“Australian for [American] beer” isn’t deceptive, court rules

Posted on April 24, 2017 by rtushnet
Nelson v. MillerCoors, LLC, 15-CV-7082, 2017 WL 1403343, —
F. Supp. 3d – (E.D.N.Y. Mar. 31, 2017)
The court dismissed Nelson’s complaint, invoking lots of
different consumer protection laws, based on Miller’s allegedly misleading
marketing of Foster’s Beer, “an Australian-style beer brand.”  Foster’s began exporting to the US in 1972,
and its can labels sported “multiple references to Australian culture and
symbols,” namely “an image of a Red Kangaroo, the national symbol of Australia,
and the Southern Cross constellation,” which is “a main component on the
Australian national flag.” In 2011, all Foster’s Beer sold in the United States
became domestically brewed. MillerCoors allegedly tricked consumers “into
believing they are purchasing the same [imported] product as they had in the
past precisely because it has maintained the same packaging for Foster’s over
time, despite the fact that the Foster’s sold in the United States is also
brewed domestically.  Nelson also pointed
to MillerCoors’s “overall marketing campaign, online and in advertisements,”
including: (1) the brand slogan “Foster’s Australian for Beer”; (2) the “How to
Speak Australian” television ads “depict[ing] Foster’s as being a product from
Australia by using Australian accents and scenery”; and (3) the official
website for Foster’s Beer, which, as of December 2015:
• Noted Foster’s Beer is made out
of hops that are only grown in three locations in Australia, and that “[t]hese
hops and an exclusive Foster’s yeast are what give Foster’s its bold refreshing
taste. The secret yeast doesn’t produce sulfur harshness that other beers can
exhibit, which means that Foster’s taste is never skunky and always
Australian,”
• Advertised, ‘ “Foster’s is
available in more than 150 countries, making it the largest-selling Australian
beer brand in the world,” ’ and
• Displayed “an outline of the
country of Australia, references to [the beer’s] roots and history in
Australia, and use of Australian symbols and phrases including ‘How to Speak
Australian,’ ‘Foster’s — Australian for Beer,’ and a video screen with images
of rugby players.”
This allegedly exploited consumers’ willingness “to pay a
premium for high quality, imported beer.”

The court found no reasonable consumer would be
deceived.  The label clearly discloses
the brewing location and isn’t hidden or in small text. “The idea that
consumers purchase products based on certain of a label’s statements or images
(e.g., pictures of a constellation and a kangaroo) but are blind to others
(e.g., a statement in plain English of where Foster’s Beer is brewed) in close
proximity on that label strains credibility.” 
Disclaimers fail to cure allegedly misleading representations on the
front of packaging “only where the alleged misrepresentation is clearly stated
and the disclaimer is exceedingly vague or requires consumers to make
inferences.”  The disclaimer here was
explicit: “BREWED AND PACKAGED UNDER THE SUPERVISION OF FOSTER’S AUSTRALIA LTD,
MELBOURNE, AUSTRALIA BY OIL CAN BREWERIES, ALBANY GA AND FORT WORTH TX.”
[Really? The first geographical words the consumer encounters is “Australia,”
twice.] Likewise, “© Oil Can Breweries, Fort Worth, TX” is displayed on the
Foster’s webpage, which was “inarguably clear as to the brewing location.” 

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Ninth Circuit bars consumer claims challenging assertions of clinical proof

Posted on April 24, 2017 by rtushnet
Kwan v. SanMedica Int’l, — F.3d –, No. 15-15496, 2017 WL
1416483 (9th Cir. Apr. 21, 2017)
Kwan alleged that SanMedica’s product SeroVital was falsely
advertised as effective, and the district court dismissed her complaint as a
lack of substantiation claim not actionable under California consumer protection
law. The court of appeals affirmed.
SanMedica advertised, inter alia, that its product had been
clinically tested and shown to produce a 682% increase in human growth hormone
(HGH), which had multiple physical and cosmetic benefits.  To proceed in a challenge to this claim, Kwan
would apparently need to allege “that one or more of the authorities alluded to
actually studied or tested the formula SeroVital contains and found that it
does not produce a 682% mean increase in HGH levels, or that Plaintiff herself
did not experience such an increase when using the product, or that a study
exists somewhere demonstrating that a 682% increase is categorically impossible
to achieve in an over-the-counter pill.” Instead, she only alleged that the study
relied upon to make the claim was “not an example of scientific evidence
recognized by experts, was never peer-reviewed, and was never published in a
peer-reviewed journal.”  So even if
affirmative statements about the existence of clinical tests proving
effectiveness are material to consumers, California law doesn’t allow
challenges to those statements merely because the consumer might be able to
show that the test didn’t demonstrate
the truth of the affirmative statement.
I think this is a mistake—with such evidence, the challenger
has shown that the statement about
clinical proof is false, even if she hasn’t falsified another part of the
ad; the Lanham Act also doesn’t allow mere lack of substantiation claims, but
Lanham Act jurisprudence correctly recognizes that there can be separable
statements about the proof behind
another statement—and advertisers make those statements in order to convince
consumers that their statements are credible.

