Rebecca Tushnet

Neighboring farmers have Lanham Act standing where false ads allegedly prompted pesticide use

Posted on February 12, 2019 by rtushnet

In re Dicamba Herbicides Litig., MDL No. 2820, 2019 WL
460500 (E.D. Mo. Feb. 6, 2019)

Plaintiffs, twenty-one soybean farmers from eight states (Arkansas,
Illinois, Kansas, Mississippi, Missouri, Nebraska, South Dakota, and Tennessee),
alleged that their soybean crops were damaged by the herbicide dicamba when
neighboring farmers planted genetically modified dicamba-resistant seeds and sprayed
that crop with dicamba. USDA permitted the sale of the dicamba-resistant seeds
in January 2015, but the plaintiffs argue that commercial sale was wrongful
because the EPA hadn’t yet approved a dicamba herbicide for use over the top of
crops grown from those seeds. (The seeds could allegedly tolerate other
herbicides, like Monsanto’s Roundup.) Allegedly,
the amount of dispersal of an herbicide varies and there are other herbicides
that wouldn’t have drifted in the same way; dicamba had previously been a
problem because of its volatility and propensity to drift, sometimes taking
other herbicides with it. In 2017, the EPA approved new low-volality dicamba
herbicides for over-the-top crop use during the growing season, XtendiMax and
Engenia.

However, the plaintiffs alleged that the new herbicides are “unsuitable
for in-crop use because they too, like the earlier versions of dicamba, are
volatile and prone to move off-target and damage nearby, sensitive crops.” This
is allegedly a further win for defendants insofar as it
induces farmers to defensively purchase dicamba-resistant seed to avoid
damages.

I’m here for the Lanham Act claim, though the other claims
are also interesting. On causation, Monsanto argued that it wasn’t the source
of the old, pre-2017 herbicide, but the causation theory was that “Monsanto
marketed and sold its dicamba-resistant seed to third-party farmers knowing
that they would spray dicamba that may harm nearby, non-resistant crops.” The
only reason to buy and plant the seeds, the plaintiffs alleged, was to use it
with dicamba herbicides, whether new or old.
The manufacturer of the herbicide wasn’t the key to causation.

Defendants challenged plaintiffs’ Lanham Act standing. The
alleged false advertising was that the Xtend seeds could be safely employed
utilizing over-the-top application of dicamba herbicides and that the dicamba
would not drift. Lexmark requires a plaintiff to plead: (1) an injury within the
“zone-of-interest,” that is, “to a commercial interest in sales or business
reputation,” (2) that was “proximately caused by the defendant’s
misrepresentations.” Plaintiffs need not be defendants’ competitors to state a
claim. The plaintiff must be a commercial actor suffering commercial injuries
instead of being a “consumer who is hoodwinked into purchasing a disappointing
product.” That was sufficiently pled here: the plaintiffs were commercial
actors, not consumers of defendants’ products, and thus they fell within the Lanham
Act’s zone of interest.

Monsanto argued that there was no standing for 2016 claims
because it was illegal for third party farmers to use dicamba herbicides with
its Xtend seeds in 2016, so the intervening criminal conduct severed the causal
chain connecting Monsanto’s misrepresentations to any wrongdoing. That is not an
automatic Article III rule; standing was sufficiently alleged.

Proximate cause: Monsanto argued that the plaintiffs were at
best indirect victims of the allegedly false advertising. But consumer
deception is always an intervening step before the harm materializes in a false
advertising case (and in a Lanham Act case it materializes to a third party,
usually the competitor who’s lost a sale as a result, even if it also
materializes as harm to the consumer). Monsanto argued that there had to be harm
to a consumer for there to be proximate cause, but the court recognized that
this made no sense. (The Lanham Act should
be triggered where there is false advertising that changes consumer behavior—if
the plaintiff’s product was exactly the same as the defendant’s and exactly the
same price and there was nothing better on the market, a misrepresentation of
superiority that diverted purchasers to the defendant wouldn’t necessarily harm
those purchasers in a tangible way, setting aside the moral disrespect of fraud,
but it distorts the competitive environment and harms other market actors, who
are the targets of the Lanham Act’s solicitude per Lexmark.) Even if the direct
victims of Monsanto’s fraud ended up with crops that were fine, plaintiffs
still alleged commercial injury because Monsanto’s misrepresentations caused
third parties to use dicamba that destroyed plaintiffs’ crop, so plaintiffs had no soybeans to sell.

Interestingly, the fact that plaintiffs successfully pled a
Lanham Act claim seemed to comfort the court in concluding that they couldn’t
bring tort claims based on ultrahazardous activity—that concept usually involves
only the actual use of the product in question, not promotion of its use. “Ultimately, plaintiffs’ claim is that
“lying” about the safety of an ultrahazardous activity—the spraying of
dicamba—is itself an ultrahazardous activity. That claim is certainly
actionable, but not under the ultrahazardous activity doctrine.”

So too with trespass and nuisance—Monsanto’s extensive seed
licensing agreement with farmers did not allow it to terminate the agreement
for misuse of dicamba, so they didn’t control whether the dicamba particles migrated
to plaintiffs’ land. There was no “ongoing” promotion, aiding, abetting,
assisting, or contributing to the trespass/nuisance, and no need to hybridize a
cause of action using trespass/nuisance plus misrepresentation theories.

Failure to warn claims/consumer fraud act claims under the
laws of Illinois and Nebraska: Monsanto argued that FIFRA preempted these
claims. Plaintiffs argued that FIFRA
preempts labeling-based claims, but that their claims were based in part on
non-labeling material, such as in-person discussion and websites (Facebook,
Twitter, Instagram, YouTube, Snapchat, Pinterest, and Linked In). (Today I learned that Monsanto or its agents
allegedly use Snapchat.) Though a few
cases hold otherwise, the court approved a more literal reading of the preemption
statute, limiting its reach to labeling and packaging.

Second, plaintiffs argued that they weren’t seeking requirements
that are “in addition to or different from” FIFRA, as required for preemption. FIFRA
bars “misbranding,” which occurs if a label contains a “false or misleading”
statement or if it “does not contain adequate instructions for use, or if its
label omits necessary warnings or cautionary statements.” Although FIFRA doesn’t
provide a private cause of action for misbranding, states are allowed to do
so. The state law requirement need only
be substantively identical; it need not be phrased in the identical language. To the extent that plaintiffs alleged that
the labels failed to contain instructions that would, if followed “prevent harm
to the environment,” that did go beyond FIFRA, which only requires instructions
that will, if followed, prevent “unreasonable harm,” so their claim was
preempted to a tiny extent, but there was still room for their failure to warn
claims.

The court reached a similar result on Nebraska Consumer
Protection Act and Illinois Consumer Fraud Act claims. However, the court
dismissed the Nebraska statutory claim because of its regulatory state harbor.
Both states’ laws have safe harbors; Illinois says: “Nothing in this Act shall
apply to any of the following: (1) Actions or transactions specifically
authorized by laws administered by any regulatory body or officer acting under
statutory authority of this State or the United States.” Although Monsanto’s advertising claims were
submitted to the EPA as part of EPA registration procedures, “exemption is not
available for statements that manage to be in technical compliance with federal
regulations, but which are so misleading or deceptive in context that federal
law itself might not regard them as adequate.”

However, Nebraska’s exemption was broader: “the Consumer Protection Act shall
not apply to actions or transactions otherwise permitted, prohibited, or
regulated under laws administered by the Director of Insurance, the Public
Service Commission, the Federal Energy Regulatory Commission, or any other
regulatory body or officer acting under statutory authority of this state or
the United States.” Being “regulated” is
enough, rather than being “specifically authorized.” Thus plaintiffs’ statutory
claim failed. I think this reading doesn’t make much sense, insofar as the FTCA
and other federal statutes regulate pretty much any commerce you can think of;
in this interpretation, the only commercial transactions covered by Nebraska’s
consumer protection law would be those that did not arise “in commerce” for
purposes of allowing the federal government to exercise its Commerce Clause
authority—what is likely a null set even after the ACA case. I have my doubts that Nebraska could have meant
to negate its law entirely in this way. But
since EPA regulates pesticide ads under FIFRA, Monsanto’s conduct was within
the safe harbor. [What about seed ads? I
thought those were the real problem.]

The Illinois Consumer Fraud Act protects “any person who
suffers actual damages as a result of a violation of the Act.” Non-consumers
“may sue under the ICFA if they allege (and ultimately prove) the nexus between
the objectionable conduct and the consumer injury or harm.” A non-consumer has
standing to sue under the ICFA where the “conduct involves trade practices
addressed to the market generally or otherwise implicates consumer protection
concerns.” The allegedly unfair and deceptive conduct—the publishing of false
information to cause farmers to defensively buy dicamba-resistant seed—sufficiently
implicated consumer protection concerns. The complaint also satisfied Rule 9(b), whether
or not that was required for all ICFA claims.

Breach of warranty claims met varying fates depending on the
state. In Kansas, a non-purchasing, non-using third party can only recover for
breach if they’re (1) “expected to use, consume or be affected by the goods,”
and (2) “injured in person by breach of the warranty.” That didn’t happen
here. Arkansas, South Dakota, and
Tennessee gave effect to defendants’ prominent disclaimers of implied
warranties of fitness and merchantability, even though plaintiffs, as
nonpurchasers, couldn’t have read those disclaimers. “[T]o give the non-purchasing
plaintiffs more rights than purchasers themselves would have is an untenable
result.”

The Magnuson-Moss Warranty Act prohibits disclaimers of
implied warranties when an express warranty is provided, but only applies to
consumer products, not agricultural products.

Also, Missouri has a law protecting crops, who knew? It is unlawful for anyone intentionally to
cause the loss of any crop. Further, “any person or entity who knowingly
damages or destroys any field crop product that is grown for personal or
commercial purposes…shall be liable for double damages.” A claim under this law
was properly alleged, as was a design defect claim.

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Alkaline water false advertising claim is unappetizing, court rules

Posted on February 12, 2019 by rtushnet

Weiss v. Trader Joe’s Co., No. 8:18-cv-01130-JLS-GJS, 2018
WL 6340758 (C.D. Cal. Nov. 20, 2018)

Trader Joe’s sells Alkaline Water, whose label includes:

• “pH 9.5 +”

• “Our Alkaline Water + Electrolytes is ionized to pH 9.5+.”

• “pH is the measure of acidity and alkalinity. The higher
the pH, the greater the alkalinity.”

