GIs can be indications of quality for purposes of applying failure-to-conform exclusion to advertising injury insurance policy

Posted on July 8, 2025 by rtushnet

Allied World Nat’l Assur. Co. v. NHC, Inc., 2025 WL 1852789,
No. 22-00469 MWJS-WRP (D. Haw. Jul. 3, 2025)

Nice to see good old-fashioned legal reasoning in these
times.

In the underlying lawsuit, class plaintiffs alleged that MNS
falsely advertised coffee products labeled as “Kona” that contained little to
nothing of the real thing, thus capturing a price premium. MNS ultimately
settled the lawsuit for $12 million and sought indemnification from its umbrella
insurers. Interpreting the relevant policy’s advertising injury coverage, the
court found that an exclusion barred coverage and granted summary judgment for
the insurers.

The underlying lawsuit asserted Lanham Act violations. MNS
and other named retailers sought the dismissal of the Lanham Act false
advertising claim against them to the extent they had acted purely in their
role as retailers. The court granted that motion, reasoning that a false
advertising claim requires “a false statement of fact by the defendant in a
commercial advertisement about its own or another’s product.” Although the
court recognized that “[t]here is limited case law on this subject” and that
“the Ninth Circuit has not weighed in on this issue,” it concluded that
retailers are not liable for false advertising under the Lanham Act “because
they do not make a false statement simply b[y] displaying or selling a product
that was falsely labeled by another.” However, it cautioned that “[i]f, for
example, a retailer controls or participates in the creation of the offending
label or creates additional marketing materials for a product that amplify the
manufacturer’s misrepresentations, imposition of liability for false
advertising may be appropriate.”

As the case headed for trial, other defendants settled and
MNS’s supplier filed for bankruptcy. Plaintiffs alleged that MNS was an active
partner with that supplier: “MNS regularly collaborated with Mulvadi in
developing marketing materials for Mulvadi coffee … Mulvadi advertising
commonly featured MNS’s logo and slogan … [And] MNS’s 30(b)(6) deponent
agreed that the company’s internal emails ‘demonstrat[ed] MNS’s involvement
with Mulvadi and Mulvadi promotion.’ ” Then they settled.

The settled claims were defined as “any and all actions,
claims, demands, rights, suits, or causes of action, whether asserted or not
asserted, that arise from or relate to the allegations made or conduct
described in” the last operative underlying complaint, “including but not
limited to allegations related to the labeling, packaging, advertising,
promotion, branding, marketing, manufacturing, design, formulation,
distribution or sale of coffee labeled as ‘Kona,’ regardless of the statute,
regulation, common law legal theory, or other legal basis on which the
allegations may be asserted.”

Ultimately, Allied World alleged that it had no defense or
indemnity coverage obligation under its policies because the settlement
liability did not arise out of the “use of another’s advertising idea in
[MNS’s] Advertisement” or “infringement upon another’s copyright, trade dress
or slogan in [MNS’s] Advertisement.” In addition, it invoked the exclusion for advertising
injury arising “out of the failure of goods, products or services to conform
with any statement of quality or performance made in [MNS’s] Advertisement.”

The insured bears the burden of establishing that the
coverage provisions apply, while the insurer bears the burden of establishing
that an exclusion applies. Hawai‘i state law governed. Insurance policies “must
be construed liberally in favor of the insured and [any] ambiguities [must be]
resolved against the insurer.”

The settlement constituted a legal obligation, and it plainly
covered the Lanham Act false advertising claims. Indemnification does not
require a finding of liability or a finding that there would have been
liability. “If insurance coverage in the settlement context were to turn on a
prediction about whether a defendant would have been held liable if a case had
gone to trial, the very uncertainty of that prediction—which is presumably one
of the factors that would otherwise induce parties to settle—would encourage
them instead to trudge on with the litigation.” True, the Hawai‘i Supreme
Court’s has stated that an insurer’s indemnity obligation “depends upon the
true state of facts surrounding the loss or injury.” But that case did not
involve a settlement. “And in cases that do not involve settlements, it makes
logical sense to say that an insurance company must defend the insured if there
is a possibility of covered liability, but that it need only indemnify the
insured if there actually is covered liability.” Settlements are different— “it
is no longer a question of possible or potential liability.” Thus, to determine
whether the legal liability created by settlement “flows from a covered claim,
a court must inquire not into what has been or would have been resolved on the
merits, but what claims the settlement has legitimately and reasonably been
designed to cover.”

That doesn’t mean that insureds can insert frivolous or
legally barred claims into a settlement just to get coverage; the court predicted
that state law would agree that “an insurance company has the right to present
evidence that some or all of a total settlement amount should be allocated to
the settlement value of non-covered claims.” But there was no such argument
here.

Allied World did argue that there was no possible liability
for ad-related Lanham Act claims as a matter of law. But it didn’t show that
the advertising-related Lanham Act claims were frivolous or meritless. The
underlying plaintiffs made clear in their motion for summary judgment that
their view of the evidence was that MNS did not merely act as a retailer, but
also participated actively in its supplier’s advertising and marketing efforts.
Moreover, the retailer-only liability claims were still appealable at the time
of settlement, and the court acknowledged that there was no binding circuit
precedent on the issue. Finally, joint and several liability for advertising
conduct was still on the table at the time of settlement.

The court turned to the relevant part of the “Advertising
Injury” provision, which defined it as an “injury arising out of your business
… arising out of one or more of the following offenses”: (i) “the use of
another’s advertising idea in your Advertisement,” or (ii) “infringement upon
another’s copyright, trade dress or slogan in your Advertisement.” The policies
further define “Advertisement” as “a notice that is broadcast or published to
the general public or specific market segments about your goods, products or
services for the purpose of attracting customers or supporters,” including any
“material placed on the internet or on similar electronic means of
communication.” But “only that part of a web-site that is about your goods,
products or services for the purposes of attracting customers or supporters is
considered an Advertisement.”

The court rejected Allied World’s claim that the phrase
“another’s advertising idea” should be understood narrowly as a “process or
invention used to market one’s goods.” “[N]o reasonable layperson would
anticipate such a stingy construction of the phrase. Instead, an “advertising
idea” is better understood as, and construed in favor of the insured as being,
“any idea or concept related to the promotion of a product to the public.” This
is similar to the California interpretation of the term as covering the “manner
or means” of advertising goods and services.

Allied World also argued that the word “another’s” in the
phrase “another’s advertising idea” means that the injury must arise from the
use of an “advertising idea” that another person owns or in which they hold a
proprietary interest of some sort. But the Kona farmers, it argued, did not
hold any legal property right in that term.

But nothing in the language of
Allied World’s policies requires that the Kona farmers have the exclusive legal
right to use an advertising idea. Indeed, nothing in the language of the
policies requires them to have any legal right or property ownership at all in
the advertising idea. The possessive term in the phrase “another’s advertising
idea” is readily understood to refer to the factual question of whether another
person uses something, rather than the legal question of whether they own it. …That
broader meaning accords with how language is ordinarily used. For example, when
trying to find a place to sit in a coffee shop, one might ask “is this your
seat?” When doing so, one is not literally asking if that other person owns the
seat. … In a similar vein, one would naturally say that Kona farmers—who
advertise their coffee as “Kona” precisely to signal the high quality and
special characteristics of their product—have hit on “Kona” as their
advertising idea. They use it, and it is theirs in that significant sense. And
it is theirs even though they have no property right in it.

While “some concepts are simply too common or too widely
used to be considered anyone’s advertising idea,” this was not one of them.

Allied World also argued that the injury from the use of
another’s advertising idea must come from that idea’s use in “your”—the
insured’s—“Advertisement,” and that the underlying lawsuit plaintiffs did not
challenge any of MNS’s own advertisements. But the underlying plaintiffs argued
that the ads at issue were legally attributable to MNS.

The court did agree that “Kona” was not a “slogan,” as
relevant to the separate definition of “Advertising Injury” as also covering
injury from infringement on a copyright, trade dress, or slogan. The court
agrees that “Kona” is not a “slogan,” that is, a “distinctive cry, phrase, or
motto of any party, group, manufacturer, or person; catchword or catch phrase.”
“Whether labeling products as ‘Kona’ might qualify as trade dress is a more
difficult question.” But it didn’t matter because initial coverage was already
established.

What about the exclusions? There, MNS faltered. The
failure-to-conform exclusion provided that Allied World’s policy “does not
provide coverage” for any “Advertising Injury … arising out of the failure of
goods, products or services to conform with any statement of quality or
performance made in your Advertisement.” Although “exclusionary clauses are
interpreted narrowly against the insurer,” Allied World would meet even a
heightened standard for applying the exclusion.

When MNS settled claims that alleged MNS was making
statements about the quality of their coffee products when they labeled those
products as “Kona,” those claims amounted to a statement of quality for
purposes of the policy. The underlying lawsuit plainly alleged that Kona coffee
has a “distinctive flavor and aroma” resulting from its cultivation in the
“volcanic soil, the elevation, and the humidity” of the Kona District of
Hawai‘i island; that “Kona coffee is one of the rarest and most prized coffees
in the world” and that a vendor of same is “tell[ing] consumers that the coffee
has a distinctive flavor profile, and that the beans are of the highest
quality.” By selling commodity coffee that did not contain much, if any,
genuine Kona coffee, MNS allegedly sold a product that failed to conform with
that statement of quality. The underlying complaint alleged that defendants
damaged the goodwill and reputation of Kona coffee precisely because a
“consumer who tries that inferior product, thinking it is Kona coffee, will
conclude that Kona coffee is not worth a premium price” and “will be unwilling
to pay a premium price for Kona in the future.” The alleged injury to the Kona
coffee farmers “flowed directly and unambiguously from the alleged failure of
MNS’s coffee products to conform with the quality expected of Kona coffee.”

