Another malware misattribution claim fails

Posted on September 27, 2018 by rtushnet

PC Drivers Headquarters, LP v. Malwarebytes, Inc., 2018 WL
2996897, No. 18-CV-234-RP (W.D. Tex. Apr. 23, 2018)
PC Drivers “offers software designed to help customers
optimize the processing speed of their computers and identify software drivers
ready to be updated.” Malwarebytes sells software that blocks various programs
on its customers’ computers, including software deemed malicious or potentially
unwanted (the latter of which are called PUPs). PC Drivers contends that, in
January 2018, Malwarebytes inappropriately branded one or more of its programs
as a PUP, which can make PC Drivers’ software inoperable and block access to PC
Drivers’ website. This happened before, and when the software received
certification from a newly developed third-party certifier called AppEsteem,
Malwarebytes stopped labeling the programs as PUPs. PC Drivers alleged that it
continues to carry AppEsteem certification and that its programs have not
changed substantially.  PC Drivers sued
for false advertising, trademark infringement [what?], trademark dilution, tortious
interference with contractual relations; promissory estoppel; and related
claims.  (Similar
litigation against Malwarebytes discussed here: §230 blocked liability.)
The court declined to grant a preliminary injunction, despite
evidence that Malwarebytes has not been cooperative with PC Drivers as PC
Drivers has attempted to figure out the problem. PC Drivers also argued that it
was the victim of an act of retaliation taken by Malwarebytes against AppEsteem
in response to AppEsteem’s threat to list Malwarebytes as a “deceptor.” But
that wasn’t enough.
Malwarebytes argued that §230’s statutory Good Samaritan protection
for blocking and screening of offensive material rendered it immune to all these
claims.
PC Drivers argued that Malwarebytes wasn’t an “interactive
computer service” under the statute, but it was, because the phrase is to be broadly
applied using the definition “any information service, system, or access
software provider that provides or enables computer access by multiple users to
a computer server ….” Malwarebytes “provide[s] users with access to the new
malware definition content that is available on its servers.”
PC Drivers also argued that the immunity didn’t apply to
Malwarebytes’ own statements, but “this requirement is present only in §
230(c)(1).”  I’m not sure this is
responsive: Malwarebytes might be immune for the blocking and any consequences
proximately caused by the blocking itself, but not immune for things it said
about the blocking, which could independently cause damage.
Finally, PC Drivers alleged that Malwarebytes did not act in
good faith. But § 230(c)(2)(A)’s good-faith requirement (for “any action
voluntarily taken in good faith to restrict access to or availability of
material that the provider or user considers to be obscene, lewd, lascivious,
filthy, excessively violent, harassing, or otherwise objectionable, whether or
not such material is constitutionally protected”) doesn’t extend to §
230(c)(2)(B) (“any action taken to enable or make available to information
content providers or others the technical means to restrict access to material
described in paragraph [A]”) under the statute.
Malwarebytes argued that PC Drivers’ federal unfair
competition claim fell under the safe harbor because it wasn’t an IP claim. “Although
the specific provision does not address intellectual property, it is a part of
the Lanham Act, which as a whole ‘pertain[s] to intellectual property,’” so
some courts call all 43(a) claims clawed back from §230 immunity, while others don’t.
The court didn’t resolve the issue because there was no likely success on the
merits regardless.
PC Drivers alleged that Malwarebyte’s designation of PC
Drivers’ software as a PUP was misleading. But this wasn’t false: the
designation “potentially unwanted program” “inherently carries with it the
acknowledgment that it is only a guess as to whether the program is or is not
unwanted,” and “unwanted” “looks more like a subjective opinion than a factual
assertion.”
Dilution: There was no evidence of fame.
Infringement: PC Drivers alleged that there was likely
confusion about association, authorization, endorsement, affiliation, or
sponsorship. Understating the matter, “the Court notes that this claim is
strange when viewed in conjunction with PC Drivers’ other claims.” Malwarebytes
invoked nominative fair use. There was no evidence that Malwarebytes used PC
Drivers’ mark in any way other than listing the name of the website to explain
what it is blocking. The PUP label “implies anything but endorsement; customers
told by Malwarebytes that PC Drivers’ software might be unwanted are not likely
to think that PC Drivers endorses Malwarebytes.” There was only one reference:
to the domain name download.driversupport.com. It was unclear how Malwarebytes could
the user of the name of the website it was blocking without using the domain
name. [Another case where “use as a mark” would also be useful to explain why
this is ok.]