The court of appeals found that it wasn’t enough to allege that
the “clinically tested” representation and the health benefit claims falsely
implied that the marketing claims of SeroVital’s health benefits were
clinically proven by credible scientific proof. That was just a lack of
substantiation allegation, repackaged. 
The court rejected Kwan’s invocation of Lanham Act establishment claim
precedent because doing so “would clearly violate recognized California law on
the burden of proof placed on the plaintiff.” 
As readers are probably aware, the burden is also on the plaintiff to
show falsity under the Lanham Act; the Lanham Act precedent, however, makes
clear that statements or implications about proof can themselves be false.  Kwan wasn’t trying to shift the burden of
proof, as the court accused her of doing; she was challenging the truth of some
of SanMedica’s claims.

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Sixth Circuit has nominative fair use sans la lettre

Posted on April 24, 2017 by rtushnet
Oaklawn Jockey Club, Inc. v. Kentucky Downs, LLC, No.
16-5582 (6th Cir. Apr. 19, 2017)
Query: Does the Sixth Circuit’s refusal to adopt nominative
fair use, and its insistence on a separate doctrine of “use as a trademark,”
make a difference?  After all, many
courts applying “nominative fair use” conduct the same back-of-the-envelope
mini-confusion inquiry in determining whether there can be any liability as we
see from the court here.
“In 2010, the Kentucky Horse Racing Commission amended its
regulations to permit gambling on historical horse races.”  This is a way of letting people gamble
without live races.  “Customers receive
anonymized information about the historical horses, handicap the race, and place
their bets,” or there’s also apparently an “automatic” feature that skips the
handicapping, so it’s basically a slot machine. 
After bets are placed, the regulations require, “the terminal shall
display a video replay of the race, or a portion thereof, and the official
results of the race. The identity of the race shall be revealed to the patron
after the patron has placed his or her wager.” In defendants’ product, the
replay isn’t an actual replay, but “computer-generated, generic, and lasts for
only a few seconds; it shows only the order of finish and does not attempt to
visually recreate the racetrack that originally hosted the race.”  It does display the track name as part of
substantiating the results.
 