MNS argued that “Kona” was merely a statement about the
origin or source of the product, rather than a statement of quality. But the
cited out-of-circuit district court decisions simply found, “in their own
unique circumstances, that statements of source were predominantly about the
provenance of products, rather than their quality.” (Citing cases about Native American
origin claims and reasoning that “similar logic could be said to apply whenever
a product is labeled as ‘Buy American’ or ‘Buy Local.’”) Although previously
the court followed the logic of GIs, now it says: “When vendors label a wine as
‘Burgundy,’ they are not seeking to avail themselves of the peculiar interest
of customers in supporting a region in central France; they mean to say to the
customer that the wine will possess the features of a high-quality, and
therefore more expensive, strain of the product.” [I often talk in class about
casual empiricism in judicial reasoning; this is a good example.]

The underlying lawsuit didn’t just allege sales diversion,
or that customers had a peculiar interest in paying premium prices to support
Kona farmers. “Its allegations were that ‘Kona’ bespoke high quality, and by
selling a product that failed to meet that standard of quality, MNS …
undermined the premium market for Kona coffee by unfairly leading consumers to
conclude that genuine Kona coffee did not meet the quality standard.
Allegations of this nature are not predominantly about the source of a product;
they are about the statement of quality that a vendor makes when it calls its
coffee ‘Kona.’” [They are both?]

Nor need a statement use “express” representations about
quality or performance to be excluded. “While the court recognizes that
exclusions must be construed narrowly, it cannot adopt a construction at war
with the language of the exclusion. And nothing in the language of the
failure-to-conform exclusion would support an artificial ‘magic words’
approach.”

MNS argued that the underlying plaintiffs’ alleged injuries
would exist regardless of the coffee’s quality; at least some of that is true
because of the alleged driving down of prices for Kona-labeled coffee, but the
court concluded otherwise. “If MNS … had sold coffee that conformed to the
quality standards of Kona coffee—which, according to the allegations in the [underlying]
lawsuit, they could only have done by selling the real thing—there would have
been no injury at all.” Even if, at trial, the underlying plaintiffs wouldn’t
have been able to prove the higher quality of Kona coffee, MNS did not identify
anything in the record of the underlying lawsuit indicating that the plaintiffs
there had abandoned or lacked the ability to prove their allegations about the
superior quality of Kona coffee. Indeed, two expert reports in the underlying
lawsuit “affirm[ed] that the use of the term ‘Kona’ reflected a statement of
quality.” One specifically opined “on how the geographical location of
production of a product … is intended to signal quality,” and further noted
that the Kona coffee “has historically carried a reputation for high quality.”

from Blogger http://tushnet.blogspot.com/2025/07/gis-can-be-indications-of-quality-for.html

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breast pump rules: Think Green’s trade dress claims against Medela proceed to trial

Posted on July 7, 2025 by rtushnet

Think Green Ltd. v. Medela AG, 2025 WL 1826137, No. 21 CV
5445 (N.D. Ill. Jul. 2, 2025)

Think Green sued Medela for infringing its trade dress in its
breast pump, as well as false advertising claims that were quickly dismissed on
summary judgment because TG and Medela aren’t the only players in the market
and the advertising didn’t disparage TG, meaning that TG couldn’t show harm.
The trade dress claims, though they seem extremely weak to me (both in whether
there would be confusion and whether the trade dress is nonfunctional), survive
for a jury.

Think Green and Medela both sell manual, one-piece silicone
breast pumps. Think Green’s pump is on the left and Medela’s pump is on the
right within each image: 

Think Green claims trade dress rights in the “three-part
shield-collector-base configuration, wherein the collector is bulbous yet fits
underneath the outer diameter of the shield and contains an ornamental rib in
its top part, while the base flares out from the bottom of the collector bulb
to meet the surface upon which the whole unit rests.” Medela previously won
summary judgment on Think Green’s design patent claim.

Much of the opinion focuses on the expert reports around
secondary meaning and confusion. Think Green’s expert witness Harper opined that
(1) among the relevant universe of consumers, there is a likelihood of
confusion that Medela’s pump is sponsored or approved by Think Green due to the
allegedly infringing trade dress; and (2) the relevant universe of consumers
would likely ascribe secondary meaning to Think Green’s trade dress. Her
surveys were not among the “rare” ones where fundamental flaws render them
“completely unhelpful to the trier of fact and therefore inadmissible.”

Harper’s secondary meaning online survey presented half of
the respondents with photos of Think Green’s trade dress, pictured immediately
below, and asked those respondents whether they associated the pump with one
particular company or brand, and if so, which brand and why. 

The control group saw a different pump and received the same
questions. 

Harper’s point-of-sale confusion survey showed the test
group an image of Medela’s pump, captured from the website buybuybaby.com,
which included the “MEDELA” brand name; the product’s name, the Medela®
Silicone Breast Milk Collector; its price; and an image of the pump that
included a lanyard and yellow stopper. 

The control group was presented with a similar image of a
different, “wearable” breast pump: 

The survey ultimately asked respondents whether or not “the
manufacturer or brand of the breast milk pump/collector [they] just reviewed …
is sponsored or approved by another manufacturer or brand.” If a respondent
answered yes, they were asked who and why.

Medela’s criticism of the control was that it was wildly
different from the trade dresses at issue. But, first, a secondary meaning
survey might not even need a control. As for the confusion survey, it contained
additional probes (why?), which the court thought helped (though the
psychological literature suggests that people are really bad at answering that
question), and anyway a bad control isn’t necessarily enough to kick out a
survey. Choosing a control is really hard, so a bad control should bear on
weight rather than admissibility.

Medela objected that the survey also didn’t reflect real-world
conditions of online purchase, including images of the pump’s packaging,
additional images of Medela’s “signature butter yellow,” a bullet point list of
the pump’s features, and the ability to click on the pump’s image to expand it.
Again, that went to weight; these were not core components of the shopping
experience.

There was also a post-sale confusion survey. [Here one real
issue is that unlike point of sale confusion, post-sale confusion’s theory requires
that the post-sale confusion negatively affect subsequent consumers—either
by causing them to think poorly about the plaintiff or by making the plaintiff’s
product seem too easily available to the hoi polloi. There’s no evidence of
this in the survey, and if you leave out that part of the theory you remove one
of its few constraints.] Harper’s survey first screened for respondents who
purchased a pump in the last year or who would consider purchasing one in the
next year then showed them four images of Medela’s pump, collected from
Medela’s online retail product pages, less Medela’s name, design elements, and
measurements. The control group saw the same control pump. 

control images

test images

The survey asked respondents what company, companies, or
brand(s) they believed put out the pictured pump, assuming they had an opinion
in that regard; why they had that belief; and whether they believed the pump
was affiliated with, or sponsored or approved by, any other company or brand. Although
there were more similar noninfringing pumps out there, the control pump was
also made of silicone, clear/white, and curved; whether the control was good
was for cross-examination and the jury.

Plus, Medela objected that most people won’t encounter other
people’s pumps in the wild, just like they mostly won’t encounter other people’s
underwear, making post-sale confusion unlikely. The court was offended on
behalf of those who pump in public, wash out/pour bottles in public, etc.

The survey also sufficiently isolated the claimed trade
dress, even though it included the “distinctive ridge around the breast shield”
visible in the test stimulus, which Think Green disclaimed as its trade dress. Again,
this went to weight rather than admissibility.  

Think Green’s objections to Medela’s expert Cohen were
equally unavailing. There’s a first time for every expert, so the fact that
this was her first trade dress survey didn’t require exclusion. Medela’s survey
showed Medela’s pump “as it had been displayed on the Amazon platform.” With
the stimulus picture still on the screen, respondents were asked open-ended
questions such as, “if you have an opinion, what company or organization makes
or puts out this breast milk collector” and whether the respondent “believe[d]
that this breast milk collector is affiliated with or sponsored by any other
company.” The court didn’t buy that keeping the stimulus on screen created
untoward demand effects. The court agreed that, because “[a] consumer would be
staring directly at the product, together with its packaging and description,
at the moment he/she made the decision to purchase (e.g., clicked ‘Add to
Cart’),” the methodology underlying Cohen’s survey sufficiently mimicked
marketplace conditions.

With that out of the way, there was enough evidence of secondary
meaning to avoid summary judgment on that ground. Along with the survey, there
was at least a minimal showing of Think Green’s volume and history of sales,
even with no contextualization of those sales or of its advertising
expenditures. As for intentional copying, “[c]opying is only evidence of
secondary meaning if the defendant’s intent in copying is to confuse consumers
and pass off his product as the plaintiff’s,” and whether that happened was for
the jury.

And for confusion, “[i]t is a rare trade dress case where
the ‘evidence is so one-sided that there can be no doubt about how the question
[of whether likelihood of confusion exists] should be answered.’” [This is
either trivial (a contested case generally means that both parties believe that
they have a shot) or wrong (TM cases aren’t actually all that special in terms
of evidence, much as we like to think TM is especially complicated). This claim
contributes to making TM doctrine worse in practice by making courts reluctant
to grant summary judgment—usually for the defendant—which has systematic
effects on who gets to do what.]

