiny. The opinion is crudely written as “speech content
regulation bad.”   If you say there are exceptions,
the exceptions contradict the general logic. 
A hunting license for conservative judges to decide what social
regulations they don’t like.  It has
nothing to do with truth or self-government but with entrenchment of a
political party.  If courts are busy with
striking down the SEC, they will not be rigorous when the gov’t tries to lock
up terrorists.
Coleen Klasmeier – Partner and Global Coordinator of the
Food, Drug and Medical Device Regulatory Practice Area Team at Sidley &
Austin LLP
NIFLA’s antecedents: Sorrell, Reed [but not Casey!] have a
lot of resonance on the same intellectual level, and Central Hudson is still
being applied. Her expectation is that courts of appeal will continue to use
those rubrics. Not sure that Central Hudson or Zauderer were ever particularly
helpful analytical tools. Rules of thumb: gov’t’s view of what’s smart decision
doesn’t count (graphic tobacco disclosures). 
Don’t burden speech b/c you find it too persuasive (Sorrell).  Don’t manipulate consumers with neuroscience
(tobacco again) [which is totally fine for private sellers]. But there are
exceptions, historically accepted health/safety warnings—she has no idea what
that might include. Thomas might use that for FTC rules. Another rule of thumb:
Don’t create a stupid record—9th Cir. American Bev. case—had record
ev. that 10% of ad devoted to warning would be enough but required a 20%
warning. CMS proposed rule requiring disclosures of list price in TV ads: the
entire record says we’re doing this because we think it might work but we’re
not sure.  That’s a bad record.  [Having read the proposed rule, I disagree
with this characterization of the evidence and its characterization, but that’s
not surprising.]  Breyer understands that
FDA is threatened by the language in these cases.  All of the labeling rules raise these
issues.  There’s a drug warning on a
diabetes drug saying it causes thyroid cancer, but it’s not based on human
data. The FDA wants doctors to know of the risk; it works in judgments, not in
facts. The agency needs facts, but it judges
those facts.  Judges make decisions about
data all the time.  The epistemology
question does go to competence—FDA’s primary jurisdiction is an issue, but
judges do have a role b/c they’re good at judging too. 
Amarin: the FDA didn’t want offlabel marketing even though
pharmaco proved that its claim was accurate; not allowed on label and thus FDA
said marketing wasn’t allowed, b/c other drugs indicated that early data of the
type you generated don’t necessarily correspond to longterm cardio benefit that
consumers would expect from a drug of this type—an extrinsic factor having
nothing to do with the drug itself [um, that conclusion doesn’t logically
follow at all—especially if you believe in misleadingness]. You can debate
whether it’s sound public health policy, but it’s not a great rationale for a
speech regulation.  Hijacking labels for
the agency’s view of public health, which is a pathology.  Agency has now internalized some of the
lessons of the cases.
Kurtzburg: Why isn’t having exceptions enough?  Zauderer: Can compel if speech is factual, noncontroversial,
and not unduly burdensome?  Gov’t can
also regulate conduct w/incidental impact on speech.  Two other exceptions he think exists: under
precedents, gov’t may not impose content based restrictions w/o persuasive
evidence of a long, if heretofore unrecognized, tradition to that effect. If
there’s a long history of requiring disclosures in commercial real estate
transactions, that’s ok.  The opinion
says it’s not calling into question health and safety warnings long considered
permissible.  Emphasis on tradition, not
just about health and safety. Doesn’t the analysis of professional speech
suggest that if the gov’t could come forward and show the long tradition, it
would be ok?  Why is Post so
worried?  It can’t be that every
regulation is really going to be called in question.  [Which is also the hunting license point:
we’re now in the business of randomly targeting things.]
Post: he has a bridge he’d like to sell you.  How much work has “tradition” done in public
forum doctrine done?  None.  It depends on who gets to say what tradition
is.  Also, redefines Zauderer by putting
the burden on the state, which is not what Zauderer was. And changes the
meaning of “controversial.”  If it means
“can’t be about controversial subject” then it takes the disclosure away when
it is needed most.  How do you
distinguish between speech/conduct when regulating the language of a
contract?  We’ve tried that for 50 years
and failed. It’s an invitation to ad hoc judgments reflecting political
prejudices of courts.  SEC required
disclosures: is that a long enough tradition? 
Why shouldn’t the gov’t be able to experiment w/ new forms of
disclosure? This is about ending the development of regulation: command and
control wasn’t good, but information forcing disclosures became preferred. It’s
not traditional so you can’t do it: but why does that make any sense given
evolving knowledge?  Also, if you want to
talk tradition, commercial speech protection was unknown to the Framers; it’s
not traditional at all! 
Compelled speech serves the very constitutional value for
which we created commercial speech doctrine in the first place, and NIFLA
treats getting more information as a bad thing.
Health/safety as tradition: commercial leases and SEC
disclosures aren’t health/safety.  Is
that in the exception?  What does it
mean?  Thomas is just carving stuff
arbitrarily as it comes into his mind, not thinking about how markets are
formed and regulated in the US.  Amarin:
missed the main justification for why you’d want safety & effectiveness
data for offlabel use: that’s an information forcing device to require
producers to come forth with information. Judge had such a poor understanding
of basic foundations of regulatory scheme. Now, you can get safety &
effectiveness approval for one indication and market it for something
else—that’s law made by a judge who admits he can’t operate his own toaster.
Klasmeier: there is appropriately a burden on manufacturers
to substantiate safety/effectiveness for initial marketing. We don’t have fully
publicly funded research. Offlabel use has been allowed for decades; FDA has
accepted that. It can’t regulate doctors b/c they’re ungovernable; tried to
regulate manufacturer speech instead. Not a foundational principle of food
& drug law that it’s illegal to disseminate info: an artifact of 1970s
controversy.
Post: it was illegal to market to general public.  [What makes it a drug is how you advertise
it.]
Klasmeier: the policies are generally agnostic to audience.  [Certainly Amarin suggest you could market
directly to consumers.] Patients are entitled to receive information about
offlabel uses, so they can go to doctors. 
Consistent w/listener-oriented rationale.
Bambauer: Post said regulatory state used information as
better version of regulation.  80% agree
that more information is generally better, but that’s too facile.  It’s really hard to use facts to convince
people.  If you try to regulate directly,
like taxing soda, the politics show the public [or relevant interest groups]
isn’t ready, but a speech regulation can be slipped in w/o as much political
awareness.  That may be good or bad, but
it doesn’t mean that the 1A check is undemocratic.
Kurtzburg: en banc 9th Circuit American Bev.
Ass’n v. SF applied NIFLA to sugar-sweetened beverage warning.  Majority applied NIFLA.  Maybe NIFLA is much ado about nothing
(concurrence said it would have gone further, because health/safety didn’t
traditionally include any warnings about sugar sweetened beverages).
Bambauer: the issue is there are so many requirements that
you can go in any order and likely invalidate a regulation.  Makes more sense to look at
factual/uncontroversial as prerequisites for Zauderer, rather than undue
burden.  9th Cir. seems to say
that warning may be factual and uncontroversial; only the burden part indicates
that NIFLA might have put more teeth in the analysis. Worries that NIFLA will
be construed in a way that will always find a way for the gov’t regulation to
fail, but only in undue burden.  Case
suggests that factual/uncontroversial disclosures will often be ok.  [But see the weird discussion of diabetes,
where the argument is that it’s not “factual” b/c it doesn’t sufficiently
distinguish type 1 and type 2 diabetes.]
Post: DC Circuit has been at war w/Zauderer for a while
now.  Misleadingness correction
only?  DC Circuit recently went en banc
and said it wasn’t just for misleadingness, but was basically just Central
Hudson.  9th Circuit similarly
set up a situation where Zauderer can always be rejected in favor of strict
scrutiny. When you can’t predict how the opinion should be applied, and when
there is so much commercial speech regulation, you’re giving a hunting license
to courts.  Much less worried about the
difference b/t Central Hudson & strict scrutiny—not interested in
fetishizing strict v. intermediate scrutiny, which is an evasion of the central
Q: what constitutional values are you trying to protect?
Being forced to carry a calorie label is not being forced to
affirm that one believes “Live free or die.”  We now have gov’t speech doctrine saying gov’t
can say anything, no matter its falsity: how does that go along with this other
problem?
Klasmeier: A defendant in a wire fraud case was subject to a
DOJ press release that was concededly inaccurate. The defendant sued over DOJ’s
statutory authority; DC Circuit rejected idea that DOJ should have to account
for its falsehoods under Data Quality Act. We litigated it as a case about
fairness and equality; disappointing result.
Post: the gov’t is absolutely privileged to defame: Paul v.
Davis.
Kurtzburg: we normally defer to agencies w/in their area of
expertise.  Should we defer to FDA on
safety & effectiveness judgments? 
[Note how this is a Lochner Q.] 
Does the 1A tip too far in the other direction?
Klasmeier: trends seem to be converging against
deference.  A lot of these cases are
Chevron step 1 cases: deference is not appropriate.  Reluctant to live in apocalyptic world Post
describes because that’s awful, but Thomas may be trying to move towards idea
that we don’t know legislative motives of yore, while we have information about
today, and we see bad records from today [so yesterday’s bad decisions are fine
and can’t be changed, especially if they were from the common law, I guess].
Moving forward, can’t politicize questions of conscience and value [like
whether to defraud consumers?]—but doesn’t know what to make of Reed in that light, since that wasn’t a
bad record [or a question of conscience and value].
Kurtzburg: false/misleading can be regulated under
commercial speech: it’s a big carveout.  Consistent
w/NIFLA’s holding: there’s a long tradition of allowing the regulation of
commercial speech that is potentially false or misleading, and no one could
argue to the contrary. [Wait for it: I’m about to discuss a 5th
Circuit case that doesn’t just argue but holds to the contrary.]  It’s an exception to the ban on content
discrimination. 
Post: sign regulation was a longer tradition, and now
there’s Reed.  Street sign, house number,
those distinctions have been made at least as long as misleadingness.
Bambauer: whether we talk about long tradition or deference
to regulatory agencies, neither really make sense for constitutional law: we
had a long tradition of racial discrimination [and more to the point, of
defamation law]. The disagreement is more about what we’re trying to
accomplish. Even the libertarians seem to recognize that fraud and things close
to fraud are unprotected not just b/c of tradition but for actual substantive
reasons.
Post: but you could never have that for political speech:
false statements about Brexit. We do apply that rule to commercial speech. Why
would that distinction matter? Could it be that not all speech is the same?