from the brochure
The track owner-plaintiffs have registered marks for their
racing tracks.  They alleged that the use
of their marks was likely to confuse consumers into believing that they are the
source of the video recreation and endorse its accuracy.  Also, the game-maker’s ad brochure includes a
screenshot of a video replay that uses the track names of Mountaineer Casino
Racetrack & Resort, Rockingham Park, and Turf Paradise, though the owners
of these tracks weren’t parties to this suit. The brochure states that “[t]he
Encore RBG System and its individual games have successfully undergone the
rigorous testing of Gaming Laboratories International (GLI), the gold standard
in technical review and authorization of wagering software and hardware.”
“Trademark use” is required before the multifactor confusion
test is applied.  “When the mark is used
in a way that does not deceive the public we see no such sanctity in the word
as to prevent its being used to tell the truth.” Prestonettes, Inc. v. Coty,
264 U.S. 359, 368 (1924). “If defendants are only using [the] trademark in a
‘non-trademark’ way—that is, in a way that does not identify the source of a
product—then trademark infringement and false designation of origin laws do not
apply.” Interactive Prods. Corp. v. a2z Mobile Office Sols., Inc., 326 F.3d
687, 695 (6th Cir. 2003).
Well, how do you know? 
The inquiry focuses on “whether a consumer is likely to notice [the
plaintiff’s trademark] . . . and then think that the [defendant’s product] may
be produced by the same company[.]”  Why
is this not a poor woman’s confusion test? 
This is left as an exercise for the reader. In fact, the court described
its earlier Hensley case in these
terms: “Because there was no likelihood of consumer confusion regarding whether
the plaintiff trademark owner was the source of the defendant’s products, we
held that the defendant’s use of the trademark was a permissible non-trademark
use.”
The track owners argued that the display of their marks was a
trademark use because it confuses consumers into believing that the track owners
provided or verified the video replays.  The court of appeals disagreed, pointing out
that there were no live feeds of races or actual video replays.  (If there had been, would that have been
likely to confuse?)  “These depictions
are sufficiently different from the Track Owners’ product—live horse racing at
their venues—that the minimal use of the trademarks, preceded by the word
‘Location,’ would not confuse consumers into believing the videos were provided
by Plaintiffs.”  It could be true that
there is such a thing as “an Oaklawn® horse race,” and thus “deciding where to
watch a live horse race or which live-broadcast race to watch [note: not which
source to watch it via] may be similar to deciding which brand of computer to
purchase.”  But here, “the fact that a
race occurred at Oaklawn or Churchill Downs is relevant only as a factual
matter—it is used so consumers can substantiate the race’s result, not to
promote the quality of Exacta’s product.”
It was fair to say that the marks were used “to substantiate
or legitimize the video,” but “only in the sense that they provide consumers
with the requisite details to verify the video game’s accuracy.”  If the game displayed inaccurate results, it
was unlikely that a consumer would blame or complain to the tracks; the target
of complaint would be defendants, the parties actively representing the
accuracy of the results.  “The term
‘Location’ preceding the trademarks sufficiently explains to consumers that the
trademarks are being used in a wholly descriptive manner and does not cause a
likelihood of confusion as to the source of the video,” especially since the
replay didn’t depict the facilities.
As for Exacta’s advertising materials, the only display of
specific track names appeared in a screenshot of a video replay, and the
brochure touts defendants’ own expertise and goodwill.  “Because this was a non-trademark use of
Plaintiffs’ trademarks, we need not reach the question whether the fair-use
defense applies.”  Sure, fine, whatever.


The same analysis applied to Kentucky common law trademark infringement and
unfair competition claims.

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9th Circuit revives class action against allegedly mislabeled baby food

Posted on April 20, 2017 by rtushnet

Bruton v. Gerber Prods. Co., 2017 WL 1396221, — Fed.Appx. —-, No. 15-15174 (9th Cir. Apr. 19, 2017)

Bruton sued Gerber, alleging that labels on certain Gerber baby food products included claims about nutrient and sugar content that were impermissible under FDA regulations incorporated into California law. The district court ruled against her.  The court of appeals, over a partial dissent, reversed and remanded.

First, the district court erred in dismissing Bruton’s claim for unjust enrichment/quasi-contract, because it was unclear at the time whether California allowed a separate unjust enrichment claim, but the California Supreme Court has subsequently clarified California law, allowing an independent claim for unjust enrichment to proceed.

Second, the district court erred in finding that a class would not be “ascertainable.” Briseno v. ConAgra Foods, Inc., 844 F.3d 1121 (9th Cir. 2017), held that there was no separate “administrative feasibility” requirement for class certification.

Third, there was a genuine dispute of material fact on Bruton’s claims that the labels were deceptive in violation of the UCL, FAL, and CLRA.  The theory of deception doesn’t require literal falsity, but rather that “(a) the presence of the claims on Gerber’s products (in violation of FDA regulations), and (b) the lack of claims on competitors’ products (in compliance with FDA regulations), made Gerber’s labeling likely to mislead the public into believing that Gerber’s products were of a higher quality than its competitors’ products…. [I]t may be literally true that Gerber’s products are ‘As Healthy As Fresh,” but due to external facts—that Gerber does not comply with the FDA regulations that otherwise prevent its competitors from making the same claim—Gerber’s labels mislead in their implications.”

This theory of deception made sense:

Shoppers in a supermarket aisle look for cues about quality in the products they buy. If a shopper sees two products on a shelf and one says “Supports Healthy Growth & Development,” while the other makes no similar claim and is cheaper, a likely inference is that the first product will be viewed as healthier, explaining why it costs more. If the products had been of the same quality, then competitive pressures would have driven the maker of the second product to use the same attractive label. In the baby food market in particular—where measuring the effect of a particular food on one’s own baby’s growth and development is not practical—consumers have to make quality judgments before the baby is fed, based on what they see in front of them at the store. When everyone plays by the rules, this process works reasonably well. But when the maker of one product complies with a ban on attractive label claims, and its competitor does not do so, the normal assumptions no longer hold, and consumers will possibly be left deceived.