Emails among Medela employees were not convincing evidence
of passing off. “In at least some of the quoted emails, the employees discuss
their desire to avoid copying Think Green’s pump and—crucially—never evince a
desire to pass their pump off as Think Green’s,” the court concluded, citing
phrases like “I do not believe this is a winning strategy,” “[W]e need to be
more innovative,” and discussions of potential advantages of Medela’s pump over
Think Green’s. “Although other email excerpts appear to support Think Green’s
narrative, in asking the Court to interpret this entire body of emails as
unequivocal proof of Medela’s intent to pass off Think Green’s trade dress as
its own, Think Green is asking the Court to ‘choose between competing
inferences.’”

On functionality, once again a lower court relies on the
existence of alternative designs to deny summary judgment. The reason this is
supposedly consistent with Traffix is that, if utility is shown by other
means (in practice the only possibilities are patent claims, advertising that touts
utilitarian advantages, or maybe effects on quality/cost), then alternative
designs need not be considered, even though that’s not what Traffix says.
Thus, the court says “[a] design does not need to be the only, or the best, way
to do things to be considered functional: It only needs to represent one of
many solutions to a problem,” then immediately proceeds to disregard that
statement.

The court found that an international patent application involving
the pump was not dispositive. Although the Federal Circuit held that “an
applied-for utility patent that never issued has evidentiary significance for
the statements and claims made in the patent application concerning the
utilitarian advantages, just as an issued patent has evidentiary significance,”
the court didn’t think that rules for the TTAB were relevant to “a court’s
Lanham Act analysis.” [??? They are interpreting the same statutory language?
Why would you ever want the PTO and judicial analyses of functionality to
differ?] “A never-approved patent application … could include any number of
useless features that would never have passed muster with the Patent and
Trademark Office”; only approved or expired utility patents show functionality.
[This seems wrong, including as a matter of applicant estoppel; it would also
make evaluating the effect of foreign patents into a mini-trial on the relationship
between foreign and US patent law.]

Anyway, even considering the application, it wouldn’t
persuade the court that functionality was present. The court thought that there
was no evidence that the “central advance” application matched the “essential
feature” of the claimed trade dress. “And although the absence of a utility
patent does not preclude the functionality of a design, the lack of a
presumption of functionality does make it considerably less likely that
functionality can be determined on summary judgment.”

Medela’s expert Faltum opines that the shape of Think
Green’s design was ideally suited for the human hand, while other shapes are
“awkward to hold, difficult to manipulate, inferior in performance,” and less
effective at creating a vacuum seal: 

The court was skeptical; 3D pumps shouldn’t be likened to 2D
shapes, and this analysis disregarded “the prominent breast shield topping the
pumps.” Likewise, a jury should evaluate the claim that the bulb design was
more effective, based on a study Faltum conducted that tested how much water
various pumps could draw through a hose from a beaker when the bulb was
compressed and released. The court agreed with Think Green’s argument that the
study merely “demonstrate[d] that there is a statistically significant
difference in the efficiency with which liquid is collected by one-piece
silicone breast milk collectors as a consequence of their shape.” But it didn’t
evaluate other potential utilitarian features of a pump (such as adherence or
comfort), “whether this alleged difference in water-drawing efficiency
translates into a more effective vacuum ‘essential for these collectors’
remains a factual question.” [I really don’t get this logic—something doesn’t
have to be comprehensively better to be functional; tradeoffs are a thing, and
each solution within the solution space should not be monopolizable. If you’d told
me “this pump will be more efficient but be less comfortable,” I probably would
have gone for speed. Perhaps there’s more to the story, but the explanation
doesn’t persuade me.]

And Think Green sufficiently countered Medela’s claim that
the suction base is ideal for stability “by pointing to several other similar
pumps that use different types of non-suction bases to provide stability.”
[Alternative designs, in one of the factors that’s supposed to determine
whether alternative designs even need to be considered!]

Advertising didn’t unequivocally claim advantages to the
design, only of the breast shield and suction base. (E.g., “Available in two
larger capacities of 100ml and 150ml, and with a new suction base that sticks
to flat surfaces to prevent accidental spills, it is the easiest and most
simple way to express breast milk.”) That just meant that having a
suction base is good, nothing about its size or shape or overall design. [This seems particularly anti-Traffix — that suction base looks like the size and shape of a suction base you’d make if you wanted a suction base; a circle uses less material than anything else of the same size, and surely they shouldn’t be forced to use a different shape or cover up the suction base.] “In
short, none of these advertisements urge consumers to purchase the pump on the
strength of any particular utilitarian quality of the suction base’s design.”
[It would be interesting to see what consumers actually thought was being
claimed.]

different breast sizes

suction base claim

suction base claim

The court pointed to Think Green’s evidence of “numerous
successful, highly rated alternative silicone one-piece breast pumps that are
designed differently than, but function the same as, Think Green’s pump.” “Where
Think Green has presented evidence that other non-infringing designs are
available, a triable issue of fact exists on functionality.” [So much for Traffix.]

from Blogger http://tushnet.blogspot.com/2025/07/breast-pump-rules-think-greens-trade.html

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ambiguity in consumer class actions v. the Lanham Act: convergence or divergence?

Posted on July 7, 2025 by rtushnet

Slaten v. Christian Dior Perfumes, LLC, 2025 WL 1840026, No.
23-cv-00409-JSC (N.D. Cal. Jul. 3, 2025)

The concept of ambiguity is now on a path to become as entrenched
in consumer protection cases as in Lanham Act cases.
My thinking on this is still evolving, but right now I’m inclined to say that an
“ambiguous” claim for purposes of Lanham Act claims means what an “ambiguous”
claim for purposes of consumer protection litigation does, even though the assessment
process is formally different. That is, a statement challenged under the Lanham
Act is ambiguous if there are multiple plausible interpretations, some of which
are not false. As the Ninth Circuit has clarified, a statement challenged under
consumer protection law can be found plausibly deceptive if reasonable
consumers could think it has a false factual meaning, even if other reasonable
consumers would think it was ambiguous and required more information to interpret/had
a different non-false meaning. That latter group can be expected to consult the
back of the label for clarification, if present. But the first group of
reasonable consumers has no reason to inquire further and therefore can be
deceived; they are functionally equivalent to the deceived group in a Lanham
Act false implication case.

The Lanham Act cases use the modifier “substantial” to
describe the relevant subset (reasonable consumers who are deceived), but accepts
much less than half as a sufficient percentage. Consumer protection cases are
right now generally stricter, requiring bigger percentages where there are surveys
(as there often are these days), so there may still be doctrinal divergence. I
think that divergence, to the extent it exists, is likely unjustified—it is
hard to see why competitors should have an easier path to remedies than the
directly deceived consumers—but it is early days for both the “ambiguity”
concept and the new prominence of surveys in such cases. 

I suspect that courts are thinking that “half or more” is
better for class action treatment, but formally it really isn’t. That is, the
common question in a consumer protection class action in the key states is “is
this ad deceptive?” and the answer to that should be “yes” if it is likely to
deceive a substantial number of reasonable consumers. Then, NY and California
(etc.) presumptions about deception kick in to allow the class to proceed. An
ad that deceives 49% of consumers—or 30%—about a material fact is actually
pretty bad! [Caveat: our concept of deception should incorporate a “compared to
what?” inquiry. If it’s impossible to provide the information in a
non-deceptive way, but the information is also truthful and useful to some
people, then we have to balance those considerations; if it’s not useful/the
ambiguous meaning is just puffery, then we don’t have to worry so much.]

A related question is the role of the jury, at least in a Lanham Act case: If courts applied similar analysis in such cases, they’d ask whether a reasonable jury could find that a claim was literally false with respect to a substantial number of reasonable consumers, such that those consumers would feel no need to inquire further. That’s not how Lanham Act courts tend to treat the issue; it would probably counsel against determining “ambiguity” as a matter of law. 

Anyway, this case involves a remand on claims over alleged
deceptive labeling/advertising of SPF in cosmetics as lasting for 24 hours. The
court initially interpreted McGinity v. Procter & Gamble Co., 69 F.4th 1093
(9th Cir. 2023), to mean that if a front label is ambiguous in that it “could
mean any number of things,” some of which would not be deceptive, a court must
look to the product’s back label to determine whether a reasonable consumer
would be deceived. Upon review of the back label, the court dismissed plaintiff’s
claims.

The court of appeals eventually remanded based on Whiteside
v. Kinberly Clark Corp., 108 F.4th 771 (9th Cir. 2024). Whiteside held
that “[a] front label is not ambiguous in a California false-advertising case
merely because it is susceptible to more than one reasonable interpretation.” On
a 12(b)(6) motion, a label “may have two possible meanings, so long as the
plaintiff has plausibly alleged that a reasonable consumer would view the label
as having one unambiguous (and deceptive) meaning.” That is:

a front label is not ambiguous
simply because it is susceptible to two possible meanings; a front label is
ambiguous when reasonable consumers would necessarily require more information
before reasonably concluding that the label is making a particular representation.
Only in these circumstances can the back label be considered at the dismissal
stage.

