court requires survey evidence in consumer protection case, importing Lanham Act doctrine

Posted on September 7, 2018 by rtushnet

Hughes v. Ester C Company, — F.Supp.3d —-, 2018 WL
4210139, No. 12-CV-0041 (E.D.N.Y. Sept. 4, 2018)
Ester-C dietary supplements contain a patented form of
vitamin C in the form of calcium ascorbate. Plaintiffs alleged that the advertising
for the supplements misleadingly represented that this provides a form of
immune system defense that protects users from illnesses, and decreases one’s
likelihood of getting or remaining ill. 
They brought standard consumer protection claims, including under
California law.
The court granted summary judgment because plaintiffs
provided no extrinsic evidence of how consumers actually interpret Ester-C’s
“immune support” representation in isolation, and also no evidence of actual
falsity in terms of “the immune benefits of vitamin C or lack thereof, the
ability or inability of vitamin C to treat or prevent the common cold or
influenza virus, or the relative bioavailability or absorbability of Ester-C
and other forms of vitamin C.”  Without
an expert, their cited evidence about vitamin C was just hearsay.
That could have been enough to get rid of the case, but the
court also found that the plaintiffs couldn’t prove that consumers received the
allegedly misleading messages.  In
another example of Lanham Act doctrines creeping into state consumer protection
doctrine, the court found that the reasonable consumer standard of state
consumer protection laws required plaintiffs to prove that the alleged claims “were,
in fact, conveyed to ‘a significant portion of the general consuming public …
acting reasonably in the circumstances.’” This requires “extrinsic
evidence—ordinarily in the form of a survey—to show how reasonable consumers
interpret the challenged claims.” 
A footnote noted that “California courts have held that
proof of deception does not require expert testimony or consumer surveys,” but
the court here reasoned that “in such cases, the plaintiffs were also clearly able
to substantiate their allegations with admissible evidence regarding the actual
material falsity or misleading nature of the implied statements and were able
to demonstrate named Plaintiffs’ reliance on such statements.” By contrast,
here plaintiffs didn’t prove the material falsity or misleadingess of the
statements on the supplement’s labeling, and the individual plaintiffs (after
denial of class certification) never testified that they saw or relied upon any
of the purported implied disease claims on the producer’s website.  Comment: saying that falsity and reliance is
required is a completely different thing than saying that survey evidence of consumer perception is
required.  This is how doctrine changes:
a shift of emphasis, and after a few rounds of judicial telephone, the elements
required to succeed are different.

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court requires survey evidence in consumer protection case, importing Lanham Act doctrine

Posted on September 6, 2018 by rtushnet

Hughes v. Ester C Company, — F.Supp.3d —-, 2018 WL
4210139, No. 12-CV-0041 (E.D.N.Y. Sept. 4, 2018)
Ester-C dietary supplements contain a patented form of
vitamin C in the form of calcium ascorbate. Plaintiffs alleged that the advertising
for the supplements misleadingly represented that this provides a form of
immune system defense that protects users from illnesses, and decreases one’s
likelihood of getting or remaining ill. 
They brought standard consumer protection claims, including under
California law.
The court granted summary judgment because plaintiffs
provided no extrinsic evidence of how consumers actually interpret Ester-C’s
“immune support” representation in isolation, and also no evidence of actual
falsity in terms of “the immune benefits of vitamin C or lack thereof, the
ability or inability of vitamin C to treat or prevent the common cold or
influenza virus, or the relative bioavailability or absorbability of Ester-C
and other forms of vitamin C.”  Without
an expert, their cited evidence about vitamin C was just hearsay.
That could have been enough to get rid of the case, but the
court also found that the plaintiffs couldn’t prove that consumers received the
allegedly misleading messages.  In
another example of Lanham Act doctrines creeping into state consumer protection
doctrine, the court found that the reasonable consumer standard of state
consumer protection laws required plaintiffs to prove that the alleged claims “were,
in fact, conveyed to ‘a significant portion of the general consuming public …
acting reasonably in the circumstances.’” This requires “extrinsic
evidence—ordinarily in the form of a survey—to show how reasonable consumers
interpret the challenged claims.” 
A footnote noted that “California courts have held that
proof of deception does not require expert testimony or consumer surveys,” but
the court here reasoned that “in such cases, the plaintiffs were also clearly able
to substantiate their allegations with admissible evidence regarding the actual
material falsity or misleading nature of the implied statements and were able
to demonstrate named Plaintiffs’ reliance on such statements.” By contrast,
here plaintiffs didn’t prove the material falsity or misleadingess of the
statements on the supplement’s labeling, and the individual plaintiffs (after
denial of class certification) never testified that they saw or relied upon any
of the purported implied disease claims on the producer’s website.  Comment: saying that falsity and reliance is
required is a completely different thing than saying that survey evidence of consumer perception is
required.  This is how doctrine changes:
a shift of emphasis, and after a few rounds of judicial telephone, the elements
required to succeed are different.