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Blast from the past: nominative fair use avant la lettre

Posted on September 27, 2018 by rtushnet

Polyglycoat Corp. v. Environmental Chemicals, Inc., 509
F.Supp. 36 (S.D.N.Y. 1980)

Found this in an unrelated search and it made me think about
the utility (if any) of the nominative fair use category. Plaintiff sued
defendant for advertising of defendant’s automotive silicone paint finish
remover called POLYCRACKER. Plaintiff’s Polyglycoat, a protective paint finish
sealant for automobiles, was heavily referenced on Polycracker’s label and its
launch ad in Auto Body Repair News, a trade journal:

The words “Polyglycoat TM Remover” appear conspiciously on
the POLYCRACKER label, one page of the ad consists solely of the bold-lettered
statement “WIPE AWAY POLYGLYCOAT TM”, and the body of the ad contains such
statements as “There’s nothing more troublesome for auto body shops than
silicone finishes like Polyglycoat” and “Take off Polyglycoat with the wipe of
a cloth.”
In terms of the Polaroid factors, the court found strong
secondary meaning in the relevant market, the use of an identical mark, product
relatedness sufficient to generate confusion, and an intent to “capitalize on
the popularity of the POLYGLYCOAT mark and product in the field.” There was no
evidence of actual confusion, but “a reasonable likelihood of confusion is
inferred from defendant’s use of plaintiff’s exact trademark to promote its
related product, the absence of a viable alternative explanation by defendant
for its appropriation of the POLYGLYCOAT mark, and other circumstances of the
relevant market.”
Thus, an injunction was warranted to keep Polyglycoat off
the Polycracker label “either as it now appears, or any other way by which the
mark is singled out as the generic, shorthand term standing for the species of
paint finish sealants which POLYCRACKER is said to remove.” Defendant was also
enjoined from singling out the mark in ads, e.g., “WIPE AWAY POLYGLYCOAT,”
“Take off Polyglycoat,” “normal prep solvents … do not remove polyglycoat,”
“The Polyglycoat wipes off easily,” and “say good-bye to Polyglycoat problems.”
However, in the absence of falsity or misleadingness,
defendant couldn’t be prevented from advertising that its product could remove
automotive silicone finishes including POLYGLYCOAT, “the most popular and
perhaps the most durable brand.” Thus, it could continue using the name “in
such conjunctive phrases as ‘silicone finishes like Polyglycoat R.’” In any
such use, the mark couldn’t appear in letters which distinguish it from the
other words in the conjunctive phrase by size, color, typeface or any other
characteristic. And a long disclaimer was required:
POLYGLYCOAT R is a registered trademark of the Polyglycoat
Corporation, Scarsdale, New York, for its protective coating and sealant for
automotive finishes. The term Polyglycoat as used herein means the product
manufactured and sold by that company, and is used without the permission of
Polyglycoat Corporation. POLYCRACKER is neither manufactured nor in any way
sponsored or authorized by Polyglycoat Corporation.
This disclaimer probably did nothing but increase
defendant’s advertising costs, since consumers weren’t particularly likely to
read it.  And aside from the required
disclaimer, this seems like pretty much the result you’d get from nominative
fair use today (since courts would probably interpret the initial ad, at least,
as using “too much” of the mark, as in the Playboy v. Welles case). 
What, if anything, does having nominative fair use as a
defined concept add?  The current Second
Circuit treatment is worse than nothing, since the NFU factors actually negate
the significance of the other key Polaroid factors, like strength and identity
of the marks, and can’t be weighed against them in an understandable way.  “Weighing” implies that enough strength and
similarity (always present in a NFU situation) ought to be able to overwhelm
the NFU factors, but they really don’t. The original concept from the Ninth
Circuit was a way to formalize the obvious fact that there are some cases in
which the multifactor test factors (particularly strength, similarity, and relatedness
of goods) don’t point to the correct result. 
In particular, the multifactor test doesn’t match our understanding of
cases in which the trademark is clearly being used as a comparator or subject
of discussion. I haven’t fully figured out my take on this, but I do think we
need some doctrinal indicator to judges that there are times when the
multifactor test is a bad idea, so that we don’t have to rely on the variable
common sense of individual judges and in particular district court judges’
understandable fear of getting reversed when courts of appeals say that you have
to use the multifactor test no matter what (except with Rogers, in the Second Circuit).

