230 bars false advertising claim against antimalware provider

Posted on November 9, 2017 by rtushnet
Enigma Software Group USA LLC v. Malwarebytes Inc., No.
5:17-cv-02915, 2017 WL 5153698 (N.D. Cal. Nov. 7, 2017)
Malwarebytes and Enigma compete in the anti-malware software
market.  When Malwarebytes’s software
detects an unwanted program, it displays a notification and asks the user if
she wants to remove the program from her computer. Enigma alleged that, in
2016, Malwarebytes started to misleadingly identify Enigma’s software as a
potential threat, in order to interfere with Enigma’s customer base and to
retaliate against Enigma for a separate lawsuit Enigma filed against a
Malwarebytes affiliate.  Enigma sued for
false advertising under state and federal law, as well as tortious
interference. The court found all claims barred by § 230(c)(2) of the
Communications Decency Act, specifically subsection (B): “No provider or user
of an interactive computer service shall be held liable on account of … any
action taken to enable or make available to information content providers or
others the technical means to restrict access to 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].”
Zango, Inc. v. Kaspersky, 568 F.3d 1169 (9th Cir. 2009),
indicated that “companies that provide filtering tools,” such as Kaspersky, are
eligible for immunity under § 230(c). It found that Kaspersky qualified as a
service provider, and “has ‘made available’ for its users the technical means
to restrict items that Kaspersky has defined as malware.” Thus, Kaspersky
qualified for immunity under § 230(c)(2)(B) “so long as the blocked items are
objectionable material under § 230(c)(2)(A).” Kaspersky properly classified
malware as “objectionable” material.
Enigma argued that Zango
was distinguishable because malware, as defined by Malwarebytes’s criteria, wasn’t
material that is “obscene, lewd, lascivious, filthy, excessively violent,
harassing, or otherwise objectionable” because it is “not remotely related to
the content categories enumerated.” Zango
did not address whether an anti-malware provider has discretion to decide what
is “objectionable” because that argument was waived.  However, Zango
clearly held that § 230(c)(2)(B) immunity applies to “a provider of computer
services that makes available software that filters or screens material that
the user or the provider deems objectionable.” Thus, Zango was factually indistinguishable.
Enigma then argued that Malwarebytes was entitled to §
230(c)(2)(B) immunity only if it acted in “good faith.” Subsection (A) protects
“any action voluntarily taken in good faith” to restrict access to
objectionable material, but subsection (B) has no good-faith requirement.  The court refused to imply one; Congress knew
how to put one in if it wanted, especially given that subsection (B) includes
an explicit reference to subsection (A) with respect to the types of material
to which immunity applies.
Finally, Enigma’s Lanham Act claim didn’t entitle it to use
the IP exclusion; a false advertising claim is not a trademark claim for §230
purposes.

