Disgorgement isn’t distinguishable from restitution in ordinary consumer protection case

Posted on January 31, 2017 by rtushnet
Brazil v. Dole Packaged Foods, LLC, 660 Fed.Appx. 531 (9th
Cir. 2016)
Brazil brought the usual California claims, alleging that defendants
deceptively described their fruit products as “All Natural Fruit.” Brazil
property alleged that Dole’s labels were deceptive given that the products
contain synthetic citric and ascorbic acid. His allegations of misleadingness
including his own testimony that he was deceived; Dole’s consumer surveys
prepared for the litigation; the FDA’s informal, non-binding policy on the use
of the word “natural” in food labels (as meaning “that nothing artificial or
synthetic … has been included in, or has been added to, a food that would not
normally be expected to be in the food”); and recent FDA warning letters to
food sellers that alleged deceptiveness under the policy because the products
in question included synthetic citric acid, among other substances. This evidence
could allow a trier of fact to conclude that “All Natural Fruit” was misleading
to a reasonable consumer and that the synthetic citric and ascorbic acids in
Dole’s products were not “natural.”
However, class certification was properly denied, leaving
only Brazil’s individual claims.  Brazil
offered a price premium theory of damages; Dole’s products weren’t valueless.  Brazil didn’t explain how a price premium
could be calculated with proof common to the class.  Brazil couldn’t substitute a theory of “nonrestitutionary
disgorgement”:

Under California law, a plaintiff
who successfully proves a defendant was unjustly enriched at his expense may in
some cases recover all profits the defendant received unjustly. Theoretically
an award of disgorgement may exceed an award of restitution; not always is the
defendant’s benefit equal to the plaintiff’s loss. But in most cases, as in
this one, the defendant’s benefit is equal to the plaintiff’s loss, so
restitution and disgorgement are functionally the same remedy. 

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For law students: Notre Dame summer IP program

Posted on January 31, 2017 by rtushnet
Details on the Notre
Dame “Get a Leg Up in IP” program this summer.

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Another “omissions about slave labor” case fails in Cal.

Posted on January 30, 2017 by rtushnet
Sud v. Costco Wholesale Corp., No. 15-cv-03783, 2017 WL
345994 (N.D. Cal. Jan. 24, 2017)
Sud brought the usual California claims based on allegations
that Costco sold prawns for which the supply
chain was tainted by slavery, human trafficking, and other illegal labor
practices. Sud alleged that the defendants were aware that the feed for the
prawns comes from trash fish caught on boats that use slave labor or other
illegal labor practices, including human trafficking. Costco publicly states on
its website that it has a “supplier Code of Conduct which prohibits human
rights abuses in our supply chain,” but plaintiffs alleged that this was
misleading given these facts, and that Costco omitted to tell consumers these important
facts.  
To show that an omission was, as required by California law,
a substantial factor in a plaintiff’s decision, she must show awareness and a
change in behavior. Change in behavior may be presumed if the omitted
information is material, “but a plaintiff must still be able to show she would
have been aware of the information if it had been disclosed.”  Here, plaintiffs alleged that Costco’s
packaging stated only that the prawns were a product of a given country, rather
than including information about labor abuses in the supply chain, creating an
actionable omission.  The plaintiffs
sufficiently pled reliance on the packaging, though not on Costco’s “Disclosure
Regarding Human Trafficking and Anti-Slavery” on its website.
Plaintiffs alleged that Costco had a duty to accurately
disclose to consumers that slavery, forced labor and human trafficking have
been tainting and continue to taint Costco’s supply chain for farmed
prawns.  For a UCL or CLRA claim, “to be
actionable the omission must be contrary to a representation actually made by
the defendant, or an omission of a fact that the defendant was obliged to disclose.”
Disclosure obligations include those relating to safety risks, but not all
material facts, including supply chain practices.  Given public information available about labor
conditions in the fishing industry in Thailand and Southeast, Costco also lacked
the superior/exclusive knowledge that might have generated a duty to disclose;
nor did plaintiffs properly allege partial representations plus active
concealment, which also could have sufficed.
The unfair/unlawful UCL claims also failed.  Plaintiffs alleged that Costco’s conduct “in
sourcing and selling farmed prawns actively contributes to the use of slave
labor in violation of bans on such human trafficking enacted by the U.S.,
California and by international conventions, including but not limited to the
Tariff Act of 1930 [,] … [t]he Anti-Trafficking in Persons Act, the UN
Declaration on Human Rights, and California Penal Code § 236, § 237, et seq.,”
and the Supply Chains Act. The Supply Chains Act didn’t clearly speak to
product labels, and, to the extent plaintiffs challenged the website disclosure’s
adequacy, they lacked standing.  Nor did
they explain how the allegations in the complaint supported alleged violations
of the other laws.
On unfairness, assuming that the standard is whether the
alleged practice “is immoral, unethical, oppressive, unscrupulous or
substantially injurious to consumers,” and weighing “the utility of the
defendant’s conduct against the gravity of the harm to the alleged victim,” the
harm alleged by the plaintiffs (buying a product they wouldn’t otherwise have
bought) didn’t state a claim.  Consumers
have access to information about supply chains, including Costco’s website
statement, so the absence of such information on the packaging is not “substantially
injurious to consumers” or necessarily immoral.  Likewise, plaintiffs didn’t identify a
particular policy or other statutory or regulatory provision that demonstrate “it
is ‘unfair’ within the meaning of the UCL for [a] manufacturer to fail to
disclose” such violations on its product packaging.