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Pa. Supreme Court fixes ridiculously overbroad holding of puffery

Posted on September 26, 2018 by rtushnet

Commonwealth v. Golden Gate National Senior Care LLC, —
A.3d —-, 2018 WL 4570102, No. 16 MAP 2017 (Pa. Sept. 25, 2018)
The Pennsylvania Supreme Court reinstated a bunch of claims
against a bunch of nursing homes under the state Unfair Trade Protection and
Consumer Protection Law, though not unjust enrichment claims. In essence, the
nursing homes allegedly made materially misleading statements about the nature
and quality of the care provided to their nursing home residents. They
allegedly knowingly failed to provide the level of care they advertised, as
they purposefully understaffed the facilities so as to maximize their profits. Chain-wide
misrepresentations included brochures, videos, websites, and video
advertisements, with claims such as:
“Snacks and beverages of various
types and consistencies are available at any time from your nurse or nursing
assistant.”
“We have licensed nurses and
nursing assistants available to provide nursing care and help with activities
of daily living …. Whatever your needs are, we have the clinical staff to
meet those needs.”
“Clean linens are provided for you
on a regular basis, so you do not need to bring your own.”
“A restorative plan of care is
developed to reflect the resident’s goals and is designed to improve wellness
and function. The goal is to maintain optimal physical, mental and
psychological functioning.”
“A container of fresh ice water is
put right next to your bed every day, and your nursing assistant will be glad
to refill or refresh it for you.’ ”
“We work with an interdisciplinary
team to assess issues and nursing care that can enhance the resident’s
psychological adaptation to a decrease of function, increase levels of
performance in daily living activities, and prevent complications associated
with inactivity.”
In truth, residents allegedly routinely have to wait hours
for food, assistance with toileting, changing of soiled bed linens, and other
elements of basic care, and sometimes must forego them entirely.
On the individual facility level, the AG alleged misrepresentations
in the resident assessment and care plans created for each resident: services
promised in the care plans were not provided because of intentional
understaffing. Also, the facilities allegedly generated billing statements
which indicated that certain care was provided when it was not, which were then
paid by public funds when residents received Medicaid or Medicare. The facilities
allegedly further deceived the Pennsylvania Department of Health by temporarily
increasing the number of staff on hand during inspections and by willfully
creating inaccurate and/or falsified resident care records for review.
The Commonwealth Court found the marketing and advertising
materials to be mere puffery: too broad or vague, or merely expressing an
intent. Then the court held that resident assessments, care plans and bills
weren’t covered by the UTPCPL because they weren’t advertising but rather
isolated statements to potential customers, or in the case of resident care
plans were created after a customer was admitted to a facility. The court also
found that the allegations about care deviating from promises were too
conclusory and unspecific. The AG didn’t identify any  “particular care plan … from which the
Facility deviated, or … identify[ ] any specific bill for services that were
not provided.”  Further, the AG didn’t allege
“how a consumer could be misled by a billing statement to believe that he
received services or assistance that he had not in fact received, or how an
un-itemized per diem charge could convey to a consumer that a particular
service had been provided in the first place.”
Here, the state supreme court identified two types of
puffery: (1) “hyperbolic boasting or bluster that no reasonable consumers would
believe to be true” and (2) “claims of superiority over a competitor’s product,”
though the examples are “statements that a laboratory imaging device provided ‘unprecedented
clarity,’ or the advertisement of a product as ‘the complete sports drink,’” so
I’m pretty sure “claims of superiority” is implicitly modified by “vague or
general,” especially since the court continues by saying that a key
characteristic of puffery is that “consumers understand that the statements are
not to be takenliterally. … It is these characteristics – the patently
hyperbolic or excessively vague character that dissuades any reasonable
consumer from placing reliance thereon as fact – that render puffery
non-actionable under the UTPCPL.”
Puffery is usually a question of fact. It was so here:
We hesitate to conclude that
consumers seeking a nursing home would necessarily find statements promising to
provide food, water, and clean linens to be hyperbolic in any respect, or to be
vague statements of optimism or intent. To the contrary, for residents of
nursing homes, many of whom are physically compromised and require assistance
with day-to-day living activities, regular access to these items is essential,
and there is no reason to think that a consumer would not take these statements
seriously.
Plus, the lower court didn’t consider the overall
context.  For example, it held that, “We
believe that respecting your individuality and dignity is of utmost
importance[,]” qualified as puffery “based on the preface alone” – that is,
based on the use of the phrase “we believe,” which was impermissible slicing
and dicing (something that’s also basic First Amendment defamation doctrine). Nor
was “[a] container of fresh ice water is put right next to your bed every day,
and your nursing assistant will be glad to refill or refresh it for you” mere
optimism or vague, given the obvious message that “a resident will have ready
access to water every day,” something that would be highly relevant to an
immobile resident.
The lower court also erred in holding that statements in
patient assessments, care plans and billing statements weren’t actionable
because they weren’t ads, applying the definition of advertising elaborated by
judges under the Lanham Act. Though some provisions of the UTPCPL specifically
mention advertising, the court pointed to two relevant UTPCPL provisions
covering conduct other than advertising. Subsection (v) prohibits conduct
“[r]epresenting that goods or services have sponsorship, approval, characteristics,
ingredients, uses, benefits or quantities that they do not have or that a
person has a sponsorship, approval, status, affiliation or connection that he
does not have,” and subsection (xxi) prohibits “[e]ngaging in any other
fraudulent or deceptive conduct which creates a likelihood of confusion or of
misunderstanding.”  The court declined to
rewrite the statute to impose the “advertising” limitation on all the provisions.
It further pointed out that other subsections prohibit “failing to comply with
the terms” of a written guarantee or warranty and “making solicitations for
sales of goods or services” without first providing certain information, making
clear that the statute overall wasn’t intended to be limited to “advertising”
under the Lanham Act.
Likewise, the lower court erred in finding the complaint
insufficiently detailed. The AG pled factual allegations based on interviews
with former employees and residents’ family members, as well as on information
from the Centers for Medicare and Medicaid services; the complaint included
representative examples of the alleged failures.  “Pennsylvania is a fact-pleading
jurisdiction; as such, a complaint must provide notice of the nature of the
plaintiff’s claims and also summarize the facts upon which the claims are
based.” But there’s no requirement to plead the evidence upon which the pleader
will rely to later prove the claims. The defendants were informed of the claims
against them, even without identifying particular patients, care plans,
assessments, or bills.
In addition, the lower court erred in holding that the state
couldn’t seek return of monies spent because it wasn’t a “person” under the
statute. The relevant statutory phrase is “person in
interest,” that is, “those whose interests were
affected by the enjoined conduct, i.e., those who lost money or property
because of the enjoinable conduct that was found to violate the UTPCPL.” This included the state when it was the one that lost money, especially given the rule of construction that this consumer protection statute
is to be interpreted liberally.  