from Blogger http://ift.tt/2m8tHn0

Posted in Uncategorized | Tagged , | Leave a comment

Ad intermediary lacks standing under Lexmark to challenge false ads

Posted on November 7, 2017 by rtushnet
Congoo, LLC v. Revcontent LLC, 2017 WL 5076397, No. 16-401 (D.N.J.
Nov. 3, 2017)
A rare case discussing Lexmark’s
proximate cause requirement in some detail. Congoo operates an online ad
business as Adblade, an aggregator that serves as an intermediary between
advertisers and publisher websites that display native ads on their pages.  Revcontent competes with Adblade.  Advertisers pay aggregators a fee based on
the numbers of clicks on their ads. Publishers usually contract with the
aggregator who “pays the higher rate, higher guaranteed minimums, or greatest
revenue.” An aggregator may pay a publisher a fee calculated by multiplying a
negotiated display rate, CPM/cost per 1000 impressions of an of an ad, by the
number of times the aggregator’s advertising unit is displayed on the publisher’s
website. In the alternative, an aggregator may pay a publisher a percentage of
the revenue the aggregator received from advertisers for the display of the ads
on the publisher’s website.
Adblade alleged that it avoids business with advertisers using
false and deceptive ads, such as negative option membership charges or
undisclosed automatic enrollment in expensive membership programs.  This is an issue in direct response
advertising, “a subset of native advertising that seeks consumer action, e.g.,
an online purchase.” When a user clicks on a direct response ad, she navigates
to a “landing page” that endorses the good or service, followed by an “order
page” where she can buy. 
In 2015, Adblade allegedly discovered that Revcontent was
promising Adblade publishers deals with better economic terms through its “use[
] [of] false and misleading ads that obtain higher CPMs”; Revcontent allegedly also
assisted with the creation of such ads. 
Revcontent’s algorithm allegedly “automatically” displays “false and
misleading” advertisements on publishers’ websites because they “have the
highest CPM and revenue to be generated.” Adbeat, a well-known industry data
source, allegedly confirmed that the most popular advertisements in
Revcontent’s network were “false and misleading.” Its report stated that
Revcontent’s top mobile ads included those for diet pills, muscle pills, and
skin cream; Adblade provided hundreds of copies of such ads, and alleged that false
and misleading ads appeared on five top Revcontent publishers that previously
did business with Adblade. (Id. at ¶ 20.)
           
Lexmark requires
plaintiffs’ interests to “fall within the zone of interests protected by the
law invoked”:  “an injury to a commercial
interest in reputation or sales.” In addition, a plaintiff must demonstrate
that its alleged harm was proximately caused by the false advertising, though
“the intervening step of consumer deception” does not necessarily break the
chain of proximate causation. Economic or reputational injury “flowing directly
from the deception wrought by the defendant’s advertising … occurs when
deception of consumers causes them to withhold trade from the plaintiff.” By
contrast, “[t]hat showing is generally not made when the deception produced
injuries to a fellow commercial actor that in turn affect the plaintiff.”
For purposes of their motion for summary judgment, Revblade
didn’t contest that Congoo’s interests fell with in the zone of interests
protected by §43(a)(1)(A), or that there was a causal connection between
deceptive native ads and Congoo’s loss of publisher clients.  However, the court agreed that the
purportedly false advertising didn’t have a sufficiently close causal link to
Congoo’s alleged harm.
In Lexmark, the
connection between the actual competitors in the market and Static Control was
very close: because Static Control seemed to be the only relevant supplier,
every harm to the competitors was also inflicted on Static Control.  Here, however, there was a disconnect
“between the injury to the direct victim”—here, competitors of falsely
advertised goods—and Congoo’s own injuries as an indirect victim, “unlike the
injuries to companies supporting those competitors in the marketplace.” The
loss of publisher clients wasn’t “surely attributable” to injury to a
competitor, but could have “resulted from any number of [other] reasons.”
Congoo’s expert stated that false and misleading
advertisements deceive consumers into clicking on the advertisements and/or
making purchases, thereby “enabl[ing] the unscrupulous advertiser to make high
cost-per-click bids to an advertising aggregator, such as Revcontent, who in
turn offers higher rates to a publisher to obtain its business. … In addition,
native ads that are deceptive and misleading likely have higher click-through
rates that also translates into a greater revenue to the publishers.” But this
was a too-long chain of causation from higher sales/higher revenues to
Revcontent’s ability to pass on more money to publishers.
Congoo’s state common law unfair competition claim also
failed because standing wasn’t broader than under Lexmark. To the extent, however, that any allegations of fraudulent
representations didn’t relate to consumer products but instead to statements to
publishers, such claims survived.