Pure omissions, when the defendant didn’t make any statement
at all about a subject, aren’t covered by the FAL, so those claims also failed. 

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Older case: placement of medical device on market isn’t representation of FDA approval

Posted on January 30, 2017 by rtushnet
Intra-Lock International, Inc. v. Choukroun, 2015 WL
11422285, No. 14-cv-80930 (S.D. Fla. May 4, 2015)
Old, but new in Westclip (why? It’s an algorithmic mystery),
and presents an interesting fact pattern about FDA approval/the lack thereof
and the relationship between that and the Lanham Act.  Intra-Lock made the IntraSpin System, used
for drawing and centrifuging a dental patient’s blood. It had three different
components: (1) blood collection material, (2) a centrifuge, and (3) a fabrication
kit and instrumentation.  Defendants allegedly
sold a “kit” of products substantially identical to the components that make up
the system, which were then assembled by the target audience to create a
competing system.  They also allegedly
promoted the kit in the US, including with courses by Choukroun promoting the
use of the competing device in various dental surgical procedures.
Intra-Lock pled that it had 510(k) pre-market clearance from
the FDA, which classified its device a Class II medical device, or “automated
blood cell separator,” while defendants deliberately skirted these
requirements, instead representing to the FDA that two of the components were
Class I medical devices, which are exempt from premarket notification
procedures and other quality system regulations. This allegedly posed serious
risks to consumers.
Defendants argued that Intra-Lock had unclean hands because
it didn’t initially have pre-market clearance; until it obtained the clearance,
it was selling nearly the exact same components in a manner similar to
defendants’ marketing. That was exactly the conduct Intra-Lock now argued was
false and misleading, which gave the court pause, but it proceeded to the
merits anyway.
Anyway, Intra-Lock couldn’t identify any false or misleading
statements—nothing on defendants’ websites and related materials mentioned “FDA
anything.” “Merely because Defendants have opted to market their Competing
Device in a fashion similar to Plaintiff, does not make any similarity to
Plaintiff’s model a false representation.” 
The claim that defendants’ system was “recognized around the world, from
Nice to New York from Los Angeles to Shanghai, from Rangoon to Moscow, from Sao
Paulo to Cape Town, Santiago to Zagreb” was mere puffery.  With reference to one of the components, a specific
type of test tube, the website said that “[t]his tube is the only authorized at
this moment.” But that didn’t specify FDA authorization and indeed could easily
be read to mean that it was the only type that defendants authorized for use with their other components.  Finally, one defendant stated that one of the
components, a centrifuge, was “FDA registered.”  But that was true.
A comment by Choukroun on a dentistry blog and conversations
between Choukroun and Dr. Robert J. Miller weren’t commercial advertising or
promotion.  Even considering them,
Choukroun didn’t claim to have pre-market clearance; he expressed his opinion that
“FDA approval” wasn’t required.
It wasn’t enough to claim that presence on the market
falsely implied FDA approval.  Some “peculiar”
type of marketing was required, such as a direct comparison to a product that
had received pre-market clearance, along with evidence that this marketing
implied FDA approval.  Intra-Lock lacked
any consumer surveys.

Intra-Lock’s real complaint was that the device required
pre-clearance, but it had complained to the FDA about that. “Absent
misrepresentation, the mere fact that Defendants may be erroneously selling the
Competing Device as a Class I device when it is more appropriately considered a
Class II device, is a violation of the FDCA, not a violation of the Lanham Act.”
Pom Wonderful was not to the
contrary; that case applied “where a party has introduced literal falsehoods or
other misrepresentations into commerce,” not here. 

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False claims of discounts cause Article III injury

Posted on January 30, 2017 by rtushnet
Morrow v. Ann Inc., 2017 WL 363001, No. 16-CV-3340 (S.D.N.Y.
Jan. 24, 2017)
Plaintiffs alleged that Ann deceptively advertised
merchandise sold in its Ann Taylor Factory and LOFT Outlet stores by falsely
claiming on its sales tags, in-store signage, and website that products sold in
outlet stores were originally or regularly sold at much higher prices.  They brought the usual California (and other
state consumer protection law) claims.
Ann argued that plaintiffs lacked Article III standing for
want of a concrete injury.  Though they
alleged that they wouldn’t have bought the products had they known the truth,
they didn’t allege that the merchandise was worth less than the price they
actually paid for it. Still, they alleged Article III injury—they spent money
they otherwise would not have spent, which is sufficiently concrete.  Spokeo
doesn’t change that, since it’s about bare statutory violations in the absence
of concrete injury.
Likewise, plaintiffs adequately pled lost money or property
under California law.  The allegedly
false labels induced them to buy products they wouldn’t otherwise have
bought.  Ann argued that only
misrepresentations about the “nature of the product” could confer standing, but
California law required only that the misrepresentation affect consumers’
“beliefs about quality,” and “[p]rices, like other attributes, can impact
consumers’ perception of merchandise.”
Among other things, Ann argued that reasonable consumers
wouldn’t be deceived, but this is a question for a jury.  Plus, the court noted, “the very fact that
Ann represented its prices as discounted suggests that such representations
might impact reasonable consumer purchasing decisions.”