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modifying a false advertising injunction is justified when likelihood that claim is false has changed

Posted on September 26, 2018 by rtushnet

De Simone v. VSL Pharmaceuticals, Inc., No. TDC-15-1356, 2018
WL 4567111 (D. Md. Sept. 24, 2018)
De Simone sought modification of a preliminary
injunction governing statements it could make about a probiotic product, VSL#3
and its relationship to De Simone’s now-competing product, Visbiome.  (I was a bit critical at the time.) They
sought to be able to advertise that ExeGi Pharma was the exclusive provider of
the “De Simone Formulation,” the term they have coined for the combination of
probiotic strains developed by De Simone and first commercialized in the United
States as VSL#3; to cite clinical studies with the term “VSL#3” in the title as
part of their promotional materials; and to engage in other speech critical of
VSL#3.
As relevant here, the prior order required ExeGi to refrain
from “stating or suggesting that the license agreement” between De Simone and
VSL had “expired,” or asserting that “VSL#3 will no longer be on the market.” At
the time, both products, though differently branded, used the same formulation.
Thus, Visbiome’s exclusivity statements were false advertising. The court also
enjoined (apparently 100% truthful) Visbiome statements that studies with
“VSL#3” in the title constituted studies relating to the “De Simone
Formulation.”
The De Simone parties returned to court, arguing that the
VSL product was no longer made under De Simone’s formulation, resulting in a
clinically different composition; VSL agreed that production was now elsewhere
but argued that the changes weren’t clinically significant, and that any
changes were the result of De Simone’s breach of his fiduciary duty so they
shouldn’t be allowed to be communicated to the public.  [You can tell my feelings about that last
part.]
A court has the power “to modify an injunction in adaptation
to changed conditions.”
The court didn’t let De Simone speak truthfully by citing
studies that use the term VSL#3 in the title (while studying the De Simone
formulation). The court previously found the extensive use of the citations to
be confusing and concluded that “[e]ven if ExeGi has a reason to refer to those
studies because Visbiome is, as a scientific matter, the same formulation that was
subjected to those trials, that scientific equivalence cannot be used as an
opportunity or excuse to erode VSL’s trademark.”  Again, “eroding” a trademark isn’t a thing,
but the court determined that the change in the VSL product’s formulation
didn’t constitute a relevant change for trademark purposes.  [Which is an interesting variant on the fact
that trademark doesn’t actually protect the public from changes in quality
initiated by the trademark owner.]  So
now, the De Simone defendants are infringing if they truthfully refer to the
studies, while VSL might be falsely advertising (if the formulation is indeed
materially different) if they refer to the studies. 
However, conditions did change as to representations of
exclusivity. At the time of the old order, while the license agreement between
De Simone and VSL had recently expired, VSL continued to have inventory of
product produced under that agreement, so De Simone’s statements at that time
that they were the “exclusive” provider of the De Simone formulation
constituted false advertising. That’s no longer true, and promotional materials
including those touting VSL#3 as dairy-free, now made clear that VSL#3 and
Visbiome were no longer exactly the same, removing the factual predicate of the
injunction about exclusivity statements. At a minimum, the likelihood of
success of a false advertising claim against the exclusivity statements had
changed: though VSL had offered explanations for the composition discrepancies,
and criticized De Simone’s published studies as biased, they hadn’t submitted a
comparable published study indicating that the current versions of VSL#3 and
Visbiome were identical or even functionally equivalent. Plus, the balance of
equities had shifted because VSL#3 has been marketed as “the same quality
product, containing the same genus and species of bacteria, in the same
proportions that you have come to expect,” while ExeGi couldn’t dispute that.
Thus, the injunction would no longer bar assertions that the
licensing agreement between De Simone and VSL has expired and that ExeGi is the
exclusive provider of the De Simone formulation, but the court refused to
declare broadly that ExeGi is free to “engage in commercial speech critical of
its competitor’s products.” This was warranted particularly because the De
Simone parties had a history of stretching the court’s orders to the breaking
point, and also because a trial was upcoming to resolve the factual disputes.
Until trial, the exclusivity statement would have to read: “We believe that
ExeGi is the exclusive provider of the De Simone Formulation because it is our
position that the current version of VSL#3 uses a different formulation.
Whether VSL#3 presently uses the De Simone Formulation is the subject of
pending litigation in federal court.”