• “ionized to achieve the perfect balance”

• “refresh & hydrate”

• “hundreds of plus symbols” on the label

Trader Joe’s flyer touting Alkaline Water said:

• “Whether you’ve just eaten an abundance of corn or
cranberries (foods high in acid); or you’ve been sweating profusely; and/or
you’ve been reading this Flyer (because obviously that would make you thirsty)
our Alkaline Water + Electrolytes is a drink that can satisfy.”

• “The mineralized water is purified through reverse
osmosis, then run through electric currents (electrolysis), which changes the structure
of the water and raises the pH to 9.5+ (neutral pH of water is 7).”

• “Trader Joe’s Alkaline Water + Electrolytes is water and
then some.”

Weiss alleged that the label misled her to believe that the
Water was a “superior source of hydration” and could help “balance pH
internally.” She further alleged that the Alkaline Water does not actually have
a 9.5 pH balance and that “the actual pH at the time of purchase and
consumption was far less on the pH scale.” She brought the usual California
claims.

The court found that this was all puffery except the “not 9.5 pH” part, and
that wasn’t sufficiently pled, a holding I find dubious.

Initially, some of the complaint alleged lack of
substantiation of the purported health benefits, which isn’t actionable by
private parties under California law. The label and marketing also didn’t make the
health claims she identified, because it was mostly mere puffery. E.g., “refresh”
was “a vague, generalized assertion incapable of being proved false or of being
reasonably interpreted as a statement of objective fact,” as were the plus symbols.
Nor did the label claim to be a superior source of hydration, just a source. The
“ionized to achieve the perfect balance” claim didn’t claim that consumers
would become perfectly balanced or tout any health benefits from the perfect balance.

As for the flyer touting the water as good “[w]hether you’ve
just eaten an abundance of corn or cranberries (foods high in acid); or you’ve
been sweating profusely,” there was still no health benefit claim. I think this ignores the effects of implicature.
Why would it be relevant to whether you should choose this water that you’ve
been eating foods high in acid? There’s
no reason to mention that other than to imply that the water you drink should “balance”
your acidity (an impossible task in my case, I fear). But because the flyer
finished by claiming to “satisfy,” it was mere puffery. As for “water and then
some,” it followed the description of the water as containing 0.1% “minerals
(electrolytes), harvested from the lake region of Utah.”

The 9.5 pH claim was factual and falsifiable. However, Weiss
failed to plead with particularity “how she came to believe that the
representation is false.” That’s a diversion, mostly corrected in the court’s
ultimate analysis. We really don’t care how she came to believe that it’s
false, or even if she did come to believe that—her belief in falsity is not an
element of her claim. We care whether the statement was false.

And as with so many Twiqbal
issues this is all about the court’s common sense: pleading that the pH was not
9.5 is a factual allegation. Is that plausible? Sure, why couldn’t water not
have pH 9.5? Apparently much water
doesn’t, according to TJ’s itself. However, the court wants a “basis” for the
assertion of falsity. “Even assuming that viewing videos on the internet or personally
testing the pH balance of the Water is enough to support her claim,” that
wasn’t in the complaint, and the complaint needed to specify when the pH wasn’t
9.5—at bottling, at purchase, or at consumption. In a footnote, the court warned: “The Court seriously
questions Plaintiff’s decision to bring this suit if the only support she has
for this claim is what she has seen on the internet, or her own rudimentary
testing. Further, the Court reminds Plaintiff’s counsel that attorneys are
subject to sanctions under Rule 11 when they present ‘factual contentions
[that] have [no] evidentiary support or … will [not] likely have evidentiary
support after a reasonable opportunity for further investigation or
discovery[.]’”

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Posted in Uncategorized | Tagged Alkaline water false advertising claim is unappetizing, court rules consumer protection, false advertising, procedure | Leave a comment

WIPIP 2019, Plenary (designs)

Posted on February 12, 2019 by rtushnet

Whole Designs, Sarah Burstein

What is a “design for a useful article”? TLDR: it’s a whole article. Egyptian
Goddess said the infringement test has to be sameness of appearance. Must
appear substantially the same to the ordinary observer.

Worst design patent claim ever: Caffeinate Labs v. Vante:
multitool shaped like a monkey; the accused design is not shaped like a monkey.
(Withdrawn when D correctly filed a motion for sanctions.) Richardson v. Stanley works: claimed &
accused designs were hammer tools w/things in the same places but didn’t look
the same. We don’t have fragmented
literal similarity as in ©; you have to look at the design as a whole.

But: the whole what? Three long-recognized types of designs. A design for the shape of an article of
manufacture, like a dryer ball shaped like a hedgehog. A design for the surface ornamentation of an
article. Or a combination of both (grab
bars covered with leopard spots).

Then came Zahn,
where the CCPA said that the old rule of claiming the whole was out; the design
is whatever the patentee says it is.
Dotted lines disclaim portions of a complete design. Now you can claim anything, including daisy
chaining so you keep an application pending and target what your competitors
are doing. Apple had a bunch of
noninfringed whole shape patents that it didn’t assert against Samsung; you can
also claim components; you can claim fragments. There’s at least three types:
intact fragments, where only the part in solid lines is claimed—never exists separately
in real life, such as the rounded edge of one side of a laptop. Apple has mastered this—there are still
pending applications from the original iPhone at the PTO. There are also fragments that are voids:
holes. Apple claims the hole where you
plug in your Lightning connector. There
are also variable fragments (she wanted to call them mutilations) where you can’t
see them by looking at the product.
E.g., a pink interior with dotted lines around the round holes in the
interior. Is that claiming an interior
with no holes? With star-shaped holes? No one knows.

Fragment design conflicts w/ the statutory text, which
refers to “an article of manufacture” not multiple articles. [This would be a good issue to try to get
cert on at this particular juncture in time.] Conflicts w/long-standing
practice. It distorts the total profits
remedy, making a not great situation worse.
And it provides protection for minor, immaterial, and/or functional
parts. Creates doctrinal incoherence: if
everything is a design, then it is difficult to apply the other rules about, e.g.,
prior art and how to deal with parent/child applications. Anticompetitive.

As a design school graduate, was trained that design is the
whole—it’s not just shape but color and all other elements. Not simply a hodgepodge of discrete elements
but a cohesive and integrated whole.
Also there is positive space/negative space in art theory: when you draw
on a piece of paper, there is a part that is perceived as ground/empty
space. Even when it’s colored and the figure
is not colored, you perceive the background as negative space and the figure as
positive space. This is important
because negative space is as important as positive space in creating the
design.

A new theory: a configuration design for an article of manufacture
would be a design that dictates the entire shape of that article, including
positive and negative spaces; a surface design would dictate the entire
surface, including positive and negative spaces; and a combination design would
be both. Thus a single image for fabric
would be a different design than that image repeated multiple times in a
pattern on fabric.

If a piece is made and sold separately, that can be a separate
design. So there can be handle design
patents.

Lemley: what happens to dotted lines under your proposal?

A: have served different purposes over time—not the same
meaning in the 19^th c. Do we
protect designs per se or tether them to a particular product? It can’t be in the abstract, but the Fed.
Cir. might screw it up. The key is that the uncertainty adds more complexity.

Lemley: then we need a standard that is something other than
infringement standard that uses dotted lines for something. When you have a
swirl for the screw top of a bottle depicted in solid lines and dotted lines to
indicate the rest of the shape of the bottle, right now courts say that the
accused design has to have some kind of a bottle shape; you wouldn’t be able to
win an infringement claim for a similar screw top configuration on a car.

A: under my rule you just don’t use solid lines for that
purpose. [I guess under her rule at
least you could try to get the grooves as part of a design for a bottle cap, to
the extent that’s a separate article; maybe a bottle cap can go on many
different things, but the problem would be diminished and you wouldn’t be
worried about dotted lines.]

The Laws of Design, Christopher Buccafusco:

Legal and nonlegal mechanisms that promote or fail to
promote disabled access in the environment. Fits into non-IP motivations for
innovation. There’s lots of important work on access and innovation, including
in access to texts, access to the internet, deafness/blindness. Will focus on physical environment and opportunities
to move around in it.

1920s/30s after WWI, medical innovation lets people
w/serious spinal cord injuries survive when they wouldn’t have before. That
creates a new population, further affected by polio epidemic which also increases
portion of population that survives into adulthood w/a major disability.
Medicalized, rehabilitationist model of disability: how to be productive
laborers in society, which typically involves lots of things disabled people
don’t actually have as goals.
Institutionalization v. preferences for independence. GI Bill then
provides a not inconsiderable amount of $ to buy accessible technology; March
of Dimes and similar things also increase ability to pay/demand side. Oldsmobile Valiant: a car driveable with two
arms and no use of legs. But veterans’ payments only allowed them to buy a
certain set of cars, e.g., a regular Chevy, then sell it and buy the Valiant. A huge amount of user innovation is going on.
Users’ language of inventorship seems to provide ways to claim continuing
community membership.

Case study: wheelchair development. One company dominated the market; it had
patents that helped. In addition, as the patents began to expire, they began to
engage in anticompetitive practices such as deals w/foreign companies to prevent
imports. Same wheelchair cost $400 in US in 1975$, but cost $100 in England.
Worked with Medicare/VA to specify which chairs would be insurable, and those
just happened to be the Everest & Jennings chair and no others. Disabled
people begin to protest the increased prices and depressed innovation. Nader
& his raiders took on the company and began to publish findings. Eventually
Justice Dep’t began an antitrust case, which was settled in 1979. Almost
immediately the market expanded, though not a ton. OTA in 1984 studied the market and found some
innovation but many of the new manufacturers suggested they were anxious about
producing new innovation b/c they were worried about products liability law if
they did more than tweak the Everest & Jennings chair. Whether this is true or not, we see a claim
about innovation drivers.

VA/Medicare as buyer has other problems: if the buyer is not
the user, that skews things. VA/Medicare cared more about initial cost than total
operational costs, for example. Ralf Hotchkiss, wheelchair innovator, argued
against patents as inhibiting progress/access in the area.

Once wheelchairs spread, people start to notice that the
built environment is hostile to them and thus to their users. That changes the
site of innovation—from innovation at the individual/product level to
innovation at the environment level. Section 504 of the Rehabilitation Act of
1973 produces a civil rights/antidiscrimination approach that has a demand-forcing
effect, creating willingness to pay on the part of institutions.

Lessons: innovation regulation is really complicated; when
users aren’t purchasers, incentives can be skewed.

Grynberg: cognitive access?

A: deliberately focused so far on physical access.

Q: FDA piece should be a bigger part: there are regulations
for wheelchairs and for wheelchair accessories [shades of the phone and the
Hush-a-Phone].