from Blogger http://ift.tt/2zor4Af

Posted in Uncategorized | Tagged , | Leave a comment

Competitor can’t challenge compliance w/certification standards

Posted on November 6, 2017 by rtushnet
Board-Tech Electronic Co. v. Eaton Electric Holdings LCC, 2017
WL 4990659, No. 17-cv-5028 (S.D.N.Y. Oct. 31, 2017)
Board-Tech accused its competitor in the light switch
market, Eaton, of false advertising because, while Eaton was authorized to
apply the “UL” certification mark to certain products (as Board-Tech was),
those Eaton products allegedly didn’t comply with the requisite safety
standards. For the parties’ light switches, the prevailing standard is UL 20, required
by the National Electric Code for new buildings; the NEC is state or local law
in all 50 states, and even where its use is voluntary, consumers rely on UL 20
labeling for safety information; many retailers also require UL 20 labeling
before they’ll sell a switch.
The UL certification mark, “certifies that representative
samplings of the goods conform to the requirements” of Underwriters
Laboratory.  Authorization requires a
manufacturer to provide six sets of representative samples of switches they
want certified, which must then pass a series of tests.  The testing can’t guarantee that the products
actually sold comply with applicable safety requirements, merely that a
purportedly representative sample did. 
However, Board-Tech alleged (plausibly, to me) that consumers rely on
the certification mark or listing, and base their purchases on the belief that
every product containing a mark or that is listed actually complies with the
applicable written safety standards. According to UL, “it is the responsibility
of the manufacturer to ensure that all of the products it sells bearing the UL
mark actually comply with the standards tested for, not just the samples that
were tested.”
Board-Tech alleged that tested samples of UL 20-labeled
switches sold by Eaton from the 7500, 7600, and 7700 series, and that all eight
sets of six light swiches, 48 in total, failed the UL 20 standards.  However, the court dismissed the complaint
for failing to specify the precise products at issue from the relevant
series.  Board-Tech alleged that it had
sufficiently alleged testing of a sample, but the court disagreed, because
Board-Tech failed to specify what it had sampled.  Nor had it explained why it was plausible to
extrapolate from a few non-specific switches to entire product lines—more than
125 of them.  Failure to provide any
allegations as to which product(s) within a broader product line failed was
also necessary in order for defendants to investigate the claim and prepare a
defense. “If allowed to proceed in such a broad manner, plaintiff would no
doubt seek access to the internal design of competitive products as well as
highly sensitive technical data. Damages discovery would involve all of
defendants’ sales of this series of products.” 
The court wasn’t willing to let that happen without more specifics.
Separately, the court didn’t think Board-Tech could bring
claims based on failure to meet the UL’s standards when the UL certification
concededly existed.  “[P]laintiff’s claim
is that even if defendants are authorized to use the mark, they are deceiving
customers by using it.”  But Board-Tech
didn’t allege there had been post-certification changes to the product, or that
the UL had found Eaton non-compliant. 
The authorized use of the mark was not “capable of being a deceptive use.”  The mark was limited by the scope of its
registration, and it certified merely that (manufacturer-designated)
representative samples conformed to UL’s safety requirements.  [Do consumers know this?  Why would they?]  Board-Tech conceded that Eaton’s switches had
been through that process.  “[I]f
defendants are authorized to apply the mark (which plaintiff concedes they
are), then plaintiff is simply policing the mark. It is up to United
Laboratories to police the mark.” 
Board-Tech could only challenge UL’s policing by seeking to cancel the
mark for failure to police. 

The court was unwilling to allow a competitor to police the
use of a certification mark by a competitor, because “[p]rivate testing of a
product against standards could be used to commence a lawsuit that could expose
competitive design and information to precisely the entity that should not have
it. While there are many cases in which competitors are proper plaintiffs – and
do obtain discovery – one should not open the floodgates to such litigation
without careful consideration.” Comment: Compare to the cases finding that
claims requiring interpretation of FDA rules, or policing of compliance with
the “organic” standard, can’t be brought under the Lanham Act because the
enforcement of those rules has been delegated to an entity other than the
court.

from Blogger http://ift.tt/2hKDWcj

Posted in Uncategorized | Tagged , | Leave a comment

“look like new forever” might not be puffery in context of technological innovation claims