Whiteside specifically rejected this court’s earlier “more
than one possible meaning” standard for ambiguity. Bryan v. Del Monte Foods,
Inc., 2024 WL 4866952 (9th Cir. Nov. 22, 2024), did not change matters. Bryan
considered whether a front label describing a fruit cup using the phrase “fruit
natural” falsely led consumers to believe all ingredients in the cups were
natural. The court explained the word “naturals” was “a noun, not a descriptive
adjective,” and so the label suggested “the phrase is just the name of the
product.” Further, the front label context indicated “although the fruit itself
is natural, the syrup may not be,” and customer surveys were insufficient
because they “asked people what they thought ‘natural’ should mean on the label
of a product, not what they thought it actually did mean as used on these
labels.”

But here, reasonable consumers could conclude from the front
label alone that defendant was advertising 24 hours of sunscreen protection.

from Blogger http://tushnet.blogspot.com/2025/07/ambiguity-in-consumer-class-actions-v.html

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Southern discomfort: class certified over malt beverage dressed like Southern Comfort whiskey

Posted on July 4, 2025 by rtushnet

Andrews v. Sazerac Co., 2025 WL 1808797, No. 23-cv-1060 (AS)
(S.D.N.Y. Jul. 1, 2025)

Plaintiffs alleged that Sazerac deceived consumers by
selling a malt beverage that looks like Southern Comfort whiskey but in fact
contains only “whiskey flavor.” The court certified a class of “[a]ll persons
who purchased the Southern Comfort Malt Products in the State of New York at
any time during the period February 8, 2020, to the date of judgment” with one named
plaintiff.

The malt beverage comes in three sizes: 50ml, 100ml, and
355ml. The 50ml bottle is cylindrical, while the two larger sizes are
relatively flat. But each has “colors, themes, fonts, symbols[,] and spacing” identical
to Southern Comfort whiskey bottles. Each bottle has a statement of
composition, which until April 2023 described the drink as a “malt beverage
with natural whiskey flavors, caramel color and oak extract.” Inclusion of the
“whiskey flavors” and “oak extract” language allegedly contributed to this
misleading impression.

Addressing only the parts that interest me:  

Sazerac argued that there was no classwide proof that the
bottles’ labeling was materially misleading. Although plaintiff’s survey found
that 62.9% of consumers believed that the malt-beverage mini bottles contained
whiskey, Sazerac argued that it was fatally flawed, and anyway only applied to the
50ml bottles.  The 50ml bottle is
cylindrical, while the larger bottles have “relatively flat front[s],” and the
statement of composition, which says that the drink contains “malt beverage,”
appears in larger font on the bigger bottles. But the court didn’t find these differences
to be material:

That the larger bottles are flat,
instead of round, might be material if their shape would tend to indicate to
reasonable consumers that the bottles contain malt beverage, not whiskey. But
Sazerac doesn’t say that its whiskey is only sold in round bottles, so it’s not
clear why the bottle shape makes a difference here. Sazerac’s observation that
the statement of composition appears in larger font on the larger bottles seems
similarly irrelevant. On the one hand, “malt beverage” is in larger font. But
so too were the allegedly misleading “whiskey flavor” and “oak extract”
phrases, at least until April 2023. Regardless, the Court sees no reason why
the impression created by a specific combination of elements on a small bottle
would vary “significantly” from the impression created by those same elements
on a larger bottle.

Anyway, misleadingness was a merits question.

Plaintiffs offered a choice-based conjoint survey to measure
their claimed damages, which estimated a 8.8% price premium from false beliefs
that there was non-malt liquor in the beverage. Sazerac argued that this study failed
to (1) show that the price premium is attributable to the beverage’s misleading
packaging, as opposed to flavor and convenience, or (2) consider supply-side
factors. The court disagreed. Plaintiffs’ theory was that the overall packaging
contributed perceived value, and the survey tested that theory. Even if the study
asked respondents to assume that the products were all available in the same
store (and thus didn’t control for convenience), that was a matter of ultimate
persuasiveness, not a matter of whether it tested the plaintiffs’ theory. “If [the]
model missed the mark, then it did so in one fell swoop for the entire class.”
Likewise, an alleged failure to measure supply-side factors can be accounted
for “when (1) the prices used in the surveys underlying the analyses reflect
the actual market prices that prevailed during the class period; and (2) the
quantities used (or assumed) in the statistical calculations reflect the actual
quantities of products sold during the class period,” as the survey here did. After
all, “[a] conjoint survey that asks respondents whether they would rather pay x
for a product labeled ‘100% Fruit Juice’ or y for a similar product labeled
‘50% Fruit Juice’ … would account for supply-side factors if both x and y
reflect the prices for which juice companies actually sell similarly labeled
products in the marketplace.” Sazerac argued that it would refuse to sell its
malt beverage at the lower price of a generic competitor. But again, that was
not relevant to whether the survey was good enough for class certification. “Moreover,
it would be improper to give Sazerac the benefit of the doubt—and to take its
CEO’s self-interested statements as controlling—at this stage.”

 

from Blogger http://tushnet.blogspot.com/2025/07/southern-discomfort-class-certified.html

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5th Circuit agrees that joint TM owners can’t sue each other under any Lanham Act theory

Posted on July 4, 2025 by rtushnet

Reed v. Marshall, — F.4th —-, 2025 WL 1822673, No.
24-20198 (5th Cir. Jul. 2, 2025)

Jade, an R&B, hip hop, and soul vocal group, rose to
prominence in the 1990s. Jade disbanded in 1995, when the members began
pursuing their respective individual careers. “Appellant Di Reed contends that
her fellow Jade members, Joi Marshall and Tonya Harris, violated the Lanham Act
by performing under their co-owned JADE mark with another singer, Myracle
Holloway.” She lost because “the Lanham Act does not authorize claims between
co-owners of a trademark.”

In 2018, the three original members agreed to a reunion
tour, and collectively applied for joint ownership of the “JADE” service mark;
it was registered in 2019 for “[e]ntertainment services in the nature of live
musical performances.” The registrants were listed as Reed, Marshall, and
Harris, all in their individual capacities. But the reunion fell through, and
in June 2021, Marshall and Harris entered into a six-month work-for-hire
contract with a different singer, Myracle Holloway. That trio performed as Jade
at multiple “90’s Kickback Concert[s].” Promoters created social media ads
that, Reed claims, inappropriately used her name, image, and likeness, along
with the JADE mark.

Reed sued the other individuals, along with two other defendants
(now settled out), alleging infringement, dilution, and unfair competition
through false designation of origin and false advertising; as well as
violations of Texas statutory and common law. After disposing of the federal
claims because co-owners and licensees thereof can’t be sued, the district
court found that it lacked supplemental jurisdiction over the state claims.
This appeal followed.

The court of appeals framed the issue as one of statutory standing.
(Scalia was never going to win this terminological issue.)

Reed, Marshall, and Harris “entered into joint ownership of
the JADE mark—that is, each individual owns a complete interest in the mark.”
This is disfavored—“a mark is fundamentally intended to ‘identify and
distinguish a single commercial source,’ not three distinct owners,” but it is
allowed (why, though, since it can’t actually perform that core function if the
owners part ways and more than one keeps using the mark? This is an example of
the US TM system not fully committing to the principles it says it uses; you
could probably get a highly similar result by saying that the mark stops
signifying the joint owners when they fragment and can be reappropriated by the
first successful user thereof). Because “[a]ny discord between co-owners could
result in ‘multiple, fragmented use’ that may result in ‘consumer confusion and
deception,’” parties should contract to clarify “outcomes should owner
interests become unaligned.” But they didn’t.

Too bad! The Lanham Act, “which is aimed at protecting
consumers and mark owners from fraud and deceptive acts,” does not provide a cause
of action “to remedy disputes between the co-owners of a trademark.” An owner
definitionally can’t be an infringer. “Co-owners of a mark, who generally have
the right to use their marks as they please,” are owners, not infringers. “[T]he
question is not whether joint ownership of a trademark could cause confusion if
co-owners went their separate ways, but whether the Lanham Act affords a
statutory right for those co-owners to sue each other.” And Holloway was not an
appropriate target either, because “Marshall and Harris, as persons with
complete ownership interests in the mark, have an unencumbered right to use the
mark as they please,” including by licensing. [Note that this is not correct—there
are uses of the mark that will lead to loss of rights, not to mention potential
conflicts with, say, JADE for other things if they try to expand.]

Dilution: Same result. Of note: “The plain text of 15 U.S.C.
§ 1125(c)(1) signals that at least two distinct marks need to be in play for
dilution to occur: ‘the famous mark’ possessed by an owner, and an imposter ‘mark
or trade name’ that causes dilution of the original mark.” Here, that mattered because
an owner can’t be an imposter, but it has broader implications (if use as a
mark is still a thing).

False advertising: Reed alleged that the “[d]efendants’
unauthorized use of [her] JADE Mark … in conjunction with the promotion and
provision of live entertainment services constitutes unfair competition and
false advertising.” More specifically, defendants allegedly falsely advertised
that “Holloway is a member of the group Jade” and “that the performances
promoted and provided by Defendants are those of the group Jade.” But this
hinged on the mistaken premise that defendants were using the JADE mark in an
unauthorized manner. Also, there was no evidence that defendants’ use of the
JADE “mark in commerce proximately caused Plaintiff to suffer injuries to
commercial interests in business reputation or sales.”

Reed’s best allegation is that in
marketing materials for the 2024 “R&B Block Party” concert, the event’s
promoters created social media posts that included a Jade song that featured
Reed’s voice. But with respect to the Lanham Act, Reed concedes that “[a]
person’s name, image, or likeness cannot function as a trademark such that it
affords a plaintiff a cause of action for trademark infringement,” and in any
event, the promoters who made the advertisements in question are not parties to
this suit.