Even reviewing the nutritional information of the competing products wouldn’t help. “Consumers cannot easily check claims like ‘Supports Healthy Growth & Development,’ or ‘As Healthy As Fresh,’  against nutritional charts to determine their veracity. Consumers might believe, for instance, that the claims refer to the quality of the produce used or the particular canning process.”  Likewise, they can’t easily figure out the import of the absence of such claims.  Even for seemingly black and white claims like “No Added Sugar,” if Gerber’s product says “No Added Sugar,” and a competitor’s product doesn’t, the nutritional chart won’t the consumer whether any of the sugar in its product was added—it will simply list the amount of “Sugars.” “Nevertheless, the reasonable assumption would be that some of the sugar in that competitor’s product must have been added, or else the competitor would have used the attractive label ‘No Added Sugar.’”

Bruton also submitted enough evidence of likely consumer deception to create a genuine dispute of material fact. The key evidence was the labels.  “A reasonable jury observing Gerber’s labels and comparing them to those of its competitors could rationally conclude that Gerber’s labels were likely to deceive members of the public.”

The district court also erred in granting summary judgment to Gerber on Bruton’s claims that the labels were unlawful under the UCL, which “borrows” predicate legal violations and treats them as independently actionable. The reasonable consumer test is only a requirement under the UCL’s unlawful prong only when it is an element of the predicate violation. The predicate violation here was of California’s Sherman Law, which incorporates standards set by FDA regulations, which include no requirement that reasonable consumers be likely to be deceived.

Judge O’Scannlain dissented from the majority’s conclusion that there was a genuine issue of material fact about consumer deception.  Bruton’s testimony about her own confusion couldn’t satisfy the reasonable consumer standard, because “a few isolated examples of actual deception are insufficient” to create a material dispute over the likelihood of general consumer deception.  The majority’s reliance on the labels was insufficient because the labels weren’t clearly false, as compared to a label “Made in U.S.A.,” when significant parts of the labeled product weren’t made in the US.  “[T]he challenged statements themselves say nothing at all about the quality of Gerber’s products; they simply report—accurately—certain nutritional features of the products.”  Nothing “inherent” in the labels would support a leap from these correct statements to deceptive quality claims, especially because Gerber’s and competitors’ labels include detailed information about their ingredients. Judge O’Scannlain didn’t see any evidence that the challenged statements made Gerber’s labels objectively more “attractive” to a “a significant portion of the general consuming public,” or that consumers consumers would conclude that any price or quality difference between Gerber and its competitors was due “specifically to the challenged label statements (as opposed to any number of other reasons that may have led Gerber’s nationally recognized brand to carry more market power).”

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Georgetown Tech Law Review seeks submissions

Posted on April 20, 2017 by rtushnet
From the editors:
The Georgetown Law Technology Review is soliciting content
for fall 2017 publication. Founded in 2015, the Review seeks to build a common
forum for technologists, lawyers, and policymakers to discuss the increasingly
complex intersections between law and technology. It leverages its presence in
Washington, D.C. to focus on legal and policy issues driven by cutting-edge
technological developments. The Review also collaborates with the Georgetown
Law Center on Privacy & Technology, the Georgetown Law Institute for
Technology Law & Policy, and the Georgetown-MIT Privacy Legislation
Practicum to promote and showcase innovative scholarship.
We welcome submissions on a wide variety of topics,
including but not limited to: intellectual property, privacy, cybersecurity,
fintech, and telecommunications. While the Review accepts traditional scholarly
articles, we are especially interested in shorter (5,000-15,000 word) pieces
focused on narrow and timely issues in law and technology. The submission
deadline to ensure fullest consideration for the fall issue is June 30, 2017,
though we are happy to accept submissions on a rolling basis.

If we can provide further information, or if you would like
to discuss a potential submission, please email us at
GLTR.Submissions@gmail.com or visit our website at http://ift.tt/2oOWJah.