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Using part of an “anticipated order” from a competitor’s supplier constitutes reverse passing off, despite Dastar

Posted on September 4, 2018 by rtushnet

OTR Wheel Eng’g, Inc. v. West Worldwide Servs., Nos.
16-35897 16-35936, 2018 U.S. App. LEXIS 20520 (9th Cir. Jul. 24,
2018)
OTR Wheel and West compete to sell industrial tires. “West
asked one of OTR’s suppliers to provide him with sample tires from OTR’s molds,
and he asked the supplier to remove OTR’s identifying information from the
tires.” This constituted reverse passing off.
Specifically, West asked the supplier, Superhawk, for 16 of
the relevant tires for testing by a potential customer. Superhawk said it would
take 50 days to make a mold for the tires. West responded, “I really need it
much sooner. . . .  Could you buff off
the [OTR] name on the sidewall or just remove the plate and let me get the tire
tested? … If we take out the nameplate and all the sidewall information, nobody
will know.”  It appears that spring
plates used with the molds were used to prevent imprinting of OTR’s mark
onto the tires, as the molds otherwise would have done.
A jury found West liable for reverse passing off and for tortiously
interfering with a contract between OTR and Superhawk, as well as
with related business relationships. West was not found liable for trade dress
infringement, trade dress counterfeiting, trade secret misappropriation, or
tortious interference with a contract between OTR and one customer, Genie.  The jury also found that OTR’s claim for
protected trade dress on its tire tread was invalid (either because the design
had functional, self-cleaning properties or because it lacked distinctiveness
from other tread designs) and that the trade dress registration had been
obtained through fraud on the PTO, though the last finding was set aside by the
trial court because of failure to meet the stringent standards for proving fraud
by clear and convincing evidence.  The
jury awarded OTR actual damages of $967,015.
West argued that Dastar
precluded the finding of reverse passing off, but the court held that, instead
of simply copying OTR’s design, West used tires from an “anticipated OTR order”
and passed those tires off as his own, meaning that the claim survived Dastar. 
This does strike me as troubling.  We have an underlying design that, per the jury’s
findings, is not itself protectable as trade dress.  Assume something more
standard, like a paper clip.  If reseller
X ordered a bunch of paper clips from a supplier who had previously only done
business with reseller Y, and thus “anticipated” more orders from Y, then it
would be ridiculous to think that X engaged in reverse passing off.  I don’t think it would change things if the
paper clip design had Y’s trademark automatically stamped on in the ordinary
course of production, such that the supplier had to change its production
methods to produce paper clips for X. 
Here, OTR claimed rights in the design, and West knew that and had to
cajole Superhawk into using the molds to make tires for it.  Nonetheless, OTR didn’t actually have rights.
In such circumstances, I would have found Dastar
to apply.

The court of appeals reasoned that it didn’t have to decide whether simple use
of the OTR mold would create a mere copy or a “genuine” OTR tire. Instead, West
passed off “actual OTR tires” because West asked Superhawk to make tires “to
fill an anticipated order” for OTR’s partner and to hold most of the tires
until the order was actually placed; West then wanted to take ten of the tires
to provide to West’s potential customer. 
“The jury could therefore conclude that the development tires were taken
from part of an anticipated OTR … order and were genuine OTR products, not just
copies.”  I think this doesn’t really
distinguish the case from my paper clip hypothetical because all of that could
have happened with standard paper clips too, even if it was only economical to
do a full production run and hope/expect that Y would buy the rest of the paper
clips.  Still, the panel purports not to
create a conflict with Kehoe Component Sales Inc. v. Best Lighting Products,
Inc., 796 F.3d 576 (6th Cir. 2015), in which the manufacturer continued to use the
same molds that it used for one customer to make additional units that it sold
in competition with the customer. Dastar
precluded a reverse passing off claim in that case, but there “the manufacturer
did not pass off products that had been produced as part of the customer’s
order. West did. ‘The right question, Dastar
holds, is whether the consumer knows who has produced the finished product.’ Here,
the product was produced for OTR, and West attributed it to himself.”  This seems to be playing linguistic games
with “produced for”—based on the timing, the product was produced when it was
produced for West, not for OTR, even
if OTR was a but-for cause of the production. 