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major beer battle turns on Mead (Johnson)

Posted on May 31, 2019 by rtushnet

Long post, lots of stuff to cover in this opinion.
MillerCoors, LLC v. Anheuser-Busch Cos., No. 19-cv-218-wmc
(W.D. Wisc. May 24, 2019)
There’s an apocryphal ad story about a cannery stuck with
unmarketable pale salmon that turned its disadvantage around by labeling the
product as “Guaranteed not to turn pink in the can!” (The competitors supposedly
responded by advertising that their products contained no bleach.)  The point is that the advertising context
itself conveys a lot of meaning: in particular, aspects of one’s own product
that one presents proudly are good, while aspects of the competition’s product
that one brays loudly about are bad, even (or especially) if the consumer has
no other information about how to identify good/bad characteristics.  AB took advantage of this standard feature of
human communication, and got sued for it.
There’s a lot of detail here (and really good lawyering on
both sides), but: AB started an ad campaign highlighting MC’s use of corn syrup
in brewing Miller Lite and Coors Lite, whereas AB uses rice in Bud Light (but
corn syrup in various other AB beverages). 
MC sued for false advertising and trademark dilution; the court granted
a preliminary injunction limited to ads that indicated in some way that Miller
Lite and Coors Lite actually contained corn syrup when consumers drank it,
specifically: (1) Bud Light contains “100% less corn syrup”; (2) Bud Light in
direct reference to “no corn syrup” without any reference to “brewed with,”
“made with” or “uses”; (3) Miller Lite and/or Coors Light and “corn syrup”
without including any reference to “brewed with,” “made with” or “uses”; and
(4) describing “corn syrup” as an ingredient “in” the finished product.  In addition, “the court would strongly
encourage advance clearance before adopting any phrase or creative license in
an attempt to maneuver around the prohibitions.”
The most disappointing part of the opinion for me was the
court’s refusal to dismiss the trademark dilution claim because fair use is an
affirmative defense. First, that’s new law as far as I’m aware, and given the
First Amendment implications of applying dilution law to comparative
advertising, it’s not a well-justified decision.  (The Ninth Circuit has held that in nominative
fair use cases (which this is), the defendant’s only burden is to show that the
use is referential (which MC pled), after which the burden shifts back to the
plaintiff to show lack of entitlement to the defense.) Second, even so, the
complaint clearly pled itself out of court; there is no way that this is not
comparative advertising/nominative fair use.
On to the main event: The yeast that makes beer needs a
nutrient substrate with sugars.  Sugars
can come from malt, “or from a combination of malt and starchy grains like corn
or rice.” The parties agreed that the sugar source relates to style and taste
characteristics, though cost may also be a factor: corn syrup is cheaper than
rice.  “There is no meaningful difference
between using rice or corn syrup as an ingredient in terms of health or safety
of the resulting beer product.” 
Fermentation “converts the corn syrup sugars into ethanol, flavors,
aromas, carbon dioxide, heat and a next generation of yeast cells, leaving a
small amount of residual sugars.” No corn syrup remains in the Coors Light and
Miller Lite products at the end of fermentation, and none is added.
Nonetheless, AB launched a huge ad campaign featuring claims
that Miller Lite and Coors Light are “made with” or “brewed with” corn syrup. Here’s
one Super Bowl ad.  Suffice it to say
that the gist—central to the ads and much repeated—is that Bud Light doesn’t
use corn syrup and Miller Lite/Coors Light do (“made with” and “brewed with”
are frequently repeated).  AB billboards
touted “100% less corn syrup” than the two competitors. An AB Twitter account posted
an image displaying a Miller Lite can next to a Karo corn syrup bottle as if in
a family portrait, and a Facebook user posted a similar image, referencing the
campaign:

Karo Lite (syrup) and Miller Lite “family portrait”

user-generated content matching BL/ML with ears of corn and Aunt Jemima syrup
Another ad showed the following frames:

“Corn syrup”/”No corn syrup” by bottles of the parties’ products

Another ad mocked MC for complaining and an AB character suggested
“also imitating us by putting an ingredients label on your packaging. People
want to know what ingredients are in their beer. But what do I know? I’m just
the king of a kingdom that doesn’t brew beer with corn syrup.”
Beer Business Daily reported that according to Andy Goeler, AB’s
head of marketing for Bud Light, “[Anheuser-Busch] did focus-group the heck out
of this [Special Delivery] ad, and found consumers generally don’t
differentiate between high fructose corn syrup and corn syrup, and that it is a
major triggering point in choosing brands to purchase, particularly among
women.”  In another interview, in response
to the question, “What is wrong with corn syrup?,” Goeler responded: “People
started to react to corn syrup, they started to react to no preservatives, and
they started to react to no artificial flavors. There are things that consumers
on their own had perceptions — for whatever reason — that there were ingredients
they preferred not to consume if they didn’t have to.”  The interviewer noted that AB focused on corn
syrup and not preservatives and asked why Goeler thought “consumers see corn
syrup as something they don’t want.” He called it “an ingredient some prefer
not to consume is the simple answer. . . . [S]ome consumers — for their own
personal reasons — have concluded that they prefer not putting something like
corn syrup, if they had a choice, into their body.” 
Though this is in one sense an ordinary bullshit nonanswer,
it contains the key conflation at issue here: treating the brewing substrate as
if it were what consumers “put[] … into their body,” which it is not.  Goeler’s answer recognizes the obvious fact
that consumers have no particular reason to think about the distinction between
beginning ingredients and the stuff in the can, and the ads are self-evidently
encouraging consumers to consider the stuff in the can as if it still contained
corn syrup, which is a reason to buy Bud Light instead.  What would be the point of the ads
otherwise?  [See discussion of Grice
below.]  Anyway, in another interview,
Goeler stated that AB would continue to focus on “ingredient transparency,” and
AB’s senior director of corporation communications echoed this, concluding that
“Knowing what is and isn’t in your beer — whether you paid for it or not —
can only be good for the beer industry overall.”  Again: there’s no corn syrup in MC beer, but of course that’s the
message; the use of “made with” and “brewed with” does not tell consumers
otherwise.
MC submitted a survey in which the control ad was the same as
the test ad, but with an added, prominent disclaimer: “While corn syrup is used
during the brewing of Miller Lite and Coors Light, there is NO corn syrup in
the Miller Lite and Coors Light you drink.” Its expert concluded that “61
percent of respondents who saw the test stimulus believe that corn syrup is in
the Miller Lite and/or Coors Light you drink,” compared to 26 percent in the
control, for 35% net confusion. The expert also concluded based on an analysis
of open-ended responses that the phrase “‘made with’ used in the Bud Light
commercial to describe the relationship between Miller Lite and/or Coors Light
and corn syrup is ambiguous.”
MC also argued that AB’s ads exploited or furthered
misconceptions about corn syrup and high fructose corn syrup (HFCS).  They are not the same thing, but MC’s industry
expert identified “a common point of confusion about corn syrup and HFCS,
despite the fact that they are very different products.” The survey expert
concluded that “more respondents who saw the test stimulus (24 percent) than
who saw the control stimulus (19 percent) believed that the commercial says,
suggests, or implies that corn syrup and high fructose corn syrup are the
same.”
Unsurprisingly, after the ad campaign was launched, MC received
a bunch of consumer communications related to corn syrup, up from basically
none. The survey expert also analyzed these, and found that 18% indicated that
the presence of corn syrup would end or decrease their purchases of MC beers
and 4% indicated they’d start or increase purchases.  Relatedly, social media responses indicated
that consumers were reacting to the ads as if corn syrup were a bad thing.  Of consumer posts that mentioned corn syrup
and at least one of the relevant brands, 22% expressed negative sentiments and
9.8% expressed positive sentiments. Similarly, 28.6% of consumer posts indicated
a mistaken belief that corn syrup used in brewing is present in the final
product (the beer itself), while only 6.9% of posts demonstrated understanding
that corn syrup wasn’t present in the final beverage.

