False advertising and the privatized state

Posted on May 8, 2017 by rtushnet
Hansen v. Scram of California, Inc., No. 17-cv-01474, 2017
WL 1628401 (C.D. Cal. Apr. 28, 2017)
When the carceral state becomes a business, can it commit
business torts?  Plaintiffs sued Scram
and Alcohol Monitoring Systems (AMS) for the usual statutory California claims
and fraud, arguing that they misrepresented the capabilities of the transdermal
alcohol monitoring devices that AMS manufactures and Scram distributes.  The devices, worn on an ankle, were designed
to detect and record any instances when a wearer consumes alcohol by detecting
alcohol vapors caused by ingested alcohol diffusing through the skin.
Plaintiffs alleged that the devices were inherently susceptible to detecting false-positive
alcohol readings as a result of “environmental alcohol,” including vapors from
cologne, aftershave, hand sanitizer, household cleaners, and gasoline.  Defendants allegedly did not inform buyers of
the risk and affirmatively misrepresented it.
Defendants’ business model relies on court mandated
rehabilitation programs, as a condition of probation or bond, and other criminal
justice system functions.  People enter
into private contracts with defendants and pay monthly fees. Users sync the
device daily with a monitoring station; if the device concludes that any alcohol
vapor readings were caused by an “alcohol consumption event,” defendants inform
the relevant law enforcement agency or court exercising jurisdiction over the
wearer that the individual consumed alcohol, but they don’t alert the wearer,
nor does the device alert in real time. Thus, users can’t get time-sensitive
evidence—an immediate blood or breath alcohol test—to challenge any resulting
revocation of their bond or probation.
Defendants allegedly advertised their device as “a
cost-effective and accurate alternative for law enforcement agencies and courts
to track the alcohol usage of at-risk individuals,” and told the public and the
governmental agencies with which they seek to work that the device could tell
the difference between alcohol vapors from ingested alcohol and alcohol vapors from
enviromnental alcohol because the rate of alcohol dissipation purportedly
differs.  Plaintiffs alleged two
instances involving third parties in which courts rejected the device’s results
as “biologically impossible and scientifically unreliable.” Plaintiffs also
cited a study that concluded that the “methodology used by AMS cannot separate
ethanol [drinking alcohol] from other contaminating alcohols and therefore is
not a reliable method.”
Plaintiffs alleged that they experienced false
positives.  For example, plaintiff Hansen
wore the device while living in a residential alcohol treatment center; the day
after she tested negative on a breathalyzer at the center, AMS sent a report
indicating that she’d consumed alcohol for a day-long period.  When Hansen received the report, she again
tested negative for alcohol and a follow-up blood test reported the same. As a
result of the report, she was subject to an additional year of alcohol
monitoring; she paid $6,400 to Scram, $300.00 for a urine test from a certified
laboratory, and $2,000 in attorneys’ fees to defend against the alleged alcohol
consumption.  (It seems like a dangerous
business model to profit from false positives when the person who is ordered to
pay faces jail if she says no.)  Hansen
alleged that, had she known about the false positives and the lack of timely
notification to users, she wouldn’t have agreed to buy the alcohol monitoring
service as a condition of her bond.
Similarly, plaintiff Oh paid Scram $225 per week for its
monitoring services and a $325 enrollment fee. A Scram employee allegedly denied
Oh’s request for a fee reduction and warned that if Oh did not pay, Scram would
report to the trial court that Oh had violated her “Scram conditions.” Scram
reported that Oh was in violation of her monitoring conditions for consuming
alcohol from June 5 to June 7, 2015; the resulting report “indicated that Oh’s
transdermal alcohol concentration stayed constant for two days, which
plaintiffs assert is a biological impossibility.” When she became aware of the
report, Oh allegedly had her urine tested for alcohol at a state certified
laboratory and that test was negative. Oh challenged defendants’ report in
court and the “trial Court was unable to come to a resolution[.]”  Oh also alleged that she lost money in
reliance on the false representations/omissions.
Defendants argued that they were entitled to quasi-judicial
immunity and the litigation privilege, because this wasn’t really a false
advertising case but a case about monitoring alcohol consumption and reporting
the resulting information to a court. Quasi-judicial immunity is “extended in
appropriate circumstances to non jurists who perform functions closely
associated with the judicial process.” “However, it is only when the judgment
of an official other than a judge involves the exercise of discretionary
judgment that judicial immunity may be extended to that nonjudicial officer.” Defendants
didn’t claim to exercise any discretion when they offer their services on
behalf of courts. Plus, plaintiffs alleged misconduct beyond defendants’ work
on behalf of courts, extending to misrepresentations about their device to
individual customers, law enforcement agencies, courts, and the general public.
Similarly, defendants argued that they were protected by
California’s litigation privilege because plaintiffs’ essential claim was that
defendants communicated information about plaintiffs’ consumption of alcohol to
courts in connection with ongoing criminal matters. The California litigation
privilege “applies to any communication (1) made in judicial or quasi-judicial
proceedings; (2) by litigants or other participants authorized by law; (3) to
achieve the objects of the litigation; and (4) that have some connection or
logical relation to the action.” Again, the court disagreed: plaintiffs’ claims
relied on defendants’ alleged misrepresentations made to people in plaintiffs’
position.

However, plaintiffs failed to allege their common law fraud
claim with sufficient particularity, which also doomed the statutory claims
because each claim relied on defendants’ allegedly fraudulent misrepresentations.
Plaintiffs needed to allege who made the representations, when the
misrepresentations were made, and how they were communicated. They didn’t
describe the content of defendants’ ads or when plaintiffs viewed them. Also,
plaintiffs failed to provide defendants of thirty days’ notice of the alleged
CLRA violations, as required for damages under the CLRA.  Plaintiffs were allowed leave to amend. 

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City of Chicago can sue pharmacos for falsely advertising opiods

Posted on May 5, 2017 by rtushnet
City of Chicago v. Purdue Pharma L.P., 211 F.Supp.3d 1058
(N.D. Ill. 2016)

The court sustained in part a claim by Chicago against defendant pharmacos,
based on their allegedly deceptive and unfair marketing campaigns that served
to “reverse[] the medical understanding of opioids so that prescribing opioids
to treat chronic pain long-term would be commonplace.” Defendants, among other
tactics, allegedly deployed sales reps to doctors and other prescribers to mislead
them into believing that the benefits of using opioids to treat chronic pain
outweighed the risks and that opioids could be used safely by most patients. The
pharmacos allegedly “knowingly disseminated unbranded marketing messages that
were inconsistent with information on defendants’ branded marketing materials,”
including misrepresentations that that opioids improved function, that
addiction risk could be managed, and that withdrawal was easily managed, and
misleading minimization of the adverse effects of opioids and overstatements of
the risks of NSAIDs.

