court rejects survey indicating consumers think “white chips” have white chocolate

Cheslow v. Ghirardelli Chocolate Co., No. 19-cv-07467-PJH,
— F.Supp.3d —-, 2020 WL 4039365 (N.D. Cal. Jul. 17, 2020) 

Plaintiffs brought the usual California claims against Ghirardelli’s
“Premium Baking Chips Classic White Chips.” They sought to bolster the
plausibility of the complaint by including a consumer survey about whether the labeling
misleads consumers into believing that the product contains white chocolate. 1,278
respondents were asked about one of four products: Ghirardelli’s Classic White
Chips, Nestle Toll House’s Premier White Morsels, Target’s Market Pantry White
Baking Morsels, and Walmart’s White Baking Chips, e.g., “Based on your review
of this package, do you think that this product contains white chocolate?” 

According to the results, 91.88% of respondents indicated
that they believed the product contained white chocolate. In response to “If,
after purchasing this Product, you learned that the Product contained no white
chocolate or chocolate of any kind, would you be less or more satisfied with
you purchase?” 64.69% of respondents answered that they would either be “much
less satisfied” or “somewhat less satisfied.” Similar percentages responded
that they would be much or somewhat less likely to purchase the product again. 

Each named plaintiff also alleged with greater specificity
than in the first complaint the reasons why they were deceived by the packaging
and why they relied on the product’s package. “For example, Cheslow desired
white chocolate chips to bake holiday cookies, bars, and brownies and found the
product in a section of a Target store labeled ‘chocolate chips.’” Plaintiffs
also alleged facts about the history of chocolate and the attributes of white
chocolate to support the allegation that chocolate is perceived to be a unique,
irreplaceable product and that reasonable consumers do not think they are
purchasing a “cheap knock-off pretending to be chocolate.” 

None of this worked.

In dismissing the previous version of the complaint, the
court held that “white” in “white chips” was a color reference, so “it would
not be appropriate to base liability off of a misunderstanding of that word.”
[Ah, those silly consumers—not misled, but just misunderstanding.] Likewise,
for the images of baking chips and cookies with chips, “it would be
unreasonable to draw a specific qualitative message about a product from an
image on that product.” Since there was nothing deceptive on the front of the
package, plaintiffs couldn’t reasonably ignore the ingredients label, which didn’t
include the words chocolate or cocoa. The placement of the product in the
grocery aisle wasn’t alleged to be under defendant’s control, and anyway it wasn’t
reasonable to draw any conclusion from its placement. 

The court declined to revisit its holding that “white”
definitely means a color, no matter what the context (I assume it would be
happy to get a “flat white” that was a smooth cup of milk), and so considered
the new allegations in isolation. 

Citing Becerra v. Dr. Pepper/Seven Up, Inc., 945 F.3d 1225
(9th Cir. 2019), which dealt with the meaning of “diet,” Ghirardelli argued
that the court should reject the survey. The court agreed. Just as, survey
notwithstanding, “a reasonable consumer would still understand ‘diet’ in this
context to be a relative claim about the calorie or sugar content of the
product,” it was still the case that understanding “white” in “white chips” to
mean “white chocolate” was unreasonable. So Becerra posed a legally
identical question: “whether a consumer survey can shift the prevailing
reasonable understanding that white chips does not include chocolate.” [Where
does the “prevailing” understanding come from? Prevailing here means winning,
not widespread—reasonableness as courts implement it is a normative concept.
But being explicit about that is a bit embarrassing for a system that is supposedly
dedicated to consumer protection. My own view about the reasonable consumer
construct is that it should be more empirical in cases like this one, as “[a]
drunken man is as much entitled to a safe street as a sober one, and much more
in need of it,” Robinson v. Pioche, Bayerque & Co., 5 Cal. 460 (1855).]  

The court noted that a survey can bolster a plausible claim but
can’t make an implausible claim plausible. [No epistemological modesty here,
even on a motion to dismiss! I should be clear: this is a readily available
reading of Becerra; the court here isn’t going off on a frolic of its
own. That’s just a problem with a standard that says that likely deception has
to be alleged but then rejects evidence of actual consumer reaction—the magic
happens where the court posits, without saying outright, that a substantial–here, nearly unanimous–majority of consumers are unreasonable in what they think words mean, and
therefore marketer exploitation of their “misunderstanding” is acceptable.] 

Anyway, the survey was bad because it only showed respondents
the front panel of the packages; consumers aren’t entitled to disregard the
ingredient list in the absence of a deceptive front panel.

