court doesn’t find consumer protection claim over “sweet cream” plausible without survey; dictionaries insufficient

Sneed v. Ferrero U.S.A., Inc., — F.Supp.3d —-, No. 22 CV
1183, 2023 WL 2019049 (N.D. Ill. Feb. 15, 2023)

Courts in consumer protection cases reject surveys with abandon when they don’t agree with the results, but may also demand them. The court dismissed Sneed’s allegations that Ferrero’s
Kinder Joy eggs were misleading because the label describes the candy as “sweet
cream topped with cocoa wafer bites,” when, in fact, the “cream” is made of
vegetable oils, skim milk powder and whey proteins. Sneed’s argument that
“cream” means a dairy product with a high fat content of at least 18% milkfat relied
on five dictionary definitions and one FDA regulation.

But her complaint recognized the existence of a food
substance known as “artificial cream,” where the milkfat is replaced with
vegetable oils. That meant the question was misleadingness: whether “cream” “has
such a singular and pervasive meaning among the general consuming public that
most consumers believe it to only mean a dairy product with 18% milkfat content
and are therefore likely to be misled by Kinder Joy’s packaging.”

She didn’t successfully allege this. “Although allegations
about the results of consumer surveys are not required as a matter of federal
notice pleading, allegations about how the general consuming public understands
the term ‘cream’ is the kind of thing that makes plausible the conclusory
allegation that ‘sweet cream’ is misleading.” Dictionaries weren’t enough, nor
was it enough that more than half of the package is white and has two large
“drops” of milk and that the front of the package says “sweet cream.” The
ingredient list on the back didn’t include “milk,” “whole milk,” or any other
indication that it is a dairy product with at least 18% milkfat. Plus, there
exist other candies on the market labeled “cream” which are instead made of
artificial cream—Goetze’s “Caramel Creams” (made since 1895), “Cookies ‘n Cream
Bites,” and Twizzlers’ “Filled Twists” that are “orange cream pop” flavor. Dismissed
without prejudice.


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if an allegedly falsely advertised product isn’t useless, P may have standing to seek injunctive relief

Perez v. Bath & Body Works, LLC, No. 21-cv-05606-BLF, 2023
WL 3467207 (N.D. Cal. May 15, 2023)

Interesting analysis of standing for injunctive relief: Where
the product is a useful one, the court finds standing based on a desire to
purchase it again if truthfully labeled.

Perez alleged that defendant BBW falsely claims that
hyaluronic acid, an ingredient in those products, “attracts and retains up to
1,000x its weight in water to make skin look smoother and more supple.” She
brought the usual
California claims

BBW argued that there was no standing for injunctive relief because she alleged
that it was scientifically impossible for hyaluronic acid to retain 1,000x its
weight in water. Past cases have said, among other things, that plaintiffs who
“explained that they were not concerned with phosphoric acid, but rather with
whether Coca-Cola was telling the truth on its product’s labels” lacked
standing because their “desire for Coca-Cola to truthfully label its products,
without more, is insufficient to demonstrate that they have suffered any particularized
adverse effects.” Perez alleged that she wanted to purchase BBW products “that
could help improve the appearance of her skin, including, specifically, Bath
& Body Works Hyaluronic Acid and moisturizing products such as those
described above.” But, she alleged, without professional testing or other
expert evidence, she couldn’t determine if BBW was telling the truth about its
products’ features. Even if the formulation or advertising changes, “as long as
Defendants may use inaccurate representations about the capabilities of their
hyaluronic acid products, then when presented with Defendants’ advertising, Ms.
Perez continues to have no way of determining whether the representations
regarding those capabilities are true.”

The court found these allegations sufficient. As the Ninth
Circuit has said, “the threat of future harm may be the consumer’s plausible
allegations that she will be unable to rely on the product’s advertising or
labeling in the future, and so will not purchase the product although she would
like to.” BBW argued that the Ninth Circuit was dealing with wipes that could
conceivably be flushable, but Perez alleged that the claim here was
scientifically impossible. “But the Court declines to look at the threatened
injury so narrowly.” While “a plaintiff must show ‘a sufficient likelihood that
he will again be wronged in a similar way,’ … [a court] ‘must be careful not to
employ too narrow or technical an approach.’ ” The inability to rely on
defendant’s representations was a “similar” injury.  

BBW argued that a plaintiff needs to allege a desire to
purchase the product as advertised. But a plaintiff can allege “a concrete,
imminent injury” even without alleging a desire to purchase the product “as
advertised.” Also, this case didn’t involve an allegedly worthless product:
“Even if hyaluronic acid cannot retain 1,000 times its weight in water, it is
not necessarily useless as a moisturizer.”

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Why do people fall for pyramid schemes? FTC v. Noland offers examples

v. Noland, 20-cv-00047-DWL (D. Ariz. May 11, 2023)

The decision in FTC v. Noland is notable for its discussion
of the testimony of a number of witnesses supporting the defendant who seem to
have been largely victims of the pyramid scheme found by the court, but
internalized defendant’s messages so strongly that they were unable to see
themselves that way. They often didn’t track expenses or even sales in an
organized way, so they overestimated their net earnings/didn’t notice their net
losses, and seem to have engaged in separate mental accounting of expenses like
attending seminars. They didn’t blame the company for losing money and some
donated large sums to legal defense for the company and its principals. It
gives some depressing insights into how people fall for pyramid schemes and may
stay true believers, thinking only that they themselves have failed to succeed.