The court refused to stay or dismiss under the primary jurisdiction doctrine.
The court wouldn’t have to determine whether opioids were appropriate for the
treatment of chronic, non-cancer pain or whether defendants’ drugs’ labels were
accurate, but whether defendants deliberately misrepresented the risks,
benefits, and superiority of opioids when marketing them to treat chronic pain,
“contrary to … scientific evidence and their own labels[.]” “Courts are
equipped to adjudicate such claims.”
The complaint sufficiently alleged deceptive practices in
violation of MCC § 2-25-090, which makes it unlawful for a business to “engage
in any act of consumer fraud, unfair method of competition, or deceptive
practice while conducting any trade or business in the city,” including “[a]ny
conduct constituting an unlawful practice under the Illinois Consumer Fraud and
Deceptive Business Practices Act.”  The
ICFA requires: “(1) a deceptive act or practice by the defendant; (2) the
defendant’s intent that the plaintiff rely on the deception; and (3) the
occurrence of the deception during a course of conduct involving trade or
commerce.” In an enforcement action, as here, the city didn’t have to allege
injury and causation, or proximate harm to any consumer. “A deceptive practice
violates the ICFA even if it doesn’t actually deceive or injure anyone … and
the Illinois Attorney General has the power to investigate and enjoin such a
practice without a showing of actual loss.”  The same analysis applied to the city’s claims
under MCC § 4-276-470(1), which makes it illegal to use deception, fraud, false
pretense, or misrepresentation with the intent that others rely on such
concealment, in connection with the sale or advertisement of any merchandise.
The city alleged sufficient facts to meet Rule 9(b)’s
particularity requirement. It identified which Chicago-area prescribers
defendants’ representatives made alleged misstatements to, what those alleged
misstatements were, and generally when and where those alleged
misrepresentations were made. In addition, the city alleged that defendants
closely tracked specific dates and the identities of defendants’ sales
representatives who made the detailing visits and such information would be
found in discovery.
The city also alleged that defendants engaged in unfair acts
and practices to promote the sale and use of opioids to treat chronic pain. An
unfair practice (1) offends public policy; (2) is immoral, unethical,
oppressive, or unscrupulous; or (3) causes substantial injury to consumers;
unfairness “depends on a case-by-case analysis.” For public policy, a practice
must violate a standard of conduct contained in an existing statute or
common-law doctrine that typically applies to such a situation. The court found
that the policy of discouraging drug addiction in Illinois, the “public policy,
enshrined in state and federal law, seeking to ensure that pharmaceuticals are
marketed and utilized appropriately,” and the public policy against
victimization of vulnerable populations for profit, were not specific enough to
constitute a relevant public policy.
A practice is immoral, unethical, oppressive, or
unscrupulous when said conduct “leaves the consumer ‘little choice but to
submit.’ ” The allegations didn’t rise to the level of leaving the prescriber
or the consumer with limited alternatives to treat long-term pain.  
“A practice causes substantial injury to consumers if it
causes significant harm to the plaintiff and has the potential to cause injury
to a large number of consumers.” The alleged $13 million in false claims billed
to the city was a significant sum, but the city didn’t allege enough under Rule
9(b) to connect defendants’ alleged deceptive marketing with prescriptions that
were covered by the city.  The city was
given leave to amend.  Similar analysis
applied to the false claims allegations involving getting the city to pay for
fraudulent claims for prescriptions for opioids that were not medically
necessary or reasonably required to treat chronic pain.
The city alleged that defendants’ misrepresentations were
material because if it had known of the false statements, it would have refused
to authorize payment for opioid prescriptions to treat chronic pain. But it
also alleged that it “paid and continues to pay the claims that would not be
paid but for defendants’ illegal business practices,” which contradicts
materiality.  Thus, the city didn’t
sufficiently allege materiality, as required for a false claims cause of
action.
The city would also have to connect its allegations about
specific prescribers who heard defendants’ misrepresentations and prescriptions
for defendants’ drugs that were paid by the city.  If those were sufficiently connected, the
city would still need to allege that those prescribers relied on defendants’
misrepresentations when they prescribed defendants’ drugs. The city argued that
reliance was plausibly pled by alleging: (1) the city’s increased spending on
opioids; (2) interviews with Chicago prescribers who prescribed opioids paid
for by the city and confirmed that they prescribed opioids based on deceptive
marketing and patients’ demand; and (3) a sample of claims for opioids that
were prescribed by physicians who were subject to defendants’ deceptive
marketing and paid for by the city. 
Defendants argued that intervening events broke the causal chain,
including (1) the prescriber’s independent medical judgment; (2) the patient’s
preferences; (3) the patient’s decision to fill a prescription; (4) the
patient’s decision whether and how to use the medication; and (5) the city’s
decision to cover and reimburse the prescriptions.  Defendants were improperly relying on RICO
case law, which doesn’t ever find causation. 
For false claims, general tort law principles applied, and a defendant
is responsible for “the natural, ordinary and reasonable consequences of his
conduct,” which includes the effect of many foreseeable intervening effects
such as filling a prescription.  If the
city did connect prescribers with prescriptions, the court would likely find
adequate allegations of causation.  So
too with unjust enrichment claims.

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court allows company to bring right of publicity claim