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Using part of an “anticipated order” from a competitor’s supplier constitutes reverse passing off, despite Dastar

Posted on September 4, 2018 by rtushnet

OTR Wheel Eng’g, Inc. v. West Worldwide Servs., Nos.
16-35897 16-35936, 2018 U.S. App. LEXIS 20520 (9th Cir. Jul. 24,
2018)
OTR Wheel and West compete to sell industrial tires. “West
asked one of OTR’s suppliers to provide him with sample tires from OTR’s molds,
and he asked the supplier to remove OTR’s identifying information from the
tires.” This constituted reverse passing off.
Specifically, West asked the supplier, Superhawk, for 16 of
the relevant tires for testing by a potential customer. Superhawk said it would
take 50 days to make a mold for the tires. West responded, “I really need it
much sooner. . . .  Could you buff off
the [OTR] name on the sidewall or just remove the plate and let me get the tire
tested? … If we take out the nameplate and all the sidewall information, nobody
will know.”  It appears that spring
plates used with the molds were used to prevent imprinting of OTR’s mark
onto the tires, as the molds otherwise would have done.
A jury found West liable for reverse passing off and for tortiously
interfering with a contract between OTR and Superhawk, as well as
with related business relationships. West was not found liable for trade dress
infringement, trade dress counterfeiting, trade secret misappropriation, or
tortious interference with a contract between OTR and one customer, Genie.  The jury also found that OTR’s claim for
protected trade dress on its tire tread was invalid (either because the design
had functional, self-cleaning properties or because it lacked distinctiveness
from other tread designs) and that the trade dress registration had been
obtained through fraud on the PTO, though the last finding was set aside by the
trial court because of failure to meet the stringent standards for proving fraud
by clear and convincing evidence.  The
jury awarded OTR actual damages of $967,015.
West argued that Dastar
precluded the finding of reverse passing off, but the court held that, instead
of simply copying OTR’s design, West used tires from an “anticipated OTR order”
and passed those tires off as his own, meaning that the claim survived Dastar. 
This does strike me as troubling.  We have an underlying design that, per the jury’s
findings, is not itself protectable as trade dress.  Assume something more
standard, like a paper clip.  If reseller
X ordered a bunch of paper clips from a supplier who had previously only done
business with reseller Y, and thus “anticipated” more orders from Y, then it
would be ridiculous to think that X engaged in reverse passing off.  I don’t think it would change things if the
paper clip design had Y’s trademark automatically stamped on in the ordinary
course of production, such that the supplier had to change its production
methods to produce paper clips for X. 
Here, OTR claimed rights in the design, and West knew that and had to
cajole Superhawk into using the molds to make tires for it.  Nonetheless, OTR didn’t actually have rights.
In such circumstances, I would have found Dastar
to apply.

The court of appeals reasoned that it didn’t have to decide whether simple use
of the OTR mold would create a mere copy or a “genuine” OTR tire. Instead, West
passed off “actual OTR tires” because West asked Superhawk to make tires “to
fill an anticipated order” for OTR’s partner and to hold most of the tires
until the order was actually placed; West then wanted to take ten of the tires
to provide to West’s potential customer. 
“The jury could therefore conclude that the development tires were taken
from part of an anticipated OTR … order and were genuine OTR products, not just
copies.”  I think this doesn’t really
distinguish the case from my paper clip hypothetical because all of that could
have happened with standard paper clips too, even if it was only economical to
do a full production run and hope/expect that Y would buy the rest of the paper
clips.  Still, the panel purports not to
create a conflict with Kehoe Component Sales Inc. v. Best Lighting Products,
Inc., 796 F.3d 576 (6th Cir. 2015), in which the manufacturer continued to use the
same molds that it used for one customer to make additional units that it sold
in competition with the customer. Dastar
precluded a reverse passing off claim in that case, but there “the manufacturer
did not pass off products that had been produced as part of the customer’s
order. West did. ‘The right question, Dastar
holds, is whether the consumer knows who has produced the finished product.’ Here,
the product was produced for OTR, and West attributed it to himself.”  This seems to be playing linguistic games
with “produced for”—based on the timing, the product was produced when it was
produced for West, not for OTR, even
if OTR was a but-for cause of the production. 

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Trader Joe’s truffle flavored oil was too cheap for reasonable consumers to think it real

Posted on September 4, 2018 by rtushnet

Brumfield v. Trader Joe’s Co., 2018 WL 4168956, No. 17 Civ.
3239 (LGS) (S.D.N.Y. Aug. 30, 2018)
Brumfield alleged that Trader Joe’s “Black Truffle Flavored
Extra Virgin Olive Oil” contains no actual black truffle, but instead contains 2,4-dithiapentane,
a petroleum based synthetic injection that imitates the taste and smell of
truffles, in violation of New York and California law as well as the Magnuson-Moss
Warranty Act. “Truffles are a very rare and expensive type of fungus, which
have sold for as much as $100,000 per pound.” 
[They are also delicious.]  All
the claims were dismissed for failure to allege an actionable misrepresentation.
“Black truffle” is printed in large black letters on the
product; “flavored” and “extra virgin olive oil” are printed in smaller cursive
letters underneath.