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does unclean hands require actual deception? answers may differ for TM/false advertising

Certified Nutraceuticals, Inc. v. Avicenna Nutraceutical,
LLC, No. 18-56631, — Fed.Appx. —-, 2020 WL 4037411 (9th Cir. Jul. 17, 2020) 

This memorandum opinion comes with a partial dissent calling
out the majority’s differential treatment of §43(a)(1)(A) and (B) claims for
unclean hands purposes. The district court rejected Certified’s false
advertising claim based on misstatements about the patented nature of
Avicenna’s products because Certified had made similar false claims about its
products. The court of appeals affirmed. Unclean hands “requires balancing the
alleged wrongdoing of the plaintiff against that of the defendant,” and the
district court did that. Unclean hands also “requires a finding of
inequitableness or bad faith,” including “any willful act concerning the cause
of action or bad faith relative to the matter.” Although evidence of actual consumer
deception is relevant, and although in trademark cases the Ninth Circuit requires
a showing that the “plaintiff used the trademark to deceive consumers,” it was
enough here to determine that Certified knowingly made false statements about the
patented nature of its directly competing product. 

Judge Paez would have reversed on unclean hands. Sufficient
inequitable conduct in trademark cases requires proof of actual deception. [Side
note: I’m not sure this was a correct description—cases often say things like “show
that plaintiff used the trademark to deceive consumers,” but “used to deceive”
and “actually deceived” could differ a lot depending on how much one values
intent versus effect, and the prior cases don’t seem to have turned on the
distinction. However, this case plus the dissent makes it more likely that, going
forward, evidence of actual deception will be required in trademark cases instead
of just highly probative. Cf. Republic Molding Corp. v. B.W. Photo Utils., 319
F.2d 347 (9th Cir. 1963) (stating that the “extent of actual harm caused by the
conduct in question” is “highly relevant” to whether the plaintiff’s conduct
was inequitable).] 

Here, the district court made no finding about actual
deception. Affirming therefore drew a distinction between trademark and false
advertising claims that didn’t exist. Prior false advertising claims rejected unclean
hands where “[o]ur review of the record reveal[ed] no evidence of actual deception
caused by plaintiffs’ advertising,” TrafficSchool.com, Inc. v. Edriver Inc.,
653 F.3d 820 (9th Cir. 2011), or where the plaintiff showed only the knowing
falsity of a claim, Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829
(9th Cir. 2002). Thus, Judge Paez dissented in part.

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calling pork “prime” doesn’t misleadingly imply USDA grading

Davis v. Fresh
Market, Inc., 2020 WL 3489369, No. 19-CV-24245-PCH (S.D. Fla. Jun. 26, 2020)
 

Plaintiffs alleged
that defendants violated Florida consumer protection law by misrepresenting,
via the name, that their Chairman’s Reserve Prime Pork product had been graded
prime by the USDA, even though the USDA does not grade pork (and approved the
product name). Plaintiffs alleged additional statements, such as a newsletter
stating, “Just like prime beef, the new Chairman’s Reserve Prime Pork is the
upper-echelon of quality in terms of having superior marbling …. ‘We’re excited
to provide our guests with fresh pork that’s the same caliber as our prime beef
offerings….”; a quote from Tyson’s President of marketing and premium
products reading, “People know of ‘prime.’ They get it right away”; a website
displaying images of prime pork next to prime beef; and the like. But
defendants never used the term “USDA.” The court found the theory implausible.
 

First, USDA approval
of the name/labeling wasn’t preemptive. While FDUTPA doesn’t apply to an “act
or practice required or specifically permitted by federal or state law,” there
was no approval of the promotional materials; the USDA has no authority to
regulate ads in conjunction with labels.
 

However, plaintiffs’
theory was still unpersuasive because there were no allegations that the
defendants did anything to communicate that the USDA even grades pork; they
didn’t claim that the product is graded. According to defendants, plaintiffs’
theory assumed that a reasonable consumer would be aware of USDA’s grading
scheme for beef but not aware that there was no such scheme for pork. This was
implausible: “A reasonable consumer sufficiently familiar with USDA grading
would note the absence of the term ‘USDA.’”

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flushable wipes injunctive relief class must go, damages class can stay

Kurtz v. Costco
Wholesale Corp., — Fed.Appx. —-, 2020 WL 3480830, Nos. 17-1856-cv,
17-1858-cv (2d Cir. Jun. 26, 2020)
 

This is a flushable
wipes case. The court of appeals decertifies an injunctive relief class under
NY law, but allows a damages class to proceed on a price premium theory.
There’s no likelihood of future injury here because the named plaintiff didn’t
claim that he intended to purchase additional flushable wipes. [Side note: the
doctrine that individual class representatives have to have separate Article
III standing for each type of relief sought, even if they plainly have Article
III standing to seek some other kind of relief, is a consequence of
precedent protecting the police against
private litigation seeking to make them stop killing people
! Like qualified immunity, it doesn’t strike
me as a very good rule.]
 

Although defendants
offered objections to plaintiffs’ expert’s regression model, that went to
probative value and not admissibility; the district court didn’t abuse its
discretion in allowing the case to proceed. (Here, the expert arguably failed
to consider some significant variables, and the regression allegedly didn’t
produce a price premium if the time frame is shifted or if additional products were
included in the underlying dataset, but the expert testified that changing the
timeframe of his model while making appropriate adjustments to other variables
still yielded a price premium, and the district court found that Weir used a
sufficiently wide range of sources to render the end-result “statistically
reliable.”)
 