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Presumptions and evidence of causation both work in false advertising cases

Posted on April 20, 2017 by rtushnet
Robroy Indus.–Texas, LLC v. Thomas & Betts Corp., No. 15-CV-512,
No. 2:16-CV-198, 2017 WL 1370545 (E.D. Tex. Apr. 10, 2017)
T&B and Robroy compete in the market for PVC-coated
electrical conduit, which is used to carry electrical wiring in buildings or
other structures. The parties are the major suppliers of PVC-coated electrical
conduit in the United States; T&B’s conduit is known as “Ocal.”  Robroy alleged that T&B made a number of
false claims that only its Ocal products had certain features, such as meeting
the UL 6 standard, the ANSI C80.1 standard, and the NEMA RN-1 standard, all significant
industry standards.
 T&B also claimed
that “only Ocal” offers local installation training and certification. And its
promotional materials claimed that Robroy “abrade[s] the surface of the conduit
prior to the application of the PVC,” thereby “remov[ing] the protective
coatings that the customer is paying for.” T&B further claimed that “UL
standards are not being followed by the abrading of the conduits [sic] exterior
zinc finish.”
T&B argued that there was insufficient evidence of harm
causation to survive summary judgment. The court disagreed.  T&B had three key arguments (1) that
Robroy has never been “kicked off” a specification for PVC-coated conduit for
any reason related to the T&B statements at issue; (2) the evidence shows
that customers made purchasing decisions based on price, quality, availability,
and other factors having nothing to do with the alleged false statements; and
(3) the evidence shows that customers made decisions to add T&B’s Ocal
product to the specifications for particular projects and to purchase Ocal
based on price and other factors, not because of the allegedly false
statements.
The court agreed with Robroy that, because this was a case
of allegedly deliberately false comparative advertising in a functionally
two-party market, causation could be presumed. 
[Why “deliberately”?  The
two-party market situation appears independently significant, assuming the
claim is material; the deliberateness might justify a presumption of
effectiveness as well. But that’s what the cases say.] A number of circuits and
district courts have adopted this rule; no case appears to have rejected it;
and the Fifth Circuit hasn’t said anything to cast it into doubt.  Causation is required by the Lanham Act, but “that
does not speak to whether and under what circumstances that element can be
satisfied by a presumption.”  Also, “[g]iven
that courts have uniformly recognized the presumption for the past 30 years,
Congress’s silence in the face of that now well-established line of authority
suggests, if anything, that Congress is satisfied with the status quo.”
T&B argued that this wasn’t really a two-party market,
but Robroy provided evidence that “during the period at issue in this case, the
PVC-coated electrical conduct market has been effectively a two-competitor
market.” Also, some of the allegedly false statements were directed at Robroy
by name, and many of the challenged statements were comparative, which would be
understood as referring to Robroy by clear implication.  Summary judgment on causation denied.
Separately, there was evidence about actual causation.
Robroy’s theory of the case was:
(1) in order to bid on a project, a
manufacturer was required to be included on the specification for the project;
(2) there were numerous projects on which T&B was not initially on the
specification; (3) those contracts would have gone to Robroy but for T&B’s
actions that resulted in T&B being added to the project specifications; (4)
it was T&B’s false statements that caused project managers and engineers to
alter the specifications to include T&B as a qualified bidder on those
projects; and (5) on those projects on which T&B won the contract, Robroy
suffered injury from the loss of a contract it would have won but for T&B’s
false advertising.
While it might be true that in particular instances
customers chose T&B’s products over Robroy’s products for reasons other
than T&B’s false statements, Robroy argued, that occurred after the stage of the process in which
the project engineers were persuaded to alter the specifications for their
projects to allow T&B to bid, which was the critical point at which the
false advertising was allegedly effective.  If T&B hadn’t been allowed to bid, according
to Robroy’s evidence, “on many of the projects the specifications initially
called for Robroy products or required quality assurances that only Robroy
could meet.” The critical step was project engineers’ decisions to “open” the
specifications to allow T&B to bid on the projects.  And there was evidence in the record that
this “opening” at least sometimes came as a result of the challenged
statements.  [Is there an analogy here to
bait-and-switch initial interest confusion? 
Initial qualification deception?] 
The allegedly false statements were clearly designed toward getting
engineers to open the specs.  E.g., “a
form letter including several of these false statements was posted on an
internal bulletin board that was available to the project specification
specialists at T&B who were responsible for attempting to ‘break’
specifications that specified only Robroy products or ETL-listed conduit.”  And T&B reps claimed success in their
endeavors. One internal comment: “That job was specified [Robroy] but with the
help of you and T[o]m Russ [a senior T&B sales representative who promoted
the use of the “only Ocal” material during efforts to “break” specifications]
we were able to open it up to Ocal.”
Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489
(5th Cir. 2000), found that evidence of subjective intent to deceive on the
part of the defendants’ executives was insufficient to show that the false
advertising in question actually succeeded in persuading customers to buy the
defendant’s products instead of the plaintiff’s.  However, here there was “evidence—including
statements by T&B representatives—that the effort succeeded.”
The evidence was mostly circumstantial, and circumstantial
evidence isn’t always enough, but here it was. 
“This is not a case in which the proof is limited to showing no more
than that the defendant’s representatives intended to mislead potential
customers or that false statements were made in the course of competitive
bidding, after which one party lost the project.” On Robroy’s evidence, Robroy
was “essentially guaranteed to be awarded a contract on those projects, until
T&B ‘broke’ the specifications, obtained the right to bid, and ultimately
was awarded the contract.” It was reasonable to infer that the challenged
statements played a pivotal role in the customers’ decisions to allow T&B
to bid on the projects, even if there might also be other reasons that
engineers might have opened the specs. The inference of causation was “strengthened
by the evidence that T&B’s own representatives expressed their view that
the characterizations of Robroy were responsible for the engineers’ decisions
to open the specifications to bidding by T&B, and that one of the project
engineers repeated one such alleged falsehood when changing the specification
to allow T&B to bid.”