The court found that the product was clearly labeled “Black
Truffle Flavored,” which didn’t necessarily entail the use of actual black
truffles.  [I’m not sure I agree that this is particularly clear.  The best argument is that the EVOO label is also in that font, so a consumer who wanted to make sure that it was olive oil would have to read it all.] Given the rarity and cost of
truffles, a reasonable consumer wouldn’t expect the $4.99 bottle of olive oil
at Trader Joe’s to contain actual truffles.  Plaintiffs didn’t reach plausibility by
alleging that “Trader Joe’s sells numerous products labeled ‘X-flavored’ that
actually contain the referenced flavor as an ingredient,” because “reasonable
consumers are not so naïve
as to believe that including actual ‘X’ in the product is the only way to make
the product ‘X-flavored.’” Nor did it help to allege that Trader Joe’s “is
renowned for selling gourmet products at relatively low prices,” and consumers
are unlikely to know how expensive truffles are or how much truffle is required
to make real truffle oil.” “A hypothetical reasonable consumer of truffle
flavored oil would know something about the expense and rarity of truffles,
signaling that the $4.99 price for Trader Joe’s truffle flavored oil is too
good to be true for actual truffle infused oil.”

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Sony’s claim that Michael Jackson performed songs on album was just its opinion

Posted on August 30, 2018 by rtushnet

Serova v. Sony Music Entertainment, — Cal.Rptr.3d —- ,
2018 WL 4090622, No. B280526 (Ct. App. Aug. 28, 2018)
[This case says a bunch of stuff that’s way too broad for
the facts; people who are concerned about things like attribution rights, and
the right of publicity, should probably be paying attention.]
Serova sued defendants for marketing a posthumous Michael
Jackson album, Michael. The album
cover and a promotional video allegedly misrepresented that Jackson was the
lead singer on each of the 10 vocal tracks on the album, when in fact he was
not the lead singer on three of those tracks. 
Serova brought a fraud claim against some defendants, alleging knowing
misrepresentation.  The trial court
concluded that the album cover, including statements about the contents of the
album, and a promotional video for the album were commercial speech that was
subject to regulation under the UCL and the CLRA. 
The court of appeals reversed because the claims about
Jackson’s performance “did not simply promote sale of the album, but also
stated a position on a disputed issue of public interest.”  That dispute was that some Jackson family
members, and others, publicly claimed that Jackson wasn’t the lead singer, and
Sony disputed that claim.  [Nice work if
you can get it, to create a disputed issue of public interest by making the statement
that’s being attacked.] “The identity of the lead singer was also integral to
the artistic significance of the songs themselves.” Thus, statements about the
identity of the artist were not simply commercial speech, and couldn’t be the
subject of actionable unfair competition or consumer protection claims, and
Sony was entitled to succeed on its anti-SLAPP defense.
Although music ads are not categorically covered by the
anti-SLAPP law, the “commercial speech” amendment that was designed to curb
abuses of the anti-SLAPP law by commercial advertisers does exclude ads for
expressive works.  [Meaning that this
decision isn’t as broadly significant as it might sound—ordinary advertisers
can’t take advantage of the “create a public controversy” way out; indeed, this
case is an example of exactly why the legislature amended the anti-SLAPP law to
exclude most advertisers.]  If an ad
falsely claimed that an album contained a particular song, that “mundane
commercial misrepresentation” wouldn’t be automatically covered by the anti-SLAPP
law.
So the question was whether the challenged conduct had some
connection to a “public issue” or an “issue of public interest.” [Of course,
the mundane commercial misrepresentation could rise to that level!]  “[P]rominent entertainers and their
accomplishments can be the subjects of public interest for purposes of the
anti-SLAPP statute.”  The complaint
itself described the controversy over the performances. “Facts concerning the
creation of works of art and entertainment can also be an issue of public
interest for purposes of the anti-SLAPP statute.”
Was this noncommercial speech?  Under Nike
v. Kasky, the speaker and the intended audience both suggested a commercial
purpose.  But the content was “critically
different from the type of speech that may be regulated as purely commercial
speech under Kasky” for two reasons
[one terrible, one not]. First, the statements “concerned a publicly disputed
issue about which [Sony] had no personal knowledge,” and second, “the
statements were directly connected to music that itself enjoyed full protection
under the First Amendment.”  [Note that
if reason number one is sufficient, then this decision is much broader than it
says it is, because it would cover a lot of advertising claims for
non-expressive products and services.]
Personal knowledge: “Kasky
ascribed great significance to the fact that, ‘[i]n describing its own labor
policies, and the practices and working conditions in factories where its
products are made, Nike was making factual representations about its own
business operations” and “was in a position to readily verify the truth of any