Posted on November 3, 2017 by rtushnet
EP Henry Corp. v. Cambridge Pavers, Inc., 2017 WL 4948064, No.
17-1538  (D.N.J. Oct. 31, 2017)
Disclosure: I consulted on this case. 
EP Henry and Cambridge compete in the market for concrete
pavingstones. Cambridge made superiority such as “only Cambridge pavingstones
have ArmorTec – a unique process that guarantees the color will never fade,
backed by our fully transferable, lifetime guarantee.” Cambridge also claimed
that ArmorTec pavers would “always look like new,” they’d would “look like new
forever,” and that their color “will never fade.” EP Henry alleged that
consumers had told EP Henry distributors that they were misled, and that after
purchase they discovered that the pavingstones didn’t continue to look like new
and weren’t fade-proof.
The court ruled that, in context of additional claims about advanced
technology, phrases like “they’ll look like new forever” and “the color will
never fade” weren’t puffery as a matter of law, even though they would be
without additional context. “[C]ourts around the country regularly find that,
standing alone, language suggesting perpetuity or an indefinite period of time
constitutes non-actionable puffery,” but Cambridge’s ad campaign allegedly
touts its breakthrough technology, telling potential customers that ArmorTec is
a “unique process.”  It was “plausible
that a potential customer could reasonably come to the conclusion that
Cambridge is not puffing, but has actually found the ‘secret sauce’ to enable
pavingstones to ‘look like new forever’ or ensure that ‘the color will never
fade.’”
With that out of the way, the New Jersey Consumer Fraud Act
claim (if any) failed because the NJCFA only grants standing to consumers and
commercial competitors “who are acting as consumers” or who are involved in a
“consumer transaction,” but not to commercial competitors generally. Negligent
misrepresentation and common law fraud claims failed because EP Henry couldn’t
allege reasonable or justifiable reliance on the alleged misstatements. Though EP
Henry argued that it reformulated its advertising campaign in response to
Cambridge’s alleged misrepresentations, it didn’t allege that it relied upon or
believed Cambridge’s alleged misstatements in doing so. The common law unfair
practices claim wasn’t recognized by New Jersey, which limits common law unfair
competition to (1) the “passing off” of goods or services; (2) unprivileged
imitation; and (3) tortious interference.

The Lanham Act false advertising claim, however,
survived.  EP Henry didn’t allege “a
specific instance of a consumer choosing to purchase pavers from Cambridge over
EP Henry because of Cambridge’s false advertising statements,” but that wasn’t
required before discovery.  It
sufficiently pled that, as a direct competitor, it suffered harm to its
reputation and sales by losing customers as a result of Cambridge’s alleged
misstatements. Without evidence from third parties and discovery, however,
Cambridge could still be entitled to summary judgment.