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falsity from former customer satisfies Lexmark standard; not so for once-potential customer

Posted on September 24, 2018 by rtushnet

Frompovicz v. Niagara Bottling, LLC, No.. 18-54, 2018 WL
4465879  (E.D. Pa. Sept. 18, 2018)
Prior
ruling covered here. Plaintiff (on behalf of a putative class) is a
water extractor. Defendant Land is a directly competing extractor and the
bottler/distributor defendants who use his water are Niagara, Ice River, and
Crossroads. Land allegedly extracts well water, which “does not satisfy the
FDA’s definition of ‘spring water’ ” and which is permitted by the Pennsylvania
Department of Environmental Protection (DEP) as a “well water” site, and not a
“spring water” site. Land’s water allegedly “has been extracted, handled, or
treated with equipment or techniques that are inconsistent with a ‘spring
water’ classification criteria” and “has tested as containing more particulates
or trace elements than are otherwise permissible or recommended under industry
standards for ‘spring water.’ ”  Niagara
and Ice River sourced their spring water from plaintiff before switching to
Land, and Crossroads also considered plaintiff’s water before choosing
Land.  Plaintiff also allegedly bottled
and sold his own water directly.
Plaintiff satisfied Lexmark’s
zone of interests test by alleging that his spring water sales were depressed
as a result of the misleading labels. Also, Niagara allegedly “falsely told
industry participants that Plaintiff should not be dealt with, and has
misrepresented to the public that Plaintiff’s spring water…is contaminated.”
Land also allegedly disparaged the plaintiff, which affected the necessary
commercial interest in reputation or sales.
Proximate cause: simple as to Land, because they’re direct
competitors. Lexmark also allows
suits against indirect competitors, though the circumstances have to be
relatively unique. Here, the alleged disparagement by Niagara qualified: “when
a party claims reputational injury from disparagement, competition is not
required for proximate cause.”  Plaintiff
also alleged that if the bottler defendants wanted to meet the demand for
spring water without Land’s “phony” spring water, they’d have to use his and
other putative class members’ true spring water. The bottler defendants argued
that this allegation was merely speculative because there was no reason to
think they would have bought from Land instead. But as to defendants who
formerly bought from Land, the theory that they would have continued to buy
from him in the absence of the mislabeling was a plausible theory of proximate
cause.  Crossroads never bought from
Land, though, and it wasn’t enough to allege that they were in negotiations at
one point.
The Pennsylvania unfair competition claims were preempted by
the FDCA, which has promulgated
 a standard of identity
for bottled water, including a definition of “spring water.” The allegation
that it was misleading to market Land’s water as “spring water” when the
Pennsylvania DEP permit identified the source as a “well water” site was
precisely the kind of claim prohibited by the FDCA.  The FDCA also impliedly preempts a state law
claim based on conduct that is wrongful only because it conflicts with the FDCA
or FDA regulations.  Land’s allegations
were, in effect, a prohibited attempt to enforce alleged violations of the FDCA
and FDA regulations.