Posted on May 5, 2017 by rtushnet
Youngevity Int’l, Corp. v. Smith, No. 16-cv-00704, 2016 WL
7626584 (S.D. Cal. Dec. 1, 2016)
Youngevity and Dr. Joel D. Wallach sell various health
supplements using independent direct sellers known as “distributors” to move product.
The individual defendants were former Youngevity distributors and / or
employees. Defendants Wakaya and TNT were companies formed by some of the
individual defendants competing with Youngevity. For about seventeen years, TNT
ran various websites that explicitly used plaintiffs’ likenesses [sadly, the
court believes that both Wallach and Youngevity have separate claims,
even though Youngevity doesn’t have a “likeness”; the court does not address the scope of a ROP claim, however, so there is no specific legal ruling]. Plaintiffs terminated the
parties’ business relationship and demanded cessation of this use, but
defendants didn’t stop.
Under California law, misappropriation of likeness requires
“(1) the defendant’s use of the plaintiff’s identity; (2) the appropriation of
plaintiff’s name or likeness to defendant’s advantage, commercially or
otherwise; (3) lack of consent; and (4) resulting injury.” Until March 2016, defendants
had implied consent to use plaintiffs’ likenesses; defendants argued that the
single publication rule barred plaintiffs from terminating consent so long as
the use was consistent.  “In the context
of websites, republication does not occur so long as the statement is not
substantively altered or directed to a new audience,” and defendants argued
that they hadn’t changed the use in the two years before the complaint, thus
precluding a claim.  The court disagreed,
because not all the elements of the claim had accrued more than two years ago:
there were no grounds for suit when consent existed.  The court was not going to “categorically
deny a plaintiff the right to terminate consent to the continued but unchanged
use of a plaintiff’s likeness after two years.”  Thus, plaintiffs were entitled to preliminary
injunctive relief. It was undisputed that the defendants used the websites to
get contact information for customers who wanted to buy Youngevity products and
advertised a website marketing their own products, falsely suggesting that some
of those products were produced and/or endorsed by plaintiffs. “A competitor’s
access to a company’s confidential customer information can clearly cause very
serious damage to a company’s market share and business goodwill that is
impossible to measure and compensate via money damages.”
The court also rejected some other challenges to plaintiffs’
claims on a motion to dismiss.  For
example, plaintiffs successfully alleged Lanham Act false advertising in
alleging that Wakaya made false statements regarding how much money a Wakaya
distributor could potentially earn: “a year from now, many of us will be
million dollar earners,” even though no Wakaya distributor has ever earned this
amount of money. This statement was allegedly made in a YouTube video;
defendants argued that there was no showing that the video came from a Wakaya
agent, but at the pleading stage, an allegation to this effect was enough to
give sufficient notice.  So too with an
allegedly false claim in a YouTube video that Wakaya was a joint venture with
billionaire David Gilmour, founder of the Fiji Water Company. However, more
conclusory statements that Wakaya falsely advertised that (1) Youngevity was
having financial problems and (2) Wakaya products originate from Fiji, without
any details regarding “where” and “when” Wakaya allegedly made the statements,
were insufficient. So too with allegations that Wakaya was a pyramid scheme and
thus claims that its distributors could earn a lot of money were false.
Plaintiffs also alleged that Wakaya’s advertisements of the
health benefits of its “pure Calcium Bentonite Clay” products was false or
misleading because these products contains high dosages of lead, which is very
dangerous. Defendants argued that there was no falsity because the challenged
Facebook post didn’t specifically disclaim lead related health hazards. However,
read as a whole, the post “tends to suggest that the clay products are overall
good for a person’s health,” which would be false if the products did in fact
contain high lead levels.

The court adopted the majority federal approach to claims brought by
competitors under California’s FAL, which holds that third party/consumer
reliance on false claims doesn’t allow a damaged competitor to sue in the
absence of the competitor’s own reliance and resulting damage.

Defendants were enjoined to cease operation of
1-800-WALLACH, myyoungevity.com, and wallachonline.com.Youngevity Int’l, Corp. v. Smith, No. 16-cv-00704, 2016 WL
7626584 (S.D. Cal. Dec. 1, 2016)
Youngevity and Dr. Joel D. Wallach sell various health
supplements using independent direct sellers known as “distributors” to move product.
The individual defendants were former Youngevity distributors and / or
employees. Defendants Wakaya and TNT were companies formed by some of the
individual defendants competing with Youngevity. For about seventeen years, TNT
ran various websites that explicitly used plaintiffs’ likenesses [sadly, the
court seems to think that both Wallach and Youngevity have separate claims,
even though Youngevity doesn’t have a “likeness”]. Plaintiffs terminated the
parties’ business relationship and demanded cessation of this use, but
defendants didn’t stop.
Under California law, misappropriation of likeness requires
“(1) the defendant’s use of the plaintiff’s identity; (2) the appropriation of
plaintiff’s name or likeness to defendant’s advantage, commercially or
otherwise; (3) lack of consent; and (4) resulting injury.” Until March 2016, defendants
had implied consent to use plaintiffs’ likenesses; defendants argued that the
single publication rule barred plaintiffs from terminating consent so long as
the use was consistent.  “In the context
of websites, republication does not occur so long as the statement is not
substantively altered or directed to a new audience,” and defendants argued
that they hadn’t changed the use in the two years before the complaint, thus
precluding a claim.  The court disagreed,
because not all the elements of the claim had accrued more than two years ago:
there were no grounds for suit when consent existed.  The court was not going to “categorically
deny a plaintiff the right to terminate consent to the continued but unchanged
use of a plaintiff’s likeness after two years.”  Thus, plaintiffs were entitled to preliminary
injunctive relief. It was undisputed that the defendants used the websites to
get contact information for customers who wanted to buy Youngevity products and
advertised a website marketing their own products, falsely suggesting that some
of those products were produced and/or endorsed by plaintiffs. “A competitor’s
access to a company’s confidential customer information can clearly cause very
serious damage to a company’s market share and business goodwill that is
impossible to measure and compensate via money damages.”
The court also rejected some other challenges to plaintiffs’
claims on a motion to dismiss.  For
example, plaintiffs successfully alleged Lanham Act false advertising in
alleging that Wakaya made false statements regarding how much money a Wakaya
distributor could potentially earn: “a year from now, many of us will be
million dollar earners,” even though no Wakaya distributor has ever earned this
amount of money. This statement was allegedly made in a YouTube video;
defendants argued that there was no showing that the video came from a Wakaya
agent, but at the pleading stage, an allegation to this effect was enough to
give sufficient notice.  So too with an
allegedly false claim in a YouTube video that Wakaya was a joint venture with
billionaire David Gilmour, founder of the Fiji Water Company. However, more
conclusory statements that Wakaya falsely advertised that (1) Youngevity was
having financial problems and (2) Wakaya products originate from Fiji, without
any details regarding “where” and “when” Wakaya allegedly made the statements,
were insufficient. So too with allegations that Wakaya was a pyramid scheme and
thus claims that its distributors could earn a lot of money were false.
Plaintiffs also alleged that Wakaya’s advertisements of the
health benefits of its “pure Calcium Bentonite Clay” products was false or
misleading because these products contains high dosages of lead, which is very
dangerous. Defendants argued that there was no falsity because the challenged
Facebook post didn’t specifically disclaim lead related health hazards. However,
read as a whole, the post “tends to suggest that the clay products are overall
good for a person’s health,” which would be false if the products did in fact
contain high lead levels.

The court adopted the majority federal approach to claims brought by
competitors under California’s FAL, which holds that third party/consumer
reliance on false claims doesn’t allow a damaged competitor to sue in the
absence of the competitor’s own reliance and resulting damage.
Defendants were enjoined to cease operation of
1-800-WALLACH, myyoungevity.com, and wallachonline.com.

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Illinois right of publicity allows truthful statements about performers in ads

Posted on May 4, 2017 by rtushnet
Martin v. Wendy’s International, Inc., No. 15 C 6998 (N.D.
Ill. Apr. 28, 2017)
Discussion
of the initial dismissal here.  The
revised complaint fares no better.
Martin holds the world record for consecutive kicks of a
footbag, which was mentioned in a Wendy’s and Guinness promotion in which every
Kid’s Meal sold at Wendy’s restaurants included a Guinness-themed toy; one of
the toys was a footbag.  A card included
with the footbag showed a picture of two people playing footbag (not
Martin).  The card read in part: “How
many times in a row can you kick this footbag without it hitting the ground?
Back in 1997, Ted Martin made his world record of 63,326 kicks in a little less
than nine hours!”  Martin sued for
violation of the the Illinois Right of Publicity Act and Section 43(a) of the
Lanham Act.