Social media posts indicating that corn syrup is in the beer and that’s bad

For the misleadingness alleged here, at the preliminary
injunction stage, a consumer survey or other “hard evidence of actual consumer
confusion” is not required. Instead, the Seventh Circuit, consistent with its
self-understanding as a court of common-sense realists who are good at interpreting
the ordinary meaning of ads, instructs that district courts should analyze “the
ads themselves, the regulatory guidance, and the evidence of decreased demand.”
 The court mentioned using intent to deceive
as the basis of a presumption that the deception succeeded, but pointed out
that courts that list this possibility never seem to find the requisite
egregious intent, and it wasn’t going to be the first.  [The evidence here seems to me to support a
finding that MC intended consumers to take away the idea that “brewed with” and
“made with” is the same as “ingredient in the beverage.”  Is that “egregious”?  I think it’s about the natural meaning of an
advertising statement.]
Statements that Miller Lite and Coors Light “use” or are
“made with” or “brewed with” corn syrup were literally true, but allgedly
deceived consumers into believing that MC’s products actually contained corn
syrup and thus were unhealthy and inferior to Bud Light. MC relied on Abbott
Laboratories v. Mead Johnson & Company, 971 F.3d 6 (7th Cir. 1992), in which
the Seventh Circuit concluded that the name Ricelyte “implies more than the
permissible message that Ricelyte is produced from rice or contains rice syrup
solids derived from rice carbohydrates. It also implies that Ricelyte actually
contains rice and rice carbohydrates—or at least we can say that Abbott has
established a strong likelihood of so proving at trial.” 
But there is no affirmative duty to disclose or disclaim if
the advertisement at issue is not false or misleading. And, unlike in Abbott
Laboratories, the court thought that, viewing the “made with,” “brewed with” or
“uses” statements in their full context, there were no express or implicit
messages that the corn syrup is actually in the finished product. [So the court
rejects the survey finding that indeed this was the message received by
consumers from the ads.]  Specifically, the
ads using the “made with” or “brewed with” language didn’t show corn syrup
being added to the finished MC products.
MC also relied on Eli Lilly and Company v. Arla Foods, Inc.,
893 F.3d 375 (7th Cir. 2018), in which the Seventh Circuit affirmed a
preliminary injunction against a cheese manufacturer’s ads implying that milk
from recombinant bovine somatropin (“rbST”)-treated cows was unwholesome. The ads
stated that “Arla cheese contains no ‘weird stuff’ or ‘ingredients that you
can’t pronounce’—in particular, no milk from cows treated with [rbST],” and
depicted rbST as “a cartoon monster with razor sharp horns and electric fur.”  Though the explicit statements were true, the
campaign “centers on disparaging dairy products made from milk supplied by
rbST-treated cows” and drew “a clear contrast between Arla cheese (high
quality, nutritious) and cheese made from rbST-treated cows (impure,
unwholesome)” with monster imagery, “weird stuff” language, and child actors “to
colorfully communicate the message that responsible consumers should be
concerned about rbST- derived dairy products.”
But the ads here didn’t “disparage” corn syrup “or otherwise
expressly draw attention to any negative health consequences.” (Even so, the
court apparently agreed with MC that an express link “may have been unnecessary
here, since at least some consumers appear to associate corn syrup, and
particularly high fructose corn syrup, with harmful health consequences, or
certainly defendant hoped,” but apparently didn’t consider that to be enough.)  Instead of “analyzing the commercial or the
advertising campaign more broadly in order to demonstrate that these statements
are misleading,” MC relied on the responses to open-ended survey questions, and
that wasn’t enough.
The problem with using the survey to find the ads misleading
(even though misleadingness is, even in the Seventh Circuit, supposed to be shown with consumer
reaction evidence) is that surveys can’t be used to bring statements that are merely
“susceptible to misunderstanding” within the scope of the Lanham Act. Mead
Johnson & Company v. Abbott Laboratories, 201 F.3d 883 (7th Cir. 2000). In
that case, “the Seventh Circuit rejected an attempt to solely rely on survey evidence
to demonstrate that language is misleading.” On a petition for rehearing in Mead Johnson, the court of appeals stated
that “interpreting ‘misleading’ to include factual propositions that are
susceptible to misunderstanding would make consumers as a whole worse off by
suppressing truthful statements that will help many of them find superior
products.” The court of appeals also removed its initial statement that “[a]
‘misunderstood’ statement is not the same as one designed to mislead.” The
court here commented that this statement would have supported plaintiff’s
position that intent to deceive could be a basis for finding a statement
misleading, but it’s gone now.  [I find
it ironic that an amendment made to recognize that the Lanham Act is strict
liability is used here to contract liability; the district court’s reasoning
also makes a logical error about the contrapositive: the fact that intentional
deception isn’t required for liability doesn’t mean that intent to deceive isn’t
probative of whether an ad is misleading.]
“The court notes that Mead Johnson is not without its
critics, and understandably so: how does one draw the line between an
advertising statement that is susceptible to misunderstanding but not
misleading?”  The court cites me:
One scholar has suggested that this
holding requires materiality in addition to a misunderstanding for a claim to
be misleading. Rebecca Tushnet, Running the Gamut from A to B: Federal
Trademark and False Advertising Law, 159 U. Pa. L. 1305, 1349 (2011). To
illustrate, Tushnet explains, “One may misunderstand a fact in the abstract: I
could be wrong about the size of a computer’s hard drive. If I am misled,
however, I am being led: induced, or at least potentially induced, to change my
position based on my misunderstanding, as when I am more likely to buy a
computer because of my belief about the size of the hard drive.”
But even this formulation “suggests that something more
overt is required on the part of the advertiser to find a true statement misleading.”
[I respectfully disagree.  The “something
more” is materiality, which shouldn’t have to be “overtly” claimed in the ad,
but rather should be based on evidence about the kinds of things consumers care
about.  In my hard drive example, nothing
more should be required than a misstatement about the hard drive’s size plus
evidence that consumers care about the size of hard drive, rather than also
requiring the rest of the ad to say “you should care about hard drive size!”]
“The Third Circuit — the only court to discuss
substantively the Mead Johnson
decisions — described the Seventh Circuit’s essential holding as follows: ‘there
are circumstances under which the meaning of a factually accurate and facially
ambiguous statement is not open to attack through a consumer survey.’”  [But exactly what are those circumstances?  I obviously share the district court’s
frustration with the vagueness of the existing Seventh Circuit formulation.  The other possibility, besides materiality,
that I discuss in my advertising law class is cost-benefit analysis: given how
utilitarian the Seventh Circuit is, that might be even more plausible,
especially given its language in response to the petition for rehearing.  The difference between true but misleading
and true but misunderstood might be whether one can convey the truth some other,
less misleading way. If a statement is useful to some substantial number of
consumers and it can’t be appropriately qualified without confusing/failing to
inform that subset, then confusion among another subset ought to be accepted as
irreducable and unfortunate “misunderstanding.” 
But if there is a way to
convey the truth without also producing a big chunk of materially confused
consumers, then the consumer protection purpose of the Lanham Act demands that
we label the inefficient presentation of the truth “misleading.”  In that case, the survey here apparently shows
that the existing ads are misleading, not just misunderstood, given the
possibility shown by the control ad of conveying the truth without confusing
nearly as many consumers.  In other
words: some people may still misunderstand the control ad. But if it’s as good
as we can get while still allowing AB to convey the truth, for whoever cares
about it, then it’s the ad that should be used.]
The district court reasoned that “requiring plaintiff to
point to some other aspect of the ad besides a truthful statement” was
consistent with the caselaw—other cases finding misleadingness “consistently
seem to rely on disparaging or derogatory references to the ingredients in the
competitor’s product, or references that suggest a quality not present in a
product is in fact in the product.” The fact that AB made a bunch of noise
about corn syrup was not itself disparaging. 
MC relied on Grice’s “maxim of relevance,” H.P. Grice, Logic
and Conversation, in 3 Syntax and Semantics: Speech Acts, 47 (P. Cole and J.L.
Morgan, eds. 1975). As formulated by MC’s counsel:
if a speaker says something that is
capable of more than one meaning and knows that . . . one of those meanings is
something that’s relevant and meaningful information to the listener and that
the other meaning is something that is irrelevant and not meaningful to the
listener, the listener will assume that the speaker means the meaningful,
relevant statement because why would you be telling me something that’s not
important.
The court found this argument “[i]ntuitively” appealing,
despite AB’s argument that there are other reasons to highlight rice versus
corn syrup distinction, namely that consumers may align Bud Light with the
“farm-to-table” movement or using a “real ingredient versus a syrup.” The court
thought that was “counter to the weight of the evidence as to defendant’s
intent that associating Miller Lite and Coors Light with corn syrup would
motivate consumer’s health concerns with consuming corn syrup or worse, high
fructose corn syrup.”  But even so, the scale
of a campaign wasn’t enough to find a “neutral, truthful statement”
misleading. 
I think the court’s reasoning does not mesh with how
advertising actually works, and encourages pollution of the information environment.
As Eric Goldman and I have written in our text:
[W]hen an advertiser prominently
claims some feature for its product, we are likely to assume that the feature
is relevant and desirable. The advertiser is using the cooperative principle of
relevance to imply these things without stating them directly. The only direct
statement is that the feature exists. Researchers have studied irrelevant
claims used to tout brands, such as claims that instant coffee has flaked
crystals. When some consumers saw ads featuring relevant attributes and others
saw ads featuring irrelevant attributes, the latter group preferred the product
more. Even when the researchers told consumers which attributes were irrelevant
in advance, consumers still preferred the product more when shown ads using the
irrelevant attribute. See Gregory S. Carpenter et al., Meaningful Brands From
Meaningless Differentiation: The Dependence on Irrelevant Attributes, 31 J. Mktg.
Res. 339 (1994).
The fact that it’s in an ad instructs the viewer about the value
to be assigned to the advertised characteristic—and consumers know this.
MC had another possible argument: the “something else” might
come from the rest of the campaign—the
ads that didn’t limit themselves to “made with” or “brewed with” but were (otherwise)
focused on exactly the same message. “In other words, consumers could
reasonably interpret ‘made with’ and ‘brewed with’ to mean corn syrup is in the
final product because of defendant’s other ads describing Bud Light as having 100%
less corn syrup, or describing Miller Lite as ‘corn syrup’ and Bud Light as ‘no
corn syrup’ without reference to the brewing process.”  But the court was concerned that this was too
much of a stretch because most of the ads at issue, and the ones most widely
disseminated, used “made with,” “brewed with,” or “uses.”
The court also declined to follow FTC cases saying that
defendants can’t exploit preexisting misunderstandings, because FTC precedent “is
largely inapplicable to Lanham Act cases.” [While each of the district court’s
conclusions here is understandable on its own, I have to say that the net
impression is: MC needs to show “something more,” but the court systematically excludes
any possible “more” that is outside the four corners of a challenged ad—which does
not fit my understanding about how human communication works.]
Thus, there was no likelihood of success on the merits as to
ads solely using the language “brewed with,” “made with,” or “uses.”
Next, the court turned to ads touting that Bud Light has
“100% less corn syrup than Miller Lite or Coors Light” or that it has “no corn
syrup.” “[T]hese statements, while also literally true, support a reasonable
interpretation that Miller Lite and Coors Light contain corn syrup,” and MC
showed a likelihood of success on the merits.  AB argued that, given the other ads, consumers
would understand these to be shorthand references to brewing, but “a reasonable
jury could and likely would find that these ads encouraged consumers to draw
the wrong inference from the original ads.”
“Ingredient” claims: There aren’t labeling requirements for
beer ingredients, and it’s not clear what an “ingredient” is when it comes to
beer. For food, “ingredient” “appears to cover items that are used in the
production of a food product, even if not in the end product (e.g., leavening
items).” In the past (and apparently even now), MC has listed corn syrup as an
“ingredient” on its website, without any reference to it being used solely in
the brewing process and not present in the end product.  In context, in most of the ads, “ingredient”
was used in conjunction with the “made with” or “brewed with” language, except
for one ad, the one that says “Look if you’re this set on imitating our
kingdom, may I suggest also imitating us by putting an ingredients label on
your packaging. People want to know what ingredients are in their beer. But
what do I know? I’m just the king of a kingdom that doesn’t brew beer with corn
syrup.”  That language crossed the line “to
encourage a reasonable consumer to believe that corn syrup is actually
contained in the final product.”
MC also challenged AB’s statements that Miller Lite and
Coors Light selected corn syrup to “save money” or because it is “less
expensive.” The court refused to hold this misleading based on MC’s theory that
a consumer would conclude that cheaper substrates are less healthy—that was
just too much of a stretch.  [This result,
by the way, seems reasonably consistent with my proposed cost-benefit reading
of Mead Johnson.]
The court then returned to MC’s “strongest evidence,” AB’s
own statements of its intent that “it was both aware of and intended to exploit
consumer concerns about corn syrup (and high fructose corn syrup in particular).”
Though this evidence indicated AB’s hope that consumers would interpret
statements about “made with” or “brewed with” as meaning that corn syrup was
actually in the finished products, the court declined to presume
misleadingness, “though perhaps this evidence could serve to color the ‘made
with’ and ‘brewed with’ statements to push them across the line to allow a
reasonable finding that they are misleading, and not simply susceptible to misunderstanding.”
[Which suggests that a jury could consider the issue as to all the ads, though
the court then indicates that it’s most interested in guidance from the court
of appeals.  Again, one might be able to
fit evidence of intent into a cost-benefit analysis as well as into a
materiality analysis: an intent that consumers believe something beyond the
literal statement could itself suggest that there are other, less confusing
ways to convey the truth, and an intent that consumers be alarmed by a
statement is pretty good evidence that they might act on it, if we believe that
a major manufacturer like AB generally has some idea about what its consumers
care about.]
The court then, somewhat confusingly, turned to whether
there was evidence that a “substantial segment” of the audience was deceived by
the challenged ads: the survey, consumer communications to MC, and social media
evidence.  AB contested the survey and
the 35% net confusion finding.
First, it was ok to use a test commercial that wasn’t the ad
that launched the ad campaign and ran the most times/was seen by the most
people. Both ads compared the beers and highlighted corn syrup, and AB didn’t
articulate a basis for treating them differently.
AB argued that the questions were leading because a consumer
who chose the answer “made with corn syrup” to a communication/filter question
was then told: “Being “made with” corn syrup may mean a number of different
things” and then asked “Which, if any, of the following statements does the TV
commercial say, suggest, or imply …?” (The possible answers included used only
during brewing, in the beverage you drink, both, neither, and don’t know/unsure.)  AB argued that the follow-up improperly
instructed respondents that the term “made with” is ambiguous. This went to
weight, rather than admissibility, and there was “at least some likelihood of
persuading a reasonable jury of the risk of confusion.” Anyway, survey evidence
isn’t required for a preliminary injunction.
As for the consumer communications, there weren’t that many
of them—32 total, out of the approximately 100 million people who watched the
Super Bowl, and many accurately described use or brewing with corn syrup.
Viewed in isolation, these statements were insufficient to prove that a
substantial segment of consumers were likely to be deceived, “but it is some
anecdotal support for the survey results.” The social media reactions were
treated similarly.
So the survey, which tested a “made with”/“brewed with” ad,
helped support a finding of likely success on the merits, but only as to those
ads that didn’t use the “made with”/“brewed with” language and thus crossed the
line from misunderstanding to misleading. 
That sounds weird, but I guess I see how the court got there: if “made
with”/“brewed with” ads are confusing but nonetheless nonactionable, then
surely the ads that go even further are deceptive.
Irreparable injury:  “[I]t is well settled that injuries arising
from Lanham Act violations are presumed to be irreparable, even if the
plaintiff fails to demonstrate a business loss.” Promatek Indus., Ltd. v. Equitrac
Corp., 300 F.3d 808, 813 (7th Cir. 2002). The Seventh Circuit hasn’t revisited this
in light of eBay (though it should, but
I understand why a district court wouldn’t, even though I think it could also
have read the writing on the wall/in the statute). Anyway, no presumption was necessary
given the evidence of irreparable harm. 
AB argued that failure to prove harm to sales prevented a finding of
irreparable harm, but MC showed reputational harm through its survey and anecdotal
social media and consumer comments, which was irreparable even with conflicting
evidence about whether MC’s sales or market share had been harmed.  Indeed, the evidence showed that MC’s market
share was “stable at best, while defendant’s sales and market share is growing,
albeit apparently at the expense of other, smaller competitors. This begs the
question why plaintiff’s share of these lost sales has not grown, at least in
proportion to its share of the market for light beers.”
However, the court qualified its finding of harm, which
affected the scope of the injunction.  As
in the SDNY
Danone case, the court thought
that there were truthful things that AB can say, and harm caused by truth
couldn’t be actionable; relevant harm comes from the difference between the
truth and what AB actually said. “Here, if plaintiff’s reputation was injured
solely, or even principally, by consumer awareness that its products are brewed
with or made with corn syrup, this may not serve as a basis for reputational
injury.” [In the Danone case,
however, there was no evidence that the potential truthful statement—Chobani actually
had less sugar than the Dannon product, just not as much less as it claimed—was
misleading, whereas MC’s evidence tends to show that the truthful “made with”/“brewed
with” statements, presented in the way AB presents them, imply misleading factual
claims to consumers.]
 