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failure to detail harm dooms medical food complaint despite plausible falsity

Posted on September 20, 2018 by rtushnet

Alfasigma USA, Inc. v. Nivagen Pharmaceuticals, Inc., 2018
WL 4409350, No. 2:17-cv-01974-MCE-GGH (E.D. Cal. Sept. 17, 2018)
Somewhat surprisingly, failure to tell a detailed harm story
torpedoes this complaint; given the specific allegations of falsity, I wonder if it
will be successfully amended (as the court allowed).
Alfasigma makes “medical foods,” which can be prescribed but
do not require prescriptions. They are not eligible for reimbursement by
Medicaid, Medicare, or many private insurers. Breckenridge makes a purportedly generic
version of Alfasigma’s Foltx called Folbic. Pharma databases allegedly link
generic foods to name brand equivalents on the honor system, without
verification by any independent entity. Thus, relying on a company’s
representation that its product contains the same active ingredients in the
same amounts as a listed brand or equivalent generic product, industry
databases will represent to the pharmaceutical industry that the generic
product is pharmaceutically equivalent to the listed products.
Nivagen began marketing a generic—Niva-Fol— that it
represented was equivalent to Alfasigma’s branded product, Foltx, and
Breckenridge’s generic, Folbic. However, Nivagen allegedly characterized its
product as a prescription drug that requires an “Rx” on the label, thereby
entitling users to reimbursement. Nivagen allegedly caused Niva-Fol to be shown
as having a National Drug Code (“NDC”) or National Health Related Items Code
(“NHRIC”) number, which identifiers are provided for approved drugs and medical
devices only. Those identifiers also appear to qualify Niva-Fol for federal
reimbursement. Finally, Nivagen allegedl falsely designated its product as
“Made in the USA.” This allegedly gave Nivagen a competitive advantage over
non-reimbursable products offered by Alfasigma, allowing it to capture market
share.
Even applying Rule 9, the complaint sufficiently pled false
advertising (except for the “Made in the USA” part, which didn’t even pass Rule
8 scrutiny).
Nivagen argued that the complaint failed to allege the factual
basis for Alfasigma’s belief that Niva-Fol lacks the same active ingredients as
Alfasigma’s products, or why it is not substitutable, or why any of the
challenged representations would be misleading, or how Nivagen got the
NDC/NHRIC designations if that wasn’t ok. 
None of that was a problem; the allegations Alfasigma did make sufficed.
“Though Plaintiff does not allege the exact statements made to the FDA, or even
who made them, this case does not lend itself to Plaintiffs having those kind
of details at this point. If the allegations are to be substantiated, that
information is known only to Defendant at this time, and is not required to be
pleaded up front.”  Arguments about
whether Niva-Fol really was entitled to an Rx designation were not suitable for
judgment on the pleadings. The only exception was “Made in the USA,” where
Alfasigma didn’t allege any factual basis for the claim that the slogan was
false or misleading—the allegation that the product wasn’t actually made in the
USA was conclusory and devoid of supporting facts.  Alfasigma could amend to fix this problem, if
it could do so.
Then, the court found that the complaint failed to
sufficiently allege injury in fact by failing to allege anything more than that
Alfasigma had been harmed by the falsity. 
[Query: without Breckinridge in the picture, shouldn’t it have been
enough to allege the falsity and materiality of the claims? In that case it
would follow almost automatically that business gained by Nivagen would have
been lost by Alfasigma, unless you believe that a generic substitute is going
to grow the market somehow.]

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only “laconic” resellers allowed: court refuses to dismiss complaint against reseller of Chanel goods