Comcast Corp. v.
Behrend, 569 U.S. 27 (2014), held that “a model purporting to serve as evidence
of damages in [a] class action must measure only those damages attributable to
that theory.” But plaintiff’s model did that: it purported to measure the price
premium attributable to the allegedly false “flushable” label. The class action
was a perfectly good way to resolve the common question of whether the model
was any good.

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NY high court reiterates that “consumer-oriented” is broad, covers statements to thousands of gov’t employees

Plavin v. Group
Health Inc., 35 N.Y.3d 1 (Mar. 24, 2020)
 

The Third Circuit
certified to NY’s highest court whether a plaintiff “sufficiently alleged
consumer-oriented conduct to assert claims under General Business Law §§ 349
and 350 for damages incurred due to an insurance company’s alleged materially
misleading representations made directly to the City of New York’s employees
and retirees about the terms of its insurance plan to induce them to select its
plan from among the 11 health insurance plans made available to over 600,000
current and former City employees.” Yes, it did.
 

The plaintiff
alleged that the summary materials he received about the health plan were
misleading about various matters, including out-of-network reimbursement rates
and coverage. The district court held that, because “the alleged deception
[arose] out of a private contract negotiated between” GHI and the City—“two
sophisticated institutions,” the conduct wasn’t consumer-oriented because the
City had contracted with GHI on behalf of its employees and, therefore, “[t]he
contract was aimed to benefit only a circumscribed class of individuals.”
 

Previous cases used
language such as “[i]n contrast to a private contract dispute as to policy
coverage, the practices before us involved an extensive marketing scheme that
had ‘a broader impact on consumers at large’ ” and“[d]efendants’ alleged
multi-media dissemination of information to the public [was] precisely the sort
of consumer-oriented conduct that is targeted by General Business Law §§ 349
and 350 … even though the subject of the conduct was in vitro fertilization.”
But claims are rejected when the plaintiff alleges only “a private contract
dispute over policy coverage and the processing of a claim which is unique to
the[ ] parties, not conduct which affects the consuming public at large.”
 

Here, although the
underlying insurance contract was negotiated by sophisticated entities, “neither
plaintiff, nor any of the other hundreds of thousands of employees and retirees
who participated …, were participants in its negotiation and, critically, that
negotiation was followed by an open enrollment period, which exposed City
employees and retirees to marketing resembling a traditional consumer sales
environment.” That marketing was what was allegedly misleading, not the
contract between the City and GHI. Competition between insurers for subscribers
during the the open enrollment period “resembles the sort of sales
marketplace—characterized by groups of similarly-situated consumers subjected
to the competitive tactics of a relatively more powerful business—that GBL
claims were intended to address.”

 

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Booking.com: validity continues to be disconnected from scope of rights

U.S. Patent &
Trademark Office v. Booking.com B.V., No. 19–46 (Jun. 30, 2020)

Kind of what I expected, though maybe a little worse in its disregard of scope issues.

Ginsburg writes the
majority (Sotomayor concurred and Breyer dissented).
 

“Generic.com” is only
generic for a class of goods or services “if the term has that meaning to
consumers,” and the evidence hree showed that consumers don’t perceive “booking.com”
to signify online hotel-reservation services as a class. So, the Court clears
the way to register a lot of these domain names, because this is not on
its face a holding about how booking.com has secondary meaning, it is a holding
about how the PTO didn’t meet the burden of showing that consumers perceive
booking.com as the name of a service.
 

Along the way, the
Court cites the parties’ agreement that “for a compound term, the distinctiveness
inquiry trains on the term’s meaning as a whole, not its parts in isolation.” And
“the relevant meaning of a term is its meaning to consumers.” Although the
Lanham Act provision that “[t]he primary significance of the registered mark to
the relevant public . . . shall be the test for determining whether the
registered mark has become the generic name of goods or services” speaks
directly by its terms only to cancellation, 15 U.S.C. §1064(3), it sets the
standard for genericity generally. However, today’s rule “does not depend on
whether one meaning among several is ‘primary.’ Sufficient to resolve this case
is the undisputed principle that consumer perception demarcates a term’s
meaning.”
 

Since consumers don’t
perceive Travelocity as a “Booking.com,” it is not generic. Goodyear’s India
Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U. S. 598 (1888), held that a
generic corporate designation added to a generic term does not create a protectable
term because it adds no additional meaning. But .com might “also convey to
consumers a source-identifying characteristic: an association with a particular
website,” because only one entity can have a particular domain name at a time.
Since consumers know that, a consumer can infer entity-designating function. (Footnote:
this doesn’t constitute utilitarian functionality, which isn’t at issue here.)
 

Comment: this
reasoning goes even further than the above and suggests what the district court
held, which is that individual domain names are likely to be inherently
distinctive because of this automatic (de facto) assumption. But the ability of
a term to distinguish this entity from other entities or domain names doesn’t seem to
come into this reasoning at all, even though it probably should. How easily
will consumers remember: was it flower.com or flowers.com?
 

Anyway, Goodyear’s
rule is more modest than the PTO argued: “A compound of generic elements is
generic if the combination yields no additional meaning to consumers capable of
distinguishing the goods or services.”
 