package with “no corn syrup” and image prominently on sides
The injunction thus didn’t disturb ads that only use the
words “brewed with,” “made with,” or “uses.” MC also sought to cover AB’s
packaging that prominently featured the claim “no corn syrup,” but this wasn’t part
of the original written PI submissions. 
The court allowed MC to submit an argument why the injunction should cover
noncomparative packaging.  [The answer is
Grice, or maybe xkcd.]

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Timeshare wars: no Lanham Act standing for property owner

Posted on May 31, 2019 by rtushnet

Wyndham Vacation Ownership v. Reed Hein & Assoc., LLC, 2019
WL 2232241, No. 18-cv-02171-GAP-DCI (M.D. Fla. May 23, 2019)
Somebody seriously needs to write a story about the
litigation war going on between timeshare companies and firms that sue timeshare
companies. Wyndham is a timeshare company, and Reed Hein is “a timeshare exit
company” directed and controlled by non-lawyer defendants, Reed, Hein, and
Paranteau. Wyndham alleged that defendants ran false and misleading advertising,
purporting to have “safe,” “legitimate,” or “guaranteed” means of “exiting”
Wyndham owners from their timeshare contracts. “After successfully luring
Wyndham Owners into paying exorbitant fees for its services, [defendant] TET instructs
them to stop making payments on their timeshare contracts, which they do,” but
TET doesn’t disclose the adverse consequence of breach. TET then would hire the
lawyer defendants “to engage in fruitless negotiations with Wyndham for a fixed
fee.” The lawyers allegedly would send boilerplate demand letters to Wyndham,
demanding that it stop communicating with their client, but never work with any
Wyndham entity to legitimately terminate a timeshare contract. Instead, they
allegedly used “deceptive and unlawful” strategies such as having the owner execute a quitclaim on the timeshare
interest without Wyndham’s knowledge or consent. Afterwards,
or after the timeshare contracts are foreclosed on, TET and the lawyer
defendants allegedly falsely tell their clients that they successfully
cancelled or transferred their timeshare contracts.
Wyndham sued for false advertising in violation of the Lanham
Act, contributory false advertising in violation of the Lanham Act, tortious
interference with contractual relations, violation of Florida’s Deceptive and
Unfair Trade Practices Act (FDUTPA), and civil conspiracy to commit tortious
interference.
Lanham Act standing: Not present.  The injury alleged came because owners
stopped making payments on their timeshare contracts, but that injury didn’t
flow directly from TET’s advertising. None of the ads allegedly included
instructions to stop paying, and the complaint alleged that the instructions occurred
after TET solicited owners. The injury was too remote. This also got rid of
contributory false advertising.
Tortious interference: Defendants argued that, as counsel
for Wyndham owners, they were agents with privilege to interfere, but this was
an affirmative defense that didn’t clearly appear on the face of the complaint.
To the contrary, the complaint alleged that defendants weren’t agents.
Likewise, the complaint didn’t indicate that the owners were predisposed to
commit a breach; rather, they were allegedly deceived into doing so.
FDUTPA: Same problem as the Lanham Act claim. [There was no
analysis of the relevant statutory language, even though it is not limited to “commercial
advertising or promotion” and otherwise is worded quite differently; FDUTPA
is an FTCA-analogue rather than a Lanham Act analogue and on its face looks to cover far more commercial conduct than advertising, which affects whether the covered conduct is the cause of the harm.  Courts don’t like to do two analyses of the
same basic claim, but I think they probably should in this situation.]

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Domain name initial interest confusion isn’t dead