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Apple v. Corellium out: 11th Cir. finds copying for security research transformative

v. Corellium, Inc.
, No. 21-12835 (11th Cir. May 8, 2023)

The Eleventh Circuit affirmed the core finding that
Corellium’s copying of iOS for security research purposes was fair use, but vacated
and remanded for further analysis of contributory infringement claims and
claims related to the use of the icons, giving Apple another bite at, etc.

I won’t recap the whole opinion, but I do note that the
court of appeals says, perhaps more explicitly than any other court, that the
question is whether a transformative character may reasonably be perceived, not
limiting that formulation to parody:

[T]ransformativeness does not require
unanimity of purpose—or that the new work be entirely distinct—because works
rarely have one purpose. In assessing whether a work is transformative, the
question has always been “whether a [transformative use] may reasonably
be perceived.” Campbell, 510 U.S. at 582 (emphasis added) (finding that a
parody was transformative even though both a song and its parody serve the same
function of entertainment). We don’t ask whether the new product’s only
purpose is transformative.

We’ll see if Warhol makes that obsolete.

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Trademark and Unfair Competition Scholarship Roundtable 2023 Reminder: Submissions Due May 15, 2023

The Engelberg Center on Innovation Law & Policy will
host this year’s Trademark and Unfair Competition Scholarship Roundtable. The
Roundtable is designed to be a forum for the discussion of current trademark
and right of publicity scholarship, covering a range of methodologies, topics,
and perspectives. Five to six papers will be chosen for discussion over the
course of the Roundtable, with each paper allocated an entire hour for
discussion and assigned a commentator. 

The Roundtable will be held on Friday, October 6, 2023.
Participation at the Roundtable will be limited and invitation-only and we
expect all participants to have read the papers in advance. The Roundtable will
cover the travel and lodging expenses for invited authors. 

We invite submissions from academics working on any aspect
of trademark, false advertising, marketing, right of publicity, or related
areas of the law. Priority will be given to those who can attend the entire
event and a dinner the night of the event. Submissions must be of full drafts
in Microsoft word format. The deadline for submission is May 15, 2023, and
decisions on participation will be made shortly thereafter, ideally, by June

To submit a draft paper, please fill out the form here
( and upload an anonymized version of your draft.  Please note that the maximum file size that
may be uploaded is 10MB. 

For further information about the Roundtable, please email
either: Barton Beebe (NYU):; Jennifer Rothman (Penn):, or Rebecca Tushnet (Harvard):

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Peloton music library class action fails because consumers probably didn’t see the claim

Passman v. Peloton Interactive, Inc., 2023 WL 3195941, No. 19-cv-11711
(LJL) (S.D.N.Y. May 2, 2023)

Interesting discussion of the way in which the objective
reasonable consumer standard allows consumers classes to bring certain probabilistic
claims, where some consumers might have different interpretations, although the
court ultimately denies certification because of damages/price premium issues.

Plaintiffs’ claims under New York law were based on the
offer of an “ever-growing” or “growing” library of live and on-demand studio
classes, which offer was allegedly false because a bunch of classes were pulled
from the library because of unlicensed music use. After it was sued in 2019, Peloton
removed approximately 6,500 on-demand classes from its library, leaving
approximately 7,000 classes available to its members.

The court initially held that problems with plaintiffs’
expert’s conjoint damages model went to weight rather than admissibility, since
it was a model that was consistent with their theory of liability.

Materiality and falsity were common questions subject to an
objective inquiry into how a reasonable consumer would react. Peloton argued that
there was too much variation in how, when, and why consumers bought subscriptions.
“Defendant’s argument confuses the question of whether a reasonable consumer
would likely be misled by an allegedly false advertisement with the separate
question—relevant where reliance is at issue—of whether an individual consumer
was misled by the advertisement….  The
inquiry demands an objective analysis of the understandings a reasonable
consumer would draw from a challenged statement, not the significance of that
challenged statement to an individual consumer’s purchasing decision.” While
context is relevant to that, it’s ad context, not any possible context:

[W]hat is relevant to the analysis
is not the number of products purchased, their exact identity, or the
circumstances under which they were purchased; what matters is the nature of
the allegedly false statement and how consumers interact with the false
statement and therefore understand it. Thus, courts generally have no
difficulty finding named plaintiffs typical of a class so long as the
challenged statement is consistent across the class.