Ebrahim: firms w/different strategies?

A: user innovation sometimes gets users to start
commercializing; sometimes firms buy out the innovation but sometimes they get
shut down. Federal gov’t encouraged accessible
buses when GM wasn’t making accessible buses and had 85% market share. GM just ran out the clock until Reagan took
over and kept its market share.

Q: each of these stories can be its own paper.

A: rather tell them together—focused on a product and wants
to tell the story of that product. [The
recent book Temp by Louis Hyman is an
interesting example of how to bring together narrative threads in a really
productive way, though I’m not sure you could do exactly the same here.]

Privacy When Form Doesn’t Follow Function, Roger Ford

Design patent: for stuff that’s seen. Taco Cabana: designs and shapes are
protectable if nonfunctional. Privacy law does something very different: “privacy
by design,” which is about process. Building privacy into design specs from the
beginning, to get better results.

For physical design, people learn to infer functionality
from particular features, e.g., olive oil bottles are dark because the oil will
deteriorate in light otherwise, so dark bottles are likely to contain sensitive
liquids. Things with multiple spikes on
them may dig down into dirt. Security
cameras signal surveillance and thus send messages; even one-way mirrors affect
the design of space. Because companies know consumers make these inferences, online
they use those signals to send messages: e.g., the image of a padlock and a secure
website. But this signal is also manipulable b/c the connection b/t form and
function is not as tight. Or phone apps
can track your movements without telling you that’s happening. This will be a bigger problem over time. Now there are padlocks that look like padlocks
but are run by software and not physical keys; consumers can be misled by the
form they recognize about how easy it is to open, so one of these broadcast its
key unencrypted and anyone with the right software could open it, while another
was secure at the software level but had screws that could simply be opened w/a
screwdriver. 22 services track you on
USA Today’s homepage, but nothing on the browser/URL line shows anything to
make you think that there’s anything other than a link b/t you and the USA Today
server.

Williams Sonoma case: zip code as personally identifiable
information—that’s a legal rule designed to solve the mismatch b/t perception
and reality: the law is designed to deal w/the fact that retailers are asking
the info in a context that looks like it’s for security purposes but is really
for marketing purposes. When Apple does
the same thing, though, the court said security is more important online so it’s
ok, without inquiring whether Apple was actually using the info for security or
marketing. Thus he thinks the courts/ regulators should look more at intentional
attempts to exploit consumer expectations.

Said: Compliance as a goal might be a different framing than
design: external constraints as something you better be designing towards.

A: Compliance oriented might avoid unexpected problems but
doesn’t necessarily avoid expected problems—manipulation of what the consumer
would expect based on the design.

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Posted in Uncategorized | Tagged design patent, patent, Plenary (designs) conferences, privacy, WIPIP 2019 | Leave a comment

WIPIP 2019, Trademark panel

Posted on February 12, 2019 by rtushnet

On Gripe Sites and Trademark Rights: Taking Stock of Cooperstock,
Carys Craig

United Airlines v. Cooperstock, Untied.com: United complaint
site with an altered/sadface logo and a popup disclaimer. Sued for © and TM
infringement, and initially held liable for infringement of both—couldn’t have
lost the case more emphatically. He represented himself; it’s now on appeal
with actual representation and intervention by civil liberties groups.

TM use: services is to be interpreted broadly, and includes
providing info to the public. Even if they were noncommercial, there’s no
requirement of monetary/commercial element for info services to be covered. D
argued he hadn’t used it as a mark, but the position of the logo on the website
is where the consumer would expect it to be. There was evidence of actual
confusion: one witness had lodged a complaint on the website, thinking it went to
United, and that was enough. Also, confusion
was likely because the services were the same: “post-flight engagement services”
and the market was identical: the services were both offered through the
internet. And they were similar because the D wanted people to recognize the
subject matter. Parody and satire aren’t defenses. An obvious spoof is still cashing in on the
goodwill of the mark.

Dilution/depreciation of goodwill: United invested and
Cooperstock used the mark to disparage the company so it was depreciation of the
mark. No internal limits. The court also
dismisses external limits—freedom of speech—out of hand. Each step of analysis
leads inexorably to the conclusion that use of a mark to criticize the mark
owner leads to an injunction.

Property right/right of the owner to reap profits from use
without interference. That’s where we
are in Canada: Michelin & Cie v. CAW (1997): © is private property and so
there’s no right to use it in the service of freedom of expression (but even
that found no TM infringement b/c no commercial use). Source Perrier v. Fira-Less (1983) says the
same thing for TM.

Lessons: Canada needs explicit statutory limitations and exceptions.
Could be clarifying of infringement provisions or (better) standalone fair use
provisions. The absence of explicit exceptions/user rights creates an
invitation for overreach/lack of cues to courts to constrain scope of “use” of
TM.

Need a real account of “user rights” transcending the
boundaries of IP. Established for © in
Canada; TM shouldn’t override them, preventing exactly what fair dealing is
designed to protect. The user is central to TM law but appears only in shape of
consumer; need fuller conception of public as consumers and citizens.

Lesson for TM theory: we need to change how we think about
TM. The communicative function provides both the justification for TM rights
and their necessary limits. Dialogism:
the mark is a textual utterance, which always invites a response. The mark as
text is never static/stable/univocal. The mark owner is privileged in the
public discourse but does not have a monopoly on meaning-making.

RT: Carol Rose: real property communicates too: keep off—so the
response from TM owners at a theoretical level may well be that dialogue =
invitation to bargain/create one’s own mark to intervene in the flow of meaning,
not invitation to act w/o consent.

A: Property based methodology can still be used to disrupt
the notion of control over the property.
Dev Ganjee: notion of property in the brand v. property in the mark
implies and relies on consumer sociality/communities of brands built through
public discourse. Then there’s a sort of appropriation/co-ownership of the
brand [but maybe that’s just the voluntary allowance of the brand owner for us
to hang out there; we can always be kicked out]. The property paradigm may be
pretty hostile to real understanding of TM.

Lunney: how bad is it? Would unitedsucks have been ok? Is there
any way to avoid the need to spend lots of $ on lawyers to figure out what you
can and can’t do?

A: Answer unclear; try again later.

Protectable Trademark Subject Matter in Common Law Countries
and the Problem with Flexibility, Lisa
Ramsey

Nontraditional TMs: colors, sounds, positions, etc. Lanham Act’s
provision on the supplemental register goes into more detail about what can be
on the SR than the Principal: configuration of goods, packaging, etc. but doesn’t
mention sound or smell (or taste). Canada
has the most detailed provision that would allow sound, scent, taste, texture,
positioning of a sign. All of these
lists are nonexclusive—e.g., hand gestures. Benefits for potential registrants:
you can look at what you’re doing and almost any part of it could be a TM so
you go from there.

Not every common law country has functionality (e.g.,
NZ). TM examiners often use lack of
distinctiveness instead but that can be defeated w/evidence of secondary
meaning, so that’s a problem.

Flexibility’s costs: uncertainty about the scope of the
resulting right. TM registration for
vodka in the shape of a skull=successful threats against sale of tequila (and
more disturbingly, hot sauce) in similar bottles. Nontraditional subject matter may make determining
scope less clear. [The example I use: does registration for the texture of velvet
on a wine bottle—a real US registration—give rights to preclude the use of RED
VELVET as a word mark for wine? What
about the sale of bourbon in a velvet sack?]

Lunney: Congress tried to prevent the Lanham Act from
allowing registration of trade dress, and courts and PTO just ignored that.
What makes you think it could be more successful now?

A: would have to be very clear: no smells. (Another factor
here is anticompetitive nature of the operation—big firms are better at getting
over the hurdles to register nontraditional marks and there are competitive concerns.)

Rosenblatt: scents are potentially infinite (though you wouldn’t
want to use all of them); are you treating all nontraditional marks the same?

A: No, wants nuance in different classes.

Fromer: one of the problems is acquired distinctiveness: it
is less likely that the person using them is thinking of the arrangement of
features as having a specific defined nature when initially adopted; the fact
that it’s chosen/defined later is a problem of its own.

Abdul-Khalik: mandate for a chemical listing or other
definitive description in order to claim the mark to limit scent? Another concern: even if you exclude
things/have an exclusive list in the statute, courts will want to provide common
law protection, exactly as California did w/its right of publicity.

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WIPIP 2019, University of Houston, Copyright panel

Posted on February 12, 2019 by rtushnet

Abandoning Copyrights, Aaron Perzanowski & Dave Fagundes:
Unilateral transfer of rights. W/personal property you think about transfer to
unknown but discrete third party, but in © abandoned rights are not up for
grabs by some new claimant, but rather in the public domain. We expect abandonment
when subjective assessment of costs of maintaining and storage outweigh the
benefits of continued possession. That calculus shifts with © b/c w/o
formalities and renewal requirements there are no meaningful costs w/a massive
trove of low value © works. Unlike your
old couch/unworn shoes, a PD work has a potentially infinite number of users
and uses—archival efforts, machine learning, general accessibility and enjoyment—so
potential value to public is potentially much higher even as incentives to
abandon are essentially nonexistent. There are altruistic/reputation based attempts
to abandoned. But there is not a lot of clarity about how abandonment is accomplished/works.

320 cases meaningfully discuss abandonment; we’ve read 25%
so far. They stretch back to mid-1850s and the issue comes up more often than
you may have thought. Lack of clarity about terminology: courts tend to
conflate abandonment (unilateral and intentional decision to relinquish) with
forfeiture (failure to comply w/formality): both get referred to as dedications
to the public domain; implied license and waiver and estoppel all get drawn in
as well. Lack of clarity is in part b/c in the old notice regime forfeiture and
abandonment were pretty similar, but more recent cases call out abandonment as
its own thing, with a test drawn from personal property: they say abandonment
requires an intent to surrender all or some rights in a work; need some overt
act that evidences that intent. Some cases allow partial abandonment.

To encourage: clarified law; simple, centralized process for
filing a notice of abandonment. Tax treatment could also matter. Some TM cases
talk about potential tax benefits of abandoning a mark. (Nonprofit donation: For works you created yourself,
you can deduct cost of creation; for works you acquire from others, you can
deduct market value.)

Q: moral rights?

A: Hasn’t yet come up for us, but intersects w/questions
around termination. Can you abandon at or around time of termination? If there’s a tax benefit to the institutional
© holder, that could be a risk to the potential terminating author/heir.

Lemley: We treat abandonment in very odd ways in TM, which
can help get at the Q of whether what we want is for someone else to grab the
rights or for no one to do so.