Posted on May 31, 2019 by rtushnet

Platinum Properties Investor Network, Inc. v. Sells, 2019 WL
2247544, No. 18-61907-CIV-GAYLES/SELTZER (S.D. Fla. Apr. 11, 2019) (magistrate
R&R)
Rival real estate investors Hartman and Sells apparently
developed a “personal feud,” and Sells allegedly initiated a campaign to harm
Hartman’s reputation and steal his clients. Defendants allegedly set up websites and email addresses using plaintiffs’
registered trademarks to confuse consumers and divert internet traffic.  Defendants argued that their websites were
noncommercial, nonconfusing gripe sites.
The registered marks were “Jason Hartman” and “JasonHartman.com,”
and defendants allegedly combined them with generic terms such as “property,”
“media,” “investments,” and “real estate investments” to create web and email
addresses.  Defendants’ emails and
websites, they argued, contained “a litany of derogatory information about Mr.
Hartman,” as well as phrases such as “investigation,” “bad news,” and “the
truth about.” Thus, they contended that confusion wasn’t plausible.
Plaintiffs responded that the disparaging terms weren’t contained
in the domain name itself, and argued that defendants’ acts were commercial and
competitive.  Because plaintiffs alleged
initial interest confusion, the absence of disparaging terms in the domain name
made confusion plausible, sigh.  Only upon
reaching the landing page would consumers find out that these were gripe sites.
 The allegations apparently included that
defendants “harvested” the personal data of actual visitors to solicit
competitive business opportunities—but there’s no suggestion in the report that
consumers would have been confused when entering contact information, which seems
like an important question about whether the confusion could have caused harm. “Based
on Axiom, Promatek, and Brookfield, the undersigned concludes that a financial
injury that results from an indirect or suggestive use of a trademark may supply
the necessary predicate for a Lanham Act claim.” [A dose of the Ninth Circuit’s
post-Brookfield domain name realism would be really, really helpful here.]
Dilution: Federal law requires federal fame and state law
requires state fame. Since “Plaintiffs repeatedly indicate that the fame of
their marks is limited to a niche segment within real estate investing circles,”
the claims should be dismissed. 
Plaintiffs alleged a couple of million dollars in advertising and
millions in revenue, but Hartman’s alleged “guru” status was limited to “his
trade.” Conclusory allegations of “famous[ness]” were insufficient.
Separately, and interestingly, the magistrate revived a pre-federal
dilution argument that I haven’t seen in a while, but that I like: “principles
of trademark dilution have no application in scenarios where, as here, the
owner of the mark, and the infringer, are involved in the same trade.” Dilution
is for noncompeting goods/services. 
Infringement was the proper remedy, if any remedy is required for
defendants’ conduct.
False advertising/common law fraud/negligent
misrepresentation: Florida requires that a plaintiff plead its own justifiable reliance
to make out these claims, which plaintiffs here did not do.  Civil conspiracy and unfair competition,
however, survived because the infringement claims did, and tortious interference
was sufficiently pled because the complaint alleged that “Defendants’
activities did either break contractual agreements with Plaintiffs and/or
stopped doing business with Plaintiffs as a result of Defendants’ intentional
and unjustified interference …. For example, one client of Plaintiffs’
canceled a speaking engagement … worth tens of thousands of dollars ….”
Invasion of privacy: The complaint alleged that defendants’
website “was, and still is, completely devoid of any privacy policy …. and
solicited visitor[s’] information through a ‘Contact Us’ fill-in webform.” Defendants
allegedly fraudulently obtained and published Hartman’s “personal IP address,
email address, and personal information, which was obtained when Mr. Hartman
sent the cease-and-desist demand through the Infringing Website’s ‘Contact Us’
webform” and the “Infringing Website publicly disclosed Plaintiffs’ private
information.”  But plaintiffs didn’t
allege a right of publicity claim, and it wasn’t clear what they were alleging.  Allegedly false statements about plaintiffs’ “business,
financial history, litigation history, commercial dealings, alleged prurient
nature, credibility, and trustworthiness” couldn’t be the basis of an invasion
of privacy claim. And plaintiffs alleged that they voluntarily disclosed Hartman’s
“personal IP address, email address, and personal information” when they sent a
demand letter through the “Contact Us” webform. 
They couldn’t reasonably expect information voluntarily disclosed to
competitors and adversaries to remain private. 
Moreover, in Florida, residential addresses and contact information “do
not typically fall within the parameters of “private” information.” And “professionals
cannot reasonably expect that this type of information will remain private
given the necessity of certain disclosures for state licensing applications,
such as those relevant to the real estate and investment sectors,” which was
the case here.  And further, Hartman
disclosed the same information when he filed a criminal complaint against defendants.
“Hartman’s expectations of privacy, even if reasonable, are ultimately
irrelevant as these quintessentially public records are not entitled to privacy
protection under Florida’s Sunshine Laws in any event.” However, the magistrate
recommended allowing leave to replead a claim for commercial appropriation
[which would have serious First Amendment problems if there wasn’t a false
endorsement; you shouldn’t be able to avoid negative comparative advertising by
using your name as your business name].

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Placebo effect is ok by CLRA: Homeopathic remedy wins jury trial on false advertising, still needs to defend against “unfairness”

Posted on May 20, 2019 by rtushnet

Allen v. Hylands, Inc., — Fed.Appx. —-, 2019 WL 2142843,
No. 17-56184 (9th Cir. May 15, 2019)
Allen, on behalf of a class, appealled following a jury’s
verdict in favor of Hyland’s. “The gravamen of [Allen’s] claims is that
Hyland’s [homeopathic] products are ineffective at providing the promised
symptom relief.” The district court framed the argument as: “Defendants made
material misrepresentations about products which do not work and cannot
possibly work as a matter of scientific principle, given the level of dilution
of their active ingredients.”
“The parties submitted conflicting jury instructions:
Allen’s proposed instructions stated that Allen needed to prove that Hyland’s
products ‘did not’ work, while the instructions proposed by Hyland’s stated
that Allen had to show that the products did not and ‘cannot relieve symptoms
as represented.’”  The court went with
“cannot,” and declined to give Allen’s proposed instruction that the jury “may
not take into consideration the placebo effect in determining whether
[Hyland’s] products provided relief.”
The jury returned a verdict for Hyland’s on the
Magnuson-Moss Warranty Act claim, express warranty claim, and CLRA claim.
Relying on the jury’s express and implicit findings of fact, the district court
found for Hyland’s on the equitable FAL and UCL claims and denied Allen’s
motion for a new trial.
If “cannot” was error, it was probably harmless, because the
parties used “do not” and “cannot” interchangeably throughout. As for the
placebo effect instruction, Allen relied on FTC v. Pantron I Corp., 33 F.3d
1088 (9th Cir. 1994), rejecting the placebo effect as a way a product could
“work.” But CLRA, Magnuson-Moss Act, or express warranty cases haven’t adopted
this holding [nor have they rejected it, for the record], so the proposed
instruction wasn’t supported by law.
Admitting Hyland’s expert was also not an abuse of
discretion.  He was a board certified
expert in toxicology who’d published extensively; several of his works
concerned the principles of hormesis (Wikipedia: “any process in a
cell or organism that exhibits a biphasic response to exposure to increasing
amounts of a substance or condition,” in particular, a response at low doses
that would be reversed or not observed at high doses), about which he was
called to testify; and his testimony on the relationship between hormesis and
homeopathy was derived from a literature review citing to several peer-reviewed
sources in his field.
There was a reasonable basis for the jury’s verdict, and no
abuse of discretion in denying Allen’s Rule 59 motion.
As to the equitable claims, the district court should follow
the jury where it found facts, but if “determining the equitable claims
requires proof of a fact that the jury did not implicitly or expressly find,
the district court must make its own determination.”  The FAL claims required proof of the same
facts as the legal claims, so that was ok. But the UCL claim had both deceptive
advertising and unfairness theories, and the latter was broader than the CLRA,
Magnuson-Moss Warranty Act, or express warranty claims. The UCL’s unfair prong
can apply to business practices that are against public policy, that are
“immoral, unethical, oppressive, unscrupulous or substantially injurious,” or
that cause unforeseeable injuries to consumers that are not outweighed by
countervailing benefits. The jury’s “narrow” findings on deceptive advertising
didn’t resolve the broader unfair practices theory. Thus, the district court
erred in granting judgement to Hyland’s without further analysis and that part
of the case was reversed.

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call for law student papers: Harvard J of Law & Tech

Posted on May 20, 2019 by rtushnet

Harvard Journal of Law & Technology Student Note Submission
Deadline: June 17, 2019
The Harvard Journal of Law and Technology (JOLT) is excited
to announce our student note submission is open for our Fall 2019 issue.
Submissions should be 4,000 to 6,000 words and engage with novel issues at the
intersection of law and technology. Topics may include but are not limited to
cybercrime, biotechnology, space law, entertainment and new media, comparative
legal approaches to intellectual property, the law of the Internet, and
technology in the public interest. We encourage creative approaches.
The deadline for submissions is 11:59 PM Eastern Time on
June 17, 2019. Submissions will be evaluated on a rolling basis but all
pre-deadline submissions will be considered! 
Download the volume 33.1 student note application at
bit.ly/studentnotefall2019. You can find the application link, full rules, and
eligibility requirements on JOLT’s website at
http://bit.ly/2VRv6j0. Email JOLT’s Notes & Comments
Editor at joltstudentnotes@gmail.com with any questions.