from Blogger http://ift.tt/2A4nnyZ

Posted in Uncategorized | Tagged | Leave a comment

Consumers can’t recover for GM’s self-tarnishment

Posted on October 31, 2017 by rtushnet
In re General Motors LLC Ignition Switch Litigation, —
F.Supp.3d —- 2017 WL 2839154, No. 14–MD–2543 (S.D.N.Y. Jun. 30, 2017)
This multidistrict litigation arose from the 2014 recall by
General Motors LLC (New GM) of General Motors (GM) vehicles that had been
manufactured with a defective ignition switch, which could cause moving stalls
and disable critical safety systems such as the airbag. After that recall, New
GM recalled millions of other vehicles, some for ignition switch-related
defects and some for other defects. The putative class plaintiffs sought
recovery on behalf of GM car owners and lessors, arguing that they were harmed
by, among other things, a drop in their vehicles’ value due to the ignition
switch defect and other defects.  While
brand owners can be protected against reputational injury, the court here holds
that a brand’s self-tarnishment provides its consumers no remedy. 
The lost brand value theory was “unprecedented and unsound.”
Brand owners don’t have to provide an indefinite guarantee of both “the
product’s resale value and the brand’s continuing good name.” It’s true that “labels
and brands have independent economic value,” but “it does not follow that a
consumer can recover if he or she buys a defect-free and functional product
that performs as expected, but the company’s actions somehow affect the value
of the company’s brand.” To do so might even over-deter manufacturers and
“diminish the resources available to plaintiffs who have been more directly
injured by the manufacturer’s products.”  
Plaintiffs attempted to amend their brand devaluation claims
to only those putative class members who have or had defective cars, but there
was no logical reason that only such people would have suffered from the brand
devaluation.  In addition, plaintiffs
pled facts from the work of a brand expert “about how the repeated recalls had
a negative impact on the brands and models that were recalled, about the
relationship of New GM to its sub-brands, about New GM’s brand architecture,
and … the primary variables that will inform the calculation of the spillover effect
of the ignition switch recalls to other recalled cars.”  These allegations merely provided a factual
basis for the proposition that “labels and brands have independent economic
value,” which the court accepted, while still rejecting the idea that consumers
purchase a guarantee of both “the product’s resale value and the brand’s
continuing good name.”
However, the court did allow certain claims to proceed,
including claims for the value of time lost to repairs, and some state law
claims if the relevant state allowed claims in the absence of a manifested
defect; did not require a special trust relationship between the parties for a
duty to disclose to arise; and/or permitted plaintiffs to plead both contract
claims and unjust enrichment claims. Most of plaintiffs’ consumer fraud,
fraudulent concealment, and breach of implied warranty claims survived, while
most of their unjust enrichment claims didn’t. 
As the court noted, “most state courts construe their consumer
protection statutes to permit recovery beyond actual damages, including
incidental and consequential damages,” which would generally permit lost time
claims.
Nonetheless, plaintiffs who bought their cars before July
10, 2009—the date on which New GM purchased most of the assets of Old GM as
part of the bankruptcy proceedings—couldn’t pursue claims for economic loss,
because the economic injury took place at the time of sale. New GM’s alleged
concealment of the ignition defect couldn’t cause economic injury to people who
bought before New GM came into existence. 
Likewise, plaintiffs who sold, traded in, or returned their vehicles
prior to New GM’s announcement of the recalls beginning in 2014 couldn’t pursue
such claims. Because they didn’t own any affected GM vehicles at the time of
the recall, they couldn’t suffer diminished value as the result of the market
correcting for the true value of the defective vehicles.  However, a plaintiff who bought her car after
New GM bought GM and sold it before the recall was announced could still plead
and prove damages in the form of out-of-pocket expenses and lost time, such as
a plaintiff who experienced shutoffs while driving and had to go to the service
shop often.

from Blogger http://ift.tt/2zUnMnn

Posted in Uncategorized | Tagged , | Leave a comment

Just in time for Halloween, a Reese’s question

Posted on October 31, 2017 by rtushnet

Should Reese’s object to the following description of candy molds?

The “Reese’s Shape” version of the tartlet/candy mold
Nominative fair use?

from Blogger http://ift.tt/2gQoieM

Posted in Uncategorized | Tagged , | Leave a comment

Initial decision in FTC 1-800 case finding that anti-keyword agreements violated antitrust law

Posted on October 31, 2017 by rtushnet

Agreed-on limits on advertising, like agreed-on limits on other inputs, risk being a per se violation of the antitrust laws.  Here, a blanket ban, including a negative keyword requirement (so that someone bidding on “contacts” wouldn’t get ads run against “1-800-Contacts” based on broad matching), was not justified by fear of trademark infringement/confusing consumers.  The ALJ also notes that 1-800’s extensive evidence that people often can’t distinguish between organic and paid results has nothing to do with whether they can distinguish between results for 1-800 and results for its competitors.  Initial ruling here.  NB: I testified for the FTC, but the ALJ doesn’t rely on my testimony.