Posted on September 20, 2018 by rtushnet

Chanel, Inc. v. WGACA, LLC, 2018 WL 4440507, No. 18 Civ.
2253 (LLS) (S.D.N.Y. Sept. 14, 2018)
Depressing but unsurprising: Chanel’s claims against used
goods-seller What Goes Around Comes Around proceed because WGACA may have been
too forward in telling the world that it could provide legitimate Chanel
products.  Chanel is appalled that WGACA
“uses the Chanel trademark and brand in its advertising and promotions,
although WGACA is not an authorized Chanel retailer or affiliated with Chanel.”  Its retail stores “prominently feature the
Chanel brand. Its store in East Hampton is decorated with a facsimile of a
giant Chanel No. 5 perfume bottle as a promotional advertisement, and the sign
in front of its SoHo store lists several brands, but lists ‘Vintage Chanel’ at
the top of the sign in larger print than the other brands, and its window
display items are all Chanel-branded.” WGACA’s website “offers more
Chanel-branded products for sale than those of any other brand,” features a
Chanel sale, and lists Chanel first under the non-alphabetical heading “Shop by
Brand.” WGACA’s social media includes quotations of Coco Chanel, photographs of
Chanel-branded products, and photographs of models and public-opinion influencers
wearing or carrying Chanel handbags, including photographs from previous Chanel
ads. They tag photos of Chanel-branded products with “#WGACACHANEL” and refer
to Chanel-branded products as “our #WGACACHANEL.”
WGACA’s website contains a section titled “Authenticity
Guaranteed,” which states, “Any piece purchased at What Goes Around Comes
Around or one of our retail partners has been carefully selected, inspected and
is guaranteed authentic.” WGACA also provides letters of authenticity to its
customers, e.g., “This letter confirms that item Q6HCHK00KB000 Chanel Black
Long Tissue Box is an authentic Chanel decoration.” But the guarantee comes
from WGACA; Chanel has not inspected or authenticated WGACA’s inventory.
Chanel plausibly stated a claim.  For example, #WGACACHANEL might create the
impression that WGACA is affiliated with Chanel or is an authorized Chanel
retailer. Also, WGACA’s extensive unauthorized use of the Chanel brand and
trademarks might constitute false advertising or endorsement, given the
extensive use of Chanel images and marks. Nominative fair use is no help
because this is the Second Circuit. “WGACA’s Chanel-branded items would be
readily identifiable as Chanel without the #WGACACHANEL hashtag and the
multiple uses of Chanel’s name and trademark in the hashtags,” and the special
prominence it gave to Chanel made it plausible that WGACA caused confusion by
using the mark too prominently or too often. And #WCAGACHANEL and WGACA’s
guarantees of authentication “of themselves” might suggest sponsorship or
endorsement by Chanel.
First sale also didn’t help because WGACA “did much more
than laconically resell Chanel-branded products: its presentations were
consistent with selling on Chanel’s behalf.” 
I didn’t realize that one had to be John Wayne to take advantage of
first sale (and there is probably a useful gender analysis to be done here;
fashion is excessive, but WGACA is apparently not allowed to be).
State common law unfair competition claims are nearly
identical but require bad faith; the court found that the complaint didn’t
plausibly allege bad faith intent to confuse. 
“If anything, the amended complaint shows that WGACA’s intent was to
display the Chanel brand conspicuously, and emphasize that their source was
Chanel.” Section 349 and 350 claims were, however, plausibly pled; they don’t
require bad faith, only deceptive/misleading conduct. 

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Accurate statement that SPLC called a group a “hate group” isn’t plausibly misleading without more

Posted on September 20, 2018 by rtushnet

Liberty Counsel, Inc. v. GuideStar USA, Inc., — Fed.Appx.
—-, 2018 WL 4339716 (Mem), No. 18-1157 (4th Cir. Sept. 11, 2018)
Who controls procedure controls substance.  The district court granted GuideStar’s motion
to dismiss Liberty’s Lanham Act false advertising claim against it.  GuideStar is a nonprofit organization that
maintains an online directory of profiles on other nonprofits, including
Liberty, an organization dedicated to advancing Christian causes. After the
Southern Poverty Law Center designated Liberty as a hate group, GuideStar added
a banner to Liberty’s profile revealing this designation.  Liberty sued and the district court
determined that there was no commercial speech.
The court of appeals affirmed on alternate grounds: failure
to properly allege misleadingness. Liberty conceded that the SPLC had in fact
designated it as a hate group. Liberty alleged that this designation was
misleading, but “a complaint must state facts demonstrating that the
defendant’s liability is plausible, not merely possible.” “Here, other than
identifying a broad swath of people whom the banner allegedly deceived, Liberty
baldly alleged customer confusion without providing ‘further factual
enhancement.’”  But what additional facts
would demonstrate misleadingness?  The
court doesn’t say, probably because to say would get require explaining what it
would take for “designated as hate group” to be false (since misleadingness
ultimately depends on consumers reaching false, that is falsifiable/verifiable
and untrue, conclusions from non-facially false statements).  How could the implication of this truthful
statement about the designation be anything other than opinion?  The court might be suggesting that it’s not
impossible that some story could be told about this, but it would require a lot
more in the way of detailed allegations. 
I have to say it’s a bit weird to me that the same court that refused to
recognize a claim in the GNC case is
less decisive about hate groups.