A: There’s a fair Q whether we want to call it abandonment
at all given the public domain aspect.

Q: why not give more attention to laches, estoppel, negligently
failing to take care of the work?

A: courts aren’t always clear and so one of our aims is to
create a taxonomy.

Rosenblatt: one challenge is that abandonment is an
affirmative defense, so we won’t see it unless there’s a fight; there may be
abandonment everywhere we don’t see. Are you more concerned w/dedication to the
public domain? Analogy to what patentees
can do as a way around real/personal property issues and implied license issues?

A: difficulty is that it’s unclear whether there is a
mechanism for dedicating to the public domain as there is in patent (but maybe
there should be).

Uniform Jury Instructions in Copyright Law, Zahr Said

© is jury unfriendly but jury reliant, which creates
policy-relevant risks of error, affecting not just any given case but the scope
of ©. Instructions are low-hanging fruit b/c they’re so bad right now.
Distributional concerns: in the cases, often one party proposes a lot of jury
instructions and the other doesn’t.

Moral divergence b/t anticopying ethos and © law. Linguistic
divergence: fair, similar, author, derivative, building, owner—they don’t
actually have the meaning that the jury may think. Deep indeterminacy, which may be where a
gap-filling jury is needed, but that layers on to the other problems; often
there’s an ontological indeterminacy where it’s not even clear what the “work”
is and the jury is supposed to figure that out without being clear that
plagiarism and infringement aren’t the same thing. 9^th Cir. threw its hands up when revising
its jury instructions and took out everything on substantial similarity. Yet © has
a higher percentage of trials than other areas of law—2/3 to 70% of litigated
cases go to a full dress trial, relating to traditions about the lay observer/reader. Risks incorporating things into ©, like
ideas, that we are trying to exclude (and may risk excluding creativity in
things like selection and arrangement).

Quid pro quo: © gives you rights that are indeterminate and
really easy to get; we trust litigation to sort out the boundaries. But that
means you can’t come in claiming that you have a full blanket but rather a shawl
with unpredictable holes (as a knitter this metaphor really isn’t working for
me).

Possibilities: rely less on juries? She doesn’t like that b/c they have a profound
role to play. But jury instructions are just so bad right now that they’re a good
place to start. Trial transcripts often feature comments by a judge: I don’t
know what to do here. That’s true even
w/more senior judges. The parties often propose conflicting instructions and
the judge picks neither; in the Led Zepplin case the judge just got reversed for
doing that. Level the playing field: where a more moneyed party removes a
reference to copying of protected expression,
leaving it just copying of expression, that’s bad. Should discourage minor tweaks to the
instructions—a waste of the docket.

You also have to address moral intuitions—even a good jury
instruction might not be complied w/. Debias
w/ respect to foreseeable jury errors, and standardize debiasing. Fogerty has good instructions about how
copying facts and ideas may seem unfair, but you can’t consider in it. Linguistic divergence: address the meaning of
derivative work: derived from, not trivial/not creative. Trim instructional clutter and statutory
bloat, like eliminating references to choreography in non-dance cases. Group
exclusive rights rather than scattering references and definitions throughout. Accurate and nonpartisan jury instructions could
be developed abstractly.

Bartow: are you going to separate out music? Always been her sense that music is the
disaster area.

A: less about works than about training attention on the
proper Q.

Lemley: plain meaning patent jury instructions are a thing
in some jurisdictions –SDNY/CD Cal might be interested, and you could get immediate
adoption. Broader Q: how sure are we that it matters? There are lots of reasons
juries might screw up © cases, and it’s not clear that it’s jury instructions
v. constructing their own good guy/bad guy narrative.

A: Plain meaning is sometimes oversimplified—you can make
the jury think their job is super easy, so you don’t want to do that. Flowcharts,
images, other things could be played w/ if you involved psychologists/social
scientists. The social science literature suggests that jury instructions do
matter.

Ramsey: use AIPLA or INTA—more likely to be adopted by judges
if institutions are involved.

Lunney: fighting against jury’s moral intuitions is an
uphill battle, and the parties have no interest in model instructions in their
own case—so can you get a model that the judge will follow even in the face of
pressure from the parties?

Copyright’s Arc, Martin Skladany: © should vary across the globe.
In poor and rich countries, we should reduce © dramatically and in middle
income countries it’s doing the right job. Lunney: we have a group of elites
making a lot of $; his concern is for the average artist. Skladany is concerned
for the average consumer, who in the US consumes 10 hours of entertainment not
counting social media, which is too much. Developing country side: incentives
are working well for elites in a broken context—they’re not producing enough content
within developing countries. They don’t have enough content; let’s get them
content. The barrier isn’t primarily © but it’s part of the equation. We’ve
attacked that educationally with A2K, but not with entertainment. Telenovels
from Brazil can make social changes in Iran.

Q: 10 hours?

A: Varies; elderly people watch more TV; Nielsen counts
things like listening to the radio as you drive as time spent consuming media.

Q: there’s so much content on Netflix already—even drastically
reducing © wouldn’t change that.

Fagundes: if the appetite for content is so great then 10
hours stays the same. If people’s demand is for content, not for new content,
then you don’t get the result of decreased elite production.

A: doesn’t need to be complete or immediate to solve
overconsumption.

Q: is encouraging people to watch telenovelas from another
country/watch Who’s the Boss really a good idea? Isn’t it another imperializing move?

A: but Brazil didn’t colonize Iran—looking for all content
across the world. Appreciate the spirit, but right now © helps only the elite
of a poor country. Promotion of civil and gender equality has faltered; media
showing people living free lives seems like it might help.

Q: what if it only decreases the quality of content and not
the amount? With new tech people are willing to produce a lot of content, even
for 6 months of ©.

A: big companies are using fMRI and other increasingly
sophisticated techniques to manipulate us; decreasing the incentive to do that
(e.g., weaponizing games into making them addictive) would be good. [Though
with control over the server, you don’t need much © if you’ve addicted
someone.]

Rosenblatt: risks sounding colonialist even if you aren’t.
Skeptical that reducing term will meaningfully reduce demand or production even
of expensive goods; you only need to look at K-pop to see that widespread short
terms of exclusivity have not reduced production pace or investment. Instead
people go for a short big splash.

A: if we don’t believe that © motivates creativity, what are
we doing here? Nollywood has more piracy; production values and production
scope aren’t as great. The problem is rural access; even piracy in cities doesn’t
get media to the least developed areas, and NGOs can’t afford licensing.

Q: why do the rich countries need less consumption?

A: Correlation b/t consumption and poor health. But every
American should be creating and we’re not doing that (dad had to work in a
factory instead of as a chef to get health insurance).

Tear Down the Stairway? Copyright Injunctions and the Public
Interest, Tim McFarlin

Comes out of interest in determining authorship: some cases
say contribution to audience appeal is a factor in who’s an author. So where
else does audience impact come into © doctrine? After Petrella, it’s easy for claimants to come out of the woodwork; the Stairway
to Heaven case is an example, using requests for injunctive relief and even impoundment/destruction. Rear
Window case mentioned the denial of the opportunity to the public to
experience a classic could be a factor in the remedy analysis. But where’s the
line b/t a classic and a nonclassic (12 Monkeys (preliminary injunction
granted), Blurred Lines?). Is the
nature/genesis of the infringement relevant?
Willfulness? Percentage of infringing content? Distance from fair use? Gilden argues that a
stronger injunctive remedy might pressure judges to find fair use more often. If
we don’t presume that every infringing derivative work might become a classic,
then are we favoring authors who already have a track record?

We already use audience reaction to measure damages—the contribution
of the infringement to the work—so can we use that to answer some of these
questions?

Buccafusco: an injunction won’t matter very much in terms of
access to truly valuable works [and 12 Monkeys]; will just shift the bargaining
b/t plaintiff and defendant.

A: yes, but can add additional uncertainty esp. with things
like new technological uses

Lunney: relative value
of contribution, or relative cost of
contribution? Cost-based returns are
what happen in competitive markets. Can
we do a Rawlsian analysis? E.g., would
Led Zepplin have created Stairway to Heaven if they’d known that the rights
would subsequently be divided (though I think you’d have to know whether the
rights would be divided in an ordinary percentage before they were famous or
whether the rights would be divided treating Led Zepplin as a famous
infringer).

Gilden: flip the Q: when the audience might want an injunction—when they wouldn’t want
to experience an infringing work.

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100% Natural chicken claims might mislead about antibiotics and other features

Posted on February 5, 2019 by rtushnet

Friends of the Earth v. Sanderson Farms, Inc., 2018 WL
7197394, No. 17-cv-03592-RS (N.D. Cal. Dec. 2, 2018)

FOE sued Sanderson, alleging FAL and UCL claims against Sanderson’s
“100% Natural” advertising for its chicken, in particular that that the ads falsely
and misleadingly suggest that its process and resulting product meet reasonable
consumer expectations for “natural” poultry, including: (1) no pharmaceutical
residues remain in the product; (2) pharmaceuticals, including antibiotics, are
not routinely administered to the chickens during the majority of their lives;
(3) Sanderson is not contributing to the spread of antibiotic-resistant
bacteria; and (4) Sanderson chickens were raised in natural conditions, such as
going outdoors.

The court found the complaint sufficient insofar as it
alleged that Sanderson’s advertisements and statements describe “natural” “in a
way that confuses consumers as to whether the chicken product was raised
without antibiotics versus raised with antibiotics and subsequently cleared of
it prior to sale, … taking advantage of consumer expectations that a ‘natural’
food product has never been exposed to antibiotics and the attendant consumer
willingness to spend more for such products.”

Sanderson argued that the ads’ full context dispelled any
potential confusion, pointing to: (1) the infographic on Sanderson’s “100%
Natural” webpage, (2) Sanderson’s “How We Grow Our Chicken” video, and (3)
Sanderson’s “Bob
and Dale” commercials.
Sanderson argued that the infographic had only true statements about
what’s not added to the chicken and says nothing about antibiotic use or
nonuse. The court didn’t accept
Sanderson’s expressio unius argument “that because antibiotics are not included
in the list of excluded artificial ingredients, a reasonable consumer could not
conclude that antibiotics are also excluded.”
Statements about the nonuse of hormones, steroids, seaweed, etc., didn’t
provide sufficient context for a reasonable consumer to conclude that “100%
Natural” chicken had been treated with antibiotics as part of the production
process. Instead, a reasonable consumer, considering the “100% Natural” slogan,
“could plausibly believe that the infographic’s ‘no additives or artificial
ingredients’ statement means no synthetic pharmaceuticals.” There was no
unequivocal disclosure about the use of antibiotics, and “the infographic’s
silence on the issue is not a disclosure.” The affirmative representations “100%
Natural” and “no additives or artificial ingredients” were plausibly contrary
to the undisclosed characteristic of antibiotic treatment. (Likewise, the
entire webpage claimed that there were “no unpronounceable ingredients” in Sanderson
chicken and that its feed is “corn and soy-based,” which plausibly implied that
there were no antibiotics/their names would be easily pronounced, “a stretched
argument at best.”)