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AARP endorsement of insurer doesn’t inherently represent that AARP chose disinterestedly

Posted on May 17, 2019 by rtushnet

Levay v. AARP, Inc.,
2019 WL 2108124, No. 17-09041 DDP (PLAx) (C.D. Cal. May 14, 2019)
Plaintiffs are AARP
members who allege to have “joined and paid to be AARP members” after being allegedly
“induced … through unlawful, misleading and/or unfair representations of
products, services and endorsements by AARP and/or concealment of AARP’s
unlawful ‘for profit’ business activities.” Specifically, they alleged reliance
on “AARP’s misrepresentations that it protected seniors and that it put their
interests first ahead of ‘for profit’ business ventures, and about its
endorsements of insurance products.” Plaintiffs alleged that AARP’s stamp of
approval was only a “stamp indicating the winner of [a] bidding war,” rather
than a true endorsement on the merits. They brought California UCL and FAL
claims.  The court found they failed to
state a claim.
Initially, the court
rejected the argument that the complaint didn’t allege any “statements by AARP,
only advertisements run by United Healthcare and New York Life ….” The
relevant representations were (1) solicitations and ads from AARP in which it
represents its status and role as an advocate for seniors, and (2) AARP
endorsements on United and New York Life insurance advertisements. “AARP does
not dispute that it permits its name to appear on the advertisements and that
AARP in fact endorses these products. Therefore, the endorsements constitute
AARP’s representations even though they appear on United and New York Life
advertisements.”
But was there an
actionable misrepresentation?  Plaintiffs
alleged that they “believed that AARP endorsed products and services, such as
insurance products, were products and services that were the best for seniors.”
But “best” was too vague ans subjective a promise of superiority, even if
implied, to be actionable. By contrast, in Hanberry v. Hearst Corp., 276 Cal.
App. 2d 680 (1969), the Hearst Good Housekeeping seal of approval could have
deceived someone who bought defective shoes. The court held that “[i]mplicit in
the seal and certification is the representation [that] respondent has taken
reasonable steps to make an independent examination of the product endorsed,
with some degree of expertise, and found it satisfactory.” But it was key that
Good Housekeeping magazine stated: “ ‘This is Good Housekeeping’s Consumers’
Guaranty’ and ‘We satisfy ourselves that products advertised in Good
Housekeeping are good ones and that the advertising claims made for them in our
magazine are truthful.’ ” “The seal itself contained the promise, ‘If the
product or performance is defective, Good Housekeeping guarantees replacement
or refund to consumer.’ ” These express guarantees “made a consumer’s reliance
on Good Housekeeping’s independent examination reasonable.”  And even if an implied promise of superiority
was actionable, plaintiffs didn’t identify any defects in these insurance
policies.
What about an
implied representation that AARP had evaluated the insurance plans for
suitability for seniors, “irrespective of profits”?  AARP wasn’t a fiduciary just because it was a
nonprofit. Plaintiffs allegedly saw “solicitations and ads from AARP … in
which AARP represented its non-profit status and advocacy role for seniors and
that it provide[d] endorsements for products and services as a benefit of
membership, which [Plaintiffs] believed meant that AARP would [ ] make
endorsements and stamps of approval based on what was best for seniors, rather
than based on profits.”
“A representation
that a product is selected irrespective of profits could be an actionable
misrepresentation because it is sufficiently specific and objectively
determinable such that a consumer could reasonably rely on such representation.”
But the complaint didn’t sufficiently allege such a representation. Sample ads
in the complaint said that United Healthcare and New York Life Insurance
Companies “pay[ ] royalty fees to AARP for the use of its intellectual
property.” “Therefore, it would not be reasonable for a consumer to believe
that AARP was not engaged in revenue generating activities,” and there was no
allegation of any representation that revenue concerns played no role in its
endorsement decisions. “It would be foolish indeed for an enterprise,
regardless of its status as a non or for-profit entity, to be blind, all other
factors being substantially equal, to revenue generating opportunities. In
short, there is nothing nefarious about AARP making endorsement decisions, or
any other business decisions, based on generating maximum revenue that will be
used to support its activities, absent some allegation that such decision
resulted in articulable harm to its members.” It wasn’t enough to allege that
AARP benefited.
Separately, the
court found that plaintiffs didn’t plead with particularity the ads they relied
on or when/how they became AARP members.

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blog posts on company’s site are “commercial advertising or promotion” under Lanham Act

Posted on May 17, 2019 by rtushnet

Luminati Networks
Ltd. v. BIScience Inc., 2019 WL 2084426, No. 18-CV-00483-JRG (E.D. Tex. May 13,
2019)
Mostly a
jurisdictional challenge; the court found it had specific personal jurisdiction
over Luminati’s claims for patent infringement and false advertising and
supplemental jurisdiction over the remainder of Luminati’s claims, though it
declined to exercise supplemental jurisdiction over Luminati’s claim for
tortious interference with employment agreements, “as determination of that
claim is best left to the judicial authority of the State of Israel.” There was
personal jurisdiction because BIScience has sold its allegedly patent-infringing
proxy service to at least 52 customers in Texas, and its service allowed
customers all over the world to utilize residential proxy devices in ten Texas
cities, which BIScience advertised (at least in terms of allowing them to use
US addresses).
Luminati
sufficiently alleged the falsity of blog posts on BIScience’s website stating:
“Some proxy providers look great and fancy until you try to integrate them.
Some—such as Luminati—are very difficult to integrate, as they require you to
install complex proxy managers and to ultimately modify your entire solution.” Luminati
sufficiently alleged falsity by alleging that its residential proxy service didn’t
require installation of Luminati’s proxy manager.

BIScience argued that a blog post on its own site wasn’t “commercial
advertising or promotion.” Yes, they were. 
The blog posts were commercial speech by a company in commercial
competition with Luminati, made for the purpose of influencing customers to use
BIScience’s GeoSurf service. Shortly after the statements at issue, the blog
posts continue: “In short, stay away from these proxies. Instead, go for
easy-integration proxies that support whatever your needs may be. GeoSurf, for
instance, takes less than 5 minutes to integrate….” Moreover, “while company
blog posts may not be traditional ads, they are a quintessential type of
informal promotion.” BIScience allegedly purchased search engine ads for terms
like “luminati” so that potential customers would be directed to its
website.  “Thus, Luminati has alleged
that these blog posts are disseminated sufficiently to the relevant purchasing
public.” [Note an emerging divergence on this: some courts would want evidence
that lots of people landed on the blog posts, which I think is probably an
issue of damages rather than “commercial advertising or promotion”; it’s still
an ad even if everyone successfully avoids reading it.]

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law firm alleging clients lost to competitor satisfies Lexmark, in part

Posted on May 14, 2019 by rtushnet

Brave Law Firm, LLC v.
Truck Accident Lawyers Group, Inc., No. 17-1156-EFM-JPO, 2019 WL 2073872 (D.
Kan. May 10, 2019)
Brave, a personal
injury firm, sued various parties for violating the Lanham Act and Kansas state
law.  
It alleged that “from
2007 to at least 2017, Defendants created and disseminated false and misleading
advertisements regarding the amount of money they obtained as settlements and
jury verdicts for their clients.” For example, one ad claimed that they
obtained a settlement of $9 million for a past client, but Brave alleged that
they didn’t because they were fired by the client. They also allegedly falsely
advertised gross recoveries of $4.1 million, $2.4 million, $2.1 million, $1.1
million, and $1.6 million.
Brave pled three
specific examples of past clients who relied on the allegedly false
advertising. One hired one of the defendants in 2011. “During mediation, the
mediator told her that her case had a value of $360,000, but the highest
settlement offer [defendant’s entity] AAPLO obtained was $225,000 in exchange
for a full release to the tortfeasor. Consolver rejected that offer and
terminated AAPLO as her legal counsel. …. Consolver then hired Brave, who
pursued a different theory of recovery and obtained a settlement amount of
$360,000.”  Defendants/their entities filed
an attorney’s lien, reducing the amount of Brave’s fee.  The other examples were very roughly similar
though more complicated.

The court rejected defendants’ arguments that the statute of limitations barred
a Lanham Act claim relating to the first client and that it wasn’t sufficiently
pled under Rule 9(b). On the limitations issue, the court borrowed the Kansas
period for fraud, 2 years; Kansas uses a discovery rule, and Brave alleged that
defendants’ injury-causing conduct wasn’t reasonably ascertainable until within
the two-year period for filing.  Brave
hadn’t pled itself out of court by alleging facts making it clear that a
reasonably prudent person would have investigated Defendants’ actions in 2007
or 2012, when Consolver hired Brave.