from Blogger http://ift.tt/2yZxw2V

Posted in Uncategorized | Tagged , , , | Leave a comment

Public disclosure of private facts

Posted on October 27, 2017 by rtushnet

Setting FERPA aside, does Taiwan Jones have any claim based on the viral tweet about his failed midterm?  (Skepticism here.)

from Blogger http://ift.tt/2yTyE5W

Posted in Uncategorized | Tagged | Leave a comment

Website copying allegations allow potpourri of claims

Posted on October 27, 2017 by rtushnet
DHI Group, Inc. v. Kent, No. 16-1670, 2017 WL 4837730 (S.D.
Tex. Oct. 26, 2017)
DHI and Oilpro compete in the market for websites for oil
and gas professionals that include job postings. DHI filed a lawsuit against
Oilpro and others asserting that the defendants hacked into their system, and
Oilpro counterclaimed for DHI’s alleged copying from Oilpro’s own website,
alleging multiple claims, which the court refused to dismiss on grounds that
give lots of leeway to website owners to make breach of contract, copyright,
CFAA, and DMCA claims.
Breach of contract: Oilpro had a browsewrap agreement on its
website, not requiring affirmative assent to access the website.  To enforce a browsewrap, “it is necessary to
show the user had actual or constructive knowledge of the terms and conditions
to prove a valid contract exists between the user and the owner of the
website.” Oilpro plausibly alleged such knowledge by alleging that DHI “knew or
should have known that Oilpro’s Terms and Conditions prohibited this conduct
because [DHI’s] terms of use for [its] own website prohibit this same sort of
conduct.” This was enough, where both parties were “sophisticated businesses
that use browsewrap agreements on their websites.”
 
Copyright: DHI argued that Oilpro didn’t identify any
material, information, or work that was both subject to copyright protection
and actually copied by DHI. However, Oilpro alleged that it owned a valid
copyright to its website and that DHI accessed it and copied data, member
profiles, and other information from the website. Under the Twombly/Iqbal
plausibility standard, it was enough to plead that the entire Oilpro website
was an original work that includes a “distinctive page layout, design,
graphical elements, and organization of member profile pages….” and that DHI
“improperly downloaded data, member profiles, and other information from the
Oilpro Website” and “then published information from the Oilpro Website on a
website owned by DHI Group called Dice Open Web….” Since Oilpro alleged
ownership of the entire website, and that DHI published Oilpro’s copied
information on its own website, Oilpro stated a plausible claim for copyright
infringement. [No no no—owning the overall layout doesn’t mean owning
everything that might be copied.  The
proper allegation would be that DHI copied copyrightable elements.]  DHI’s objections to the Magistrate Judge’s
recommendation to deny its motion to dismiss the copyright infringement claim
is OVERRULED.
The court also denied DHI’s motion to dismiss Oilpro’s DMCA
counterclaim because it alleged that it “had technological measures in place,
including a robots.txt file, monitoring software, and firewall software, to
prevent automated technologies from accessing the website” and DHI “circumvented
these technological measures to access the Oilpro website and download material
that was then published on [DHI’s] own website.” Specifically, robots.txt was
plausibly a technological measure, as other cases have held.  But note: The statute also requires that the
measure “[e]ffectively controls access to a work” defined as a measure that,
“in the ordinary course of its operation, require[ ] the application of
information, or a process of treatment, with the authority of the copyright
owner, to gain access to the work.” How does robots.txt require the application
of information to gain access, as opposed to provide extra information to
potential accessors?
Trademark infringement: Oilpro successfully alleged that it
had a protectable mark that DHI used to cause confusion about the
authorization/sponsorship of the DHI site. 
[The court then proceeds to confuse nominative and descriptive fair use,
applying the standards for descriptive fair use.] DHI argued that it used
Oilpro’s mark to acknowledge Oilpro as the source of certain information, but
the fair use defense was not available on a motion to dismiss because the
complaint didn’t indicate on its face that DHI used the mark on its website in
good faith—which, of course, is not an element of a nominative fair use
defense.
CFAA and the coordinate state Texas Harmful Access by a
Computer (THACA):  The court held that
Oilpro’s allegations of a knowing violation of the terms and conditions of the
website are sufficient to state a claim under both the CFAA and the THACA.
Misappropriation: Oilpro did enough by alleging that it
expended time, skill, and financial resources to create the website and
information on the website, that DHI wrongfully accessed the site without
authorization and obtained Oilpro’s data without having the expend the same
time, skill, and financial resources, that DHI was free-riding on Oilpro’s
investment, that Oilpro has had to expend even more time and resources because of
this alleged unfair competition, and that Oilpro has been and will continue to
be damaged by the misappropriation. [However, there seems to be a serious
copyright preemption problem with this misappropriation claim.]
Tortious interference: also ok.