Peloton also argued that falsity wasn’t a common question
because there wasn’t 100% agreement in plaintiffs’ survey on the meaning of “ever-growing”—the
survey found that only 76.5% of respondents thought that “ever growing” meant
“increase over time.” But misleadingness is an objective inquiry. “Evidence
that actual consumers, in fact, interpreted the challenged statement in line
with ‘the plaintiffs’ proffered theory of deception’ is relevant to, and may be
necessary for, the ultimate conclusion that a reasonable consumer would have
been deceived.” But  “the fact that
consumers may have interpreted the statement differently does not preclude
certification.” Differences in understanding might bear on injury, but falsity
itself “cannot differ from case to case or be based upon whether the case is
prosecuted on an individual or a class basis; it turns upon an objective
analysis that applies across cases.”

Nonetheless, because causation, injury and damages weren’t
common among the putative class members, individual questions predominated and
a Rule 23(b)(3) class couldn’t be certified. The evidence submitted didn’t show
a price premium or propose a methodology which could be used to demonstrate a
price premium.

Peloton presented affirmative evidence that there was no
price premium and “compelling evidence” that plaintiffs failed to carry their burden
on predominance. The challenged claim wasn’t on a product label or package:

[N]o purchaser of a Peloton product
need have been exposed to the Challenged Statement and the evidence suggests
that many of the purchasers were not exposed to the Challenged Statement. The
Challenged Statement did not appear in every Peloton advertisement and did not
appear on all of Peloton’s marketing materials. Rather, the Challenged
Statement appeared in a relatively small subset of Peloton’s advertisements, and
did not appear in any television advertisements, which represented Defendant’s
largest advertising channel during the Class Period. The Challenged Statement
also appeared on only four of the 269 pages of Pelton’s website, the primary
place where consumers purchase Peloton products.

Even when it did appear, the claim wasn’t alone or the most
prominent. E.g.: “Experience unlimited access to the world’s best instructors
anytime, anywhere, with 15+ daily live classes and an ever-growing library of
9,000+ classes available on-demand.”

Website tracking data suggested that, at most, 10.99% of
website visitors could have been exposed to the statement, but that didn’t show
that they actually saw/noticed it.Peloton’s expert did a survey about whether
consumers even noticed the claim. She found that only 0.7%-1.3% of the test
group noticed the statement and that there was no statistically significant
difference between the test and control with respect to their conclusions about
the Peloton products after viewing the webpages. And, despite its statements
above, the court also gave weight to plaintiffs’ own survey that showed that
people ascribed “different meanings”: while 76.5% understood that the number of
classes in the Peloton library would increase over time, 61.8% of them expected
the number of classes to increase because no classes would be removed from the
library, while 31.4% believed that more classes would be added than removed.
Also, 79.8% interpreted the statement to mean the number of classes would
increase each day, week, or month, while 3.7% thought the increase would be
annual (the remainder had no view). This wasn’t fatal: “materiality is an objective
inquiry and thus subject to common proof.”

But this evidence does bear on
whether the Challenged Statement could have caused a price impact. That many
had differing views over what the Challenged Statement meant and took different
meaning from it suggests both that the statement did not have a powerful
marketing impact and that those who saw the Challenged Statement may not have
interpreted it in such a way as to give rise to a price premium.

In addition, the price of each relevant Peloton offering
remained constant both before, during, and for almost eighteen months after the
class period. While those results “could perhaps be explained away if there
were other confounding factors, including if Defendant offered something
additional of value to consumers after the takedown or if sales fell markedly,”
Peloton’s expert looked for other confounding factors and found none. The
burden of demonstrating that there was a price premium (and thus that the
predominance requirements of Rule 23(b)(3) have been met) was plaintiffs’ and
they did not satisfy it. Plaintiffs’ conjoint model assumed that individuals
saw and noticed the challenged statement to generate its price premium
calculations, but that assumption wasn’t supported by the evidence. Plaintiffs’
survey also didn’t distinguish the value of Peloton’s library of classes—a Peloton
innovation—from the value of its purported “ever-growing” size.

In addition, plaintiffs didn’t show that there was a model
capable of measuring the damages attributable to their theory of liability,
since their model conflated the existence of a library with its ever-growing
size. “Courts routinely reject price premium methodologies under Comcast when
the proposed methodologies do not attempt to isolate the premium due only to
the allegedly misleading marketing statement.” The model also didn’t consider
the impact of supply-side factors. “Because Defendant might have responded to
the decreased demand by producing fewer Peloton products, the damages of the
putative class members would presumably be less.” Nor did the model “consider
how competitors would have reacted to a decrease in demand for Peloton
products, which could in turn affect the supply of Peloton products.” It would be
different if the products had only one relevant attribute and that attribute
was falsely advertised, since there the entire price paid would be based on
falsity and no price premium analysis would be required. [The hypothetical is a
joint pain cream that doesn’t cure joint pain; note that this is not a
one-attribute product, since there are non-cream treatments for joint pain, so
in fact there are at least two attributes, one of which is true in the hypo.]

The same flaws doomed plaintiffs’ omission theory, which
relied on a consumer survey showing that 48.9% of respondents would be either
extremely or moderately concerned if Peloton were forced by legal action to
remove 50% of their classes. Peloton’s designated witness testified that there
were only “a single-digit number of subscription cancellations that were
directly attributable to … the on-demand classes removed from [Peloton’s]
library in March 2019.”