A link on the webpage went to the FAQ, which disclosed the
use of antibiotics. But the entire context of the website need not be
considered—review is limited to the four corners of the page. “No authority suggests a reasonable consumer
is expected to search a company’s entire website (or certainly all of a
company’s statements across all forms of advertisements) to find all possible
disclaimers.” The reasonable consumer
standard doesn’t require them to be “private investigators.”

The “Bob and Dale” ads said “all chickens must be cleared of
antibiotics before they leave the farm.” Sanderson argued that this could not
plausibly leave a reasonable consumer with the impression that Sanderson does
not use antibiotics, because “if the process was devoid of antibiotics, surely
there would be nothing to ‘clear’ before the birds left the farm.” Not so. “A lawyer may well catch this turn of
phrase, but the reasonable consumer standard does not demand that consumers
interpret advertisements the same way a judge interprets statutes.” This
negative inference isn’t required of a reasonable consumer, any more than she’s
expected to use ingredient lists on the back of a box to contradict claims on
the front. The ad didn’t focus on the fact that Sanderson uses antibiotics and
then clears its chickens of the drugs before sale, nor was it merely making
literally true statements regarding federal law requiring all chicken to be
clear of antibiotics before point of sale. Instead, the ad focused on
Sanderson’s competitors, and their use of phrases “no antibiotics ever” or
“raised without antibiotics” as essentially being redundant in light of federal
law requiring no chicken products contain antibiotics at point of sale. “By
criticizing its competitor’s advertising as misleading to consumers,
Sanderson’s commercial is likely to mislead reasonable consumers into believing
that Sanderson products were no different than its competitors who never used
antibiotics in their chicken production.” This was plausibly misleading to
consumers who were willing to pay a premium for chicken that had never been
exposed to antibiotics.

As to allegations about chicken cultivation, plaintiffs
cited surveys indicating that at least
half of consumers understand “natural” to mean the animal roamed outdoors. This,
plus the allegation that Sanderson chickens don’t roam, sufficiently alleged
misleadingness.

Allegations about Sanderson’s contribution to antibiotic
resistance were also sufficient at the pleading stage. Plaintiffs alleged that
Sanderson’s process contributes to the build-up of unnatural
antibiotic-resistant bacteria, and “100% Natural” thereby misleads the public
regarding the threat to public health the product entails. Sanderson argued
that it never said anything about antibiotic resistance. However, plaintiffs sufficiently alleged that
the ads “mask the difference between Sanderson’s products—which are raised with
antibiotics and cleared of the drugs before point of sale—and competitors’
products which never encounter antibiotics,” misleading consumers into thinking
the key concern is whether antibiotics residues remain on the product, and not
how the use of antibiotics in the production of chicken can contribute to
antibiotic resistance even after the drugs are cleared from the animal’s
system. Plaintiffs sufficiently alleged falsehood by citing numerous studies
and reports about how the overuse of antibiotics in agriculture contributes to
antibiotic resistance and alleging that Sanderson chickens do in fact contain
antibiotic-resistant bacteria when they leave their facilities.

The video “How We Grow Our Chicken” allegedly didn’t disclose
the full extent of Sanderson’s antibiotic use. Sanderson’s statements that the
“only time we inject antibiotics” is a single time under the shell and that
broiler chickens are not injected with anything were true standing alone, but
together their combined message was potentially misleading. “Injection is not
the only means of administering antibiotics to chickens, and Plaintiffs aver
Sanderson routinely feeds antibiotics to its broiler chickens.”

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En banc court again strikes down sugar-sweetened beverages warning, with divided and divisive reasoning

Posted on February 5, 2019 by rtushnet

American Beverage Ass’ v. City & County of San Francisco,
No. 16-16072 (9^th Cir. Jan. 31, 2019)

After the panel
opinion striking down SF’s sugar-sweetened beverages (SSB)
disclosure was reheard by the en banc court in light of National Institute of
Family & Life Advocates v. Becerra (NIFLA), 138 S. Ct. 2361 (2018), the en
banc court again struck it down, though not with enough force for a vigorous
special concurrence in the judgment. To
the majority, the disclosure was an “unjustified or unduly burdensome disclosure
requirement[] [that] might offend the First Amendment by chilling protected
commercial speech” under Zauderer v. Office of Disciplinary Counsel, 471 U.S.
626 (1985).

The ordinance required certain SSB ads within the city to
state: “WARNING: Drinking beverages with added sugar(s) contributes to obesity,
diabetes, and tooth decay. This is a message from the City and County of San
Francisco.” Traditional media ads and some other things, like small logos, were
excluded. The warning had to occupy at least 20% of the advertisement and be
set off with a rectangular border.

Under Zauderer,
the government may compel truthful disclosure in commercial speech as long as
the compelled disclosure is “reasonably related” to a substantial governmental
interest. The Supreme Court vacated and remanded CTIA–The Wireless Ass’n v.
City of Berkeley, 854 F.3d 1105 (9th Cir. 2017), in light of NIFLA, but that didn’t make a difference
to this case. CTIA “examined a similar health and safety warning and held
squarely that Zauderer provides the
proper analytical framework for considering required warnings on commercial
products,” and is not limited to disclosures that correct falsity.

“NIFLA did not
address, and a fortiori did not disapprove, the circuits’ precedents, including
CTIA, which have unanimously held
that Zauderer applies outside the context of misleading advertisements.”

Indeed, “NIFLA
preserved the exception to heightened scrutiny for health and safety warnings.
The Supreme Court made clear that it was not calling into ‘question the
legality of health and safety warnings long considered permissible.’” Judge
Ikuta’s special concurrence read this language to mean that only health and
safety warnings of ancient origin could avoid heightened scrutiny, but “the
most natural reading of this passage” was as a reference to health and safety
warnings in general, especially given that the NIFLA majority was answering Justice Breyer’s dissent listing
examples such as warnings about seat belts and about the availability of whooping
cough vaccine. “There is no indication that either of those required
disclosures is of ancient origin or that the majority intended some health and
safety warnings (if accurate, uncontroversial, and not unduly burdensome) to be
precluded merely because the knowledge that the warnings convey is new.”

Under Zauderer, a
compelled notice must be (1) purely factual, (2) noncontroversial, and (3) not
unjustified or unduly burdensome. SF failed to meet its burden on (3). SF’s
argument that the border and 20% size requirements adhered to best practices
for health and safety warnings was unpersuasive. Some tobacco and prescription
warnings must occupy at least 20% of those products’ labels or advertisements,
and SF’s expert concluded that larger warnings are more effective. But the
record here showed that a smaller warning would achieve SF’s stated goals; SF’s
expert cited and discussed a study that examined a warning similar to that
required by the ordinance, but covered only 10% of the ad. SF failed to show
that the contrasting rectangular border containing a warning that covers 20% of
the advertisement didn’t “drown[] out” Plaintiffs’ messages and “effectively
rule[] out the possibility of having [an advertisement] in the first place.” A 10% warning wouldn’t necessarily be valid,
and a 20% warning isn’t necessarily invalid, but on this record, SF didn’t
carry its burden.

Judge Ikuta dissented from most of the reasoning. NIFLA superseded Zauderer by holding that government-compelled speech is a
content-based regulation of speech. (The majority is obviously right that this
isn’t new; what’s relatively new is the suggestion that there are some
commercial speech regulations that are other than content-based, always contrasted
with the content-based commercial speech regulation actually before the court
in a given case, combining poisonously with the post-Reed idea that all content based regulations are the same variety
of bad.) Content-based regulations are
presumptively unconstitutional. After NIFLA,
governments may not “impose content-based restrictions on speech without
persuasive evidence of a long (if heretofore unrecognized) tradition to that
effect.”

Zauderer now only
applies to “some laws that require professionals to disclose factual,
noncontroversial information in their ‘commercial speech.’” Anyway, the factual accuracy of this warning
wasn’t undisputed. (Will it ever be?)
The FDA says that added sugars are “generally recognized as safe,” and
“can be a part of a healthy dietary pattern” when not consumed in excess
amounts. The disclosure was also not
“uncontroversial” (will it ever be?) because the record showed this was a
controversial topic. Nor did the warning
“relate to the terms on which the advertisers provide their services,” which
Judge Ikuda took to be a NIFLA-added
limit on the reach of Zauderer,
because soda is a product and not a service and the warning doesn’t address the
terms of the deal. [This reasoning is just bad; (1) there is no reason to
distinguish disclosures for services from disclosures for products for
constitutional purposes (I think for Judge Ikuda this is a collateral
consequence of the idea that Zauderer
is now only for professional speech and not for ordinary commercial speech, but
professionals can sell you products as well as services), and (2) the “terms”
here should include “what you’re getting for your money,” and the disclosure
relates to the components of SSBs.] Judge Ikuda did agree that the warning was
too burdensome, as well.

And the majority here was wrong to say that “NIFLA preserved the exception to
heightened scrutiny for health and safety warnings,” because only “health and
safety warnings long considered permissible” were excepted. “NIFLA did not specify what sorts of
health and safety warnings date back to 1791, but warnings about
sugar-sweetened beverages are clearly not among them.” [Look, the majority
clearly has the better of this argument; the sensible meaning is that health
and safety warnings have long been considered permissible, not that warnings
about poxy air would be ok because they’re old but warnings about PCBs would be
problematic because they’re new. Even Justice Scalia was very clear (in his Lucas v. South Carolina Coastal Council
opinion) that newly discovered facts about the nature of the physical world can
trigger old doctrines allowing regulation.
However, the not unrelated question about what constitutes a “factual
and uncontroversial” disclosure may thwart the majority’s attempt to preserve
health and safety warnings, insofar as it’s usually possible to find someone to
contest any factual proposition. [But of
course, when it comes to abortion/ “informed consent,” the government can
require the disclosure of all sorts of things, without a “factual/uncontroversial”
requirement, because that’s different.]]