The court first held that the statute of limitations for IRPA was one year, and
thus the claim was time-barred; IRPA was designed to supplant rather than alter
the common law of publicity, which had a one-year statute of limitations, and
thus it was inappropriate to use the five-year statute of limitations
applicable to claims for “an injury done to property” and “all civil actions
not otherwise provided for.”
But anyway, the IRPA claim failed.  An IRPA violation required a “commercial
purpose,” which was present, because defendants used Martin’s name in their
“promotion,” falling within the statute’s definition of “[c]ommercial purpose” as
“the public use or holding out of an individual’s identity (i) on or in
connection with the offering for sale or sale of a product, merchandise, goods,
or services; (ii) for purposes of advertising or promoting products,
merchandise, goods, or services; or (iii) for the purpose of fundraising.” However,
IRPA excepts, among other things, “use of an individual’s name in truthfully
identifying the person as the author of a particular work or program or the
performer in a particular performance.” 
“[I]t would be nonsensical to hold that the law prohibits Guinness from
reciting that bare fact in a promotional item but permits it to include the
fact in the books it sells.”
Nor did Martin state a plausible Lanham Act claim. He added
the allegation that business associates in Montreal, Canada, told him, “We
thought you had something to do with it,” i.e., they believed that plaintiff
was directly involved in defendants’ footbag promotion.  But the Lanham Act inquiry “must focus on
confusion by the customer.” Even with this anecdote, Martin didn’t plausibly
allege that ordinary consumers were likely to believe that Martin endorsed the
footbags based only on defendants’ mention of his record on the instructional
card.  In the context of the promotion,
it was clear that “mentioning plaintiff’s record on the instructional card
served only to offer a sample of the sort of world records Guinness
publishes—and plaintiff does not claim that Guinness does not have the right to
publish the record in its books.”
Martin argued that the case should be governed by Abdul-Jabbar
v. General Motors Corp., 85 F.3d 407 (9th Cir. 1996), but that case involved a
TV ad, not an instruction card included with a free promotional toy; the latter
“is not a context in which consumers are accustomed to seeing celebrity
endorsements.” More importantly, defendants did not use Martin’s record to
“make a claim for” its footbags, as the analogy between Lew Alcindor and GM’s
car did in the Abdul-Jabbar ad. Mentioning
the record served at most as “an illustrative example” of what to do with a
footbag; “it had nothing to do with the qualities of the footbag.”

The court declined to reach defendants’ First Amendment
defense, which was a good thing for them because the court didn’t see a
meaningful difference between this case and Jewel
v. Jordan, finding “image advertising” to be commercial speech.  Defendants invoked the Rogers test, but it wasn’t clear that the promotion Martin
challenged should be characterized as an “expressive work.” [Aaaaargh.  Ads are expressive works.  Whatever the right name is for the things Rogers covers, it’s not that.]

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What does a counterfeit look like?

Posted on May 1, 2017 by rtushnet
Coach, Inc. v. Chung Mei Wholesale, Inc., 2016 WL 7470001,
No. 15-22829 (S.D. Fla. Jul. 17, 2016)
Interesting case involving alleged counterfeiting of Coach
products.  The defendants ran a business
importing goods from China and selling them to retailers and wholesalers,
including merchants who sell items at flea markets or operate 99-cent retail
stores.  Customs and Border
Protectionseized a shipment imported by Chung Mei from China, which CBP
determined contained 1,800 “Coach Design Handbags,” identified as constituting
“counterfeit copies” of the Coach trademarks. A private investigator observed
approximately “2,000 units of handbags bearing Coach trademarks” from that
shipment.  CBP intercepted a similar
second shipment, this time with “approximately 3,000 units of clutch purses
bearing Coach trademarks.” The private investigator took photographs of the
imported handbags. A Coach employee trained to identify counterfeits examined the
photos and concluded the pictured items were counterfeit and bore counterfeit
representations of four registered Coach trademarks as well as trade dresses.
Coach sought summary judgment on its counterfeiting and
related claims, which the court denied because a reasonable jury could conclude
that the bags didn’t use counterfeit marks. A counterfeit mark is defined as a
“spurious mark which is identical with, or substantially indistinguishable from,
a registered mark”; the standard is “more rigorous than the test for likelihood
of confusion.”  The private investigator
and Coach employee’s opinions were not sufficient, nor was one of the
defendant’s acknowledgement at his deposition that the exterior—but not the
interior—of the confiscated bags bore resemblances to Coach products.  
The court’s own review of the photos showed
undoubted similarities, but also that there was a genuine issue whether they
could be considered “identical” or “substantially indistinguishable” from
Coach’s marks. “For example, the design on the clutch bags confiscated in the
second seizure consists of a series of thick black ovals, some containing four
smaller ovals inside forming a flower-like pattern, while the marks Coach
claims are infringed consist of a series of the letter ‘C’ in bold black font.”  The court also mentioned factors that seemed
to go more to likely confusion (which is understandable, as Coach also alleged
regular infringement), such as the differing zippers and interiors on the bags
and the extremely low prices ($2.50 each) and resultant likely quality of the
bags.  The CBP’s notice of seizure letter
was also insufficient to prove the goods counterfeit—which, as my suit against
ICE indicates, is a good call given that, despite what ICE initially told me,
they don’t have any independent standards or training on what constitutes a
counterfeit; ICE instead relies entirely on what trademark owners say.
 

comparison

close-up comparison

Coach argued that it didn’t have to show likely confusion,
but that’s only true when there’s no disputed factual issue over whether the
defendant’s products are identical to or substantially indistinguishable from
the plaintiff’s products.  For similar
reasons, the court declined to grant summary judgment on the trade dress
infringement and trademark dilution claims.
Denouement: Defendants lost a jury trial on
infringement/counterfeiting and also had to pay attorneys’ fees, though not all
individual defendants were found liable.