There is no
automatic classification of generic.com as nongeneric, the Court says, but the
test doesn’t give any weight to the genericity of what comes before the dot; it’s
only whether the full term is perceived as the name of a class. “Evidence
informing that inquiry can include not only consumer surveys, but also
dictionaries, usage by consumers and competitors, and any other source of
evidence bearing on how consumers perceive a term’s meaning.” As to surveys,
they “can be helpful evidence of consumer perception but require care in their
design and interpretation.” We get a cite to our amicus brief noting that “survey
respondents may conflate the fact that domain names are exclusive with a
conclusion that a given ‘generic.com’ term has achieved secondary meaning.” But
difficult questions aren’t posed here because the PTO didn’t contest the lower
courts’ assessment of consumer perception of booking.com specifically.
 

The PTO’s real objection
wasn’t to Booking’s exclusive use of “Booking.com” as a mark, but to the risk
of “undue control” over similar language “that others should remain free to
use.” However, the Court thought that trademark law’s existing protections for
descriptive uses sufficed: first, only confusing uses are infringing, and
weaker/more descriptive marks are less likely to be confused:
 

When a mark incorporates generic or highly descriptive components,
consumers are less likely to think that other uses of the common element
emanate from the mark’s owner. Similarly, “[i]n a ‘crowded’ field of look-alike
marks” (e.g., hotel names including the word “grand”), consumers “may have
learned to carefully pick out” one mark from another. And even where some consumer
confusion exists, the doctrine known as classic fair use, protects from
liability anyone who uses a descriptive term, “fairly and in good faith” and
“otherwise than as a mark,” merely to describe her own goods.
 

[I note that putting
a generic term in one’s domain name is likely to be pretty risky for descriptive
fair use, given “otherwise than as a mark.”]
 

Booking.com concedes
that its mark would be “weak” and that “close variations are unlikely to
infringe.” [And we will now rely on courts to ensure that it and other users of
generic.coms stick to that concession—but since the US doesn’t have a cause of
action for unjustified threats relating to IP, the C&D letters can be
pretty aggressive regardless of the likely litigation outcome, and it’s really
hard to get a fee shift as a successful defendant, especially if (as they often
do) courts treat having a valid mark as making any assertion of infringement
reasonable.]
 

The competitive
advantage conferred by seizing on a descriptive domain name doesn’t justify
refusing registration. All descriptive terms “are intuitively linked to the
product or service and thus might be easy for consumers to find using a search
engine or telephone directory,” but they’re still registrable. And the exclusive
connection between a domain name and its owner “makes trademark protection more
appropriate, not less.” [And here is the issue that European systems will find
much easier to resolve than ours: that statement makes perfect sense if we
aren’t worried about scope at all
. But we should be!]
 

Unfair competition
law isn’t a good enough substitute for registration because registration
confers valuable benefits, such as under ACPA and the UDRP.
 

Sotomayor,
concurring. There’s no (nearly) per se rule against generic.com registrations.
However, consumer-survey evidence “may be an unreliable indicator of
genericness.” But the Court’s opinion doesn’t make surveys “the be-all and
end-all.” Given the availability of other evidence and the weaknesses of
surveys, the PTO might have been right about genericity here and the district
court may have been wrong; that’s just not the question before the Court. [Although
it is the way to bet about how errors will go, given the parties’ resources. In
other cases like Wal-Mart, the false positive issue has led the Court to
more restrictive rules—but because the Court generally does want to hold out
the prospect of some protection in such cases, the overall result of Sotomayor’s
concurrence at least is consistent with Wal-Mart and Qualitex:
you should have to show secondary meaning for your specific claimed mark
and only then can you get trademark rights.]
 

Breyer, dissenting: What
booking.com is, is obvious from the name. Genericity “preserves the linguistic
commons by preventing one producer from appropriating to its own exclusive use
a term needed by others to describe their goods or services.” Adding .com
shouldn’t be enough to do so.
 

Distinguishing
descriptive from generic terms isn’t always easy, especially with a compound
term. For a compound, courts have to determine “whether the combination of generic
terms conveys some distinctive, source-identifying meaning that each term, individually,
lacks. If the meaning of the whole is no greater than the sum of its parts,
then the compound is itself generic.” 

Breyer would have
held that appending “.com” to a generic term “ordinarily yields no meaning
beyond that of its constituent parts.” The combination of “booking” and “.com” “does
not serve to ‘identify a particular characteristic or quality of some thing; it
connotes the basic nature of that thing’—the hallmark of a generic term.” Any “reasonably
well-informed consumer” would understand that trademark.com is the website of
the trademark owner, which is why courts generally ignore the TLD when analyzing
likely confusion.
 

And here we get to
the heart of the disagreement: because .com will be ignored in an infringement
inquiry, it should also be ignored for validity. (Absent some exception such as
where the TLD interacts with the second-level domain in a meaning-changing way;
also new gTLDs like “guru” might behave differently.) In other words, Breyer
wants to think about scope when assessing validity.
 