Ann also argued that claims based on the FTCA should be
dismissed because there’s no private right of action under that law.  If plaintiffs were actually trying to assert
direct FTCA claims, that would be true. But instead, they were using the
alleged FTCA violation to identify “unlawful” conduct under the UCL.  It’s ok to use FTCA violations to establish
unlawfulness when another statute does confer a private right of action. 

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Placebo effect means customer satisfaction doesn’t disprove harm; suggestive TM can be fact claim

Posted on January 30, 2017 by rtushnet
In re 5-hour ENERGY Marketing & Sales Practices Litig.,
No. MDL 13-2438, 2017 WL 385042 (C.D. Cal. Jan. 24, 2017)
Plaintiffs alleged that defendants engaged in deceptive and
unfair business practices under the laws of various states and the
Magnuson-Moss Warranty Act in selling 5-hour ENERGY, including  both representations on the 5HE packaging and
off of it.  On-label representations
include the product’s name and the claims to provide “five hours of energy” or
“hours of energy,” and “no crash.” These statements were allegedly misleading
because 5HE provides only a few minutes of energy, at most, and results in a
“crash” at the end of the five hours.  Plaintiffs alleged that they used 5HE for a
while—up to 1300 times for one plaintiff—before discontinuing use.
Defendants argued that the repeat purchases showed that
plaintiffs weren’t injured and that, after their first purchase, they couldn’t
have been deceived because they had personal experience with the product and no
longer required the statements on the packaging to understand the product’s
effects.  However, as a matter of law,
repeat purchase isn’t proof of lack of injury; injury is a matter for the jury.
 Federal Trade Commission v. Pantron I Corp.,
33 F.3d 1088, 1097 (9th Cir. 1994) (even if some consumers were satisfied and
became repeat purchasers, claims were false as a matter of law).  In particular, the Pantron court said, “Where, as here, a product’s effectiveness
arises solely as a result of the placebo effect, a representation that the
product is effective constitutes a ‘false advertisement’ even though some
consumers may experience positive results.” Or, as the court here says, “what
mattered most in a false advertising claim was not how consumers felt about the
product but what the product actually did.” The case law establishes that “evidence
of consumer satisfaction takes a backseat to scientific evidence showing that
the product’s claims are verifiably false.”
So too with defendants’ reliance argument based on
plaintiffs’ personal experiences.  Cases
accepting similar arguments concerned “items like a lipstick that promises
24-hour coverage or a ‘fresh’ orange juice—products where the consumer can
quickly tell whether the representations on the products’ packaging are true.”  But, as the lipstick case recognized, for
things like “dietary supplements”—exactly the issue here—it might be harder to
tell for some products.  [That is, 5HE is
at least partially a credence good, not an experience good.] Here, plaintiffs
testified that they weren’t sure or that they thought they should give the
product a chance.  “Although the Court is
skeptical that the Plaintiffs on the far end of the spectrum—those who
purchased 5HE several hundred times before discontinuing use—can state a false
advertising claim for their later purchases, Plaintiffs have raised a genuine
dispute of fact that at least some subsequent purchases satisfy the reliance
requirement.” A trier of fact should decide when the “reasonable consumer”
would learn of the efficacy of the product, especially given that “consumers
may operate for some time under a ‘placebo’ effect before realizing that the product
lacks efficacy.”
Although plaintiffs couldn’t plead the off-label representations
they relied on with sufficient specificity, the court found that some state
consumer protection laws didn’t impose reliance requirements, only exposure to
the misrepresentation: New York, New Jersey, and New Mexico don’t have
reliance.  So too with NJ and California
warranty law.  Defendants argued that
causation was still required, but “[t]o prove causation in a state that does
not impose a reliance requirement, the plaintiff need only prove that the
reasonable consumer is ‘likely to be deceived,’” which would be better decided
by the trier of fact.
Courts have required that a “written warranty” under the Magnuson-Moss
Warranty Act reference a “specified period of time” in order to be actionable. Plaintiffs
argued that the 5HE trademark, the “five hours of energy,” and the “no crash”
statements qualified, but defendants argued that the 5HE trademark couldn’t be
the basis for an MMWA claim because it’s suggestive as a matter of law, not
descriptive, and “is used to indicate the source of goods, not to provide a
warranty to customers.”  The case law
holds that trademarks can be warranties. 
The Sixth Circuit’s conclusion that the trademark was suggestive rather
than descriptive had “little relevance.” 
“It is unclear to the Court why trademark classifications should play
any role in determining whether the trademark constituted a ‘written promise’
to consumers. As simple as it is, the 5HE trademark meets the standard required
by the MMWA.”

The court dismissed claims related to decaffeinated 5HE
packaging because none of the named plaintiffs had bought it.  Though the alleged misstatements on the
packaging were the same, the ingredients differed significantly—6 mg of
caffeine compared to 200 mg.  The
composition of the product would be very important to the issue of whether the
product provided “five hours of energy” and caused a “crash” at the end of the
five hours, and no remaining named plaintiff could testify about their
experiences with the decaffeinated product.