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Lost sales as irreparable harm

Posted on May 1, 2017 by rtushnet
Epson America, Inc. v. USA111, Inc., No. 17-cv-00129, 2017
WL 1484400 (D.S.C. Apr. 26, 2017)
Let’s admit it: the case law is a mess on this.  Epson sued its competitor, d/b/a iRULU, for falsely advertising
its portable consumer projectors, specifically its BL20 model. The court
granted a preliminary injunction.  Quality and price for these projectors are “largely
determined based on the resolution and brightness of the projector,” the latter
of which is measured in lumens and which is important to consumers. iRULU sells
about 30 different models, with advertised lumen ratings between 800 to 2800
lumens.  The BL20 was advertised on
Amazon and other online retailers as having 2600 lumens and was designated as
an Amazon “Best Seller” in the Fall of 2016.
Epson commissioned an independent technology consulting
company to test the BL20 projector, and the results showed lumen output of
approximately 80 lumens instead of the 2600 advertised.  iRULU argued that it reasonably relied on test
reports from Chinese labs showing a “luminous flux” of “3714.568 lm” on one
test and “3869.0 lm” on the other, but it didn’t provide other evidence or show
that those tests were accurate.  It
ceased advertising its BL20 projector as having 2600 lumens, at least on some
websites, but didn’t  provide a lumen
rating.  The court found that Epson
showed falsity.
Epson also showed injury due to loss of sales and market
share: iRULU’s market share was 24% since it entered the market, and Epson’s
loss in sales was estimated at approximately $16 million.  iRULU argued that no injunction was necessary
because it removed the offending ads, but Epson still showed irreparable harm. iRULU’s
claims of 2600 lumens were still present on some websites, including iRULU’s
own website, even after iRULU represented to the court that the claims had been
removed. Also, the BL20 still comes up when searching for “2600 lumen
projector,” “apparently as a result of prior advertisements or customer
comments.” Thus, cessation of the challenged conduct didn’t stop irreparable
injury.
iRULU also argued that Epson’s loss of projector sales could
be compensated by money damages if proven at trial, and therefore an injunction
is not appropriate. But injunctive relief is allowed even if money damages are
available, if a remedy at law is inadequate. Epson showed a decline in sales;
the court was not persuaded that iRULU wasn’t responsible for at least part of
that decline.  Also, money damages would
not prevent iRULU from “infecting the marketplace with the same or similar
claims in different advertisements in the future,” so there was irreparable
harm.


The court granted a preliminary injunction requiring iRULU to cease false
advertisements of inflated lumen ratings, and ordering it to provide a lumen
rating of either “undetermined” or Epson’s independent test result of 80 lumens
on all advertising. However, the court didn’t require corrective notices to be
sent to consumers at this point in the case. 
iRULU could also arrange for court-approved testing, whose results could
be used in ads once a validated lumen rating was produced.

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split panel upholds Berkeley cell disclosure law

Posted on May 1, 2017 by rtushnet
CTIA-The Wireless Ass’n v. City of Berkeley, No. 16-15141
(9th Cir. Apr. 21, 2017)
A City of Berkeley ordinance requires cell phone retailers
to inform prospective cell phone purchasers that carrying a cell phone in
certain ways may cause them to exceed FCC guidelines for exposure to
radio-frequency radiation. The court of appeals affirmed the denial of a
preliminary injunction both on First Amendment and preemption grounds (which I
will not mention further)
Berkeley passed an ordinance requiring cell phone retailers
to disclose information to prospective cell phone purchasers about the federal
government’s radio-frequency radiation exposure guidelines relevant to cell
phone use. Since cell phones are no longer commonly carried in a holster or
belt clip, but closer to the body, humans are exposed to more RF radiation from
them than they would be if they were carried away from the body or used with
hands-free devices, which is inconsistent with the FCC’s safety recommendations
(also disclosed in cellphone manuals).  The
city found that consumers aren’t generally aware of those safety
recommendations.  The city found that the
existing disclosures/warnings “are often buried in fine print, are not written
in easily understood language, or are accessible only by looking for the
information on the device itself.”
One sentence of the initial disclosure said: “The potential
risk is greater for children.” The district court held that this sentence was
preempted, and Berkeley re-passed the ordinance without that sentence. Now,
cellphone retailers have to provide a notice indicating that Berkeley required
the statement that:
To assure safety, the Federal
Government requires that cell phones meet radio- frequency (RF) exposure
guidelines. If you carry or use your phone in a pants or shirt pocket or tucked
into a bra when the phone is ON and connected to a wireless network, you may
exceed the federal guidelines for exposure to RF radiation. Refer to the
instructions in your phone or user manual for information about how to use your
phone safely.
The disclosure must be either on a prominently displayed
poster no less than 8½ by 11 inches with no smaller than 28-point font, or on a
handout no less than 5 by 8 inches with no smaller than 18-point font, with the
city’s logo. A retailer may include additional information on the poster or
handout “if it is clear that the additional information is not part of the compelled
disclosure.”
The court of appeals began by pointing out that this
disclosure is a summary form of a disclosure already compelled by the FCC, but
CTIA didn’t sue the FCC.  Under Zauderer, “the government may compel
truthful disclosure in commercial speech as long as the compelled disclosure is
‘reasonably related’ to a substantial governmental interest,” whether or not
the compelled speech is directed at preventing consumer deception.  Preventing deception is one substantial
interest, but “any governmental interest will suffice so long as it is substantial”
rather than trivial—the interest must be more than the satisfaction of mere
“consumer curiosity.”
“Given that the purpose of the compelled disclosure is to
provide accurate factual information to the consumer, we agree that any
compelled disclosure must be ‘purely factual.’” But Zauderer’s reference to “uncontroversial”
disclosures referred to the factual accuracy of the compelled disclosure, “not to
its subjective impact on the audience.” The disclosure in Zauderer might have caused controversy, “for example by
discouraging customers from hiring lawyers who offered contingency-fee
arrangements because they feared ‘hidden costs’ or by harming the reputation of
the lawyers who offered such fee arrangements,” but that didn’t make it
invalid.
The court of appeals found that protecting the health and
safety of consumers is a substantial governmental interest.The FCC’s limits on
RF radiation exposure furthered the interest of protecting the health and
safety of cellphone users, both by setting low limits (with really large safety
margins) and by compelling disclosures that would allow users to avoid
exceeding those limits. Berkeley’s ordinance furthered that same interest,
given that the evidence showed that most consumers were unaware of the FCC’s
advice.
CTIA argued that RF radiation from cellphones hadn’t been
proven dangerous to consumers.
But this is beside the point. The
fact that RF radiation from cell phones had not been proven dangerous was well
known to the FCC in 1996 when it adopted SAR limits to RF radiation; was well
known in 2013 when it refused to exclude cell phones from its rule adopting SAR
limits; and was well known in 2015 when it required cell phone manufacturers to
tell consumers how to avoid exceeding SAR limits. After extensive consultation
with federal agencies with expertise about the health effects of
radio-frequency radiation, the FCC decided, despite the lack of proof of
dangerousness, that the best policy was to adopt SAR limits with a large margin
of safety.
The court wasn’t going to disagree with the conclusions of the
agency and the city that this compelled disclosure was “reasonably related” to
protection of the health and safety of consumers.