Reed argued that she suffered “lost opportunities such as
the creation of new compositions under JADE name and subsequent profits from
new compositions”; “business reputation in the form of deliberate exclusion
from promotional appearances under JADE name”; and lost “performances under the
JADE name.” But, even had there been evidence in the record, “the defendants’
co-ownership of the JADE mark does not exclude Reed from using the mark as she
pleases. In other words, the defendants’ use of the JADE mark has not caused
Reed to ‘los[e] opportunities’ associated with the mark; she, as a co-owner,
has the right to pursue those opportunities consistent with the (lack of)
conditions linked to her ownership interests.” [Among the implications: she
benefits from defendants’ use to preserve her own rights, since their use in
commerce redounds to her benefit. Could a state law proceeding force partition
by sale? What about partition in kind?]

False designation of origin: Here it seems like Belmora
would at least allow for some sort of labeling remedy under appropriate circumstances,
but Reed’s theory was not conducive to that. She argued that the defendants’
“unauthorized use” of the JADE “mark” and her “voice and likeness in commerce”
was “likely to deceive consumers as to the origin, source, sponsorship, or
affiliation of Defendants’ services.” Specifically, she argued that consumers
would think that the Holloway-Marshall-Harris performances were “affiliated
with or sponsored by” her. [My theory: people who knew the group but didn’t
know the performers’ names would think that she was performing—this
seems much more plausible. But the remedy might be much more limited.]

The court of appeals found that, even if she did fall within
the statute’s zone of interests, her injuries were not proximately caused by a
violation of the Lanham Act. [I don’t think this is a conflict with Belmora,
but rejecting my theory might be—she doesn’t need to own a TM to bring a Belmora
claim.] Her allegations were all premised on unauthorized use of the JADE mark.
But that use wasn’t unlawful, and Lexmark bars “suits for alleged harm
that is ‘too remote’ from the defendant’s unlawful conduct.”

 

from Blogger http://tushnet.blogspot.com/2025/07/5th-circuit-agrees-that-joint-tm-owners.html

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claim of failure to warn of kratom’s addiction potential not preempted; a “disease claim” involves helping, not causing, disease

Posted on July 3, 2025 by rtushnet

J.J. v. Ashlynn Marketing Gp., 2025 WL 1811854, No. 24-cv-00311-GPC-MSB
(S.D. Cal. Jul. 1, 2025)

Plaintiffs sued on behalf of putative nationwide,
California, and NY classes, alleging that Ashlynn failed to warn consumers of
the potentially addictive nature of its products, which contain dried leaves
from a plant called kratom. As alleged, “the active alkaloids in kratom …
work on the exact same opioid receptors in the human brain as morphine and its
analogs” and it “has the same risks of addiction, dependency, and painful
withdrawal symptoms, among various other negative side effects.” As a result, plaintiffs
allege that kratom “has sunk its hooks into tens of thousands of unsuspecting
customers and caused them serious physical, psychological, and financial harm.”

The symptoms of kratom withdrawal include: “irritability,
anxiety, difficulty concentrating, depression, sleep disturbance including
restless legs, tearing up, runny nose, muscle and bone pain, muscle spasms,
diarrhea, decreased appetite, chills, inability to control temperature, and
extreme dysphoria and malaise.” However, because it “does not produce a
debilitating ‘high’ like cocaine or heroin, it is very easy for users to take
the drug every day without feeling as though they are developing a drug
addiction or harming themselves.”

Plaintiffs alleged that defendant had superior knowledge
compared to reasonable consumers, and that it had received numerous user
reports about the addictive potential of kratom in the United States. They also
alleged that defendant interacted with growers and distributors in Southeast
Asia who have disclosed the addictive nature of kratom to it. Nonetheless, its
product only had “a bog-standard disclaimer stating that the Products are not
regulated or evaluated by the FDA.”

product front (“all natural”)

product back with disclaimer of FDA approval

Defendant argued that the FDCA preempted the claim because a warning about addiction would be a prohibited “disease” claim. A disease claim explicitly or implicitly claims “to diagnose, mitigate, treat, cure, or prevent a specific disease or class of diseases.” As the court easily concluded, a disclosure that a supplement has addictive qualities is not a “claim to diagnose, mitigate, treat, cure, or prevent” disease. “Instead, such a disclosure informs the consumer that, rather than improving one’s health, kratom has exactly the opposite effect.” The defendant “can easily comply with state laws and the FDCA by avoiding false, misleading, or deceptive statements or omissions regarding kratom’s alleged addictiveness.”

The court did, however, dismiss nationwide class allegations because of differences in the consumer protection laws of the various states on reliance, burdens of proof, statutes of limitations, and damages.

Plaintiffs could bring claims for “unpurchased products” (forms in which they didn’t buy kratom) because the products were all substantially similar for purposes of their claims.

NY statutory and common law fraudulent omission claims: A plaintiff bringing a fraudulent omission claim must show either that (1) “the business alone possessed the relevant information,” or (2) “a consumer could not reasonably obtain the information.” This was sufficiently alleged; although defendant didn’t have exclusive knowledge of the risks, “an omission can still be actionable where it is shown that a consumer could not reasonably obtain the omitted information.”

At the pleading stage, it was enough to allege that “selective online materials or niche federally funded studies” are not “reasonably accessible or comprehensible to consumers”; that kratom is marketed as providing benefits without disclosure of its addictive potential, and, “most importantly,” “that consumers are not aware of the risks of kratom consumption before making their purchases because the available information is either difficult to access or, as with the medical literature, incomprehensible to the average person.” Misinformation about kratom is allegedly rampant.

California: A fraudulent omission must either (1) “be contrary to a representation actually made by the defendant,” or (2) “an omission of a fact the defendant was obliged to disclose.” A defendant “has a duty to disclose when either (1) the defect at issue relates to an unreasonable safety hazard or (2) the defect is material, ‘central to the product’s function,’ and the plaintiff alleges … (1) the defendant is in a fiduciary relationship with the plaintiff; (2) the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) the defendant actively conceals a material fact from the plaintiff; or (4) the defendant makes partial representations but also suppresses some material facts.” This too was done.

Although there was a lot of public information about kratom, it was conflicting, and many documents referenced “complex studies” or were “difficult-to-access reports and letters.” It was plausible that the manufacturer had superior knowledge compared to the average consumer. Defendant argued that its labels directed users to consult with a doctor before use, who in turn would have informed a user of kratom’s addictiveness. But “Defendant cannot simply place the onus of warning consumers of the potential adverse effects of its kratom products on consumers’ doctors by adding boilerplate language to its labels.”

Claims for equitable relief also survived because plaintiffs adequately alleged that public injunctive relief would be appropriate. California class members and members of the public are still at risk of harm—public safety harms can’t be redressed through money damages.

from Blogger http://tushnet.blogspot.com/2025/07/claim-of-failure-to-warn-of-kratoms.html

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plaintiffs don’t have to use full FDA methods for testing nutrients to avoid FDA preemption

Posted on July 2, 2025 by rtushnet

Scheibe v. ProSupps USA, LLC, — F.4th —-, 2025 WL
1730272, No. 23-3300 (9th Cir. Jun. 24, 2025)

The FDA specifies testing methods for determining the amount
of carbohydrates and calories in a food, as well as a sampling process for
those tests requiring “a composite of 12 subsamples (consumer packages) or 10
percent of the number of packages in the same inspection lot, whichever is
smaller, randomly selected to be representative of the lot.” A dietary
supplement, is “misbranded” in violation of the FDCA if its label differs by a
specified margin from the results of these tests. Foods containing up to 0.5
grams of carbohydrates can be labeled as zero-carbohydrate, and foods
containing up to 5 calories can be labeled as zero-calorie. State law claims
that aren’t identical to FDCA violations are preempted.

This is the background for the claims here, over a dietary
supplement: Hydro BCAA. The supplement’s FDA-mandated label states that each
13.8-gram serving contains 10 grams of amino acids but zero grams of
carbohydrates and zero calories. Scheibe bought the supplement to help him lose
weight and gain muscle mass; his preliminary testing of one sample, using a FDA-specified
method, found that the supplement contained 5.68 grams of carbohydrates and 51
calories per serving, “far exceeding the FDA’s allowable margins for
zero-carbohydrate and zero-calorie labeling.” He sued under California consumer
protection law.

The district court dismissed the claims because he didn’t
use the 12 random sample process. But a plaintiff need not prove a claim in the
pleadings, and his allegations made misbranding plausible.

Anyway, because compliance with the FDCA can be determined
only by the FDA’s testing methods and sampling processes, “the Act necessarily
preempts mislabeling claims proven only through testing methods and sampling
processes ‘not validated or accepted by the FDA for use in th[at] context.’” But
ProSupps bears the burden of showing preemption, and Scheibe didn’t plead
himself out of court. Instead, he pled facts allowing a reasonable inference
that the supplement was misbranded. His preliminary testing “allows a court to
draw a reasonable inference that testing a composite sample according to FDA
regulations would show that the supplement is misbranded under the Act.” It was
plausible that additional samples would contain similar amounts, and even if
those samples they had far fewer carbohydrates and calories than Scheibe’s
original sample, “they still could lead to a result that exceeds the margins
for zero-carbohydrate or zero-calorie labels and thereby establish misbranding
under the Act.” (It’s not clear whether the result would be the same with lower divergences from the label. If every other sample in a 12-sample group was zero and zero,
the average would be 0.47 grams of carbs and 4.25 calories per serving, just slightly below the relevant thresholds. Whether such a result is likely is of
course well beyond the record and my expertise.) Maybe his test result was
weird. “But the Federal Rules of Civil Procedure do not cast judges as skeptics
of pleadings.”