Robroy’s state-law unfair competition claim under the common
law also proceeded.

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Having a product in development isn’t enough for Lanham Act standing

Posted on April 20, 2017 by rtushnet
Pulse Health LLC v. Akers Biosciences, Inc., 2017 WL
1371272, No. 16-cv-01919 (D. Or. Apr. 14, 2017)
Pulse was formed to develop a product that can measure
aldehyde molecules in human breath via a non-invasive hand-held device. Its
device was called FRED or Revelar. Akers develops and sells diagnostic products
and devices designed to deliver various health information test results. The
parties entered into contracts for Akers to make a breath tube containing a
chemical reagent that could accurately measure aldehyde molecules in human
breath, to be used with the FRED/Revelar device. Akers’ development failed,
according to Pulse, and Pulse requested to part ways. The final agreement
provided that Pulse transferred the relevant tech back to Akers, and Akers
waived the remainder of what Pulse was supposed to pay.  Akers granted Pulse an exclusive and
perpetual license to use the relevant tech in the field of aldehyde tests,
which included any testing for oxidative stress, but excluded tests relating to
diabetes, cancer, and alcohol. The agreement further provided that Akers had no
rights with respect to Pulse’s technology for its hand-held FRED/Revelar
device.
Akers started to sell hand-held products that Pulse claimed measured
oxidative stress and free radical damage through disposable tubes, which Pulse
determined was a copy of its FRED/Revelar product. “The chemistry for the
OxiChek and the Assigned Technology reagents are the same, and the circuit
boards for the OxiChek product have a similar layout and the same optical
chamber, LED, diodes, switches and gates as the original FRED/Revelar device
developed by Plaintiff.”
The court rejected Lanham Act and state-law consumer
protection claims.  Pulse wasn’t within
the zone of interests protected by the statute and there could be no proximate
causation of injury, even if, as alleged, Akers “knowingly made false
statements in advertising the technology’s ability to detect levels of oxidative
stress or free radicals” using Pulse’s technology.  Because Pulse didn’t have a competing product
on the market, it failed to allege any injury to a commercial interest in
reputation or sales. Possible future sales of a product under development weren’t
enough, despite the alleged “spoiling” of the market based on Akers’ false
advertising.  Any such injury was purely
speculative.
The Oregon Unlawful Trade Practices Act only protects
consumers, not competitors. Because leave to amend would not allow Pulse to fix
either of these problems, it was denied.

Lesson: write your noncompete more clearly so that suing for
breach will give you all the relief you seek, I guess?

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My colleague Laura K. Donohue, now on Twitter

Posted on April 20, 2017 by rtushnet

Where she will be tweeting about the national security state, privacy, et cetera.  She’s got comprehensive knowledge and a prime location, so take a look!

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Grange grudge: court orders disclaimer to resolve confusing corporate status