The disclosure was also purely factual. The majority broke down the disclosure
and found that each statement was true:
(1)        “To
assure safety, the Federal Government requires that cell phones meet
radio-frequency (RF) exposure guidelines.”
(2)       
“If you carry or use your cell phone in a pants or shirt pocket or tucked into
a bra when the phone is ON and connected to a wireless network, you may exceed
the federal guidelines for exposure to RF radiation.”
(3)        “Refer
to the instructions in your phone or user manual for information about how to
use your phone safely.” (This was an instruction that implied truthfully that
information about safe use could be found in a manual.)
Some literally true statements can still be misleading, and
CTIA argued that this disclosure was, by requiring “an inflammatory warning
about unfounded safety risks” that suggested that the federal limit was the
line between safe and unsafe exposure, and that used “the inflammatory term
‘radiation,’ which is fraught with negative associations, in order to stoke
consumer anxiety.”
That wasn’t how the majority read the text; telling
consumers that cellphones are required to meet federal “RF exposure guidelines”
in order “[t]o assure safety” “assures consumers that the cell phones they are
about to buy or lease meet federally imposed safety guidelines.”  The second sentence, telling consumers what
to do to avoid exceeding federal guidelines, wasn’t reassuring, but neither was
it inflammatory: it contained information that the FCC wants consumers to know
for their safety. The phrase “RF radiation” is precisely the phrase the FCC has
used from the beginning, as well as the technically correct term.  A cellphone retailer who’s concerned about
implications can add a further statement; there was no evidence that any had
found this desirable, or that cellphone sales had decreased in Berkeley.
Thus, there was no likely success on the merits. The public
interest also weighed against CTIA, in that the public interest favors “the
robust and free flow of accurate information,” and “requiring disclosure of
truthful information promotes that goal.”
Judge Friedland dissented in part, arguing that the
disclosure was indeed misleading because, “[t]aken as a whole, the most natural
reading of the disclosure warns that carrying a cell phone in one’s pocket is
unsafe,” and Berkeley didn’t show that was true.  The repeated references to safety plainly
conveyed that something unsafe was at issue, and specifically implied that carrying
a phone “in a pants or shirt pocket or tucked into a bra” wasn’t safe. Existing
FCC guidelines “make clear that they are designed to incorporate a many-fold
safety factor, such that exposure to radiation in excess of the guideline level
is considered by the FCC to be safe.”
Also, even if the statement was truthful, the dissent
wouldn’t apply Zauderer when the government’s
aim was something other than to prevent an ad from being misleading.
The dissent ended with a caution about “false, misleading,
or unsubstantiated product warnings”:

Psychological and other social
science research suggests that overuse may cause people to pay less attention
to warnings generally: “[A]s the number of warnings grows and the prevalence of
warnings about low level risks increases, people will increasingly ignore or
disregard them.” Relatedly, “[w]arnings about very minor risks or risks that
are extremely remote have raised concerns about negative effects on the believability
and credibility of warnings. . . . In essence, such warnings represent apparent
false alarms as they appear to be ‘crying wolf.’” If Berkeley wants consumers
to listen to its warnings, it should stay quiet until it is prepared to present
evidence of a wolf.

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“tests prove X” claim can’t be falsified by showing not-X, court (wrongly) rules

Posted on May 1, 2017 by rtushnet
Dyson, Inc. v. SharkNinja Operating LLC, No. 14-cv-09442
(N.D. Ill. Apr. 26, 2017)
Dyson and Shark compete in the market for vacuum cleaners. When
Shark began running an infomercial for its competing vacuum in September 2014,
Dyson’s margin on its DC65 vacuum fell from $300 per vacuum to less than $100
per vacuum. The September 2014 infomercial claimed “more suction and deep
cleans carpets better than Dyson’s best vacuum,” with a super, “Shark NV650 v.
Dyson DC65 based on ASTM F558 measured at the hose and ASTM F608 embedded
dirt.” There were also similar print ads and short TV ads. The packaging and, at
some point, Shark’s website also made similar claims.
The CEO said, in the infomercial: “I have the independent
lab tests to back it up. We asked independent testing facilities to conduct the
one and only industry-recognized test of carpet cleaning, and we went head to
head with Dyson’s best. Both vacuums were tested on four of the most commonly
owned carpet types in America. And when all was said and done, the independent
lab tests proved without question that our new Shark Rotator Powered Lift-Away
deep cleans carpets better than Dyson’s best $600 vacuum.” The super read,
“Independent LAB TESTS PROVE . . . Dramatization footage of ASTM F608 embedded
dirt (NV650 in carpet/low pile mode) Shark NV650 vs. Dyson DC65.” In October
2014, a revised infomercial said similar things until the statements were
removed in August 2015.
The general principles that come out of this: Dyson argued that
Shark’s advertisements referencing “independent” tests were false, because the
tests were performed by Intertek, an entity that was not independent of Shark
because Shark paid it $1 million per year for various tests. The court evaluated
falsity by what “a linguistically competent” person would think independent
means “according to ordinary usage.” That would mean “free from outside
control” and “not beholden to.” Dyson didn’t submit sufficient evidence to go
to a jury. “[T]he mere fact that a customer pays for a service does not mean
the service provider is controlled by the customer. In considering
independence, the issue is not whether Intertek is paid but whether Shark is
such an important customer as to make up a material portion of Intertek’s
business.” Dyson didn’t put forth evidence on this question. Contacts between
Intertek and Shark, including an Intertek employee’s email to Shark about a
Dyson ad and discussions about the proper settings to test the vacuums, didn’t
show that Shark controlled Intertek clearly enough to avoid a jury. Thus, Dyson
couldn’t get summary judgment on its claim.
The court rejected Dyson’s claim based on the ad statement
that Shark’s vacuum deep cleaned carpets better than “Dyson’s best” vacuum. Though
a new vacuum called the Ball Multi-Floor supposedly became Dyson’s “best” in
April 2015, Dyson didn’t provide evidence of its bestness, and in any event Shark
always disclosed via an asterisk the Dyson model on which it was basing its
comparison, not the Ball Multi-Floor. “[T]he court will not ignore the portion
of Shark’s ad that explicitly states that DC65 is the Dyson vacuum to which
Shark was referring.” Summary judgment for Shark.
Dyson argued that Shark had no independent tests to prove
the superiority of its vacuum from July 8 to August 12, 2014, because Shark did
not receive the final report establishing that its vacuum was superior until the
latter date. The court agreed that Dyson had shown falsity: Dyson’s packages
made the superiority claim, and Shark didn’t show that an earlier version of
the report supported its claim. Hark argued that the information on the
packaging could not have affected the purchasing decision of customers because,
at that time, the vacuums were available for sale only on the website, so
customers would not have seen the claim on the box until after they had made
the purchase decision. “A reasonable jury could conclude that a statement on a
box that the customer could not see until after he purchased the vacuum was not
material to the purchase decision.” (Dyson made the same argument about stale
claims of its own on Dyson packages sold through its website.)
As to the “tests prove” claims, Dyson argued that even if it
failed to show that Shark’s test is invalid, Dyson could still win by putting
forth its own tests showing that Shark was no better than the Dyson. Shark
rejoined that the only way to prove a claim that “tests prove x” was false was
by showing the tests do not prove x. If Dyson were right, its claims would
survive summary judgment. The Seventh Circuit rule is the standard one: “If the
challenged advertisement makes implicit or explicit references to tests, the
plaintiff may satisfy its burden by showing that those tests do not prove the
proposition; otherwise, the plaintiff must offer affirmative proof that the
advertisement is false.”
Surprisingly to me, the court agreed with Shark. “[A] claim
that the ‘test proves x’ is literally false only if the test does not (reliably)
prove x.” Shark’s valid independent tests supported its statements. “That Dyson
conducted other tests that reached a different conclusion does not make Shark’s
statements about its tests false.”
RT: What if VW advertised that emission tests proved its cars
met emissions standards? Wouldn’t we say that those tests didn’t “prove” X,
which could be falsified by other evidence? In my opinion, there are two claims
here—the tests prove claim, which adds credibility to X on its own, and X. I
have always understood that the statement “tests prove X” claims both that
tests prove X and that X is, in fact, true; otherwise why would the tests be
relevant? Separately, this result seems problematic from a pure statistical
perspective. Suppose Shark had a valid test
that showed superiority at the 95% confidence level, but Dyson had 19 valid
tests that showed no superiority at the 95% confidence level. A 95% confidence
level suggests that the test will only be wrong one out of twenty times; with
that evidence, a jury should be able to conclude that Shark’s test, though
valid, did not “prove” Shark’s claim.
Nonetheless, the court granted Shark’s motion for summary
judgment as to claims where this was the key argument.