from Blogger http://ift.tt/2yR4j7Z

Posted in Uncategorized | Tagged , , , | Leave a comment

Likely success & irreparable harm still doesn’t justify ex parte TRO against false ad. given counterspeech

Posted on October 27, 2017 by rtushnet
Verified Nutrition, LLC v. Sclar, 2017 WL 4785948, No. 17-cv-07499
(C.D. Cal. Oct. 23, 2017)
Verified sells ProstaGenix, which is “an all-natural
supplement with a proprietary form of Beta-sitosterol” (BetaRexin). Verified
primarily advertises ProstaGenix through an infomercial featuring Larry King,
available on Verified’s website, Prostate Report.  Prostate Report also provides “reviews” of
various prostate supplements on the market, including Verified’s product
ProstaGenix and defendants’ competing product, Prostate Miracle. Plaintiff
Buckley also publishes a magazine called “The Men’s Guide to Prostate
Supplements,” which provides similar reviews. The website allegedly discloses
that Buckley is the inventor of ProstaGenix and writes the reviews on the
website, and that Verified Nutrition sponsors the website. Buckley claims he
has “spent approximately $150,000 to have five reputable and independent
laboratories conduct more than 280 laboratory tests on over 150 different
prostate supplements.”
On Prostate Review, Buckley wrote about his determination that
his product was superior to Prostate Miracle because ProstaGenix contained
almost twice as much Beta-sitosterol.  He
included Prostate Miracle’s ingredient list on Prostate Review (which the court
suggests might be the source, however unjustified, of defendants’ “plagiarism”
claim).
Defendants began operating three websites: http://ift.tt/2hgbLls,
http://ift.tt/2i9plGT, and http://ift.tt/2hgbLSu. They
take images directly from the Larry King infomercial and superimpose negative
text over them. [Verified also sued for copyright infringement; even if the
claims are false, it’s hard to see how this isn’t fair use—the problem if any
is in the falsity, not in the exploitation of a market to which Verified has a
right.] Defendants’ claims allegedly include: 1) calling ProstaGenix and
Buckley’s business a “total scam;” 2) claiming that Verified Nutrition “does
not exist;” and 3) calling Buckley a “liar, plagiarist, and conman,” a “career
huckster,” a “slimeball,” a “serial fraudster,” a “career con artist,” a
“despicable schmuck,” and a “sociopath.” They also accuse Buckley of pretending
to be an “independent, unbiased 3rd party” reviewer, “fraudulently selling one
bogus product after another, since 2005,” and having a “long history of
defrauding consumers.”
Verified alleged that these negative statements were false
and had an adverse effect on their sales and goodwill. Searches for “Larry King
prostate,” among others, returned links to defendants’ websites, and a YouTube
video that is also embedded on the websites, which states, among other things,
that “In the Larry King Prostate report, Larry King stages a fake interview
with career huckster Fred Buckley and partner in crime, wife Corinne Buckley.”
Verified sought the TRO based on its claims for false
advertising, defamation, trade libel, and unfair competition.  The court found that falsity appeared likely,
and that the allegedly false statements were material, because “statements that
certain reviewers or distributors are fraudsters would be material.”  Plaintiffs submitted evidence that Verified
Nutrition exists as a Nevada limited liability company, disproving the claim
that it is a “fake company,” as well as evidence that they spent approximately
$150,000 in testing the ingredients of prostate supplements to review them on
Prostate Report, which goes to the “fake review” statements.
Thus, the court found likely success on the merits for false
advertising, as well as for the defamation/trade libel claim, though I’m not
sure where the special damages are alleged/proved—claims about general
goodwill/reputation are usually insufficient to plead special damage. This is