factual assertions it made on these topics.” [Except that Nike was making
representations about its subcontractors’
business operations, and part of the dispute was its limited opportunity to
verify all that—even if you think that “Nike” is capable of having “personal
knowledge” of anything.  Nike was in a better position to verify the truth of
its factual assertions than its audience, but that relative position is not the
same as having personal knowledge.  If you
engage in speech promoting your own products or services, you are responsible
for the claims you make.  If you can’t
verify their truth, then you shouldn’t be making those claims.  See also: substantiation.]
Here, Serova alleged that another set of defendants, not
Sony, “jointly created, produced, and recorded the initial versions” of the
Disputed Tracks and knew that Jackson didn’t perform them.  According to Serova’s allegations, Sony was
itself deceived and thus “lacked the critical element of personal knowledge
under the Kasky standard.”  Because Sony lacked actual knowledge, it could
“only draw a conclusion about that issue from [its] own research and the
available evidence. Under these circumstances, Appellant’s representations
about the identity of the singer amounted to a statement of opinion rather than
fact.”  The lack of personal knowledge
also meant that regulating the speech here had a greater risk of a chilling
effect, given that the UCL and CLRA create liability without intentional or
willful conduct.
Sony’s PR statements directly addressing the public
controversy were noncommercial, and the statements on the album cover and promo
video “also staked out a position in that controversy by identifying the singer
as Michael Jackson. The fact that those statements were made in the context of
promoting the album does not change their constitutional significance.”
The court of appeals was unwilling to force Sony to either
provide disclaimers about the singer’s identity or omit the disputed tracks
from the album.  And in another instance
of disturbingly broad language, the court of appeals thought that it would be
constitutionally problematic to compel commercial speech of this type, citing Nat’l
Inst. of Family & Life Advocates v. Becerra (2018) ––– U.S. ––––, 201
L.Ed.2d 835. Although commercial speech disclosures can mandate “purely factual
and uncontroversial information,” the compelled disclosure here wouldn’t be “uncontroversial”
because there was controversy around the performer of the tracks, and it wouldn’t
be “purely factual” from Sony’s perspective, as it had no personal knowledge of
the facts.  [That’s … not what “purely
factual” means.  You’re entitled to your
own opinion, but not to your own facts.]
[This analysis hints at one reason why commercial speech
doctrine has persisted despite assaults on it: all the other ways we have of
making distinctions between ok and not ok false speech that seeks to sell a
product are much worse. If “controversial” is independently meaningful (and it
shouldn’t be if a disclosure is factual), then it’s easy enough for a large entity
to generate the necessary “controversy” by taking a stand, no matter how stupid
and disprovable that stand is. Likewise with a requirement that a corporate
entity have “personal knowledge” of the falsity of its claims—my understanding
is that this has royally messed up securities law and consumer protection law
went to strict liability for very solid reasons.]
Second, the statements at issue described and promoted an
album that was fully protected by the First Amendment. “The identity of a
singer, composer, or artist can be an important component of understanding the
art itself…. [W]hether Michael Jackson was actually the lead singer of the
songs on the Disputed Tracks certainly affects the listener’s understanding of
their significance.”  Thus, the
statements at issue here were “unlike the purely factual product or service descriptions”
in other cases, such as Kwikset and
the representation that products were manufactured in the US. [Look, I might
even agree with this outcome, but this distinction is profoundly
disingenuous.  Kwikset is very much about specific definitions of “Made in the USA”
that are subject to contestation, and consumers are extremely unlikely to have
a definition of the term specific enough to make the distinctions that the
actual regulators have to make.]
Not all ads promoting an artwork are noncommercial speech; “mundane
or willfully misleading” claims might not be protected, such as a statement
falsely stating that a particular song is included in an album. But “where, as
here, a challenged statement in an advertisement relates to a public
controversy about the identity of an artist responsible for a particular work,
and the advertiser has no personal knowledge of the artist’s identity, it is
appropriate to take account of the First Amendment significance of the work
itself in assessing whether the content of the statement was purely commercial.”
Indeed, a footnote suggested that even representations about the identity of
the artist could be regulated, at least if the identity of the artist wasn’t an
issue of public interest [in which case no materiality] and the defendants had
personal knowledge of the issue.

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Amicus seeking rehearing in Honey Badger case

Posted on August 28, 2018 by rtushnet

Mark Lemley, Mark McKenna, and I wrote a brief in support of rehearing.  Here’s hoping!