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Second Circuit finds “therapeutic grade”/physical effects claims for essential oils falsifiable; suggests that lack of substantiation violates NY law

MacNaughton v. Young Living Essential Oils, LC, 2023 WL
3185045, No. 22-0344, — F.4th — (2d Cir. May 2, 2023)

In 2020, NAD found that Young Living’s claims that its essential
oils are “therapeutic-grade” and impart physical and/or mental health benefits were
“unsupported.” But MacNaughton had already spent money on Young Living’s
products, including lavender oil advertised to “promote[] [a] feeling of calm
and fight[] occasional nervous tension” and peppermint oil that allegedly
“helps to maintain energy levels.” Feeling misled by claims that the product
would have effects like “promot[ing] feelings of relaxation & tranquility,”
MacNaughton sued under common law and various state statutes, including NY’s
GBL.  The district court claims that its
products would do things like “help[] to maintain energy levels” was
run-of-the-mill puffery.

Relying on Int’l Code Council, Inc. v. UpCodes Inc., 43
F.4th 46 (2d Cir. 2022), the court of appeals reversed, though it did affirm
the dismissal of warranty claims.

Young Living instructs its salespeople that in “describing
therapeutic-grade oils,” they should mention that “every essential oil . . .
has the highest naturally-occurring blend of constituents to maximize the
desired effect.” The website also formerly contained a statement that though
the therapeutic-grade “promise” was “bold,” the salesperson could “share [the]
products with confidence, knowing that Young Living truly has the experience to
produce essential oils that work.” Similar guarantees remain on Young Living’s
“various blogs and other websites.” Young Living continued to advertise the products
as being “therapeutic-grade.” MacNaughton cited three studies, all of which
conclude there is insufficient evidence to find that aromatherapy is an
effective treatment of anxiety or of any other type of condition.

The breach of warranty claims were properly dismissed
because MacNaughton failed to allege proper notice and privity of contract.

Puffery comes in two forms (1) subjective statements that
cannot be proven true or false and are therefore non-actionable puffery as a
matter of law and (2) objective statements that can be proven true or false but
are so exaggerated that no reasonable buyer could justifiably rely on them.

Under category one, claims that a website designed to
compile construction codes “provides a complete understanding of relevant
material” and that the author of a book on animals “thoroughly researched
dozens and dozens of animals” have been deemed non-actionable puffery as a
matter of law. Under category two, claims can be falsifiable but “so patently
hyperbolic that any allegations that it misled consumers are facially
implausible,” such as a bubblegum brand advertising that its gum permits
chewers to “blow a bubble as big as the moon.” “Yet, if the company falsely
advertised that you could ‘blow a bubble bigger than your own head,’ it is
plausible that a reasonable buyer could be misled.”

“Once the statement is identified as both provable as false
and plausible, a defendant can only prevail on the puffery defense after a
fact-intensive inquiry on how a reasonable buyer would react. That inquiry
cannot be resolved at the pleadings stage.” That was the case here. Young
Living’s statements about its “therapeutic-grade” oils having health and
medicinal benefits are both provable and not “so patently hyperbolic that any
allegations that it misled consumers are facially implausible.”

“Therapeutic-grade” was “not a subjective or vague term, but
rather one that represents the item possesses a degree of quality as to produce
healing.” It was distinguishable from grade + “adjectives that are merely
general representations of superiority” such as “superior grade” or “prime

The ad context was also relevant:

Along with the “therapeutic-grade”
label, Young Living also promised that each Product would produce particular
medicinal or physical effects, such as “promot[ing] a sense of clarity and
focus.”  Additionally, Young Living
directed its salespeople to emphasize that every oil “has the highest
naturally-occurring blend of constituents to maximize the desired effect” and
that “Young Living truly has the experience to produce essential oils that
work.” The accuracy of all these statements and claims is provable. ‘’

NAD/NARB rulings weren’t binding, but were relevant to the plausibility
of deception of a reasonable consumer. These claims were all provable, and they
weren’t patently hyperbolic. Thus, puffery couldn’t be resolved on a motion to

In addition, the court rejected Young Living’s argument that
the plaintiff alleged only lack of substantiation, not falsity. Notably, “Young
Living does not cite any binding case law to support its argument that the New
York General Business Law does not protect against advertising that lacks

Unjust enrichment was also sufficiently pled.

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Pandemic art kit didn’t infringe artist’s rights

 Keck v. Mix Creative Learning Center, LLC, No. 4:21-CV-00430,
2022 WL 19691177 (S.D. Tex. Dec. 19, 2022)

Technically, the trademark analysis here is weird (the
parties agreed that the copyright fair use analysis would determine the
trademark fair use analysis; the plaintiff’s lawyer is Higbee, FWIW), but the
trademark claim is so clearly Dastar-barred and parasitic on the
copyright claims that it’s hard to object.

Keck is a mixed-media artist who registered a trademark in
her name (the court doesn’t specify for what, which is an indication of the
level of attention given the trademark claims). Defendants used a couple of
pictures of her Dog Art work as an example of a style that kids using its art
kits could emulate. The court found that this was fair use and granted summary
judgment to defendants.