Shark argued that Dyson had unclean hands due to Dyson’s
continued use of the phrase “Twice the Suction” to describe its vacuums after
that claim became stale. But this conduct didn’t arise out of the same
transaction from which this case arises, so summary judgment for Dyson on this
defense was merited. Also, “[t]he conduct about which Shark complains in its
affirmative defense is conduct the parties are already fighting about in
another lawsuit. To apply the unclean hands doctrine here (or there) would
leave the alleged wrongs without remedy.” 

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US companies can be enjoined from false advertising in China

Posted on May 1, 2017 by rtushnet
Primo Broodstock, Inc. v. American Mariculture, Inc., No.
17-cv-9, 2017 WL 1502714 (M.D. Fla. Apr. 27, 2017)
Primo is a Texas corporation that breeds and sells “highly
disease-resistant” shrimp from the Ecuadorian litopenaeus vannamei strain.
Defendant Robin Pearl has an extensive background in shrimp farming and is the
co-founder of defendants AMI and API. 
AMI supplies fresh and frozen shrimp, which is produced at AMI’s large
shrimp farming facility in Florida, while API is AMI’s wholly-owned subsidiary.  (I mention the geographic origins because the
alleged false advertising here took place in China and was aimed at Chinese
customers, but the court doesn’t explicitly discuss why it is applying Florida
law and the Lanham Act to this conduct.)
In 2015, Primo and AMI agreed “to use a defined portion of
AMI grow-out capacity to produce broodstock for Primo for sale to third
parties.” AMI agreed to grow young, post-larval shrimp – supplied by Primo – to
large adult size at the AMI facility, and AMI would then either sell the live
adult shrimp back to Primo at fixed prices based on the animal’s weight, or
“harvest” (kill) the animals to sell as fresh or frozen dead shrimp, with the
proceeds belonging exclusively to AMI. The agreement barred AMI from selling or
transferring any live Primo Shrimp to others without Primo’s permission. The
business arrangement quickly soured, among other things because defendants
claimed that Primo was not repurchasing the live adult shrimp, causing
defendants to incur significant costs to maintain the large animals.  A year after the agreement began, defendants
threatened to harvest all live Primo shrimp of a certain size that Primo did
not buy back within ten days. Primo filed suit in state court seeking to block this
“shrimp-ocide.” The parties resolved the dispute out of court by giving Primo a
few months to remove all its live shrimp from the AMI facility; Primo
ultimately left about 46,000 live adult shrimp at the facility, which it could
not afford to repurchase, as well as 650,000 shrimp that were too young to buy
back.
The court refused to grant a preliminary injunction based on
Primo’s trade secret claim (which asserted, among other things, that the shrimp
themselves were Primo’s “intellectual property”).  But it did grant a preliminary injunction
based on unfair competition/false advertising under state and federal law.
Plaintiffs alleged a “scheme to obfuscate the market in
China – and ultimately the world – regarding the genuineness of Plaintiff’s
proprietary shrimp broodstock.” Rather than clarify that the breeders they
supply to Chinese companies are merely hybrids derived from pure Primo stock, defendants
claimed that the live shrimp they sell are “the real Primo.” While defendants
agreed “that the use of [the Primo] name is improper,” they asserted that the
name was being used by their Chinese customers, over whom they had no direct
control.  They didn’t “necessarily
oppose” an injunction preventing use of the “Primo” name and claimed to have
already requested their distributors “cease using the name ‘Primo’ in any
capacity while marketing [Defendants’] products.”
Plaintiff pointed to evidence including a translated article
from a Chinese trade magazine titled “API: Who is the real ‘Primo?’ This
question is left to the Chinese farmer to answer.” This article was also posted
on the website of a company named Primo (China) Broodstock Co. It featured a Q
& A with Mr. Pearl, who discussed the history of API’s shrimp and stated
that API “selected Primo (China) Broodstock Co., Ltd. to be [API’s] official
recognized partner” in China.  Primo
(China) claimed to be “the officially designated partner [ ] of high-resistance
‘Primo’ shrimp breeding by API in China” and “welcome[s] the customers who are
confident and full of intention about the ‘Primo’ to join us to make the shrimp
better together.”
Primo also introduced a transcription of video recordings
taken at a November 3, 2016 “Primo shrimp” sales presentation held in China
before approximately 55 to 60 people, where Charles Tuan, a former defendant
here, introduced Mr. Pearl, and then a Mr. Huang from Primo (China) spoke. Mr.
Tuan asked: “If it’s the real Primo, then why need change the name? …[A]ll
breeder sources are written in black and white on the paper and establish for
you that these are the real Primo.” He also said that “the breeder source of
Haimao” – which the court thought was a reference to Primo – “is fake.”  Pearl thanked his “agents who are helping
[API] promote Primo Broodstock here in China” and then discussed the failed
business relationship between Primo and AMI. He claimed that Primo had removed
only one family of broodstock from AMI’s facility, leaving defendants with “the
full bank of genetics at [their] farm.” Mr. Pearl also said that defendants were
“spending a lot of time and a lot of money taking the Primo APE animal[ ] …to
the next level.”  (APE means all
pathogens exposed, that is, proven hardy.) During his speech, Mr. Huang
asserted that “Primo does not have breeder shrimp” and discusses how he set up
a new company – Primo China – “for purposes of importing the Primo shrimp” to
China.
The third document was  a brochure allegedly given to those who
attended the presentation, which states that “Primo abandoned over 650,000
animals and all its genetic material” at the AMI Facility. Other evidence was
similar.
Defendants argued that their statements were “entirely
truthful” and that they “studiously avoided giving any impression of
association with Primo” and had “no direct control over [Mr. Huang],” who
“formed his company prior to any affiliation with… Defendants.”
The court found that Primo showed a substantial likelihood
of success on the merits.  The statement
that API possessed Primo’s “full genetic bank” was likely false, since Primo
presented evidence that it never provided defendants with breeders from more
than six of Primo’s family lines, out of twenty-four families. Defendants’ own
DNA genetic analysis showed only fourteen different groups of animals. Also, at
least in China – “the world’s largest shrimp farming country” – using the name
“Primo” in connection with shrimp provided goodwill.  API chose to work with Mr. Huang after he had
already formed a company called “Primo China,” and allowed Mr. Pearl to attend
events designed to tout the “realness” of the “Primo” shrimp API shipped.
Failure to grant an injunction would likely result in
continued – and irreparable – harm to Primo’s reputation and goodwill, “at
least in China.” “[T]he public has an interest in ensuring that American businesses
compete fairly with each other, both at home and abroad, and refrain from
engaging in trade practices that confuse and deceive consumers.”