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Nominative fair use defense in 2d Cir goes about as well as you’d expect on motion to dismiss

Posted on August 28, 2018 by rtushnet

Excelsior College v. Wolff, 2018 WL 3964703, No. 17-CV-0011
(N.D.N.Y. Aug. 16, 2018)
Excelsior alleged that Wolff infringed its rights by advertising
and selling a test preparation service that uses Excelsior’s registered marks
and copyrighted material for a Clinical Performance Nursing Exam required to
pass its nursing program.  Wolff, a
former student who signed the academic honesty policy, uses robscpne.com and
robbie-wolff.com and his html [foolishly] includes “CPNE” and “Excelsior
College” as keywords and meta-tags. He used RobsCPNE on social media.  Wolff allegedly requests CPNE test questions
and exam feedback from students who take the CPNE exam, then them to students
preparing to take the CPNE exam, allegedly violating and causing the violation
of the honesty policy.
We’re in the Second Circuit, so nominative fair use can’t be
used to kick out the case on a motion to dismiss. Strength: registered without
requiring a showing of secondary meaning, so presumed inherently distinct
(though given what CPNE stands for, that’s a little hard to accept) and
plausibly has acquired distinctiveness due to use since 1975 and “significant”
sums spent on advertising. Similarity: yep. Proximity/bridging the gap:
Excelsior also offers test prep services. No pleading of actual confusion, but
that’s ok. Bad faith: knowledge of the mark and disregard of C&D demands,
along with use of a privacy protection service to conceal his domain name
registration [um, didn’t it use his name?] alleged bad faith. Sophistication:
favored Wolff, but irrelevant.  At this stage,
the court couldn’t evaluate the nominative fair use factors (whether use is
necessary to identify the defendant’s product or service—seriously? That
follows from the allegations of the complaint). It was plausible that
purchasers could believe there was sponsorship, approval, or affiliation with
Excelsior, since it advertised test prep for people seeking an associates
degree through Excelsior and the website included the CPNE mark.  
On ACPA, Wolff argued that allegations of bad faith weren’t
plausible because the domain robscpne.com sent users to robbie-wolff.com and
the content is “replete with references to Defendant, Robbie Wolff, by name,
including testimonials and reviews.” But it was also “replete with Plaintiff’s
mark and references to Excelsior College/Excelsior University, which could
cause confusion,” and Excelsior alleged bad faith intent to profit [from
confusion?].  However, that doesn’t
really rebut the point that Wolff does not seem to have hidden his identity in
any way, which makes allegations alleging bad faith from his use of privacy protection for his contact info implausible.
Copyright infringement: also plausibly alleged that Wolff
copied substantial amounts of Excelsior’s materials.  False advertising under NY GBL § 350: the
requirement that conduct be consumer-oriented was satisfied by the alleged
trademark infringement. State law unfair competition additionally required bad
faith. The complaint alleged that the defendant used an identical mark with the
bad faith intention to profit from the known goodwill of the plaintiff’s mark.
That was enough to plausibly plead bad faith.
Tortious interference (with the honesty agreement) was also plausibly
pled even though the CPNE is a practical exam, not a written exam, and even
though Wolff argued that all test preparation services involve training the test-taker
how to answer the type of questions likely to be on the test.

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No need to be chicken about copying in poultry feeder case

Posted on August 27, 2018 by rtushnet

CTB, Inc. v. Hog Slat, Inc., 2018 WL 4035945, No.
14-CV-157-FL (E.D.N.C. Aug. 22, 2018)
CTB sued HS for making an allegedly exact replica of CTB’s poultry
feeder, infringing its registered trademarks for product configuration and
color (color on the supplemental register).  
The parties’ feeders, side by side
Pan feeders are the industry standard. The usual configuration: a pan
(bottom portion in which feed collects), grill (top portion, usually made up of
spokes of varying number, size, and shape), and center cone (feed distribution
mechanism). Feeders are sold to roughly forty “integrators,” who own the
chickens and dictate which feeders individual growers may use.  Also of relevance, CTB also had a patent for
a poultry
feeder, which expired in 2010. The patent said it was aimed at
providing a “barrier for preventing birds and animals from bodily climbing into
the feeder yet simultaneously allowing those that do force their way inside to
easily exit without sustaining injury or damaging the feeder apparatus.” (It
discloses a locking brood gate and a mechanism for rotationally unlocking and
locking the pan structure and grill structure together.

Image from patent drawings

Right after the patent expired, CTB filed a trademark
application for the configuration of its feeder, which was rejected on
functionality grounds. CTB responded and the PTO issued a registration:
The mark consists of a
three-dimensional configuration of a unique mechanized poultry feeder which
includes a pan structure and a grill structure. When viewed from any side, the
perimeter of the feeder has a generally octagonal shape as it has two generally
vertical sides, one defined at the bottom of the pan structure and the other
defined at the top of the grill structure, and four generally diagonal sides
which inter connect the vertical sides to the horizontal sides. Internal angles
between the diagonal sides and the vertical sides are generally smaller than
the internal angles between the diagonal sides and the horizontal sides. The
matter shown in broken lines is not part of the mark and serves only to show
the position or placement of the mark.
 

TM registration
CTB also sought to register the configuration and the color
combination of red pan and gray grill, which was rejected on functionality
grounds.  Then it sought to register only
the color combination, which application was rejected multiple times for lack
of inherent distinctiveness and ended up on the supplemental register.
 