During the pandemic, defendants (a local art studio and its
principal) began selling art kits online “so that the students could learn
about media, styles and techniques that world-renowned and lesser-known artists
use, as inspiration for the students to create their own works of art.” According
to Defendants, “[t]he artist’s biography and a sample of the artist’s style of
work was included in each kit to recognize the artist and to document and teach
the particular art style, as well as recognize such works as part of historic
scholarship, promote discussion and criticism, and to inspire each student to
create their own masterpiece works.” The kits included slides “with publicly
available images of the artist’s works along with historical and biographical
information about the artist from, for example, the artist’s publicly available
website.” Defendants provided zoom art classes to accompany the kits. As part
of these lessons, the individual defendant described the artists and their
techniques. Several artists featured in the kits applauded and even reposted
the children’s work on their Instagram accounts.

One such kit was the “Michel Keck inspired dog masterpiece
kit.” The kit consisted of pictures of six pieces of Plaintiff’s art,
biographical slides, and materials such as paint, paint brushes, and collage-style
puzzle pieces “so that the students would have the necessary materials to
create their own masterpieces in the form of mosaics and/or completely new
artworks.” The copies of Keck’s work were made by right-clicking Google images. 

defendant’s ad for art kit

Defendants sold only six of these kits—including two sold to Keck—for gross revenue of $240. Once they received notice of the lawsuit, they removed all art kits from the website. Plaintiff continued to demand $150,000 per work, which can’t have helped the optics.

The use was commercial but transformative. “While Defendants made no alterations to the works, they included the pictures in a kit with tools to allow students to create their own art. Defendants also prepared slides with biographical information on the artists.” Unlike in Warhol v. Goldsmith, the purpose and character was “not to create commercial visual art but to teach children about different artistic styles…. [T]he use of source material, accompanied by biographical information or other scholarship or lessons, transforms art into an educational tool.”

The court noted that defendants weren’t “in the business of selling artistic reproductions and did not sell these kits as works of art themselves. Defendants did not include Keck’s art in the kit for their inherent decorative value but to demonstrate a specific style of art.” The educational purpose didn’t need to be “as rigorous as that provided in a museum exhibit or university art history course.” Defendants also acted in good faith. “They had no warning before this of Plaintiff’s—or any other artist’s—displeasure.”

Interestingly, this all only tilted factor one “slightly” in favor of defendants.

Nature of the work: favored plaintiff, but least important.

Amount/substantiality: not important; six pieces of art were used (the court doesn’t discuss size or resolution).

Market effect: The proper market is not “licensing of any kind” or “merchandising.” “Conceptualizing a defendant’s conduct too broadly would render any unauthorized as harmful to the market for an artist’s work, calling into question the usefulness of this fourth factor.” The proper market was licensing for art kits that use the art as “an example of a particular art style and inspiration for students.” This didn’t show market harm. Moreover, “[t]he widespread use of Plaintiff’s art for educational lessons would likely, if anything, increase her name recognition and commercial value.”

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“same” claim was literally false where probiotics had different strains and different profiles

ExeGi Pharma, LLC v. Brookfield Pharmaceuticals, LLC, —
F.Supp.3d —-, 2023 WL 3142311, No. 20-CV-192-JPS (E.D. Wis. Mar. 21, 2023)

ExeGi sued Brookfield for state and federal false
advertising/tortious interference. The court here resolves only the Lanham Act
claims, partially in ExeGi’s favor.

The parties compete in the market for probiotics. ExeGi
sells Visbiome; Brookfield sells HPP as a food product. “To the extent HPP is
marketed as a medical food and deemed a medical food, it is required to be
consumed under the supervision of a physician.” Brookfield attempted to copy
Visbiome’s formulation based on its expired patent; HPP is produced in a
different manufacturing facility than Visbiome, under different conditions, but
was made with the same species of bacteria as were listed on the expired patent
for the formulation of Visbiome plus an additional species of bacteria. Prior
to the expiration of the patent, however, three of the strains listed in the
patent were reclassified as different strains from different species. “Thus,
HPP has three species of bacteria not in the formulation of Visbiome, and
Visbiome has one species of bacteria not in the formulation of HPP.” Also of
relevance, “[d]ifferent strains of bacteria within the same genus and species
can have different functionalities in and benefits to the human body, and can
have widely differing performance characteristics and modes of action.… HPP and
Visbiome have sufficiently different metabolic profiles, meaning the two
products are … genetically and biologically different.”

Visbiome “is one of the most extensively studied probiotics
on the market, having been the subject of more than 70 human clinical trials.”  

Brookfield “formulated” HPP “as a generic to” Visbiome. Its
label doesn’t list the exact quantity of each bacteria species or strain
designation, noting instead that its blend of bacteria is proprietary. The
label indicates that HPP is a medical food for the dietary management of
dysbiosis associated with gastrointestinal conditions such as irritable bowel
syndrome and ulcerative colitis. It doesn’t explicitly claim to have been the
subject of tests or studies. The insert says:

High Potency Probiotic Capsules are
labeled as a medical food as defined by the Orphan Drug Act and additional FDA
regulations. … This medical food is not subject to NDA or ANDA approval and is
not an Orange Book product. This product is intended to be used under active
medical supervision.