Posted on April 17, 2017 by rtushnet
National Grange of the Order of Patrons of Husbandry v. California
State Grange, 2016 WL 8730678,  No. 16-201
(E.D. Cal. Sept. 23, 2016)
As relevant here, plaintiffs sued the California Guild and
Robert McFarland for false advertisement and unfair competition under the
Lanham Act, and moved for a preliminary injunction.  “The National Grange is a nonprofit fraternal
organization founded in 1867 to promote the interests of rural America and
agriculture.”  The California State
Grange was created as its California affiliate in 1873 and elected McFarland as
its leader in 2009.  After disputes
arose, the National Grange revoked the California State Grange’s membership and
the two sides disaffiliated in 2013.The disaffiliated chapter, led by
McFarland, continued as a separate entity under the California corporate
charter filed in 1946, while the National Grange chartered a new California
State Grange in 2014.
Defendants continued to represent themselves publically as
the California State Grange, but in 2015 the court granted the National Grange summary
judgment on its trademark infringement and false advertisement and unfair
competition claims. The court permanently enjoined the disaffiliated entity
from using the word “Grange,” but declined to extend that prohibition to
include similar words because the National Grange did not expressly seek such
relief in its initial complaint. Those rulings are pending on appeal in the
Ninth Circuit [ed.: where they may languish for a long time].
In April 2016, the court granted the National Grange’s
motion for post-judgment injunctive relief, ordering that the disaffiliated
entity
[R]emove the word “Grange” from all
corporate registrations and other documents filed with any federal, state, or
local government … [R]emove the word “Grange” from all public telephone and
business directory listings, on the internet or otherwise, … [Refrain] from:
(a) conducting business using the name “Grange,” …; (b) using “Grange” in any
domain name or email address …; and (c) referencing their past affiliation with
plaintiff or any other entity whose name contains the word “Grange,” including
representing themselves to be the former California State Grange; successor to
the California State Grange; or formerly known as, trading as, or doing
business as the California State Grange….
The disaffiliated entity changed its corporate name to the
“California Guild,” but continued to refer to itself as “CSG” and “[f]ormerly
the California State Grange.”
In this proceeding, the National Grange sought a lot more
relief, including a prohibition on “referencing the history and goodwill of the
California State Grange” and surrender of all physical and intellectual
property of the California State Grange (the physical property also being
subject to a California state proceeding).
Defendants “continued to advertise that ‘cities and
townships have grown up around our rural halls’; that the the [sic] Defendant’s
organization has ‘lobbyists in Sacramento and boasts a long history of
successful legislative advocacy’; that the Defendants’ organization was the
first organization to support and promote women as equal voting members’ [sic];
and that ‘[i]n these uncertain times our members find comfort and security by
returning to our roots and reaffirming principles and goals set by the founders
140 years ago.’ ” The National Grange argued that “only the California State
Grange can claim the 140 years’ [sic] of history and goodwill associated with
the organization.” The court noted that defendants apparently found a way
around the injunction “by taking credit for the California State Grange’s
history and achievements without referencing it by name.”
Without discussing Dastar,
the court stated that “[t]he Lanham Act prohibits uncredited references to
another entity’s history and achievements.” 
However, the court noted another loophole: the California Guild remains
incorporated under the same corporate papers that the California State Grange
formerly existed under.  Thus, defendants
were “technically correct when they refer to the California Guild as an organization
that has existed for ‘decades’ and around which ‘cities and townships have
grown up.’” Though the National Grange maintained that this was nonetheless
deceptive, the court found that its “hands were tied with respect to claims to
history and achievements accrued post-incorporation”  because such claims weren’t false or
misleading but true, although “claims to history and achievements accrued prior
to 1946 are undeniably false.”  The court
wasn’t ignoring reality or gamesmanship; it was recognizing that, “for some
reason, plaintiffs have not taken effective action in the three years after the
parties disaffiliated to prevent defendants from occupying the California State
Grange’s corporate charter. The court cannot step in to save plaintiffs here.”
Thus, the court would only enjoin defendants from referencing history and
achievements accrued by the California State Grange prior to its incorporation.  Irreparable injury existed because “further
uncredited references to their history may permanently dilute their brand in
California.”
The National Grange also challenged defendants’ allegedly
false claims that local chapters must ‘disaffiliate’ with the California Guild
in order to join [the California State Grange]” and that the local chapters “are
‘no longer nonprofit, must pay taxes, cannot accept tax deductible donations,
or receive various grants.’ ” But the National Grange didn’t show falsity for
those statements.  Any acts defendants
engaged in while purporting to act in the official capacity would violate the
existing order; they were allowed to solicit new guild members and officers in
their own capacity.  The court denied the
National Grange’s request to enjoin “performance of Grange rituals” as vague
and overly broad.  “While performance of
similar functions can contribute to a violation of the Lanham Act, plaintiffs’
request encompasses legitimate commercial activities such as soliciting new
members and providing services to farm communities.”
The National Grange’s request for delivery of all business
records, physical property, and intellectual property also went beyond the
false advertising claims at issue here.  There
was no evidence that defendants’ alleged use of business records and mailing
lists constituted false advertising. Using the “proprietary mailing lists of
the California State Grange … albeit under different names” to contact Grange
members with proper identification was “not, in itself, false advertisement.”
Use of website logos, images, and backgrounds that are nearly identical to the
National Grance could cause actionable confusion, but the National Grange’s
request for relief was too broad. 
The court declined to evict defendants from the buildings
alleged to belong to the California State Grange, but it did agree that, given defendants’
other deceptive tactics (referring to themselves as an organization “created in
1873,” “provid[ing] 160 years of service,” and “oldest agricultural
organization in California”), their use of the National Grange’s buildings and
former telephone numbers “would serve to further create a false impression
among the public that they are affiliated with or successors to the California
State Grange.” Eviction was a drastic measure for a preliminary
injunction;  at this stage, a further
disclaimer would suffice. However, it was reasonable to require defendants to
cease using the old phone numbers.
As for that disclaimer: though the court would allow defendants
from to claim credit for the history and achievements of the corporate entity
formerly named the California State Grange from 1946 to 2013, “unless the
public is notified that defendants are not in fact the California State Grange
there would be a strong probability of confusion.”  Thus, all communications discussing the
history or achievements of the corporate entity formerly named the California
State Grange required a prominent disclaimer: “NOT AFFILIATED WITH THE
CALIFORNIA STATE GRANGE.” Defendants were already using a mealy-mouthed
disclaimer, “not affiliated with … the Grange of the State of California’s
Patrons of Husbandry Chartered.” The National Grange argued that this name was “unknown
to the California Granges.” Without specifically ruling on that argument, the
court saw no harm in making the disclaimer clearer.