TM registration (supplemental)

Another patent owned by CTB says: “[I]t is relatively well
known within the agricultural industry that adult turkeys and chickens are
attracted to the color red and, therefore, many adult turkey and chicken
feeding trays are now colored red in order to entice the adult turkeys and
chickens to move towards the red feeding tray so that it is easier for the
adult turkey and chickens to find their food.” And it touts the virtues of
reflective particles, which attract feeding animals, “preferably metallic
flecks or flakes, such as titanium or aluminum, or any other metallic or
non-metallic material that will bond with the nonreflective material of the
feeder.”
As sold, each feeder has the parties’ respective registered
brand names molded onto the upper grill portion and bottom pan portion of the
feeders.
Functionality: The court quoted a previous case: “TrafFix does not require that a patent
claim the exact configuration for which trademark protection is sought in order
to undermine an applicant’s assertion that an applied-for mark is not de jure
functional. Indeed, TrafFix teaches
that statements in a patent’s specification illuminating the purpose served by
a design may constitute equally strong evidence of functionality.”  The expired utility patent here contrasted
its supposedly better shape to prior art configurations whose “shape and
configuration of the barriers” allowed “birds which force their way in the
feeder apparatus [to] become trapped inside.” “This functional advance is
echoed multiple times in the claims of the patent and is specifically connected
to the configuration of the feeder.” This was strong evidence of functionality;
the registered mark claimed the same features as the patent.  Likewise, the other patent showed every angle
of the configuration as claimed in the trademark registration and didn’t
acknowledge any other embodiments with different configurations.

The patent stated that the area created by the grill and its
individual spokes and hub allowed for the functionality of birds entering and
exiting the feeder without injury.  CTB’s
ads also touted a “patented feeder grill design [that allows] young birds to
exit pans easily” and so on, providing further evidence of functionality. The
parties agreed that the pan underneath the grill was shaped functionally. This
dicated the V-shaped profile of the pan claimed as part of the trade dress. CTB
argued that the section connecting the upper grill structure to the lower pan
member wasn’t functional: the “two vertical walls, partly formed from the pan
structure.” However, the “double-pan lip,” as touted in CTB ads, functioned to
save feed.  
The appropriate focus is the overall trade dress, but the
whole trade dress was functional: this was “an arrangement of functional parts,
the arrangement of which was dictated solely by functional concerns.”  Alternative designs need not be considered.
The presumption of nonfunctionality from registration had
dropped from the case, and there was no evidence the configuration was dictated
by any concerns other than functionality. 
[What CTB submitted to PTO in response to overcome the initial rejection
was basically arguments that there were other designs in the industry and that
its ads and patent mostly claimed
advantages that weren’t part of the identified configuration, which doesn’t
seem like a strong argument to me.]
Color:  The parties’
products consisted of a red pan and a grill that is silver with metal flakes or
shiny gray. Here’s a great legal sentence: “[I]t is undisputed that chickens
are attracted to shiny objects.” CTB argued that metal flakes weren’t relevant
because it was claiming only the color gray. But the use of metal flakes in a
gray color scheme could be functional. Plus, the parties both used shiny gray,
so CTB’s argument meant that it wouldn’t be using an embodiment its own trade
dress, which the court thus concluded was red and shiny gray.  There was no presumption of validity here,
and CTB’s own patent and ads touted the advantages of using red and shiny gray.
Other CTB patents, and other industry patents, also identified red as
functional for attracting poultry.  [If
functional for poultry, why not for people?]  CTB’s witness Cole also testified that he
conducted tests and found that red and shiny gray was close to the best.
CTB argued that there was no scientific evidence to support
the conclusion that chickens are more attracted to these colors versus other
colors. CTB misperceived on whom the burden lay, and didn’t show that the
colors were “ornamental, incidental, or arbitrary” or were chosen for any
reason other than functionality. Dismissing its own position in its patent as “apocryphal
lore” couldn’t avoid summary judgment. [But might make for an interesting ad by
a competitor, a la the Pizza Hut Puffery
ad.] Plus, functionality is a legal conclusion, not a scientific one.
CTB argued that it could still have rights in a color combo,
but “a functional arrangement of functional parts remains functional. The undisputed
evidence shows that, historically, plaintiff utilized a red pan and metal grill
for functional reasons, and, more recently, plaintiff utilizes a red pan and
gray plastic grill with metal flakes for functional reasons.”
For some reason [which could be the difficulty in analyzing an unfair competition claim based only on labeling, especially when we know that labels often don’t work], the court went on to deal with remaining
unfair competition claims as a matter of failure to show damages/proximate
cause instead of pointing out that functionality ended anything but, perhaps, a
claim for insufficient labeling. There was no evidence of any harm, just a
theory of price erosion.