The uniqueness conferred
by the domain name system doesn’t change the Goodyear rule. “Wine, Inc.”
likewise “implies the existence of a specific legal entity incorporated under
the laws of some State.” [This is an intuitive weakness of the majority’s reasoning:
it isn’t explicitly willing to turn its empiricist, consumer-perception-is-all
gaze on the Goodyear rule, but Breyer seems likely to be correct that
Wine, Inc. is likely to produce different survey results than “Wine.” However,
my sense is that Ginsburg would also allow Wine, Inc. to present its consumer
survey, perhaps with an eye to the problem of de facto secondary meaning.]
 

To Breyer, “functional
exclusivity does not negate the principle animating Goodyear: Terms that
merely convey the nature of the producer’s business should remain free for all
to use.” The majority’s “fact-specific approach” rejects that principle.
Although consumers might not call Travelocity a booking.com, “literal use is
not dispositive.” [We might call that production versus recognition: consumers
may understand a lot of stuff they wouldn’t say.]
 

Breyer correctly
notes that the facts that supposedly convert some generic.com domain names into
descriptive marks are unlikely to vary from case to case:
 

There will never be evidence that consumers literally refer to the
relevant class of online merchants as “generic.coms.” Nor are “generic.com”
terms likely to appear in dictionaries. And the key fact that, in the
majority’s view, distinguishes this case from Goodyear—that only one
entity can own the rights to a particular domain name at a time—is present in
every “generic.com” case.
 

So what would
vary? Survey evidence. But survey evidence “has limited probative value in this
context,” given the phenomenon of de facto secondary meaning. Thus, the TTAB
and some courts have concluded that “survey evidence is generally of little
value in separating generic from descriptive terms.” Here, while Booking’s
survey showed that 74.8% of participants thought that “Booking.com” is a brand
name, 33% believed that “Washingmachine.com” was a brand. What’s the
difference? Booking.com isn’t inherently more descriptive than
“Washingmachine.com” or any other generic.com. Respondents were likely reacting
to having heard of Booking.com, suggesting that washingmachine.com could
undergo the same transformation by investing heavily in advertising. Association
of booking.com with a particular company is simply not inconsistent with
genericity.

 

Thus, quoting
McCarthy, the majority rule “[d]iscard[s] the predictable and clear line rule
of the [PTO] and the Federal Circuit” in favor of “a nebulous and unpredictable
zone of generic name and top level domain combinations that somehow become
protectable marks when accompanied by favorable survey results.”
 

Also, this rule
threatens “serious anticompetitive consequences in the online marketplace” by adding
to the non-registration advantages of doing business under a generic name: basically,
easier access to consumers’ memories, searches, and trust. Booking says it won’t
threaten similar uses, “[b]ut other firms may prove less restrained,” and of
what use is trademark registration distinct from domain name registration other
than to “extend its area of exclusivity beyond the domain name itself”?
 

The majority says
that infringement/descriptive fair use will police the scope of protection, but
we’ve already seen boundary-pushing. (Citing Advertise.com v. AOL, LLC, 2010 WL
11507594 (CD Cal.) (owner of “Advertising.com” obtained preliminary injunction
against competitor’s use of “Advertise.com”), vacated in part, 616 F. 3d 974
(CA9 2010).) “Even if ultimately unsuccessful, the threat of costly litigation
will no doubt chill others from using variants on the registered mark and
privilege established firms over new entrants to the market.”
 

Breyer’s dissent is
particularly notable for its repeated use of “anticompetitive” and variants, suggesting
the potential for the revival of a mid-twentieth-century analysis of trademarks
as having the capacity to confer unwarranted market power.

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Expert causation/falsity evidence is admissible in fake review case

Vitamins Online, Inc.
v. Heartwise, Inc., 2020 WL 3452872, No. 2:13-cv-00982-DAK (D. Utah Jun. 24,
2020)
 

Some pre-bench trial
motions here in this Lanham Act false advertising case based on alleged manipulation
of Amazon’s customer review system and misrepresentation of the content and
characteristics of green coffee and garcinia cambogia products. I want to focus
on motions to limit testimony about the reviews.
 

VO’s expert Belch was
assigned to study how consumers used online reviews for weight loss supplements
on Amazon.com and whether such reviews were credible to them; and to provide an
opinion about the power of “influencers” to create demand for products, whether
Dr. Oz acted as an influencer concerning the products at issue in this case,
and whether that affected demand. NatureWise argued that the study couldn’t show
injury/causation; Belch didn’t test whether any consumers switched from VO’s
products to NatureWise’s in reliance on any particular review at issue here.


The court declined to preclude Belch from offering an opinion on the cause of
lost sales at trial. Belch concluded that, “[a]ssuming [Vitamins Online’s]
claims are true, and based on [his] business and academic experience, [he]
would opine that [NatureWise’s] practices are deceptive and injurious to
Vitamins Online.” This could be evidence of causation; NatureWise’s arguments
went to weight, not relevance or admissibility.
 