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Food & Drug Law Institute writing competition

Posted on January 27, 2017 by rtushnet
Thomas Austern Writing Competition:  
The H. Thomas Austern Writing Competition is intended to encourage law student interest in the areas of law that affect food, drugs, biologics, cosmetics, dietary supplements, medical devices, and tobacco.
Top papers will be considered for publication in the Food and Drug Law Journal and award winners will receive a monetary prize.

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Identifying Boundaries in Patent and Trademark Law.

Posted on January 27, 2017 by rtushnet
The American University Law Review is proud to present its
annual Federal Circuit symposium, 
Panel 2: Trademarks
First Amendment Freedom of Speech and Trademarks: What Is,
and What Should Be, the Relationship Between the Two?
Christine Farley, American University Washington College of
Law (Moderator)
Ned Snow, University of South Carolina
Gov’t interest in not registering marks?  Ultimate question is whether it aligns with
the purpose of TM law.  Breyer provided
an answer himself: we want a marketplace where people are nice to one another,
an economic marketplace w/o namecalling. That’s right. The economic marketplace
is better off w/o that.  Both
individually and macro perspective. 
There are more participants that will join if they’re less
offended/excluded.  You could say: if I
want fewer people to buy my good, that’s my own business, but there’s a
spillover effect on other market participants and other transactions. We want
to make the marketplace one that people are not offended to enter into.  Macro: it is more attractive on the whole
even if I’m not going to purchase disparagingly marked products.  Gov’t’s interest is preserving a marketplace
where individual participants can get along well.
Douglas Rettew, Finnegan
A lot of TM answers at the argument could have been given
but weren’t. SCt was looking for a gov’t justification consistent w/consumer
protection and business protection from freeloaders. Gov’t interest: if
something is disparaging/scandalous, it’s far off from source identifying
function, it’s distracting and the non source identifying function overwhelms
the source identification function.
Lee Rowland, ACLU
This case is a perfect storm of threats to 1A.  Really reasonable people who think the
economic market is better off w/o namecalling. 
Breyer asked why the 1A means we can’t have nice things. The reality is
that our 1A comes with harm.  Is there something
different about the market?  I can’t
begin to find a justification for that. The marketplace for ideas is where the
gov’t should be most hands off.  Gov’t
making choices about the kind of speech we see in the aisles, or should
consumers make choices about what to support? 
People fill seats at the Washington team’s game; liberty doesn’t always
lead to justice or right moral course. 
Breadth of disparagement clause: any institution. End the Fed; Yankees
Suck. Those are good source identifiers.
Rebecca Tushnet, Georgetown University
No, those are very good expressive
messages about the person wearing the T-shirt, not good source identifiers—PTO
denies rights to I heart DC, etc. on a regular basis b/c it’s good information
not good source identification.  Rowland’s
passionate defense of the 1A applied to “the market” is why this case is
ultimately about Lochner.  You should hate TM law and registration in
its entirety if you really want the gov’t to be hands off.  TM registration (and infringement law) is not
common law fraud.
Snow: 1A is all about context.  If you had an anti-disparagement law in
political debates, that would be clearly unconstitutional. What about trademark
allows or doesn’t allow for gov’t to play a role in the benefit it will give to
TM registrants?  We can learn a lot from
other provisions of TM law—other criteria for registration should teach us something
about the reach of TM law. If we think about source identification—source identification
is expressive, self-identification. 
Calling your hotel Marriott if your name is Marriott is the ability to communicate
something about your product.  Distinctiveness
says you can’t get a TM unless it is sufficiently distinct from the product you’re
selling.  I can’t call a product Ned
Snow, but we’re fine with it—b/c common names require distinctiveness for TM
rights.  So the ultimate question is
whether criteria other than distinctiveness/lack of genericity are also
sufficiently like distinctiveness in aligning w/the purpose of TM. The purpose
becomes very important in order to understand the legitimacy: so what is the
purpose? If we can find a rational basis for disparagement, we should be good
to go with that content-based distinction.
Rowland: I agree, but it’s not content based.  It’s viewpoint based.  We wouldn’t challenge distinctiveness b/c of
the implications for other areas of 1A doctrine.  The difference b/t content based and
viewpoint based restriction on speech. 
You can say things in a public park you can’t in a private place.  Forum law has gotten too robust, often to the
detriment of speech. Whether you’re in a forum analysis or gov’t
benefit/unconstitutional conditions, there’s a gradation depending on how much
the gov’t is trying to manipulate the content or viewpoint of your speech.  TPM=not much scrutiny.  Content-based rule: then you get strict
scrutiny, though commercial speech or limited public forum or gov’t program
changes the standard. Third rail: no viewpont or speaker-based discrimination:
nobody who supports abortion rights can speak in this room b/c it’s owned by
the gov’t. Gov’t may never have as valid interest suppression of private
speech.  Except for terrorism, Holder. 
That’s true in tax benefits.
RT: That’s all cool, and if Tam were denied any registration
at all until he stopped using the name, Rowland would be right.  But he’s not. 
He’s allowed to enter the room, he just has to sign in with a
nondisparaging name; he’s allowed to chant his name while he’s in the room.  What is viewpoint based/why is it bad?  Hating gays is a viewpoint.  Hating is not.
Rettew: 2(a)’s breadth is such that it doesn’t cover any
particular viewpoint.
Snow: Content/viewpoint is a mess.  This case is a hard one.  I came down on the side of content, but there’s
more there than meets the eye b/c of the human subjectivity involved in
determining disparagement. W/deceptiveness, at first glance, that seems
objectively verifiable.  [Though I teach
two courses almost entirely dedicated to figuring out what’s
confusing/deceptive.]  The subjectivity
of distinctiveness is different from the subjectivity of disparagement—it turns
on morality and the judge’s perception of what the public morals are, which is
inherently shaded by one’s moral code, and so there’s a better argument for
invalidating this provision than others. 
Ultimately I think it’s content based b/c deceptiveness criterion isn’t
black and white, when you look at the actual test.  And on morality—which played a bigger role
than we realized in the Fed. Cir. decision—that opens up a deeper question
about the role of morality in the law. This is not Lawrence, where morality is the reason for the law; instead it’s
about upsetting commerce if you upset the public [or specific groups who get
excluded].  We can find that in many
other legal contexts. 
Farley: inconsistency in results has been made much of by
the challengers—examples of TMs approved by PTO compared to those disapproved.  To make the point about inevitable
subjectivity. Lingering question of vagueness. 
What do you make of that??
Rettew: this is one of the strongest arguments; I’ve argued
cases on that.  One thing people are
realizing is that TM is messy.  It’s very
vague.  WANKER allowed for beer, rejected
for clothing. TITMOUSE refused for computer cursor control devices, but ok for
animation production services.  PUSSY
POWER rejected for entertainment, but PUSSY POWER REVOLUTION for clothing. 
Farley: they do reject all SHIT marks.
Rettew: Madonna for wines was once considered scandalous.  Norms and viewpoints change over time.
Rowland: we don’t see the kind of inconsistency of other