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No, wood is good: possibility of detecting image manipulation keeps image from literal falsity

Posted on August 27, 2018 by rtushnet

Louisiana-Pacific Corp. v. James Hardie Building Prods.,
Inc., No. 3:18-cv-00447-JPM, 2018 WL 3978364 (M.D. Tenn. Aug. 20, 2018)
LP challenged statements JH made regarding engineered wood
siding products in its “No Wood Is Good” marketing campaign. The parties
compete in the manufactured siding industry. LP claims to be the “undisputed
leading manufacturer and distributor of stand-based engineered wood siding
products in the United States.” JH produces cement-based siding products that
it markets as alternatives to engineered wood siding, including LP’s products.
JH made superiority claims on http://www.nowoodisgood.com and
http://www.nowoodsgood.com, in promotional materials, and in representations made by its
agents to prospective customers. It stated that engineered wood sidings are
inferior because “pests love” engineered wood sidings, and that engineered wood
sidings are “natural fuel for fire,” “susceptible to water absorption,” and
“won’t weather well.”  It used images and
video of a woodpecker within a hole in what appears to be siding material and
an image of buckling siding that JH indicates is LP’s strand-based engineered
wood siding.

As for the woodpecker picture, LP argued that the image was
literally false because it was doctored to add the woodpecker, and the image’s
colors were edited to make the hole seem more severe and misrepresent its
siding’s susceptibility to woodpecker damage. The record showed that the hole
was in fact made in LP siding, and there was circumstantial evidence that it
might have been a woodpecker; the record indicated that engineered wood
products (including LP’s) are susceptible to woodpecker damage.
JH argued that adding the woodpecker was puffery. The court
disagreed.  It was a specific
representation rather than a broad, general one, and the court didn’t see why “[n]o
reasonable consumer would believe that JH captured the woodpecker in the act of
nesting in the hole.” However, the image was not literally false because it was
“arguably identifiable as a fake.” The siding was too thin for the bird to nest
within it and that the photo does not show that the bird has pecked through the
moisture barrier that would be installed underneath the siding. “[A] reasonable
consumer (who would be familiar with the dimensions of the product) may be able
to spot the woodpecker as a fake.”
“Pests Love It”: LP argued that its products are treated
with a termite-resistant zinc borate-based process that resists damage from
pests and thus its siding doesn’t suffer structural damage from them, but JH responded
that LP’s products are not impervious to pest damage. The court found the claim
to be not literally false, but an exaggeration “to emphasize the point that
wood siding is vulnerable to pest damage. No reasonable consumer would believe
that pests ‘love’ wood siding, or that any siding material would be
specifically designed to lure or attract pest damage.”
Photo of warped siding: LP argued that the image was
literally false because the image does not depict engineered wood siding. JH responded
that the image depicted fiber-based engineered wood siding. Originally, the ad
referred to OSB siding, but was then changed to refer to “Engineered
Wood.”  The image of buckled siding concededly
depicted fiber-based wood siding, a distinct type. LP produces and sells both
types.  The image labeled “Engineered
Wood” wasn’t literally false, because it was factually accurate. If engineered
wood siding is not properly installed, its natural expansion due to water
absorption could result in buckling. Thus, the image was partially accurate,
and there was a disclaimer that identified improper installation as a possible cause.
But the disclaimer, in small font and at a distance from the image itself, wasn’t
completely effective. This partial truth/partial correction rendered the image
not literally false, except as to when the image was labeled “OSB Siding.”  The visual cues that an expert could use to
identify the product weren’t clear in JH’s marketing and a non-expert might not
recognize them on visual inspection. Thus, reasonable consumers would be
unambiguously deceived by the image of buckled fiber-based siding labled “OSB
Siding.”
There was no proof of consumer reception of the challenged
images/statements. JH’s expert concluded that “the woodpecker image, the ‘Pests
Love It’ statement, and online advertising for siding products generally are
not material to purchasing decisions of builders, installers, or contractors.”  The Sixth Circuit permits “a presumption of
money damages where there exist[s] proof of willful deception” where the
defendant has been specifically targeted, with a specific reference to the
competitor or a product identified as the competitor’s.  Only the ads labeled “OSB Siding”
specifically targeted LP, the only producer of OSB siding in the US, while other
companies make engineered wood products.  But was this falsity willful?  It was reckless, given JH’s knowledge that LP
made both kinds, the difficulty of distinguishing them visually, and the lack
of evidence that JH took any steps to confirm what kind of siding it was.
JH’s expert report didn’t rebut the presumption of money
damages, because the expert’s survey polled only a subsection of the market; it
excluded do-it-yourself home builders and do-it-yourself remodelers. Given that
JH actually created a separate website geared for consumers and another for the
trade audience, that wasn’t good enough. 
Thus, LP showed likely success on the merits as to the one statement,
but not the others.  The court also
presumed irreparable harm because reputational injuries were at risk, and
reputational harm can’t be quantified and redressed.
 

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