These statements have not been
evaluated by the Food and Drug Administration. This product is not intended to
diagnose, treat, cure or prevent any disease.


High Potency Probiotic Capsules are
intended for the dietary management of individuals with distinct nutritional
requirements relating to dysbiosis associated with GI conditions such as IBS
and [ulcerative colitis]. High Potency Probiotic Capsules are a non-drug
medical food that addresses distinct nutritional requirements to promote
microbial balance in people with dysbiosis associated with IBS that cannot be
achieved by modification of diet alone.

Maintenance of a healthy gut
microbiota contributes to an overall healthy gastrointestinal environment.

Brookfield relied upon a summary of scientific literature to
support its dietary management claims, along with dossiers created for each of
the bacteria used in HPP. No clinical trials have been performed on the HPP
formulation as a whole. With regard to the nine individual strains of bacteria
contained in HPP, there have been no clinical studies performed on five of
those strains.

It also made a number of comparative claims that it was
generic, comparable, comparable generic, compared to, competed against, had the
“same strains,” had the “same probiotic bacteria,” and had the same GCN as
Visbiome (a GCN is a standard number assigned by a drug pricing service to
drugs). Although there don’t seem to have been surveys on this, “[m]ost of the
public and some clinicians incorrectly refer to genus and species as ‘strains.’”

Brookfield identified its primary customers for HPP as “the
large pharmaceutical wholesalers” and retail pharmacies, the latter using
rebate programs that typically involve incentivizing one choice over another
generic.  It didn’t advertise directly to
clinicians or consumers, aside from the product label and package insert.

Brookfield represented in communications directly to
individual retailers that it has the “same strains” of bacteria as Visbiome. A Brookfield
witness clarified that this statement was not intended to mean that the
products contained “all of the same strains,” but rather “many of the same
strains.” Its scripted answer to questions regarding similarities is: “Brookfield’s
High Potency Probiotic Capsules contain the same probiotic bacteria in the same
total potency per capsule (112.5 billion bacteria) as (Visbiome). Since precise
formulas are proprietary, we are unable to make an exact comparison to (Visbiome).”

First Databank, the largest of the drug compendia, groups
drug and non-drug products under the same GCN if they have the same active
ingredients, dosage form, route of administration, and strength. The parties’
products were at one time given the same GCN code, but that is no longer true. Brookfield
initially represented to First Databank that HPP contains eight probiotic
strains, rather than the nine it actually contains, which was corrected in 2019,
when a revised label with nine strains was submitted. Brookfield also represented
to First Databank that its product was a “Generic Equivalent” of VSL #3 and
Visbiome and a “medical food.” It made similar statements to other drug compendia
and wholesalers.

Brookfield’s witness testified that listing VSL #3 and
Visbiome as products to which HPP is a “generic equivalent” on the HDA form
“point[s]” recipients of the form “in the right direction of what these
products are similar to,” though it was not accurate to refer to HPP as a
generic equivalent of Visbiome because that term only has meaning in a drug
context. ExeGi’s expert also stated that this was inaccurate because HPP and
Visbiome are “genetically [and] biologically … different.”

Unlike a drug, a medical food cannot claim to prevent,
treat, cure or mitigate the symptoms of a disease without making a drug claim
that would require FDA approval. The statute defines a medical food as “a food
which is formulated to be consumed or administered enterally under the
supervision of a physician and which is intended for the specific dietary
management of a disease or condition for which distinctive nutritional
requirements, based on recognized scientific principles, are established by
medical evaluation.” But what constitutes an established “distinctive
nutritional requirement” is not specifically defined by the FDA. The FDA
inspected the facility that was manufacturing HPP, and they requested HPP’s
label and packaging insert. It has not initiated any enforcement action as a
result of its investigation.

The FDA’s Orange Book provides therapeutic equivalence
evaluations, but it doesn’t apply to medical foods.

Did the non-label/package statements qualify as “commercial
advertising or promotion”?  Yes:
Brookfield disseminated information about HPP to the three largest
pharmaceutical wholesalers, as well as directly to individual retailers. These communications
were more than “purely negotiation of individual contracts, but rather
encompass a variety of media through which Brookfield represented information
about HPP.”

FDA/FDCA preclusion: ExeGi argued that it wasn’t asking the
court to rule on whether HPP was actually a medical food, but whether
Brookfield held HPP out as a medical food “despite having no data upon which to
make such claims and affirmatively determining not to gather such data.” That
didn’t avoid preclusion: “analyzing the quality of the data proffered by
Brookfield in support of its claim that HPP is a medical food—or even
determining that there is no data at all, as ExeGi would have the Court
find—would require it to analyze an area that the FDA has expressly held out as
its own for rulemaking.” Summary judgment granted to Brookfield as to this
aspect of the case.

Literal falsity of the other statements: The court rehearsed
the Seventh Circuit’s rather incoherent treatment of literal falsity, including
the challenging statement that “‘literal’ must be understood in the common
colloquial sense in which Americans … say things like ‘I am literally out of
my mind.’ ” Consistent with the Seventh Circuit’s, let’s say confident,
approach to judicial factfinding, the court found literal falsity as to “same”
claims but not “generic” claims.