content-based rules.  TM bar and PTO:
this isn’t an incredibly diverse bar, any more than this panel is. Not a
coincidence that Dykes w/ Bikes was rejected, or that Heeb was rejected, but
Redskins was approved and a 50-page federal opinion defends it.  It’s not a representative group of Americans.  Almost every group trying to reclaim a word
has been rejected.  Nobody batted an eye
on Redskins for decades. Combination of vagueness + demographics = viewpoint
discrimination.
RT: (1) Vagueness doctrine, if an independent reason, should
invalidate all registration system. 
Churrascos: same applicant, different results; that’s not about
political or demographic characteristics of examiners.  School grades, likewise are going to vary
across the country—if vagueness if fatal to a gov’t program, bye-bye public
school.  (2) Each examiner has limited
time and resources; a lot depends on what the applicant does. Wanker and
Titmouse actually have really easy explanations (product differences and
audience interests—beer is an adult product and clothing is not so there’s more
scope; the Titmouse clothing had a bird logo and the Titmouse computer
peripheral was a mouse in the shape of a woman’s breast; Madonna was litigated
at a different point in time, but that’s also true of genericity); it’s true
that the Pussy ones are more inconsistent.
Snow: the one thing about disparagement/immoral/scandalous
that’s different is moral judgments going on. The question as I see it reflects
lack of diversity on moral norms/codes, but that doesn’t feed directly into
viewpoint/content based Q. It’s about whether law can turn on moral judgments
or not.
Rowland: A teacher having lots of rules: can’t write about
Civil War b/c this is geography class. 
And if you write about Trump, you can only write in favor.  That’s the difference.  Turn on political views of the teacher. Antidiscrimination
laws are aimed at conduct.
RT: Can a student get a bad grade for denying the Holocaust?
[Rowland says that’s about truth; I think that’s deep waters.] Could you have
an assignment “write about someone you admire, not someone you hate”?  I think so. 
You can’t disparage anyone is not you can’t disparage Trump; nature of
gov’t program also matters—you can get a registration and keep using your disparaging
term.
Farley: is denying registration really a huge deterrent?
Rettew: Registration is not that big a deal. Corporation: a
lot of time companies can’t clear marks; they do search after search. We often
tell them they can use it even if they can’t register it b/c the standard for
registration is different from the standard for protectability/noninfringement
of others’ marks. Many companies don’t care as much about registration because
internet allows nationwide use/rights even without a registration. There are
people who have overestimated the value. There are benefits to registration,
but not the ones people talk about: (1) counterfeiting. (2) Juries like
registrations; it’s a blue ribbon that means something to them.  Those are what matter.  So it really matters only if you’re going to
trial or going after counterfeiters.
Rowlands: matters b/c people value it.  It’s definitely a meaningful benefit. If gov’t
denies you benefit based on viewpoint or content of speech, that’s a
burden.  Simon & Schuster, Son of Sam
case.  Commandeered his money and gave it
to victims.  When the gov’t is using the
power of the purse to penalize speech, that’s a massive burden.  Practically people won’t speak. Denial of
benefit should always be considered a burden. 
Irony: ACLU really does have weird relation to IP b/c it’s a restriction
on speech. If we’re better off w/o namecalling—denying registration allows
proliferation of that kind of mark—not accomplishing the goal.  Our positions are bizarre b/c end result
doesn’t align.
RT: I think my position aligns.  Depends on whether or not you’re committed to
the expressive message!  I heart DC
shirts will be more prolific when there’s no registration b/c people can
compete to provide the message.  Baking
soda sold with racist mascots won’t be. And that probably reflects the right
balance—when you have a commercial motive distinct from your expressive motive,
you are more likely to modify the message than when you think the expression
sells the product.
Farley: 43(a)?
Rettew: yes and no. I don’t know the answer; I think you
could and would bet on that side, but then Taco
Cabana says otherwise.
RT: [brief precis of my argument]
Farley: what will the Court do?  Gov’t speech, unconstitutional
conditions?  Consider some marks expressive
and subject to different rules? 
Content/viewpoint?
Rowlands: the third rail is gov’t speech.  The four-part test is not great (ACLU was on
the other side), but at least makes some sense about observers/gov’t’s
historical role.  Administrative
involvement isn’t enough.  Adjudicating
application is what happens when you apply for a park permit. Gov’t itself has
disclaimed that TMs represent gov’t speech. 
Far more likely to be unconstitutional conditions.  Distinctions in that case law b/t money and
program that isn’t money; this is the latter. 
Where they focus in on: the nature of this benefit, and is the gov’t’s
role close enough to gov’t speech to justify this regulation?  The worst case scenario for the Justices is
gov’t imprimatur for a slur.  There’s no
case that really is on point. 
Manipulating private viewpoints outside the scope of the program, you
lose.
Snow: Agree—think unconstitutional conditions.  One other spin: something to be said for
content of speech? Are they more likely to find viewpoint-based discrimination
when it deals w/religion or politics v. registration of a commercial TM.  Maybe obscenity is viewpoint based, but we
didn’t really know.
Q: any way to reduce vagueness?
Rowlands: blacklists, as state license plate authorities
have.  A stretch to interpret the statute
that way, but PTO has some discretion. 
Or interpret disparaging as meaning of a real person, but “institutions”
in statute makes that a dead letter.
Q: how the standard of substantial composite works in
practice. 
Rowlands: Badly!
Rettew: Best you can do is analogize to infringement.  15% or higher is usually enough for
confusion.
Rowlands: Heckler’s veto.
Q: Reed v. Town of Gilbert/Brown v. EA.  Key issue: morality/content based.  Strict scrutiny.  If this is content based, would it survive?
Rowlands: Reed isn’t in one of these compromised areas of
the law—commercial speech, gov’t benefit. 
It’s the purest version of what the 1A stands for. We’ve conceded
already, if this is just content distinctions, we wouldn’t have filed.  Brown + Reed + Ward v. Rock Against Racism—Ct
articulated more of a mushy, touchy-feely definition: gov’t targeting speech b/c of content, and Reed rejects that test and begins more textual analysis.  Get more protection even if the motive is
suppressing content even if the law looks content-neutral on its face.  Morality is all through this, but at the same
time we’re seeing a Ct rejecting more subjective moral framewk. They will
likely back off Reed—pretend it doesn’t
mean what it says.  Reed: you could see 2 distinct categories of speech treated
differently, and they’ll say Reed
only means that. We didn’t mean to eclipse everything else.  Otherwise they can’t issue judgments based on
morality, and the new nominee will want to do so.  E.g., new attempts to crack down on revenge
porn, mandating filters.
Q: how grandfathering comes into this.  You can find a large segment of Af-Am
population that would object to Negro or Colored People, yet NAACP/UNCF are
old, established marks. If someone came in today, they probably wouldn’t be
able to get it through.
Farley: Whitelist/blacklist.
Snow: Also an issue w/genericity. There is one distinction
b/t the two. A markholder can police the mark; these cases lie in a sea of
ambiguity and policing will be persuasive to a judge. But we can’t police
morality and make sure the morals of society change/don’t change.
Rowlands: it’s a one-way ratchet.  NFL team 40 years ago wasn’t considered
offensive, but Tam wants to reappropriate – language gets more offensive over
time. Creeping chill about what future society will accept; unfair to ask any
markholder.