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New verse, same as the first in Sony/Michael Jackson case

Posted on September 14, 2018 by rtushnet

Serova v. Sony Music Entertainment, 2018 WL 4356891, — Cal.Rptr.3d
—-, No. B280526 (Ct. App. 2018)
The court amends its opinion finding that Sony’s advertising
that Michael Jackson was the performer of all the songs on the posthumous
Jackson album Sony released wasn’t commercial speech, but the amendment doesn’t make things any
better.  This provides an interesting
contrast to the other day’s One A Day opinion. 
The court here adds a footnote arguing that it didn’t matter whether
consumers would have understood Sony’s advertising to make factual claims about
the singer’s identity. What mattered instead was Sony’s lack of personal
involvement in creating the recordings [pretending that “Sony” is the kind of
entity that can have personal involvement]. It’s not that Sony’s statement is
opinion (in which case consumer understanding of what claim was being made
would be relevant), it’s that Sony’s lack of personal knowledge of its own
business operations makes the speech noncommercial.
Obviously, this creates pretty bad incentives for
corporations, but I think it’s worth reiterating that this is also inconsistent
with Kasky, on which the court of appeals purportedly relies, since Nike was
making statements about its subcontractors’ practices that the California
Supreme Court concluded were commercial speech. [Nike’s defenders even argued
that, precisely because it was talking about its subcontractors, the argument
that commercial speech has greater verifiability than other kinds of speech
shouldn’t apply.]  Nike’s statements were
the kinds of factual claims, including claims about Nike’s outsourcing
practices and their results, that it was in a better position to verify than
consumers. Consumers were also likely to rely on Nike’s expertise and greater
relative access to knowledge, as the Bayer court observed with respect to
Bayer.  To the extent that Nike may have
lacked “actual” knowledge, that was (1) a creation of Nike’s own choices to
subcontract rather than to do the work itself, for which it was responsible
(the analogy between that and the situation here is fairly strong), and (2) a reason that
Nike should have verified its statements rather than just saying them. [In the
actual situation involved in Nike, Nike maintained that it took steps to
substantiate its advertising claims—it simply took the position in the
California and US Supreme Courts that it didn’t have to do so and should be
able to win dismissal even assuming it had made those claims without knowing if
they were true.]

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New verse, same as the first in Sony/Michael Jackson case

Posted on September 14, 2018 by rtushnet

Serova v. Sony Music Entertainment, 2018 WL 4356891, — Cal.Rptr.3d
—-, No. B280526 (Ct. App. 2018)
The court amends its opinion finding that Sony’s advertising
that Michael Jackson was the performer of all the songs on the posthumous
Jackson album Sony released wasn’t commercial speech, but the amendment doesn’t make things any
better.  This provides an interesting
contrast to the other day’s One A Day opinion. 
The court here adds a footnote arguing that it didn’t matter whether
consumers would have understood Sony’s advertising to make factual claims about
the singer’s identity. What mattered instead was Sony’s lack of personal
involvement in creating the recordings [pretending that “Sony” is the kind of
entity that can have personal involvement]. It’s not that Sony’s statement is
opinion (in which case consumer understanding of what claim was being made
would be relevant), it’s that Sony’s lack of personal knowledge of its own
business operations makes the speech noncommercial.
Obviously, this creates pretty bad incentives for
corporations, but I think it’s worth reiterating that this is also inconsistent
with Kasky, on which the court of appeals purportedly relies, since Nike was
making statements about its subcontractors’ practices that the California
Supreme Court concluded were commercial speech. [Nike’s defenders even argued
that, precisely because it was talking about its subcontractors, the argument
that commercial speech has greater verifiability than other kinds of speech
shouldn’t apply.]  Nike’s statements were
the kinds of factual claims, including claims about Nike’s outsourcing
practices and their results, that it was in a better position to verify than
consumers. Consumers were also likely to rely on Nike’s expertise and greater
relative access to knowledge, as the Bayer court observed with respect to
Bayer.  To the extent that Nike may have
lacked “actual” knowledge, that was (1) a creation of Nike’s own choices to
subcontract rather than to do the work itself, for which it was responsible
(the analogy between that and the situation here is fairly strong), and (2) a reason that
Nike should have verified its statements rather than just saying them. [In the
actual situation involved in Nike, Nike maintained that it took steps to
substantiate its advertising claims—it simply took the position in the
California and US Supreme Courts that it didn’t have to do so and should be
able to win dismissal even assuming it had made those claims without knowing if
they were true.]

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