Scheibe wasn’t arguing that every serving must have the same
amount of nutrients; he was arguing for a reasonable inference about the results
of the FDA-mandated twelve-sample process. Indeed, it may be “impracticable”
for a plaintiff to test 12 different samples “randomly selected to be
representative of the lot” before discovery opens. “[T]he fact that defendants
may have exclusive control and possession of critical facts—like their own
product inventory—cannot categorically prevent plaintiffs from stating a
plausible claim.”

from Blogger http://tushnet.blogspot.com/2025/07/plaintiffs-dont-have-to-use-full-fda.html

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Scotts loses trade dress claim over green & gold for Miracle-Gro

Posted on July 1, 2025 by rtushnet

Scotts Co. v. Procter & Gamble Co., 2025 WL 1779167, No.
2:24-cv-4199 (S.D. Ohio Jun. 27, 2025)

A different Scotts trade dress claim than the
one I blogged last year. While it’s hard to get rid of trademark claims on
a motion to dismiss, a preliminary injunction may be a different matter—as it
is here, where the court does a thorough job with an expansive trade dress
claim (which frankly should have John Deere’s lawyers taking notice, given its
own reliance on green and yellow). This might be a good case to give students,
given its accessibility.

Scotts makes the Miracle-Gro line of plant food and lawn and
garden products, some of which are depicted below: 

P&G recently introduced a new non-selective herbicide—a weed
killer—called “Spruce”:

Scotts is the market leader in the lawn and garden business.
What is its Miracle-Go trade dress? It has an incontestable registration that “consists
of a rectangular shaped box in the colors green and yellow” for “plant food.” When
the appropriate colors are transposed onto the lined image in the registration, the
mark looks something like this:

But Scotts claimed more, alleging a trade dress comprising:

(1) A green and yellow color combination;

(2) With each color presented as a separate horizontal band
and the top color taking up a smaller ratio than the bottom color;

(3) With the two bands sharing a common border that runs
horizontally along the package;

(4) With a straight line dividing the two colored bands; and

(5) A circular horizontally centered graphic element.

The court referred to the “rectangular shaped box”
combination as the Registration, to avoid confusion with this broader trade
dress claim—broader because it lacked a shape restriction and applied to more
than plant food. Nonetheless, Scotts has never used the Miracle-Gro Trade Dress
with any herbicide, nor did it plan to. Also, the broader trade dress did have
some greater specificity—specifically, the “circular horizontally centered
graphic element.” As implemented, this element was the Miracle-Gro logo or
wordmark, which consists of “white text overlaid on (and extending beyond the
horizontal border of) a black circle with some additional graphic sheen.”

Products using this broader trade dress have been on the
market from 15 to 70 years, depending on the product. Plant food was the
original, sold for over 70 years, and was most closely associated with the
registration.

Since 2014, Scotts has sold around 104 million units of this
product for approximately $650 million. During the same period, Scotts sold
roughly one billion units of Miracle-Gro, generating approximately $5.6 billion
in revenue, although just under one-third came from so-called “specialty
products” or “flavors,” “which come in quite different packaging (although
sometimes with at least some of the design elements from the Trade Dress).” 

Ninety percent of sales occur at brick-and-mortar stores,
including “do-it-yourself … home centers” like “Lowe’s, Home Depot, Menards”;
large chain retailers like Target, Walmart, and Meijer; and hardware, garden,
and club stores. The cost ranges from $6 to $20 depending on the product and
configuration.

Spruce became available to consumers mid-November 2024. It
costs between $12.99 to $39.99 depending on the configuration. Spruce is
carried in brick-and-mortar retailers such as Home Depot, Lowe’s, Walmart,
Target, Ace, and True Value, as well as online. P&G has invested
significantly in television, online/social media, print, and in-store
advertising as part of the product rollout:

The bottom of each container consists of a clear or
transparent section. The transparent portion is designed to allow consumers to
see the liquid product. A spruce green portion predominates most of the product
packaging. “The Miracle-Gro green is a brighter green with a glossy finish that
resembles a freshly cut lawn on a sunny day, while the green on the Spruce
packaging has a matte finish and is darker, more like a pine (or spruce) tree
in a shadowy forest.” On most packages, a round, yellow dandelion image (with
an even darker green background) traverses the clear and dark green portions, intended
to depict a half-living, half-dehydrated-and-dying, dandelion. The Spruce
trademark appears in bold white text, with a yellow “violator” containing the
text “Visible Results in 1 HOUR.” I learned: “A graphic violator is a visual
element used in product design that sellers use to draw the consumer’s
attention to certain messaging the seller wants to emphasize.”

Many third-party lawncare products similarly use green and
yellow color combinations: 

Although market presence for all of these wasn’t shown, Scotts
admitted that Preen Weed Preventer Plus Plant Food product (leftmost) is
“widely sold in the lawn-and-garden marketplace” (perhaps outselling the
Miracle-Gro weed preventer product) and at times “shelved right next to” that
Miracle-Gro product. That is true also of Spectracide (center), which Scotts
admitted is “a leading weed killer product.”

Plaintiff’s witness Sass had worked for Scotts for over 20
years. He testified about the 12 distributor declarations and 110 consumer
declarations submitted to the PTO for the Registration. The declarants each
said something like: “when I see packaging which is green on top and yellow on
the bottom in connection with plant food products, I interpret the packaging
design as an indication that the goods come from a single source, i.e., the
makers of Miracle-Gro.”

Testifying about differences from other products on the
market, Sass emphasized the importance of the proportions (“typically one-third
green on top, two-thirds yellow on the bottom”) and a dark circle element for
the Scott products. The court concluded that the proportions were “perhaps more
important” than Scott argued.

Meanwhile, P&G’s witness Croswell testified that P&G
settled on Spruce’s dark green because P&G believed it would make Spruce
distinctive in the weed-killer market and because it invoked the namesake of
the brand (i.e., Spruce trees). “[D]uring development, P&G and one of the
third-party marketing companies it used identified concerns about whether a
certain version of the Spruce design may have been too similar to a particular
competitive product. But at no point during that process did anyone raise a
concern that any version of the proposed Spruce design was too similar to the
Miracle-Gro line of products.” And P&G has no plans to expand the Spruce
brand into other product categories in the lawn and garden space.

Nobody was aware of instances of actual confusion.

Winning my heart, the court began its confusion analysis by cautioning
that it would not allow Scotts to extend the benefits of incontestability to
the common-law trade dress, and that incontestability and likely confusion are
two different questions.

Strength of the mark: Miracle-Gro’s trade dress likely
acquired distinctiveness through secondary meaning, even though its PTO declarations
were only directed to a rectangular box and it had no survey evidence. Length
of time on the market, advertising, sales volume, and market leadership favored
secondary meaning nonetheless.

The trade dress was also probably nonfunctional.

Without evidence of actual confusion, “it basically comes
down to the Court’s assessment of the objective likelihood of confusion based
on the products and packaging, along with the evidentiary value of the
competing consumer surveys the parties tendered.”

Given that strength of the plaintiff’s mark and similarity of
the marks are the most important, Scotts lost primarily because of
dissimilarity.

Miracle-Gro’s trade dress had substantial commercial
strength, but its conceptual strength was unclear, especially given the definitional
questions (are proportions key to the trade dress, or not?). The court noted
that, on all the products it saw, the one-third/two-thirds division was the
same, and the green was above the yellow. With that, plus the “circular
horizontally centered” black circle at the dividing line between the colors,
there was likely some conceptual strength.

“But when you start subtracting individual elements from
that combination, the distinctiveness quickly vanishes.” There was nothing
particularly distinct about using green and yellow for packaging in the lawn
care industry: they “are the colors of sunshine and plants.” Although the
burden is on the defendant to show what actually happens in the market, P&G
did so, showing that several other strong market performers use green and
yellow. It’s not that those others are confusing—it’s that reasonable consumers
wouldn’t just rely on seeing green and yellow to attribute source given the
market.

The dissimilar Miracle-Gro variants also sapped some of the
conceptual strength of the trade dress. “[T]he more consumers come into contact
with Miracle-Gro products with a different style of packaging, and in
particular different color combinations, the less likely they are to look for
the green and yellow combination as identifying their favorite lawn and garden
product.” (But the black circle abides.)

Nonetheless, this factor overall tilted towards Scotts.

Relatedness of the goods: One of the products bearing the Scotts
trade dress is a “Weed Preventer.”

That didn’t move the needle much (herbicide is not “weed
preventer” but killer, and you’d use the weed preventer on a flowerbed but not
the weed killer, and vice versa for weeds sprouting between bricks), but the
products were somewhat related insofar as they are all in the lawn and garden
category.

Similarity of the marks: a “defendant’s resounding success
on this factor makes the plaintiff’s burden of prevailing on the seven other Frisch’s
factors effectively insurmountable.” Similarity doesn’t depend on a
side-by-side, element-by-element comparison; it is based on the overall
impression arising from the combination of elements. Even going element by
claimed element, there was substantial dissimilarity.