Brookfield argued that “same” claims weren’t literally false
because, in context, it didn’t mean

“all of the same strains,” but rather “many of the same
strains.” The Court disagreed. Dictionaries define “same” as “identical or
equal; resembling in every relevant respect” and “resembling in every relevant
respect; being one without addition, change, or discontinuance.” The products
aren’t the same in that way.  “[D]ifferent
strains of bacteria within the same genus and species can provide different
benefits to the human body, function differently in the human body, and have ‘widely
differing’ performance characteristics and modes of action, as well as ‘sufficiently
different’ metabolic profiles.” [Whose burden is it to show that “can” is “do”
here?] Visbiome has also been the subject of over 70 human clinical trials,
while HPP has not. “Same” was thus literally false. Even if Brookfield meant to
say the “same species” instead of the “same strains,” that statement would
still be literally false.

Brookfield argued that “same” didn’t mean “all the same,”
but it required the court to read “same” as “many of the same” or “some of the same.”

defies common sense. In the Court’s
view, the word “same” unambiguously and unequivocally means “identical” or
“equivalent” and, based on the undisputed evidence before it, “could not
reasonably be understood to mean anything different.”

Generic/generic equivalent: There was a disputed issue of
material fact on whether “generic” or “generic equivalent” had to mean “identical”
in the context of non-FDA-approved medical foods. Brookfield noted that ExeGi
hadn’t performed any testing to disprove genericity or evidence about the
meaning of these terms in the context of non-drug products that are not subject
to FDA approval. The parties offered conflicting evidence on whether “generic”
meant “can be used as a substitute,” could apply to products with different strains,
meant “lower-cost alternative of a similar product,” etc. But Brookfield didn’t
show any relevant industry evidence to support its definition of “generic
equivalent,” and its own testimony showed that it didn’t consider that HPP was
a generic equivalent to Visbiome (it argued that it had used the phrase on a
form that presumed FDA-approved drug status and was trying to fit a square peg in
a round hole), so that was literally false:

The undisputed evidence indicates
that industry players view the term “generic equivalent” as meaning a “substitute”
for or an “equivalent” to another product. Thus, the undisputed
evidence—particularly that products with different strains of bacteria within
the same genus and species can have widely differing effects—makes it wholly
clear to the Court that calling these products “generic equivalents” is
literally false.

Materiality: Materially requires only a likely effect, not
an actual effect, on consumers, so disputes over whether the challenged statements
actually influenced drug compendia’s, wholesalers’, retailers’, or ultimate
consumers’ decisions as to HPP compared to Visbiome were immaterial. Factors
that go to materiality of a representation include “(1) consumer motivation,
which typically considers the importance of the product or service feature to
which a misrepresentation is directed; (2) consumer reliance, which considers
how a misrepresentation is used; and (3) consumer concern, which considers the
extent to which a misrepresentation departs from the facts.”

The challenged statements were material, given Brookfield’s
marketing goal to get the same GCN as Visbiome. It was irrelevant that drug
compendia relied only upon the labels of the products, and not the form
claiming “generic equivalence,” in assigning GCNs. “This fact is immaterial
given the legal standard of capacity to influence choice, rather than actual
influence. While evidence of actual influence is a factor, it is not
dispositive.” [Interesting interaction with Article III standing, it seems to
me.] Emails from customers inquiring whether Visbiome is the “same” as HPP,
among other evidence, showed that equivalence was “a product feature of concern
to consumers.”

Actual/likely injury: ExeGi showed evidence of sales
diversion, including customer statements explaining that they wanted to buy
Visbiome but were sold HPP instead, including one customer who complained to
ExeGi that a pharmacist informed her that HPP was the same as Visbiome and
FDA-approved, both of which were literally false.

The common-law unfair competition claim received the same
treatment; tortious interference with contract had genuine factual issues that
precluded summary judgment.

The court also found permanent injunctive relief appropriate.
“[T]he scope of ExeGi’s proposed permanent injunction would not remove HPP from
the market; it would address only cessation of the challenged statements” that
the court found literally false.

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in a Lanham Act (false advertising) case, presumptions cannot substitute for Article III injury

TocMail, Inc. v. Microsoft Corp., — F.4th —-, 2023 WL
3070085, No. 22-10223 (11th Cir. Apr. 25 2023)

Previous district
court opinion
allowing Lanham Act false advertising claims to proceed
against Microsoft; applying the Article III analysis that doesn’t (yet?) get applied to
trademark claims, the court of appeals concludes there’s no standing and thus
no jurisdiction over the appeal.

TocMail “offers a product geared towards a specific type of
threat called Internet Protocol (IP) evasion. TocMail launched its IP-evasion
product, got a patent, and then sued Microsoft for false advertising—all within
two months.” It alleged that Microsoft misled the public into believing that
Microsoft’s product offered protection from IP evasion. But at summary judgment
it failed to show any injury.