Brave also identified specific allegedly false ads.  Although Brave didn’t allege which exactly
Consolver viewed or when she viewed them, it was enough to allege that defendants
“engaged in a false advertising scheme that exposed potential clients, such as
Consolver, to numerous false advertisements over a period of time. The
requirements of Rule 9(b) are relaxed when the alleged fraudulent acts are
numerous and occur over an extended time period.  Here, it would be unduly burdensome to
require Defendant to specify every false advertisement that Consolver relied
upon and when she saw that advertisement.”
Brave also
sufficiently alleged falsity by identifying specific claims about verdicts or
settlements achieved by defendants and alleging that they were false. For
example, ads reporting the $9 million settlement were allegedly “literally
false” because “the person that actually reached the settlement had terminated [defendants/their
entities] prior to any settlement being reached.” Defendants argued that the
claim was true because they were able to assert an attorney’s lien against the
former client when settlement was eventually reached and thus they contributed
to the ultimate resolution.  The court
wasn’t persuaded. The ad didn’t identify defendants as causally helping to
obtain a settlement: it said that one of them did obtain it.
As to another
client, defendants argued that the claim failed to satisfy Lexmark. The alleged “injury to a commercial interest in reputation
or sales” was that because it had ended up embroiled in litigation about the
attorney’s lien on that client’s recovery that (1) it “has been embroiled in
litigation and forced to deal with the abandoned lien issue for years”; (2) it
“has sustained injury to its reputation as well as been forced to spend
considerable time and expense defending frivolous litigation”; (3) “the
allegations that Brave Law Firm, LLC and its employees acted ‘illegally,
unethically[,] and immorally’ have been disseminated far and wide and damaged
its reputation both within the Kansas legal community and [with] potential
clients.” Proximate cause ordinarily requires “economic or reputational injury
flowing directly from the deception wrought by the defendant’s advertising; and
that occurs when deception of consumers causes them to withhold trade from the
plaintiff.” Here, the allegations of injury were “simply too remote” from the false
advertising.  Brave didn’t allege losses
of fees from an attorney’s lien, but rather from losses due to fighting with
defendants about the underlying case.
As for the third
client, it was sufficent to allege that Brave “likely” would have been her first
choice in the absence of advertising; it was not required to allege that she
definitely would have been. This third client’s claim was dismissed, allegedly because
of defendants’ missed deadlines, and allegedly would have resulted in a
multimillion-dollar recovery. Defendants argued that it wasn’t plausible to
conclude that Brave would have won, and won so big.  But it was enough to allege that the client’s
“case would not be one that was particularly difficult to win and, if properly
handled, would have generated a substantial attorneys’ fee upon successful
resolution.”
However, Brave didn’t
successfully plead tortious interference. Even if Brave pled the existence of a
business relationship or expectancy with the clients, nothing indicated that
defendants were aware of that when those clients initially hired defendants.

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CopyrightX: Article 13

Posted on May 14, 2019 by rtushnet

Panel Two: Online
Service Providers, Automated Anti-piracy Systems, and Article 13 [like CDA 230,
it may never lose the initial number even if it no longer fits the statutory
numbering]
Moderator: Jennifer
Esch
Giancarlo Frosio:
Copyright and Article 13
Summary of current
provisions.  Automated technology is the intended
effect. Hard to see how that can be done without general monitoring of all
contents of a platform for unlimited times. 
Scarlett court made clear that
fundamental rights are implicated—freedom of information and expression—and automated
technologies are not proportional, especially given that they might jeopardize a
business.  Limitations and exceptions
also need to be accommodated somehow.
Ginka Hristova: The
Effects of EU Article 11 and Article 13
Content ID is the
prime example that people give of how it should be done but Content ID works
badly—it’s not a good model.  [And the
same content owners complain bitterly about Content ID not being good
enough!]  Burden of proof is reversed
from the Electronic Commerce Directive. 
Now platforms will have to prove that they’re making enough efforts to
avoid direct liability.  Collisions
w/GDRP as well.  Especially when determining
whether exceptions and limitations apply, much information will need to be
collected.
Mohammed Iriqat:
Copyright Piracy in the Arab World
Extensive unlicensed
downloading of music, movies, software. 60% of software running in the Arab
world is unlicensed.  Millions of DVDs.  Gov’t institutions and universities participate.  Microsoft Office $5 an unlicensed CD,
compared to $70 authorized price.  $2
billion in calculated economic loss. 
Possible solutions: collective management organizations, but there are
just 5 Arab CMOs and 22 Arab countries. Raise awareness. 95% of Arab citizens
don’t see a problem with illegal downloads. 
Internet laws like DMCA, which are lacking in the Arab world.  Customs authorities: no control over entry of
pirate CDs.  World Cup 2018: Four
countries blockaded Qatar, which had the rights to broadcast; they made sites
to distribute the World Cup w/o authority of the Qatari rightsowner. Intergovernmental
conflict.  Qatar went to WIPO for
arbitration, but WIPO hasn’t made a final decision.
Jordan Gimbel:
Twitch and the Likely Effects of Article 13
Wide spectrum of
online service providers and treatments of unauthorized use/debates w/ different
rightsholders: music, film, gaming.  Twitch
isn’t YouTube or Twitter; has some features but also Patreon-like.  You can live broadcast your gaming.
Streaming could
infringe, but game publishers/developers often license streaming—an attractive
complement to their titles.  Many license
monetization by individual streamers. But we’re not immune from unauthorized
works appearing.  We do see notices for
(1) livestreaming sports; (2) violations of embargo conditions on new games;
(3) user disputes over emotes (users who create designs for the overlay).  Twitch as complement: NBA brought its
G-League (farm team) cames to Twitch, allowing others to costream it (add it to
their own channel with their own overlays). 
NFL selected a few costreamers who could stream it to their own audience
w/their own commentary.
We process DMCA
notices in minutes; suspend live broadcast for 24 hours. For VOD works we mute
the songs—if you create an archive of a live broadcast, we scan & create
audio fingerprints w/Audible Magic and mute portions for matches.  Some rightsholders have priority access—soccer
leagues, game companies—to act w/o needing to send notice.
How does this change
under Art. 17/13?  Obligation to license,
notice and staydown: filters are the only option.  Reference files aren’t available for
livestreams so that’s a challenge. This content is yet to be created.  And the overlays are different digital
assets. We can scan the audio, but scanning images on overlays from multiple
sources are a challenge. Scratching our heads. 
Algorithmic tools are going to be needed; taking $ from other
developments. Open Qs.  Mistakes in
livestreams lead to suspension of channel, which impacts people’s
livelihoods.  Filter’s false positives
are therefore concerning. Crossborder implementation challenges: different
rightsholders across Europe.  GEMA
(German PRO) announced that it thought it should be given a larger negotiating
power on behalf of images as well as music. That’s great, but only for Germany.
Q: what could gov’ts
do/what are the missed opportunities?
Hristova:
implementation legislation.
Q re real people
depicted in games.
Gimbel: US-centric
answer: right of publicity is what’s debated.
Q: where do you get
the filters from? Google?
Gimble: question of
market power.  Content ID has been around
for a while and they’re set on approach. Compliance w/best efforts: we’re
trying to figure out whether that means we can engage in licensing from a
vendor, but may have to develop a filter that maps to your service using your
reference materials. Open Q: does the law require us to build our own tech to
do that because we have a different way in which we serve content, w/overlays
that are different from other services. [One of my biggest questions about all
this is how licensing is going to work for visual works—is there just going to
be a wealth transfer from platforms to the small percentage of visual artists who
are represented by PROs and to the PROs themselves based on the overall “value”
of visual works?  Whereas music really
does have a high percentage of covered material deliberately part of a PRO,
visual works don’t and won’t.]
Terry Fisher: some
suggestions about implementation: make platforms responsible for costs of
wrongful blocking of noninfringing materials in order to incentivize balancing
and use of mechanisms such as arbitration or option system to reduce social
costs of this regime.

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