RT: w/o 1A controlling, you can have an easy doctrinal
answer: evaluate at time of application. Madonna! You already showed it wasn’t
a one way ratchet. That wasn’t the standard applied to the Washington team.  That means no TM law uncertainty, though
societal change may still produce uncertainty.

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If you don’t like low-cost imitator brands, you’ll love this decision

Posted on January 26, 2017 by rtushnet
Moroccanoil, Inc. v.
Zotos Int’l, Inc., 2017 WL 319309, — F. Supp. 3d –, No. 16-7004 (C.D. Cal.
filed Jan. 19, 2017)
The court granted a
preliminary injunction in this trademark case, using the “serious questions
going to the merits” standard, which others consider dubious after eBay. 
Irreparable harm came from the potential threat to plaintiff’s high-end
brand positioning if people believed it also appeared in discount stores.
Moroccanoil
distributes hair and body care products in the United States featuring “argan
oil to revitalize and replenish hair.” It has incontestably registered
trademarks for MOROCCANOIL and for design marks for hair care products.  It also alleged, and the court found,
protectable rights in a trade dress including:
(1) a distinctive turquoise blue color; (2) copper orange lettering,
graphics and background design elements; (3) copper orange and white lettering,
the word “MOROCCANOIL” in vertical and horizontal orientation, graphics and
background design elements on a turquoise blue background; and (4) an amber
bottle packaged in a rectangular blue box.
registered marks