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Uber can’t get taxi false advertising case dismissed on 12(b)(6)

Posted on April 17, 2017 by rtushnet
Delux Cab v. Uber Technologies, Inc., 2017 WL 1354791, No.
16cv3057 (S.D. Cal. Apr. 13, 2017)
Delux, a cab company in San Diego, sued Uber for false
advertising about “the purported exceptional safety of Uber” and the relative
unsafety of taxicab rides. Challenged claims included:  “SAFEST RIDES ON THE ROAD—Going the Distance
to Put People First,” and that Uber sets “the strictest safety standards possible
…. The specifics vary depending on what local governments allow, but within
each city we operate, we aim to go above and beyond local requirements to
ensure your comfort and security—what we’re doing in the US is an example of
our standards around the world.” Uber also touted rigorous background checks
that it said compared favorably to those in the taxi industry.  Uber added a separately itemized $1 “Safe
Rides Fee” shown on receipts, touting the fee as supporting an “industry-leading
background check process, regular motor vehicle checks, driver safety
education, development of safety features in the app, and insurance.”
Uber argued that the statements were all puffery, but many
of them were specific and testable: Uber claims that it is “setting the
strictest safety standards possible,” that its safety is “already best in
class,” and that its “three-step screening” background check procedure, which
includes “county, federal and multi-state checks,” and adheres to a
“comprehensive and new industry standard.” A reasonable consumer “could
conclude that an Uber ride is objectively and measurably safer than a ride
provided by a taxi or other competitor service, i.e., it is statistically most
likely to keep riders from harm.”  Nor
were the statements merely aspirational and subjective.  Thhe simple addition of phrases such as “Uber
is committed to …,” “Uber works hard to …,” or “We’re doing everything we
can to …” to an advertising statement isn’t an automatic shield from
liability.  Nor did the context preclude
a finding of misleadingness. Though Delux didn’t dispute that Uber screens
criminal records going back seven years and conducts county, federal, and multi-state
checks, the additional statements it made were also falsifiable, and the
seven-year multi-jurisdictional background check was allegedly not “industry-leading.”
Uber also argued that several of its statements weren’t made
in commercial advertising or promotion because they were made to journalists
independent of Uber. Those challenged statements were “inextricably
intertwined” with the reporters’ coverage of a matter of public concern, whether
Uber is safe for riders.  Claims based on
those statements weren’t actionable under the Lanham Act.
The “Safe Rides Fee,” however, was actionable even though
Uber argued that it related to a transaction that had already occurred; it was
aimed at getting future rides.

Uber agued that Delux didn’t adequately allege proximate
cause.  Injury can be presumed in false
comparative advertising cases.  The parties
here were direct competitors, and it made sense that Uber’s alleged
misrepresentations would decrease taxi rides.

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