Color: Very distinct shades of green, and Spruce was matte
(and transparent in part) while Miracle-Gro was glossy and entirely opaque.

Separate horizontal bands of color with top smaller: Scotts
has the one-third/two-third ratio, and Spruce uses a clear, bottom portion (about
one-fifth), then dark green predominates over most of the rest. The yellow
portion, it is relatively small and is used to highlight a message—“Visible
Results in 1 HOUR.”

True, on both packages, the colors “shar[e] a common border
that runs horizontally along the package” in the form of “a straight line
dividing the two colored bands.” “But these visual elements are wholly
unremarkable and add little to the overall visual impression of each product.”

Likewise, both products contain a “horizontally centered
graphic element.” But on one, it’s the Miracle-Gro logo, which is white text on
a black circle with some additional features. Spruce, has a circular yellow
dandelion (with different graphics on each half) overlaid on a dark green
background. Moreover, the circular graphics are “in different places on the
package ([top] v. bottom).” “The dissimilarity on this element could not be
more stark.”

There were other dissimilarities as well, including in the
actual containers—with five Spruce configurations versus the entire Miracle-Gro
product line, “none of them even remotely resemble each other in shape.” Scotts
didn’t have text in the top portion; P&G did. The graphics were “meaningfully”
different: photorealistic images of vegetation versus graphic design-like
elements (e.g., an outlined paw print). And the Spruce trademark creates its
own distinct visual impression, serving as a house mark.

The trade dresses at issue are “clearly distinguishable and
would appear so to all but the most obtuse consumer.”

Scotts tried to change this result with survey evidence. Its
expert, Dr. Wind, conducted a Squirt survey—one that presents survey
respondents with both of the conflicting marks and “do[ ] not assume that the
respondent is familiar with the senior mark.” Potential purchasers of
Miracle-Gro and Spruce were broken into three groups, Home Depot, Lowe’s, or
Meijer, each with a test and control cell. After telling respondents to imagine
they were considering purchasing a lawn and garden product, the survey showed
respondents in each group in-store displays from the stores to which they were
assigned (except the Lowe’s, which was mistakenly shown Home Depot; the court
found this rendered the survey “suspect and deserving of little weight” as to
this subgroup). E.g., Home Depot respondents saw these: 

Then test respondents were shown some of the same photos
containing Spruce, with red lines surrounding the Spruce products, and asked
how they would describe those products to a friend.

Finally, test respondents were shown the in-store display
that included Miracle-Gro products along with various other third-party
products (the right-most photo in the initial photo array above) and were
asked: “Do you believe that any of these products or product lines on this
plant food display were made by the same company that manufacturers the
products you saw that were circled in red?” Respondents were asked some
follow-up questions (e.g., the reason they selected the products).

The survey repeated the process for (1) asking whether
respondents thought any of the products or product lines in the display with
the Miracle-Gro “ha[d] a business affiliation or connection with the company
that manufactures the products you saw that were circled in red” [I note that
there was no training on what a “business affiliation” is, and there probably
should be]; and (2) asking whether respondents thought any of the products or
product lines in the display with the Miracle-Gro “gave permission or approval
to the company that manufactures the products you saw that were circled in
red.”

Control groups saw the same images and stimuli, except the
colors on the Spruce products were black, white, and silver.

If a respondent who answered positively mentioned green and
yellow in connection with Spruce, the coders tagged that respondent as
“confused.” Dr. Wind calculated net confusion rates, “[d]ue to explicit
reference to the green and yellow packaging” of 16.2% for the Lowe’s subgroup,
9.1% for Home Depot, and 17.7% for Meijer.

P&G objected to (1) the Squirt survey format; (2)
the design; and (3) what Wind counted as “confusion.”

Squirt: P&G argued that Miracle-Gro and Spruce do
not appear side-by-side in the marketplace and that an Eveready survey
is the appropriate tool to use where one of the marks at issue (here Miracle-Gro)
is a strong mark. The court agreed with this criticism. “The products at issue
are typically not displayed side-by-side in a retail setting, nor was there a
sufficient showing that the typical consumer sees them sequentially,” and
Miracle-Gro is commercially strong. The court quoted McCarthy to the effect
that “Squirt methodology is inappropriate unless there are ‘a significant
number of real world situations in which both marks are likely to be seen in
the marketplace sequentially or side-by-side.’”

Design: P&G argued that Squirt surveys have an
inherently leading nature (seems true), which was amplified by stimuli unreflective
of true market conditions. This was even more problematic than choosing Squirt
in the first place. First, there was the Lowe’s error. Second, in the Home
Depot image, nearly half of the “plant food” display shown to respondents was
dominated by a pallet of Miracle-Gro potting mix. “[T]he Court finds it
unlikely that large pallets of Miracle-Gro potting mix typically sit directly
in front of Home Depot’s plant food shelves (or at least, that customers
typically would stand behind such a pallet while selecting something on the
plant food shelf). Simply put, the Home Depot photo was highly suggestive.”

Identification of confused respondents: Dr. Wind “classified
any respondent ‘confused’ for simply describing the products as ‘green and
yellow’—even if they mentioned nothing about Scotts or Miracle-Gro.” That is,
if a respondent accurately noted that the packaging for Spruce products
contained the colors green and yellow, that would be coded as reflecting
“confusion.” This the court found most troublesome of all. “P&G identified
a significant number of responses that clearly should not have been coded in
that manner—namely, respondents who referenced “Spruce” in their answers, and
who did not mention “Miracle-Gro” or “Scotts” at all, but who happened to
mention that the Spruce bottle was green and yellow (which it is).”

P&G offered its own survey by Dr. Simonson: an “aided Eveready
survey.” An Eveready format assumes that survey respondents “are aware
of the [senior] mark from their prior experience.” This “format is especially
useful when the senior mark is readily recognized by buyers in the relevant
universe.” Respondents are shown the allegedly infringing products,, then asked:

• Who do you think makes or puts out this product?

• Does the company that makes this product put out any other
products?

• Does the company that makes this product have a business
affiliation or connection with any other company? [Again, no definition/training.]

• Did the company that makes this product receive permission
or approval from another company?

However, Simonson used the typical Eveready questions, but displayed
multiple products from the marketplace (as would occur in a Squirt
survey), instead of the single, allegedly infringing product. Each respondent
viewed a picture array of products, like so:

They were asked to review all the products “as they would if
they were considering purchasing a weed preventer at an online store.” The
respondents then saw one of the four images below, with the Spruce product (or
a control version of the Spruce product, bottom) blown up on the left-hand
side: 

They were then asked variations of the four standard
Eveready questions along with follow-up probing questions as necessary. The
“control” “had a different trade dress, but still incorporated green and yellow
elements as well as the language and small icons used on Spruce.” Simonson found that “only 2.9% of the Test group respondents … mentioned either Miracle-Gro or Scotts.” Although the
court didn’t rely on the Simonson survey, it didn’t like the control.

Here, the characteristic being
assessed was the color combination. But instead of altering solely Spruce’s
color, as Dr. Wind did for his control, Dr. Simonson created an entirely new
shape, maintained the colors green and yellow (but making white the most
prominent color), and added a circular graphic element to the top portion of
the packaging. In many ways, Dr. Simsonson crafted a control that was more
similar to the Miracle-Gro’s Trade Dress than Spruce’s current packaging, which
may explain why the control group displayed greater confusion than the test
group.

(The court  did reject Scotts’ criticism that
the answers “Ortho,” “RoundUp,” “fertilizer,” or the like should have been
coded as confused. “This case is about Miracle-Gro; not every brand Scotts
uses. And Scotts certainly does not have a monopoly on the word ‘fertilizer.’”)

Remaining factors: Marketing channels favored Scotts; degree
of purchaser care was not very significant/it was dependent on mark similarity.
Intent: (1) P&G considered other packaging designs with other color
schemes; (2) some third-party reports prepared for P&G, as part of Spruce’s
packaging development process, featured images of Miracle-Gro products; (3)
Scotts sent P&G a letter expressing concerns about confusing similarity
between the products’ designs in May 2024. This was “attenuated at best” intent
evidence. “It seems natural to the Court that a product development team might
consider different colors and designs, then test those options before going to
market.” Nor was a study’s inclusion of “a few images of Miracle-Gro products
(along with many, many other lawn and garden care products)” evidence of
intentional copying. “Scotts is the category leader; you would expect some of
its products to appear in any report about the market.” Finally, the Scotts
letter had no bearing on intent—the packaging design was nearly finalized by
then. No weight.

Likely product line expansion: Not likely; no weight.

Dilution: In the Sixth Circuit, “[t]he ‘similarity’ test for
dilution claims is more stringent than in the infringement milieu.” Given the
high level of dissimilarity here, that was fatal.

from Blogger http://tushnet.blogspot.com/2025/07/scotts-loses-trade-dress-claim-over.html

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“local” can be literally false when a company is foreign

Posted on July 1, 2025 by rtushnet

El Paso Disposal, LV. v. Ecube Labs Co., 2025 WL 1766310,
No. EP-24-CV-97-KC (W.D. Tex. Jun. 26, 2025)

Plaintiffs operate waste collection companies that collect
trash from customers in Texas, New Mexico, and Oklahoma. Defendant Haulla, a
“waste broker” that acts as an intermediary between waste haulers and their
customers, allegedly fraudulently obtained their confidential customer
information by posing as customers, accessing plaintiffs’ customer portal in
violation of its terms of use. Using that information, Haulla allegedly
contacted customers to entice them to break their contracts and switch to
another, Haulla-affiliated waste pickup company. The false advertising part is
that Haulla’s agents allegedly falsely claim to be calling from a “local
pickup” or “local [waste] collection company” when they contact plaintiffs’
customers. (Common law fraud and tortious interference claims were preempted by
Texas’s trade secret law to the extent that the relevant information was a
trade secret, but not if they weren’t; plaintiffs could  plead in the alternative.)