Without Zauderer’s
cover, the mandatory disclosure flunked intermediate scrutiny because the
warming wasn’t sufficiently tailored to the government interest in warning of
the public health dangers from drinking SSBs.
It was underinclusive—it didn’t apply to all SSBs, much less all
sugar-sweetened products, and it didn’t apply to many ads for covered SSBs.
Moreover, “San Francisco could disseminate health information by other, less
burdensome means, such as a less intrusive notice or a public health campaign.”

Judge Ikuda also objected that the majority failed “to provide any guidance
regarding when a warning is unjustified or unduly burdensome.” Instead of
considering the “totality” of the requirements, the majority considered only
whether a smaller warning would accomplish the city’s stated goals. It should
have tested the regulation against Central
Hudson scrutiny, rather than reasoning that if it couldn’t meet Zauderer’s exception then it couldn’t
pass Central Hudson.

Judge Christen and Chief Judge Thomas concurred in part and
in the judgment. They would apply Zauderer,
but would have reasoned that SF couldn’t show that the speech at issue was
“purely factual.”

“[W]here, as here,
the parties disagree about the veracity of compelled speech, the court should
begin by asking whether the government’s message is objectively true,” because
an assessment of controversiality or burdensomeness will often entail much more
subjective judgments.

To the concurrence, there was no evidence that SSBs “contribute[]
to” obesity, diabetes, and tooth decay, because “diabetes” is an umbrella term
referring to both type 1 diabetes and type 2 diabetes and the causes of type 1
diabetes are unknown, so the research linking SSBs to type 2 diabetes is
irrelevant. [This reasoning is
unimpressive. Drinking and driving
contributes to car accidents even though it doesn’t contribute to every car
accident or even every kind of car accident.]
The message was therefore also controversial. That provided a more
objective basis for invalidating the law than its burden. [The concurrence doesn’t notice that its
subjectivity comes in when interpreting the semantic meaning of the required
disclosure—a weakness that also came up in the case invalidating the initial
tobacco warning images for putatively conveying a factual message that smoking
always causes autopsies.]

SF argued that a reasonable person would understand the
reference to diabetes as “the kind of diabetes that can be caused by
overconsumption of sugar,” but that argument was “in tension with the goal of
having a public health message understood by the maximum number of consumers,
not just those with sophisticated levels of health literacy. Because the
message would be conveyed to sophisticated and unsophisticated consumers, we
must read it literally.” [I guess in the
next round of this we get to debate whether “contributes to” communicates
something like “always causes” or “uniformly raises everyone’s risks the same
amount” or something like that. The
point of the message was not to educate consumers about the different types of
diabetes; it was to provide them with actionable information about the
relationship between SSBs and the disease state of diabetes. If they end up knowing the latter without
being aware of the former, they’re not misled.
I find it odd to treat the warning as a purely abstract item of
information rather than information that might affect actions, as was its
point.]

The concurrence defends its “persnickety” insistence on
factuality not only because of the constitutional rules, but because of the
social consequences of government-mandated messages, given the pervasive
stigmatization of people with type 1 diabetes as having a disease that is the
result of a lack of personal responsibility.
[Again, it’s completely unclear to me how the warning would worsen this
problem; assume it said (correctly, as far as the concurrence is concerned)
that SSBs are associated with type 2 diabetes.
People would still need to learn the difference between type 1 and type
2 independently of the warning. Unless
the thought is that the mandatory warning should also educate them about type 1
diabetes and perhaps caution them against shaming anyone with diabetes?]

Further, the warning was “problematic” because it suggested
that sugar was always dangerous for diabetics, whereas consuming SSBs can be
medically indicated for a type 1 diabetic when there are signs of hypoglycemia,
to raise blood sugar levels quickly.

Judge Nguyen concurred also, arguing that Zauderer is only for disclosures that
correct false/misleading speech and that SF’s warning flunked Central Hudson. Applying Zauderer
was particularly bad because the SSB warning was a content-based
regulation. [Sigh.]

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False advertising about sperm sales is legal in Georgia, court rules

Posted on February 5, 2019 by rtushnet

Zelt v. Xytex Corp., — Fed.Appx. —-, 2019 WL 423052
(11th Cir. Feb. 4, 2019)

Reproductive rights advocates often make the point that legal
interventions to prioritize fetal life over all other considerations have
collateral consequences far beyond abortion.
As the court here decides, those consequences include immunizing a sperm
bank from the consequences of its fraud.

The Zelts sued Xytex, a for-profit sperm bank, for
misrepresenting the characteristics of the sperm donor whose sperm they used to
fertilize their eggs, resulting in two children.

On its website, Xytex promised it
would carefully screen men applying to donate sperm using interviews and a
physical exam to ensure their suitability to become a donor. Its website also stated
that Xytex would conduct physical exams every six months to confirm donors’
“continued good health,” update online donor profiles, and convey new
information learned about donors to clients who used sperm purchased from Xytex
so that clients could “make the most informed decision possible when selecting
a donor.”

Xytex advertised, and told the Zelts, that Donor #9623 had
bachelor’s and master’s degrees and was working on a Ph.D., had an IQ of 160,
had a “nearly perfect” medical and mental health history, had no criminal
background, was one of Xytex’s most sought-after donors, and that his sperm
were rarely available. In fact, before the Zelts’ purchases, Donor # 9263 had:

been diagnosed with psychotic
schizophrenia, narcissistic personality disorder, a drug-induced psychotic
disorder, and significant grandiose delusions; been hospitalized repeatedly for
mental health reasons; received Social Security Disability Insurance due to a
finding that he was disabled; and been arrested for burglary, trespassing, driving
under the influence, and disorderly conduct. He has no master’s degree, was
never enrolled in a Ph.D. program, and had dropped out of school, only earning
a college degree years after the Zelts purchased his sperm and used it to
inseminate Rene Zelt. He also has a felony conviction, having pled guilty to
residential burglary.

He lied on his written questionnaire about his educational
achievements and mental health background. He told a Xytex employee that he
thought his IQ was about 130, but a Xytex employee suggested to him that he had
an IQ of 160 and encouraged Aggeles to lie about his education. As alleged,
Xytex could easily have disconfirmed his lies with a quick Google search. His
physical exam was minimal and Xytex did nothing to verify anything it said
about him. “It never requested Aggeles’s medical records or asked him to sign a
release so it could obtain his medical records, never asked about his mental
health history or spoke to any of his mental health providers, never asked
about his criminal history, never requested any proof of his identification, and
never attempted to confirm his educational history.”

The Zelts alleged that the donor’s illnesses were genetic
and heriditary and that they suffered physical and emotional pain and suffering
as a result of learning the truth about their sperm donor. They spent money to
evaluate their children for mental illnesses and expect to do so in the future.

The district court granted Xytex’s motion to dismiss on the
basis that the claims boil down to a wrongful birth claim, which Georgia law
does not recognize. The court of appeals affirmed on related grounds. The
essence of the fraud is that Xytex made misrepresentations about Donor #9623
that Xytex knew would induce the Zelts to purchase his sperm. “Had they known
the truth about Donor #9623’s background, the Zelts would have acquired sperm
from a different donor, one who had characteristics they found desirable.” However, they suffered no legally cognizable
injury, because Georgia does not allow courts to assess the difference in the
value of a child’s life with one sperm donor and the value of a child’s life
with a different donor. [Which … doesn’t
seem to be the damages being pled, even if you kick out the emotional damages
as a consequence.]

Georgia doesn’t recognize wrongful birth claims, though it
does recognize a limited claim for wrongful conception where a botched
procedure fails to prevent pregnancy; the damages recoverable are for the resulting
medical procedures and their consequences (lost wages, loss of consortium) but
not for costs of child-rearing because parents aren’t injured by having a
child. The Georgia Supreme Court was
unwilling to declare that “life, even life with severe impairments, may ever
amount to a legal injury.” Where a plaintiff wanted the pregnancy, but not an
impaired child, “Georgia courts will not compare the value of an impaired
child’s life to the child’s nonexistence.”

Here, the comparison was not to the nonexistence of the
child but to the child’s existence with another donor. This wasn’t a wrongful birth action. However, even though “[a]ssigning a numeric
value to a person’s existence with impairments … is not the same as assigning a
numeric value to the impairments only,” the task was close enough to prevent
any recovery here. Though the court was “sympathetic”
to the Zelts’ “pain and fear over what they and their children stand to suffer,”
they suffered no legally compensable injury because their children may be
different from what they wanted. They couldn’t get damages for costs from the pregnancies,
because they wanted the pregnancies and those costs wouldn’t differ with a
different donor.

“Monetizing the detrimental value of these characteristics
is a task ‘more properly suited to legislative action[,] as the legislature
offers a forum wherein all of the issues, policy considerations and long range
consequences involved … can be thoroughly and openly debated and ultimately
decided.’” [Though one could argue that the legislature already did that, by
enacting a false advertising law that does not exclude for-profit reproductive
health care businesses like Xytex.]
Thus, all the claims alleging objectionable inheritance from the donor
had to be dismissed, including the false advertising claims and claims under
the Georgia Fair Business Practices Act for injunctive relief, for want of
cognizable injury.

It seems to me that the sperm were worthless to them; at the
very least they should get an award for the value of the sperm as warranted and
the actual value of the sperm, which would not require putting any number on
the value of the resulting children. But the court of appeals disagreed—their unjust
enrichment/disgorgement claims were barred because calling Xytex’s enrichment
“unjust” “necessarily implies that the Zelts’ children somehow are worth less
than they would have been worth had they been conceived using a different
donor’s sperm.” But: if I fed my kids
cereal that falsely promised to improve their immunities and intellects, I
would value the resulting kids no less, but I still would have been defrauded
of the extra amount I paid for the cereal.
You can put a value on the inputs without having to put a value on the
outputs.

Xytex’s conduct was “[r]eckless, reprehensible, and
repugnant,” but perfectly legal.

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Swinging for the fences: court finds fraud on PTO from false first use date

Posted on January 31, 2019 by rtushnet

Anello Fence, LLC v. VCA Sons, Inc., 2019 WL 351899, No.
13-3074 (JMV) (JBC) (D.N.J. Jan. 28, 2019)

“This trademark case arises out of a family dispute over the
use of the last name ‘Anello’ in competing outdoor fencing businesses in
northern New Jersey.” And you could probably get a decent Hollywood movie out
of it, or maybe even an HBO series. Steven Anello owns Anello Fence, and
Steven’s cousins Vincenzo Jr., Salvatore, Christopher, and Anthony own VCA
Sons, Inc. Anello Fence sued the defendants for trademark infringement,
contributory trademark infringement, misrepresentation, false designation of
origin, false advertising, unfair competition, unjust enrichment, and tortious
interference. VCA counterclaimed for cancellation of trademark registration,
false advertising, cybersquatting, and unfair competition; here the court
grants summary judgment to VCA on Anello Fence’s claims.