trade dress

This combination,
the court found, was nonfunctional, inherently distinctive product packaging serving
“a purely aesthetic purpose comprised of specific colors, fonts and styles,”
and, though suggestive marks are presumptively weak, Moroccanoil’s advertising
and promotion in major media outlets had added commercial strength.  Moroccanoil positions itself as a premium
product, sold on its own website as well as “premium” salons and spas,
“high-end” retailers such as Saks, Neiman Marcus, Barneys, Nordstrom and
Sephora, and “upscale” beauty supply stores such as Planet Beauty and Design
Collection.
Zotos is a
“professional beauty industry leader that manufactures and markets a range of
hair care products.” Zotos began to sell hair care products featuring argan oil
known as “Luxe Majestic Oil” in packaging with the term “MAJESTIC OIL” in
vertical white lettering with an orange fleur-de-lis symbol in front of a blue
background.
Majestic oil

Zotos’ largest
client is Sally Beauty Supply, a retailer chain that sells beauty supplies at
value prices. Zotos’ products appeal to consumers in the market for “a
lower-priced alternative to hair care brands that are typically sold at higher
price points at high-end department stores and salons.” Zotos used flyers, in-store
displays and emails that stated: “Compare to Moroccanoil® and Save” and “If you
like Moroccanoil® products, you’ll LOVE our new Luxe Majestic Oil line.”  (I found a saved email online using the
tagline “Naturelle Pro Majestic Oil was created to compete as a low cost alternative
to MoroccanOil brand”—does adding “compete” change anything?  What about the Sally Beauty webpage where
there are a number of different “compare and save” options presented?)
 

compare to display

like/love page from Sally Beauty

like/love ad on the same page for Bed Head/BTZ

like/love ad on the same page for Biolage/Biotera

As to similarity, Zotos
argued that vertical lettering was functional and common in hair care products,
and that the shades of blue were clearly distinct, and that an amber bottle was
functional for liquid products.  The
court found that product names “Moroccanoil” and “Majestic Oil” are
sufficiently distinct, and the injunction wouldn’t cover the name, but the
appearance of the products was “strikingly similar”: similar white vertical
lettering, similar placement of an orange symbol, and a similar blue background,
even if an amber bottle by itself was functional.
There was no
consumer evidence of confusion; Moroccanoil’s survey found that 41% of
respondents believed that Majestic Oil products were manufactured by or
associated with Moroccanoil.  The survey
was flawed—it used the Squirt format,
which is “most appropriate where a product with a weak mark is sold in close
proximity to the alleged infringer in the marketplace,” and though it’s
possible for consumers to encounter both products online, it was unclear that a
significant number of consumers would encounter the marks in close proximity.  Still, the court found the survey to be “some
evidence” of likely confusion.
Though the products
were sold in different types of stores, the court found that the parties targeted
the same general class of purchasers – female consumers of hair care products,
as evidenced by Zotos’ “efforts to target and capture Moroccanoil customers”
through its comparative advertising, such as “If you like Moroccanoil, you’ll
LOVE Luxe Majestic Oil!”  Zotos argued
that this tactic expressly distinguished its products, but Zotos products are
sold on the Internet without the “comparative advertising.” Plus, the term
“our” in (one) Zotos’ ad – “If you like Moroccanoil® products, you’ll LOVE our
new Luxe Majestic Oil line” – “may appear ambiguous to consumers as to whether
the companies are associated with each other.”
The court found
Zotos’ intent neutral; it was obviously aware of Moroccanoil but there was no evidence
of intent to confuse.
Overall, the factors
favored Moroccanoil.
Irreparable harm: since
Zotos was targeting Moroccanoil with its like/love ads, Moroccanoil argued that
Zotos was interfering with Moroccanoil’s ability to maintain its image as a
premium brand.   Moroccanoil’s expert
report by “an independent consultant in the professional beauty industry”
claimed that once the public perceives a brand is no longer “premium,” it is
“difficult, if not impossible, to reinstate the premium position,” using
examples of beauty brands such as Miss Clairol and Sebastian Shaper “whose ‘premium’
products declined in sales once such products entered the mass market consumer
retail channel.” Given the survey evidence, the court found a risk of
irreparable injury to Moroccanoil’s customer good will and reputation.
The court enjoined
Zotos from distributing its Majestic Oil products in their current packaging.  It accepted Moroccanoil’s testimony that it might
be possible to repackage the product. 
Thus, Majestic Oil could be required to recall the product from Sally
Beauty’s brick-and-mortar stores and distribution centers.

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What’s in the box? Not a valid agreement to arbitrate!