NatureWise also
sought to preclude Vitamins Online’s experts Noonan and McAuley from offering
testimony at trial that reviews were literally false, arguing that their report
stated no opinions as to the alleged falsity or truthfulness of any of
NatureWise’s reviews. The report said:

It’s impossible for us to determine if a review is “fake” or not by
using [our] method. In my opinion, it’s impossible for anyone to prove a review
is “fake” just by looking at the review itself. [Our] algorithm is specifically
looking for patterns in the data, which might indicate that the reviews are
biased.

However, the report
concludes that “the only logical explanation of the patterns we are seeing in
the data is blatant review manipulation.” At trial, the experts would thus be
precluded from opining on whether any single NatureWise review is literally
false, but they would be permitted to discuss how they reached their
conclusion— “a discussion which could very well implicate the doctrine of
literal falsity.”

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9th Circuit shows some hostility to functionality for product design, gets federal fame right

Blumenthal
Distributing, Inc. v. Herman Miller, Inc., Nos. 18-56471 & 18-56493 (9th
Cir. Jun. 25, 2020)
 

HM and Blumenthal/OSP
engaged in litigation over “knockoffs” of HM’s Eames chairs and Aeron chairs. A
jury found that HM’s registered and unregistered claimed EAMES trade dresses
were protectable, and that OSP willfully infringed and diluted them, resulting
in an award of $3,378,966 in infringement damages and $3,000,000 in dilution
damages, and OSP was enjoined. The jury also found that HM’s registered and
unregistered claimed AERON trade dresses were unprotectable because they were
“functional.”
 

The court of appeals
affirmed the infringement judgment on the Eames chairs, reversed on dilution
for want of federal fame, and reversed and remanded on the Aeron trade dress
because the jury wasn’t properly instructed on functionality. The basic problem
is an insight that the Ninth Circuit has had before, but has often put badly:
if consumers want the product because of the way it looks, but they want the
way it looks because of the reputation of the source, then the appearance is
not aesthetically functional simply because consumers want it for the way it
looks. The problem is causation, because if consumers want the product for the
way it looks, that is often aesthetic functionality. In addition, being
known for introducing a design to the market shouldn’t itself count as the
relevant reputation—that’s the rule of Dastar—as opposed to being known
for making quality physical instantiations of the design. But making that distinction
can prove difficult.

 

Eames chairs

“HM introduced the
first Thin Pad Eames chair in 1958, and has sold hundreds of thousands of them
in the United States, along with a related line of Soft Pad Eames chairs. The
Aeron chairs were introduced in 1994 and were even more successful; by the time
of trial, HM had sold 6.5 million of them in the United States.” Versions have
been “exhibited in American art museums and made repeated appearances in
American pop culture.” 
The claimed unregistered
Eames trade dress was “the overall appearances of its Thin Pad and Soft Pad Eames
chairs, excluding the chairs’ colors and all components beneath the chairs’ seats.”
The registered trade dress was the
same, except that it excludes the chairs’ upholstery.

 

Aeron chair

The claimed unregistered
Aeron trade dress was the overall appearance of the Aeron chair with an
oval-shaped lumbar support, excluding the portion of the chair beneath the seat
and the chair’s color. The registered Aeron trade dress was the same, except
that it also included the control box under the seat. The difference between
the registered and unregistered trade dresses were not material to the appeal.

The court framed the
aesthetic functionality test as “whether, if one seller were given exclusive
rights to use the claimed trade dress, other sellers would be forced to use
alternative designs that make their products more costly to sell, or for which
consumers’ willingness to pay would be lower for reasons having nothing to do
with the reputation of any source (e.g., the alternative designs would not have
as much intrinsic aesthetic appeal). If such competitive disadvantages would be
significant, then this second requirement for aesthetic functionality is
satisfied.” 

The court of appeals
rejected utilitarian functionality arguments for the Eames chairs, because the
fact that they had some utilitarian functionality didn’t make the overall
appearance functional, nor did the functionality of various features make the
overall appearance functional. “For example, the jury could have reasonably
concluded that the metal trapezoidal design of the Eames chairs’ armrests was
motivated by design considerations, at the expense of the comfort that a softer
surface could have provided.” OSP argued that this shape enabled the “armrests
to be attached to the [rest of the chair] at three points” rather than two
points, but cited no evidence that the extra point of attachment has any
utilitarian benefit.
 

The Aeron verdict
was reversed because this instruction (taken from the Ninth Circuit Model
Civil Jury Instructions) was bad:
 

A product feature . . . is non-functional if its shape or form makes no
contribution to the product’s function or operation. If the feature is part of
the actual benefit that consumers wish to purchase when they buy the product,
the feature is functional. However, if the feature serves no purpose other than
as an assurance that a particular entity made, sponsored or endorsed the
product, it is non-functional.
 