what happens when only one side shows up to litigate—which is why it’s good to
be nervous about ex parte proceedings. 
Plaintiffs were also likely to succeed on their UCL claim.
Plaintiffs claimed irreparable harm to their reputation and
also the decline in sales of their product, but lost sales “is just the type of
harm that could be remedied by monetary compensation after a full trial on the
merits.” So, was potential harm to reputation enough?  Many of plaintiffs’ allegations of harm relied
on the fact that defendants’ websites were “gaining traction on the Internet,
and rising in the results when Buckley entered certain search terms on Google,
which typically would have resulted in Plaintiffs’ websites being on the top of
the list.” [At some point, courts are going to have to note the importance of
personalized results—if Buckley clicked on defendants’ websites before, they’re
going to come up again for him, but
that’s less helpful evidence about what J. Random Searcher will see.]  In order to counter this false advertising,
plaintiffs alleged that they’d have to spend a lot of money on ads, but money
could be recovered after a full trial on the merits.  Only 400 people had seen the YouTube video at
the time of filing, after about 30 days (so much for “rising in the results”).
The court found that reputational harm could increase over time, tipping the
irreparable harm factor in favor of plaintiffs. 
[Not clear how this is less speculative than in other cases, but ok.]
Balancing the equities/public interest. The harm to defendants
seemed limited, “given they do not have a right to disseminate allegedly false
statements.” As for the public interest, “while the public has an interest in
not being exposed to false information, currently the public is able to view
both Plaintiffs’ and Defendants’ advertisements regarding their respective
prostate supplements, and can come to their own conclusions. Much of the
information Plaintiffs use to demonstrate their claims are true and that
Defendants’ are false, is also available on Plaintiffs’ website, Prostate
Report, and thus also available to consumers to weigh the parties’ claims
themselves.”  This reasoning is
interesting and troubling in equal measure; it seems to suggest that the
parties ought to fight it out in the marketplace of ideas—but will consumers
actually consult both websites?  The
answer might well be yes, if this is the kind of product that consumers do seek
to educate themselves a bit about, but applied outside the TRO context it would
seem worrisomely in conflict with the basic premises of false advertising law.  However, applied to the ex parte TRO, where
the speech ultimately might be true/nonactionable, caution is more
understandable—and consistent with a First Amendment tradition of protecting
speakers from speech-suppressive orders they have not been able to contest.

As the court noted, none of the defendants had yet appeared,
and plaintiffs hadn’t filed proofs of service for the individual defendants.
There’s no requirement of formal service of process before a TRO can issue, but
the court was troubled by the possible lack of notice. On balance, the court
found that a TRO was not indicated, but they did provide sufficient evidence warranting
an order to show cause as to statements that Verified Nutrition “does not
exist”; ProstaGenix is ineffective and “just a cheap imitation of Prostate
Miracle”; Prostate Report is a “fake review site” using “fake lab tests” and
fake lab reports, promoted through a “gang of fraudsters”; and Buckley is “a
liar, plagiarist, and con man” as well as a “sociopath” who publishes
plagiarized and “fake review magazines” promoting his business and ProstaGenix.
[Query whether “sociopath” can be proven true or false, and thus capable of defamatory
meaning.]

from Blogger http://ift.tt/2gOEjFI

Posted in Uncategorized | Tagged , | Leave a comment