Posted on January 24, 2017 by rtushnet
Norcia v. Samsung
Telecommunications America, LLC, — F.3d —-, 2017 WL 218027, No. 14–16994 (9th
Cir. Jan. 19, 2017)
Norcia brought a
putative class action bringing the usual California claims against Samsung,
alleging that Samsung made misrepresentations as to the performance of the
Galaxy S4 phone. Samsung moved to compel arbitration on the ground that an
arbitration provision contained in a warranty brochure included in the Galaxy
S4 box was binding on Norcia. The court of appeals affirmed the denial of
Samsung’s motion.
Norcia bought his
phone at a Verizon Wireless store.  When
he paid, he got a receipt labelled “Customer Agreement” which included a statement
(in all capital letters) that: “I understand that I am agreeing to …
settlement of disputes by arbitration and other means instead of jury trials,
and other important terms in the Customer Agreement.” Norcia signed the
Customer Agreement, and Verizon Wireless emailed him a copy.
After that, Norcia
took the phone, still in its sealed Samsung box, and a Verizon Wireless employee
opened the box and helped Norcia transfer his contacts from his old phone to
the new phone. Norcia declined the offer by the Verizon Wireless employee to
take the box and the rest of its contents, which included Samsung’s “Standard
Limited Warranty,” which included a statement that “All disputes with Samsung
arising in any way from this limited warranty or the sale, condition or
performance of the products shall be resolved exclusively through final and
binding arbitration, and not by a court or jury.”  The statement continued that purchasers could
opt out of the arbitration agreement by providing notice to Samsung within 30
calendar days of purchase, either through email or by calling a toll-free
telephone number.
“[A]rbitration is a
matter of contract and a party cannot be required to submit to arbitration any
dispute which he has not agreed so to submit.”  Samsung bore the burden of showing agreement
by a preponderance of the evidence.
First, Samsung argued
that including the arbitration provision in the Product Safety & Warranty
Information brochure created a valid contract between Samsung and Norcia.
California law governs contract formation. 
“A party who is bound by a contract is bound by all its terms, whether
or not the party was aware of them.” 
Contracts can be made “in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a
contract.” Silence or inaction isn’t acceptance, unless the offeree has a duty
to respond to an offer and fails to act in the face of this duty (when she’s
given the opportunity to opt out) or the offeree retains the benefit offered.  Nonetheless, silence won’t be consent when
the offeree reasonably did not know that an offer had been made.
Norcia didn’t
expressly assent to any agreement in the brochure, or sign the brochure or
otherwise act in a manner that would show “his intent to use his silence, or
failure to opt out, as a means of accepting the arbitration agreement.” No
exception to the general rule applied; Samsung didn’t identify any duty imposed
on Norcia by California law, nor any previous course of dealing between the
parties. Nor did Norcia retain any benefit by failing to act, given that the brochure
stated that Norcia was entitled to “the benefits of the Limited Warranty”
regardless whether Norcia opted out of the arbitration agreement.  Without “outward manifestations of consent
[that] would lead a reasonable person to believe the offeree has assented to
the agreement,” no contract was formed between Norcia and Samsung.
Samsung argued that
the brochure was analogous to a shrink-wrap license, or to terms included in a
box sent to the consumer, which the Seventh Circuit has held to be enforceable.  The court of appeals first commented that a previous
“unreasoned” Ninth Circuit statement about the enforceability of shrink-wrap
licenses in California wasn’t focused on contract formation, and anyway wasn’t
free from doubt; there were no identified California cases on the subject.
At most, previous
precedent indicated that “a shrink-wrap license of intellectual property is
enforceable in California” when it states on the packaging that opening the
package constitutes consent to the license. But “[e]ven if a license to copy
software could be analogized to a brochure that contains contractual terms, the
outside of the Galaxy S4 box did not notify the consumer that opening the box
would be considered agreement to the terms set forth in the brochure.”  
How about the
in-the-box contract approved by the Seventh Circuit?  In the relevant case, consumers ordered a
computer over the phone, but when the box arrived, it contained the computer
and “a list of terms, said to govern unless the customer return[ed] the
computer within 30 days.”  The Seventh
Circuit stated that “[p]ractical considerations support allowing vendors to
enclose the full legal terms with their products,” and concluded that “[b]y
keeping the computer beyond 30 days, the [buyers] accepted [the seller’s]
offer, including the arbitration clause.”  But California hasn’t adopted that rule
(though it has held that statements in the box can constitute warranties;
warranty and contract law differ).  Even
if in-the-box contracts may be binding under certain circumstances, no contract
is formed “when the writing does not appear to be a contract and the terms are
not called to the attention of the recipient.” 
Samsung’s brochure was
called “Product Safety & Warranty Information.” That title indicated that
the brochure contained safety information and the seller’s warranty. “A
reasonable person in Norcia’s position would not be on notice that the brochure
contained a freestanding obligation outside the scope of the warranty.” Nor
would a reasonable person understand that failing to opt out of an arbitration
provision contained within the warranty constituted assent to a provision
requiring arbitration of all claims
against the seller, including claims not involving the warranty.
Samsung urged the
Ninth Circuit to agree with the Seventh that “the practicalities of consumer
transactions require the enforcement of in-the-box contracts and that consumers
expect that products will come with additional terms.”  Nope. 
Call your legislator if you want a different public policy.

Samsung’s next
argument, that Norcia agreed to arbitrate his claims by signing the Customer
Agreement with Verizon Wireless, was meritless. 
Verizon isn’t Samsung; Samsung isn’t a third-party beneficiary of the
contract. 

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