The middle sentence
misstated the law, because it’s not true that being “part of the actual benefit
that consumers wish to purchase when they buy the product” is sufficient proof
that a feature is functional under Au-Tomotive Gold. The instruction
didn’t capture the utilitarian functionality factors, such that “a feature that
provides a utilitarian benefit is not functional unless the Disc Golf
factors weigh in favor of finding it so,” and it didn’t capture the rule that “a
feature that provides an aesthetic benefit is not functional unless that
benefit is wholly independent of any source-identifying function and the
feature’s protection would put competitors at a significant non-reputation-related
disadvantage.” This error was presumptively harmful, requiring reversal and
remand. 

Comment: As far as I can recall, no court has ever opined on how to determine “significance” for these purposes. Is it qualitative? Quantitative? What increment of non-reputation-related
market share is a trademark claimant entitled to by virtue of having some
reputation-related market share, especially since functionality ordinarily
trumps secondary meaning? With respect to phrases conveying a particularized message such as “Lettuce Turnip the Beet,” our recent amicus brief indicates that the First Amendment interests in conveying such a message are inherently significant. Again, I think there’s a real insight here but the word “significant” isn’t super helpful in implementing it: the mere fact that a design is, aesthetically speaking, decent doesn’t mean that it is aesthetically functional. I have occasionally suggested framing the question as whether, in a counterfactual world in which the plaintiff has no source-related reputation, the design would still have particular attractions beyond “eh, it’s a fine design”; Justin Hughes has suggested looking for a larger tradition or principles, which would often accomplish much the same thing as my test, to protect things that have preexisting associations or meanings, e.g., a champagne container in the shape of a slipper or a heart-shaped chocolate box or a black (slimming) engine for a boat. The Betty Boop case is a good one here because it clarifies the normative nature of the inquiry: given that the copyright in Betty Boop expired, is the ability to compete in the Betty Boop market significant? I think Dastar means that it is, even if other mugs and T-shirts exist at the same price point.

Dilution: requires
federal fame, which means “household name” status. This HM did not prove. The
Ninth Circuit’s earlier Trek case held that Trek failed to show such fame even
though the company spent “between $3 million and $5 million per year” on
advertising, including in mainstream publications; had around 4.5 million
visitors to its website per year; made products sold by over 1,600 independent
dealers in 2,000 locations across the nation; and sponsored superstar Lance
Armstrong, who prominently used Trek bicycles. The court reasoned that
“incidental media coverage,” such as that connected to Lance Armstrong, did not
“by itself constitute evidence” that the mark was famous, because “[m]any
products receive broad incidental media coverage.” Also, “[a]dvertising to a
mass audience is not the same as achieving fame with a mass audience and, by
themselves, such advertisements prove only that Trek desires widespread fame,
not that it has achieved it.” By contrast, “surveys showing that a large
percentage of the general public recognizes the brand, press accounts about the
popularity of the brand, or pop-culture references involving the brand would
provide evidence of fame.” Though Trek was a FTDA case, the TDRA didn’t lower
the standard for fame among the general consuming public.
 

HM’s evidence,
viewed in the most favorable light, showed:
 

HM spent, on average, $550,000 per year on advertising the Eames chairs
from 2004 through 2015 (and under $400,000 per year from 2004 through 2009);
the Eames chairs appeared in obscure publications such as Contract, Metropolis,
and an “industry publication” called Monday Morning Quarterback; at the time of
trial in 2016, HM had, at the very most, around 875,000 unique followers on
Facebook, Twitter, and Instagram combined; most of the Eames chairs are sold
through a distribution channel consisting of only around 45 independently owned
dealers with 130 locations across the country; and the Eames chairs were “very
heavily” featured in the TV show Mad Men, have appeared in other TV shows and
movies, and have been exhibited at several American museums, including the
Museum of Modern Art and the Henry Ford Museum.

This was plainly
weaker than the Trek evidence, which was legally insufficient. Even if the jury
instructions accurately stated the law, HM didn’t offer evidence sufficient to
allow a reasonable jury to conclude that the Eames trade dress met the standard
for fame. The dissent wanted more leeway for trade dresses than trade names,
but it’s still required that the mark be famous among the general consuming
public as a mark, not just recognizable (e.g., the Statue of Liberty is
famous, but it’s not famous as a mark). “Even assuming that the shape of
the Eames chair is more recognizable than the name ‘Trek,’ there nonetheless
was no basis from which the jury could reasonably infer that the general
consuming public would link all Eames-shaped chairs to a single source of
goods.” 

Judge Friedland, as
mentioned, dissented, relying on the idea that a mark can be a mark even if the
consuming public doesn’t know the identity of the (singular) producer; that HM
was not well known did not mean that the Eames chair was not well known. The
dissent would have held that the jury could “deem HM’s experts credible and …
infer from their testimony that the general consuming public had become
familiar with the Eames chairs through encounters in business environments, pop
culture, and museums.” Because the design was distinctive, the jury could find
that it served as “a signature of chairs made by a leading furniture
manufacturer, even if they could not specifically name HM as that manufacturer.”
 

I think the majority
clearly has the better of this because of the difference between being well
known and well known as a mark.
 