In 1963, Emilio Sr. and Joseph Anello started a fencing
company, Anello Brothers, Inc. Their younger brother, Vincenzo Sr., joined the
business in 1971. Steven is Emilio Sr.’s son.
VCA’s owners are Vincenzo Sr.’s sons and Steven’s cousins. The parties
compete directly and are located within a mile of one another. The
litigation/arbitration history between them is extensive.

In 2003, after Joseph retired, the relationship between
Emilio Sr. and Vincenzo Sr. began to deteriorate when they couldn’t agree on
the business roles of their respective sons and decided that only one son each
could work at Anello Brothers. Three of Vincenzo Sr.’s sons departed and
started VCA Sons. Emilio Sr. sued
Vincenzo Sr., VCA, and Salvatore for, in essence, stealing business from Anello
Brothers. The result was an order requiring that Anello Brothers be sold to a
third party or liquidated and dissolved by the end of 2005. In 2005, Steven moved to Florida and sold his
own recently started New Jersey fencing company to VCA; his sale included a
restrictive covenant prohibiting him from returning to the northern New Jersey
fencing industry for a certain period.

In late 2006, Emilio Sr. unilaterally closed Anello
Brothers. Steven returned to New Jersey and formed Anello Fence in March 2007.
In April 2007, Steven paid VCA $30,000 to void his restrictive covenant. In
2010, Anello Fence applied for ANELLO on the Principal Register, claiming first
use in 1963. After registration was refused as primarily merely a surname, and
after only three and a half years in business, Anello Fence amended its
application to allege that the mark had “become distinctive of the
goods/services through applicant’s substantially exclusive and continuous use
in commerce for at least the five years immediately before the date of this
statement.” The service mark registration issued in 2011. In 2013, Anello Fence
repeated the process for ANELLO FENCE (after five years of operation) and
secured a registration for ANELLO FENCE in stylized lettering, with a triangle
partially forming the letter “A” on the Principal Register.

In the meantime, in early 2011, Anello Brothers — which had
been “essentially defunct” since 2006 held a shareholders’ meeting at which Emilio
Jr. joined with Vincenzo Sr. to oust Emilio Sr. from his position as president
of the company. The remaining shareholders then decided to re-open Anello
Brothers over Emilio Sr.’s objection. Steven quickly sued the principals of
Anello Brothers to prevent them from using the Anello name, and secured a TRO.
The lawsuit was then consolidated with two other actions between the parties, who
agreed to binding arbitration.

All of the resulting arbitration decisions listed the same
named parties: Steven, Vincenzo Sr., Catherine (Vincenzo Sr.’s wife), and
Emilio Sr., but not VCA nor any of its principals. The arbitrator found that Emilio
Sr. and Vincenzo Sr. were each entitled to 50% of the value, if any, of Anello
Brothers, but declined to address the trademark question, which was being
litigated in the instant case. The arbitrator noted that Anello Brothers closed
in 2006; that Steven’s father, then the corporate president, had no objection
to Steven’s use of the name; and that there was nonetheless no evidence of any
assignment. Also, Vincenzo Sr. owned 50% and had contributed to the goodwill of
the company, so the arbitrator declined to preclude Vincenzo Sr. from using the
names Anello Brothers or Anello Brothers Fence Company (but requiring him to
compensate Steven for post-2006 investments in the Anello goodwill as part of
ending the TRO; after Vincenzo Sr. declined to pay the compensation, the
arbitrator indicated that Vincenzo Sr. couldn’t use the name except as a family
name and not a trade name), while noting that “the federal court may have
jurisdiction and authority to consider and address this issue incident to the
trademark litigation.”

The court, unsurprisingly, found that there was no
collateral estoppel/issue preclusion from the arbitration rulings. The current
parties weren’t present or in privity with those who were and the issues
weren’t raised, actually litigated, and necessary to the prior judgment.

The court correctly noted that, because the litigation began
within five years of registration for both marks, neither registration could
become incontestable; any valid legal or equitable ground could be used to
challenge their validity. It then found
that the registrations weren’t valid because they were procured through fraud. [Ok, the court said “trademarks,” but it
meant registrations.] Fraud requires clear and convincing evidence of a
knowingly false, material representation with the intent to deceive the PTO. The
“intent to deceive can be inferred from indirect or circumstantial evidence,
indicating that the registrant actually knew or believed that someone else had
a right to the mark.”

The court found the requisite fraudulent intent. For the first mark, Steven claimed acquired
distinctiveness based on use for at least five years, and that hadn’t happened.
His claimed basis for the representation to the PTO was an assignment from
Anello Brothers, but there was no assignment and Steven knew that. “Formal assignments of trade names are not
required, because the law presumes that when a business is conveyed, its trade
name and goodwill are also conveyed.” But courts “must be cautious in scenarios
that do not involve clear written documents of assignment” and must
“[r]equir[e] strong evidence to establish an assignment … to prevent parties
from using self-serving testimony to gain ownership of trademarks.” The Anello
Brothers business was never conveyed to Steven (in fact it was defunct and then
revived in order to oust Emilio Sr. and reopen the business). Nor would a naked assignment of the name
without the goodwill have sufficed; thus, even if there had been a genuine
issue of material fact as to assignment, “the trademark would nevertheless be
invalid because it is undisputed that the actual Anello Brothers business was
not transferred along with the mark.”
Steven claimed that Emilio Sr. assigned the rights to him, but (1) there
wasn’t evidence of this; at most there was evidence that he didn’t object to
use of the name, which isn’t an assignment, and (2) Emilio Sr. wasn’t a
majority owner of Anello Brothers and therefore couldn’t consent. By the time of his deposition, Steven
admitted that he did not receive “any type of permission to use the name
Anello” in his fence company from Anello Brothers and instead argued that the
mark had been abandoned.

As for the ANELLO FENCE mark, that was applied for when
Anello Fence had in fact been in business for over five years, but the
statements to the PTO also claimed that the use was “substantially exclusive,”
and Steven knew his cousins were competing with him in the northern New Jersey
fencing industry during both of the relevant time periods and using the Anello
name. This “substantially exclusive” assertion might potentially amount to
fraud in both applications, but the claim of first use in 1963 was sufficient to
cancel both registrations. [I see the
court’s point, but I do think the PTO tends to disregard claimed first use
dates, whereas it does not disregard claims of five years of substantially
exclusive use; I don’t think it would necessarily have been material to the PTO
whether the date was 2007 or 1963 given that what’s at issue is a word mark,
though for trade dress it might well have mattered. A stronger basis for the finding of fraud for
the second registration is the lack of substantial exclusivity plus the
specific circumstances of the claimed first use here, which interact with each
other.]

Anyway, the claimed first use in 1963 was “a knowingly false
statement sufficient to cancel both marks’ registrations.”

VCA then argued that it had priority in the name
Anello. Without a registration, the rule
is first in time, first in right. Prior
use can also justify cancelling a registration (a backstop to the fraud finding). VCA opened in 2003 and allegedly used the name Anello in ads
since then; this was the use that Anello Fence argued was trademark
infringement. Anello Fence didn’t open
until 2007. Anello Fence’s only argument was that the arbitration order barred
VCA from using the name Anello, but the court disagreed. Steven also knew that VCA had been around
since 2003 and even sold his own business to VCA, then paid it to release its
restrictive covenant. “The Court finds it incredible for Steven to now claim
that he was not aware of Defendant’s prior use of Anello.” Even without that,
VCA had superior rights in the Anello name.

Without valid marks, the remaining causes of action failed;
although unfair competition and tortious interference can address harms beyond trademark infringement, in this case, the
claims weren’t based on anything other than the facts underlying the infringement
claim.

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claim to bring original formula of another’s brand back wasn’t nominative fair use

Posted on January 26, 2019 by rtushnet

GlaxoSmithKline LLC v. Laclede, Inc., 2019 WL 293329, No. 18-CV-4945
(JMF) (S.D.N.Y. Jan. 23, 2019)

Judge Furman gets another TM case; in his close adherence to
precedent he demonstrates some of the current weak points in TM doctrine, here
the Second Circuit’s incoherent treatment of nominative fair use and its
handwaving around irreparable harm.

GSK bought the rights to Biotene, a line of OTC medicines
for treating dry mouth, from Laclede.
Laclede later launched Salivea, a competing line. GSK sought an injunction on trademark and
breach of contract grounds. The court
denied the motion to the extent that it was based on the contract claims and
granted a limited injunction on trademark grounds.

The noncompete agreement GSK signed with Laclede provided
that Laclede agreed not to compete in the dry-mouth enzyme-based-treatement
market for three years, and its sole shareholders also agreed not to so compete.
GSK subsequently reformulated Biotene, removing certain enzymes. Over three years after the closing date of
the agreement, Laclede introduced Salivea, sending “approximately 100,000
mailers … to [healthcare professionals] and others based on contacts
generated at conventions and rebate recipients.” In the first, a green banner announces:
“Back Again! Salivary Enzymes and Components – Essential for Dry Mouth Care.”
Just below that banner, the advertisement reads — in smaller typeface — “From
the Creators of ORIGINAL biotene,” with “biotene” appearing in a stylized font
and featuring a water droplet in the center of the “o.” Just below that, the
largest text on the flyer declares: “SALIVEA utilizes the same ingredients as
the ORIGINAL Biotene. The Proven and Loved Formula!” In mouseprint on the side
is: “Biotene is trademark [sic] owned by GlaxoSmithKline.”

In the second flyer, a header in all capital letters reads:
“DID YOU KNOW BIOTENE HAS CHANGED?” It continues: “Over 35 years ago, Laclede
developed Biotene enzyme toothpaste and mouthwash that became the #1 brand for
dry mouth. Biotene was acquired by the GSK Company and was reformulated. After
years of perfecting formulas, we now introduce SALIVEA mouthwash and toothpaste
that utilizes the Proven Enzyme Technology as in the ORIGINAL Biotene.” Highlighted
in red, the flyer lists “CURRENT Biotene Changes,” including “ENYZMES
(Removed),” and “PARABENS (Added),” alongside a picture of a Biotene oral rinse
bottle. [One would think that this negative information would dispel likely
confusion about source.] A footer states:
“Back Again! Salivary Enzymes and Components – Essential for Dry Mouth Care.” Above
the footer, the flyer compares “SALIVEA Mouthwash Utilizing ORIGINAL Biotene
Formula” with the “ORIGINAL Biotene Formula / The #1 Recommended Brand for Dry
Mouth.” It has the same disclaimer.