Microsoft’s Safe Links, part of its larger product,
evaluated links as users clicked on them; the parties disputed whether it
protected users from IP evasion, which occurs when a link sends visitors to
different websites depending on the visitor’s IP address, thus attempting to send
a security program to one (safe) website and the real user to another
(malicious) website. Microsoft’s ads included statements like:

Sophisticated attackers will plan
to ensure links pass through the first round of security filters. They do this
by making the links benign, only to weaponize them after the message is
delivered, altering the destination of the links to a malicious site. With Safe
Links, we are able to protect users right at the point of click by checking the
link for reputation and triggering detonation if necessary.

As a new market entrant,

TocMail hasn’t done much to market
its product. In bringing its product to market, TocMail has issued two press
releases, sent some emails to potential investors, and spent a few thousand
dollars on digital advertising. That’s essentially it. TocMail hasn’t made any sales.
TocMail admits that, although over 33,000 people have visited its website, it
has not made a single sale and has zero revenue. There’s no evidence that
TocMail has achieved any reputation in the marketplace.

It nonetheless estimated, based on Microsoft’s sales, “more
than $43 billion in lost profits.”

While the harm theory might have survived a motion to
dismiss, TocMail didn’t offer any expert testimony on damages causation,
relying instead on the presumption of injury that some courts have held arises
in a two-player market. According to TocMail, “TocMail and Microsoft are the
only cybersecurity vendors that promote their cloud-based, time-of-click
services as effective protection against IP evasion.” Given Microsoft’s dominance,
TocMail argued, consumers would believe Microsoft over a startup. And TocMail pointed
to evidence that one of Microsoft’s customers, Bosch, raised concerns about IP
evasion and asked Microsoft if it would need to add a third-party solution for
additional protection. Microsoft responded that Bosch “should be covered for
email-based threats” with “the full suite of [Advanced Threat Protection] and
the right best practices.” At the same time, Microsoft said that it “of course
encourage[s] customers to take a multi-tiered approach to security.” And it
noted that it was “exploring new ideas” to prevent IP evasion.

The district court granted summary judgment for Microsoft on
failure to show falsity or misleadingness, but the court of appeals had to do
Article III first.

TocMail failed to show injury in fact. It didn’t offer
testimony from any witness saying that he or she would have purchased TocMail’s
product if not for Microsoft’s advertising, any expert testimony calculating
TocMail’s lost sales from consumers who went with Microsoft (its expert instead
calculated lost profits by assuming that TocMail would have sold to everyone
who paid for Microsoft’s product), or a survey showing that consumers had any
interest in buying TocMail’s product. When it sued, it had done minimal
advertising, and hasn’t made a single sale. Any harm was pure speculation. There
was no evidence that the website visitors who declined to buy the product had
even seen Microsoft’s advertising or bought Microsoft’s product. As to the
customer who asked about IP evasion, TocMail didn’t depose anyone from that
customer or provide other evidence that it would have bought from TocMail. The Supreme
Court has indicated its “reluctance to endorse standing theories that rest on
speculation about the decisions of independent actors.” [Ed. note: Like trademark
claims do?]

TocMail’s claim was too hypothetical and uncertain, given that
it assumed: “(1) that consumers read Microsoft’s advertising, (2) that
consumers understand IP evasion, (3) that consumers are concerned about IP
evasion, (4) that consumers would be willing to buy computer security programs
from a company without any reputation, (5) that consumers would pay the price
TocMail is charging, and so on.”

“All TocMail needed was some evidence that it suffered an
injury: some testimony, some survey, some report. But TocMail has none.” What about
presuming injury from being in a two-player market? Well, that presumption has
been applied to the merits, not standing. “While it may make sense to presume
injury in assessing the merits, presuming an injury in fact for purposes of
standing would raise serious constitutional questions.” [Ed. note: Cf. the TMA’s
presumption of irreparable injury.] “A legal presumption would seem to fall
short of showing (through specific facts) a concrete and actual injury.”

Moreover, a presumption of injury from a two-player market “is
based on an assumption about how third parties will behave. But this
presumption collides head on with the Supreme Court’s ‘reluctance to endorse
standing theories that rest on speculation about the decisions of independent
actors.’ … In short, we can’t presume an injury in fact.”

The court here agreed with Hutchinson v. Pfeil, 211 F.3d 515
(10th Cir. 2000), which held that a presumption of injury alone cannot serve to
prove standing. The cases that use the presumption of injury “merely support
the proposition that when a plaintiff with an otherwise sufficient interest to
have standing shows that its interest has been subjected to patently false
representations, harm sufficient to sustain a claim and justify equitable
relief may be presumed” (also citing Ortho Pharm. Corp. v. Cosprophar, Inc., 32
F.3d 690, 697 (2d Cir. 1994) (“Because consumer behavior is unpredictable, and
because of the general rule in our [c]ircuit against making presumptions of
injury … favorable to the plaintiff, we affirm the district court’s decision
dismissing [the plaintiff’s] Lanham Act claims for lack of standing.”)). “The
presumption cannot be used to show Article III standing.”

Is INTA worried yet? 

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