Thus, defendants were enjoined from referring to their shrimp as “Primo”
anything, including “Primo shrimp,” “Primo animals,” “Primo breeders,” or
“Primo broodstock”; stating that their shrimp were created by breeding a male
shrimp and a female shrimp from the same Primo family line; stating that they
had Primo’s “genetic bank” or “full genetic bank” or that Primo left or
abandoned its “genetic bank” or “full genetic bank” at the AMI facility; and
appearing at any Primo China or Dingda (another similar Chinese company)
promotional event.  They were not, however,
enjoined from stating that certain of their animals were derived from pure
Primo stock, whose genetic makeup was unknown to defendants at the time. “Indeed,
to fail to mention Primo at all could constitute grounds for a ‘reverse passing
off’ claim under the Lanham Act,” citing Dastar
(even though API would be the physical source of the shrimp, sigh). 

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Internet surveys are admissible (but may raise IRB concerns)

Posted on April 26, 2017 by rtushnet

Bimbo Bakeries USA, Inc. v. Sycamore, No. 13-cv-00749, 2017 WL 1377991 (D. Utah Mar. 2, 2017)

Bimbo charged that defendants misappropriated its trade secret for making Grandma Sycamore’s Home-Maid bread, and infringed on its trade dress related to the packaging of its bread. Here, the court resolved challenges to experts, as relevant here in favor of admission.

Defendant U.S. Bakery sought to exclude the expert testimony of Dr. Glenn L. Christensen; the court found him qualified to testify to quantitative surveys, of which he had prepared three. He conducted his surveys over the Internet using pre-screened panels of respondents provided by a third-party vendor, using digital images of the parties’ respective products. The court held that the internet was a proper method for conducting surveys, despite defendant’s argument that they didn’t effectively recreate the consumer experience of buying bread and screened out responses from those who buy bread, but who do not use the internet.  Defendant didn’t cite authority holding internet surveys unreliable. It was true that most consumers don’t buy bread online, so online surveys might not the best way to simulate the bread buying experience. But defendant merely speculated that the results might be different if the surveys were conducted in person or among people who buy bread but don’t use the internet.  Where the overall look of the product was at issue, online surveys could be relevant; other arguments could be addressed to the jury.  “To prove that a survey technique is unreliable the party must do more than speculate that there may have been a better way of completing the survey.”

The surveys also chose a representative enough sample for the jury to weigh them.  The survey looked for respondents in Utah and southern Idaho, the area Bimbo’s trade dress allegedly had secondary meaning, so that was okay. Using online panels was okay; defendant failed to explain how people who participate in surveys on a regular basis may skew the results. Screening out people who completed the survey on a smartphone was also okay because of the smaller screen size shrinking the visual stimuli.

Defendant also challenged the survey questions, arguing that the survey showed respondents the trade dress of Grandma Sycamore’s bread with the words “Grandma Sycamore’s removed,” but didn’t remove the unique spelling of the words “HomeMaid” from the image, thus making the package identifiable by means other than the trade dress.  But defendants didn’t explain how that made the results unreliable, though the jury could weigh it.  Defendant also challenged two surveys because only respondents who answered the questions in a particular way were asked follow-up questions, and that the surveyor also would repeat the respondents’ answer back to the respondent when asking them to substantiate their answer, which increased the likelihood of confirmation bias. Furthermore, Dr. Christensen screened out respondents who completed the surveys too quickly. None of these were fatal; defendant didn’t show how the questions rendered the underlying method unreliable, since the questions themselves were open-ended and not leading. Defendant also didn’t show that screening of results of those who answered too quickly had a disparate impact on those respondents who answered a particular way; if it did so, then exclusion of the survey might have been proper.

Finally, defendant argued that failure to ask whether the respondents would have bought the bread if it wasn’t made locally made the survey unreliable.  Defendant used the tagline “Fresh. Local. Quality.” Dr. Christensen attempted to test whether these advertisements created a false or misleading impression that these were local products and whether this impression was material to whether the respondent purchased bread. But he didn’t ask “Would you have bought the bread if it wasn’t made locally?”  That didn’t make the preceding questions unreliable.
The court also refused to exclude defendant’s survey expert Himanshu Mishra, offered in rebuttal to Dr. Christensen’s surveys.  It didn’t matter that he didn’t conduct surveys of his own.  “Rebuttal experts need not produce extrinsic evidence to be able to testify to perceived surveying flaws…. Dr. Mishra’s testimony is more speculative and theoretical than Dr. Christensen’s actual surveys because Dr. Mishra did not produce surveys of his own. But the rule does not require the exclusion of expert testimony that lacks one hundred percent certainty.”

Also, Bimbo argued that Dr. Mishra shouldn’t be allowed to testify that Dr. Christensen’s failure to secure Institutional Review Board approval prior to conducting his surveys violates the law.  The court held that neither party had adequately briefed the law on the issue.  “If lack of approval does not violate the law then Dr. Mishra cannot testify that it does.”

My final expert note: defendant offered Larry Soter as an expert in the “baking industry”to testify that Bimbo’s ingredients that are used to manufacture Grandma Sycamore’s Home Maid Bread didn’t constitute trade secrets.  Bimbo argued that it would be improper for Mr. Soter to testify that each individual element didn’t comprise a trade secret because the alleged trade secret is the combination of all the steps and ingredients. “[A] trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which, in unique combination, affords a competitive advantage and is a protectable secret.” However, this rule does not mean that analyzing the individual processes is irrelevant. Finding that some of the components are secret may aid the fact finder in determining whether the combination of the individual processes is a trade secret, and it may be relevant to know how common the individual components of the claimed trade secret are.  Mr. Soter wouldn’t be allowed to claim that the combination of individually publicly known components was not protectable because such a statement would be informing the jury of the wrong legal standard, but there was no indication he would so testify.

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