On Salivea’s website, it declared: “It’s Back! The Original
Formula that made Biotene #1 for Dry Mouth.” Below that: “From the Creators of
biotene,” with “biotene” once against appearing in stylized script and
featuring the water droplet. It continues with similar claims: “Over 35 years
ago, our researchers developed an enzyme technology system that became The #1
Treatment in The World for Dry Mouth Care. Now, after years of perfecting
formulas, we’re proud to introduce the New SALIVEA Dry Mouth Care Products.”
Another page reads: “Proven Enzyme Technology / Over 35 years ago, Laclede
developed Biotene enzyme toothpaste and mouthwash that became The #1 Brand for
Dry Mouth. Biotene was later acquired by the GSK Company and was reformulated.
/ We Listened! We brought back salivary enzymes ….” The same disclaimer
appeared.

In Mohawk Maintenance Co. v. Kessler, 419 N.E.2d 324 (N.Y.
1981), the New York Court of Appeals identified an “ ‘implied covenant’ to
refrain from soliciting former customers following the sale of the ‘good will’
of a business.” This implied covenant isn’t time-limited. It bars targeted solicitation of former
customers but not advertising to the general public. “[A]lthough the issue is a close one, the
Court concludes that Defendants’ actions are nearer to the permissible
public-advertising end of the spectrum than to the impermissible
specific-targeting-of-former-customers end of the spectrum.” GSK didn’t
identify any specific former customers that were solicited after the express
noncompete clause lapsed; instead, the complaint alleged that ads were mailed “to
health care professionals, including dentists, throughout the United States.” NY
holds that a seller may “advertise to the public” so long as the advertisement
is “general in nature … and not specifically aimed at the seller’s former
customers.” Targeting a “class” of customers isn’t enough.

The court also rejected GSK’s argument that the second part
of the express covenant—the part binding Laclede’s owners—didn’t expire after
three years. Though the first part of
the covenant expressly had a three-year term, and the second part didn’t, that
wasn’t dispositive. First, “New York courts adhere to a strict approach to
enforcement of restrictive covenants.” Thus, a non-compete provision that is
“vague and unspecific” will be deemed unenforceable. And the language here—that the owners “also
agree” to the noncompete—indicates that the prior provision governing Laclede
was what was supposed to apply to the owners.
And it wouldn’t make sense for Laclede and its owners to be governed by
different non-compete durations. Anyway, “the Court has some doubts that a
time-unlimited non-compete would be enforceable under New York law.”

Trademark claims: because the Second Circuit said so,
nominative fair use is tacked onto the end of the Polaroid factors, even though (1) that makes the test an even more
incoherent mix of normative and empirical parts, and (2) the Second Circuit
acknowledged that a number of the Polaroid
factors don’t fit well with nominative fair use situations. The court here thus runs through the list. Strength
and competitive proximity favored GSK; similarity is of course identical
because you can’t consider the “comparative purpose” of the use under the
similarity factor, and anyway the materials here prominently featured the Biotene
mark in equal or larger size/prominence to the Salivea mark, so that favored
GSK.

There was some anecdotal evidence of confusion: declarations
from GSK stated that healthcare professionals expressed confusion about the
relationship (e.g., a conversation with an oral hygienist in which the
hygienist stated “that she understood SALIVEA was a GSK product that was
replacing BIOTENE”) and declarations from healthcare professionals themselves
claiming that they were confused (e.g., declaring that, after receiving “a
total of three mailers,” a dental hygienist was “immediately confused as to
whether [SALIVEA] was made by [Plaintiffs], because the mailer referenced that
GSK had reformulated the BIOTENE formula”). The total was seven declarations
recounting around twenty instances of actual confusion. This favored GSK, but only slightly, given
that Laclede sent approximately 100,000 mailers. “Measured against that number,
twenty reported cases of actual confusion are not a lot. And none of the
declarations address confusion stemming from SALIVEA’s website …. Nevertheless,
even a small number of declarations can be revealing.”

There was also some evidence of bad faith intent to profit
from Biotene’s goodwill. One mailer
referenced Biotene more often than Salivea. Another said at the top: “DID YOU
KNOW BIOTENE HAS CHANGED?” The main text was “phrased in a way that leaves a
reasonable reader confused about whether Laclede or GlaxoSmithKline
manufactures SALIVEA”: “Biotene was acquired by the GSK Company and was
reformulated. After years of perfecting formulas, we now introduce SALIVEA
….” The court concluded that,

taken together, the heading and the
main text could be easily be read to suggest that GlaxoSmithKline had
reformulated BIOTENE and was repackaging it as SALIVEA. Nowhere on the
Mouthwash Mailer is it evident that SALIVEA is a Laclede, and not a
GlaxoSmithKline, product. And while the depiction of the SALIVEA bottle is
indeed larger than the depiction of the BIOTENE bottle, the overall impression
of the advertisement suggests an untruthful association between SALIVEA and
BIOTENE, on the one hand, and between Laclede and GlaxoSmithKline, on the
other.

The other mailer also “purposefully obscured” the relationship
between the parties, prominently declaring that SALIVEA is “From the Creators
of ORIGINAL biotene,” (with “biotene” in its distinctive, stylized typeface),
and states that “SALIVEA utilizes the same ingredients as the ORIGINAL Biotene
– The Proven and Loved Formula.” It didn’t clarify that Laclede and
GlaxoSmithKline are separate entities or that SALIVEA is not related to
BIOTENE. “Instead, the advertisement leaves the inevitable impression that
SALIVEA is a follow-on to, or an improved version of, BIOTENE made by the same
manufacturer as ‘the ORIGINAL Biotene.’”

Quality favored neither side, because it is a garbage factor
that should be eliminated from the current test, and consumer sophistication
favored Laclede.

Nominative fair use factors: in the Second Circuit, the
first one is “whether the use of the plaintiff’s mark is necessary to describe
both the plaintiff’s product or service and the defendant’s product or service,
that is, whether the product or service is not readily identifiable without use
of the mark.” Here the court bobbles: “First, it is plainly not ‘necessary’ for
Defendants to use Plaintiffs’ mark to describe SALIVEA.”

This a bad result aided by the Second Circuit’s mashup of
the nominative fair use test from multiple circuits with the usual Polaroid
factors. In the non-Third Circuit
version, the question is not (as it is with descriptive fair use) whether the
use of the mark is necessary to describe the defendant’s product; it’s whether
it’s necessary to describe the plaintiff’s product/service to identify it for
purposes of discussion. The Third Circuit limited nominative fair use to the
hybrid situation where the defendant needed to explain its genesis/experience
in order to explain the reason consumers might trust it (which, not for
nothing, seems relevant here), but that makes nominative fair use captive to a
variant of descriptive fair use. The better
treatment, which seems acceptable under the Second Circuit standard would be to
evaluate the necessity of the reference to
the specific claim being made (e.g., “Salivea uses the original, good
formulation that Biotene has abandoned”).
Here, however, the court
reasoned, because Salivea could easily describe itself as “dry mouth care”
etc., there was no need to mention plaintiff’s mark. [So if I’m an architect
who worked for another firm for three decades, there’s no need to mention that
firm because I can just describe myself as an “architect”? That seems … restrictive, and in tension with
the First Amendment. The ultimate result here may be right, but it’s not because
of any lack of necessity—it’s because of what comes next.]

Next, Laclede used more of the Biotene mark than is
necessary to identify SALIVEA. This factor requires courts to evaluate whether
the defendant used the mark “too prominently or too often, in terms of size,
emphasis, or repetition.” As discussed above, it did.

Third, Laclede “suggest[ed] sponsorship or endorsement by
the plaintiff holder” and obscured “the true or accurate relationship between
plaintiff’s and defendant’s products.” The ads suggested that Salivea was “a
replacement for, or a follow up to,” Biotene, most evidently in the headlining
text “DID YOU KNOW BIOTENE HAS CHANGED?” [I’m guessing that the result is different for
a headline “DID YOU KNOW BIOTENE HAS CHANGED FOR THE WORSE?”] The ambiguous “we now introduce …” language also
hurt.

On balance, GSK showed likely confusion.

It also showed irreparable harm through showing “loss of
reputation and goodwill.” Irreparable harm “ ‘exists in a trademark case when
the party seeking the injunction shows that it will lose control over the
reputation of its trademark pending trial,’ because loss of control over one’s
reputation is neither ‘calculable nor precisely compensable.’ ” As framed, this is equivalent to a finding
that likely confusion automatically means irreparable harm, since it would
always be true by definition. This
result is inconsistent with eBay, and
it wrongly conflates the idea of lost control with the idea of harm from the lost control materializing,
which is (in the absence of further evidence, say of the inferiority of the
defendant’s product) not shown merely by showing the existence of the
risk. In other words, the logic of “lost
control” is that irreparable harm is possible, but possibility is not
likelihood, which is the standard in other cases.

With that out of the way, it wouldn’t be a hardship to refrain
from overreliance on GSK’s marks in advertising, especially since Laclede
already discontinued the mailers at issue. And a preliminary injunction limited to
enjoining trademark violations would not disserve the public interest.

However, GSK sought relief that was too broad, including “all
use of the words ‘#1 Brand for Dry Mouth, It’s Back, ‘Back Again,’ ‘Brought
Back’ or variations thereof,” and “the dissemination of any and all claims
referencing Laclede’s prior ownership of the BIOTENE brand.” GSK’s request for a laundry list of
prohibitions was inconsistent with its focus in the likely confusion analysis
on the totality of the advertising, and the court agreed that the proper approach
was to look at the total impact of the uses. GSK’s proposed injunction could
“sweep in instances of nominative fair use.” Thus, the preliminary injunction issued by the
court covered: all use of the registered blue-and-red Biotene logo, or any
confusingly similar variation thereof; all use of any images of the packaging
for Biotene products; and the dissemination of any advertising or packaging
materials declaring that Salivea is a successor of, or replacement for, Biotene;
and any ads substantially similar to the two prior mailers. [In many ways, the
limited scope of the injunction makes up for the narrowness of the nominative
fair use reasoning, except insofar as other claimants will cite only the narrow
reasoning against other comparative advertisers.]

from Blogger http://bit.ly/2MCzAm4

Posted in Uncategorized | Tagged claim to bring original formula of another's brand back wasn't nominative fair use contracts, trademark | 1 Comment

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Rebecca Tushnet

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claim to bring original formula of another’s brand back wasn’t nominative fair use

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