The dissent rejected
the side-by-side comparison of the facts here with the facts in the Trek case
because it thought there was more evidence here of “actual consumer recognition”
because the Eames chairs are “ubiquitous” in office environments and depicted
in “countless” TV shows and movies. [One could do a very interesting class
analysis of the imagined “general consuming public” here: although Mad Men
was surely culturally significant for us New Yorker types, what portion
of the public was actually exposed to these TV shows and office environments,
or went to the museums that focused on the chair design?] Also, the design here
is “iconic” and museum-worthy while Trek is a “non-distinctive four-letter term
with multiple meanings.” The media coverage wasn’t “incidental” as it was in
the Trek case because the chair was a distinctive product design “that the jury
could have inferred was memorable to many consumers who saw the chairs.”
 

Excellent example of
casual empiricism here: “While members of the public can consume products or
encounter advertisements for products without focusing on the marks they
feature, it would be difficult for consumers to interact with a product without
forming an impression of its overall appearance (its dress)—particularly when
that appearance is distinctive.” [I think this is just made up: at least, I don’t
recall any literature suggesting that overall appearance does any better than
any other kind of feature at sticking in a consumer’s mind; like most things we
encounter, most design probably doesn’t go into long-term memory at all, certainly not as source-identifying. And as
a legal matter it’s inconsistent with the Wal-Mart rule that all product
design requires secondary meaning for protection.]

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UL’s interpretation of its own standards is opinion (but not all standards application would be)

Warren Technology,
Inc. v. UL LLC, — F.3d —-, 2020 WL 3406585, No. 18-14976 (11th Cir. Jun.
22, 2020)

This decision comes
out the right way—a manufacturer’s disagreement with UL’s interpretation of its
own standards doesn’t make UL’s interpretation false—but it also highlights
that the fact/opinion divide is very fraught.
 

Warren, which makes
UE heaters (don’t worry about it) for HVAC systems, sued its competitor Tutco
and UL, which is a Nationally Recognized Testing Laboratory accredited by OSHA
to certify products’ compliance with safety standards, including the UL 1995
standard for UE heaters. Warren sued for Lanham Act false advertising and
contributory false advertising, damages under the common law of unfair
competition, and violation of the Florida Deceptive and Unfair Trade Practices
Act.
 

“All of Warren’s
claims are based upon its allegation that, despite UL’s having certified
Tutco’s UE heaters as compliant, Tutco’s heaters do not, in fact, comply with
the UL 1995 standard,” because (Warren argued) UL misapplied the standard.

UL must, to do its
OSHA-accredited job, interpret its standards. UL’s resulting authorization to
Tutco to use UL’s mark was not an actionable misrepresentation. Even a
misinterpretation of the UL standard wouldn’t necessarily be a falsehood as
opposed to a matter of opinion, “provided it was made in good faith and in
accordance with OSHA’s criteria for independence, procedural regularity, etc.”
However, in order to limit what counts as opinion, the court indicated that it
would be possible to plead an actionable misrepresentation based on a
miscertification by UL. That could happen if UL failed to meet its own
standards for testing, or interpreted the UL 1995 standard inconsistently over
time, or applied it inconsistently to Warren and Tutco, or lacked independence
relative to Tutco. Interestingly, all but the first of these examples appear to
be the court reasoning from conduct that would invalidate a certification mark.
But why those things (aside from the first) would remove an interpretation from
the category of “opinion” is an interesting question.

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reconsidering, court rules that FDUTPA covers more than Lanham Act “advertising,” reinstates only state claims

Westgate Resorts,
Ltd. v. Reed Hein & Assoc., LLC, 2020 WL 3265972, No.
6:18-cv-1088-Orl-31DCI (M.D. Fla. Apr. 27, 2020)
 

Previously,
the court dismissed
Lanham Act false advertising and coordinate state law
claims against timeshare exit purveyors. Here, the court reverses part of its
earlier holding, with respect to non-advertising-based state law claims.
Although courts often say that federal Lanham Act and state law claims are
subject to the same analysis, that is an overstatement; in some circumstances,
state laws are broader.

FDUTPA covers
deceptive acts and practices that go beyond advertising. Westgate alleged that,
once in contact with Westgate timeshare owners, defendants committed “unfair
and deceptive acts and practices” by “instruct[ing] owners of Westgate
timeshare interests to stop making payments of validly assessed maintenance and
taxes, and of legitimately owed note and mortgage payments, to Westgate in
Florida, which damages Westgate.” Owners who started out current on their
payments were allegedly deceived into thinking they could safely exit without
foreclosure and stopped payments at defendant TET’s instruction, when in fact
they defaulted and entered into foreclosure. These allegations were supported
by testimony from customers of TET. This plausibly proximately caused Westgate’s
damages and might entitle Westgate to injunctive relief, even if the conduct was
no longer ongoing. “[A] jury could find that TET engaged in deceptive practices
by guaranteeing owners that it could legitimately exit them from their
timeshare interests and instructing those same owners to stop making payments
to Westgate, knowing that it would not actually negotiate with Westgate, that
Westgate would likely foreclose, and that TET would simply claim that it had
successfully ‘terminated’ the owners’ timeshare interests without disclosing
the foreclosure.”

 

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