This motion addressed state and federal false advertising
claims as well as negligent misrepresentation.

Was “local” plausibly false here, where Haulla operates in Texas
but is a South Korean company that operates out of the Philippines? Bimbo
Bakeries USA, Inc. v. Sycamore, 29 F.4th 630 (10th Cir. 2022), found that “local”
was puffery in the tagline, “Fresh. Local. Quality,” for bread baked in
multiple out-of-state locations. “Local” could take on multiple different
meanings, including that the company merely hired local workers.  But there have to be limits, for example “if
somebody says they support the ‘local’ NFL team” but instead support a team
“more than two thousand miles from here,” “then they have undoubtedly deceived
you.” Thus, the phrases “local pickup company” or “local collection company” provided
more specificity than the slogan in Bimbo and could be falsified—they could
imply “that the company maintains an office in close enough physical proximity
to collect the customer’s trash.” And Haulla’s offices were allegedly located “halfway
around the world, much too far away to drive to businesses in Texas and pick up
their trash,” so that was plausibly false.

Commercial advertising or promotion: Like almost all courts
(and correctly), the court decides that Lexmark means that “by a competitor”
is not part of the current test, only the other three elements of Gordon
& Breach. So, what constitutes sufficient public dissemination to be commercial
advertising or promotion in the context of this industry? Plaintiffs offered
only one specific allegation where a customer was contacted by Haulla and it
referred to itself as a local trash pickup company. It was unclear exactly how
large the customer group was, though Haulla allegedly created more than “2,500
fake customer profiles.” But, given that plaintiffs alleged a “sophisticated
and wide-ranging fraudulent scheme that turns on Haulla’s attemptsto secure
confidential information, which it then uses to systematically target
Plaintiffs’ customers and entice them to switch waste collection providers,”
there was “a reasonable inference that these statements were made a substantial
number of times to Plaintiffs’ customers, and as part of broader efforts to
encourage customers to switch to a Haulla-represented company.” [This is a
classic example of the manipulability of Twiqbal. A hostile court could
easily have said exactly the opposite.] The court noted that evidence on this point
would be required to avoid summary judgment. The rest of the elements of the commercial
advertising test weren’t disputed.

Materiality: Taking what is the increasingly minority view,
the court found that literal falsity (which it characterized as being allegedly
present here) allowed a presumption of deception without need for materiality.
Even though plaintiffs conceded that Haulla was “registered to do business in
Texas” and that it acts as a middleman for Texas-based waste collection
companies, “this does not take away from the literal falsity of Haulla’s
alleged statements that it is a local trash collection company even though it
does not actually collect trash and is not local under any reasonable reading
of that term in this context.”

Plaintiffs also plausibly pled injury, so the Lanham Act
claim survived.

Texas common-law false advertising: claim dismissed because
it doesn’t exist in Texas, per two Texas appellate decisions.

Negligent misrepresentation (based on the alleged statements
to plaintiffs): not barred by the economic loss doctrine. Plaintiffs allegedly relied
on Haulla’s representation of “being a customer or acting with a customer’s
authorization” to supply “Haulla with information that enabled Haulla to access
[Plaintiffs’] confidential and proprietary information and steal [Plaintiffs’]
customers through use of the information.”

Under Texas law, courts analyze the economic loss doctrine by
first determining the extent to which a legal duty exists between the parties
independent of the contract, then examining the extent to which a party
suffered an independent injury, or is merely seeking to recover
benefit-of-the-bargain damages under the terms of the contract.

But the allegations supported the theory that there was no
valid contract, thus no economic loss doctrine involved, because plaintiffs’
website terms of use prohibited uses by third parties, only allowing “customers
and their respective employees” who are limited to using the site “solely for
purposes relating to their own respective account(s).” Under Texas law, “if a
contract is fraudulently induced, ‘there is in reality no contract’ because
there was no assent to the agreement.”

Even if there were a valid contract, Haulla allegedly breached
an independent duty, causing Plaintiffs an independent injury. First, “a party
has a legal duty to use reasonable care when supplying information in the
course of its business for the guidance of others in their business,” which
“exists independent of any contractual obligation.” Haulla’s agents had a “duty
imposed by law” to use reasonable care in communicating information to plaintiffs,
which they allegedly breached when misrepresenting themselves as customers or
customers’ agents.

Second, an independent injury is one that goes beyond the
“economic loss” that is the “subject matter of a contract.” Plaintiffs alleged
reputational damage due to Haulla’s actions: a non-economic loss.

Fraud claims also survived.

from Blogger http://tushnet.blogspot.com/2025/07/local-can-be-literally-false-when.html

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Visa logo doesn’t represent that cards will be protected against fraud

Posted on June 25, 2025 by rtushnet

Schuman v. Visa U.S.A., Inc., — F.Supp.3d —-, 2025 WL
1731795, No. 1:24-cv-666-GHW (S.D.N.Y. Jun. 23, 2025)

This one is interesting both as a fraud warning and as a
pronouncement on what reasonable consumers think about the possibility of
fraud.

Schuman bought eight Visa-branded gift cards at a CVS,
loaded each of them with $500, and gave them to his employees as holiday
presents.

Three of the cards, however, had
been emptied of funds by scammers before Plaintiff’s employees could use them.
The scammers allegedly stole the cards’ funds using a well-known technique
called “card draining”: they removed the cards from their packaging on the
shelf, recorded the cards’ account numbers, returned the cards to their
packaging, and when Plaintiff later loaded money onto the cards, they used the
account numbers to quickly make purchases before his employees could.
Defendants’ cards, Plaintiff says, are especially susceptible to “card
draining” because their flimsy cardboard packaging allows scammers to access
the cards inside without enough evidence of tampering to alert a reasonable
consumer.

Schuman alleged “that the cards’ prominent display of Visa’s
logo gave him the false impression that their funds would be secure from fraud,
and that without this peace of mind, he would not have purchased the cards.” The
cards’ express warnings regarding tampering and other potential security
threats allegedly did not do enough to put him on notice of the potential for
“card draining.” There were also allegations of other barcode vulnerabilities
(a scammer can attach a barcode to an unsold gift card, leading the consumer to
load money onto the scammer’s card), though he didn’t allege that happened to
him. He sued under NY’s GBL.

The back of the packaging includes two warnings related to
potential tampering by third parties. First, in the top right corner, the
packaging states, in capital letters: “IF TAMPER EVIDENT, DO NOT PURCHASE. NO
VALUE UNTIL ACTIVATED AT REGISTER.” Second, above the account number associated
with the card, the packaging states, in red lettering: “For security purposes,
please check that the underlined portion of this number matches the number
below.” Visa allegedly knew that its Visa Vanilla cards were susceptible to
fraud because scams affecting those cards were “known and widespread.”

But “no reasonable consumer would fail to recognize the
possibility that a gift card they bought may be subject to a third-party scam.
Nor would one reasonably expect that the Visa logo, standing alone, was a
promise that no scam could ever occur.”

“The Visa logo consists simply of the word ‘VISA’—it makes
no assertions about the security from the possibility of fraud of the cards or
of their packaging.” It didn’t claim that fraud would be prevented, or that if
it did occur that Visa would help out in good faith (something plaintiff also said
he trusted Visa to do). “No reasonable consumer would expect the allegedly ‘widespread’
practice of third-party scams affecting prepaid cards to somehow not affect one
of the industry’s major suppliers.” Other statements from Visa about the
importance to Visa of keeping its consumers’ cards secure were, among other
things, nonactionable puffery. (These statements included that Visa is “one of
the most trusted brands in the world,” that it “protects consumers,” that
“security is embedded in everything we do,” and that it “aim[s] to increase
transaction approvals so that business can thrive while customers are protected
and satisfied.”)  Finally, Visa’s use of
specific statements about its commitment to anti-fraud measures “only confirms
that the word ‘Visa’ alone does not, in and of itself, include a promise about
the cards’ fraud security or the measures Visa takes to combat the possibility
of fraud.”

Plaintiff also objected to the failure to warn about
specific scams/card draining in particular. The anti-tampering warning didn’t
warn consumers of the possibility that a card-drainer may access a card’s
account information by tampering with the packaging in a way “that can go
unnoticed by the reasonable consumer.” And the red-letter instruction consumers
to compare the portion of the card’s barcode number that is visible through a
window in the packaging with a number inside the packaging and confirm that
they are the same was equally nonmisleading. For omissions, Second Circuit
cases read NY law to require that a plaintiff must plausibly plead either that
“ ‘the business alone possesses material information that is relevant to the
consumer and fail[ed] to provide this information’ or that plaintiffs could not
‘reasonably have obtained the relevant information they now claim the defendant
failed to provide.’ ” The latter is the more important standard. Given the
allegations of widespread complaints and reporting on card fraud, as well as
the warnings on the card itself, plaintiff could reasonably have obtained the
relevant omitted information.

from Blogger http://tushnet.blogspot.com/2025/06/visa-logo-doesnt-represent-that-cards.html

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