mistaken exclusion of materiality survey leads to remand in false advertising case

Wing Enters., Inc. v. Tricam Indus., Inc., — Fed.Appx.
—-, 2020 WL 5739718, 2019-2279 (Fed. Cir. Sept. 25, 2020)

A remand because the district court wrongly excluded one
survey in this false advertising case (though didn’t abuse its discretion in
excluding another), then granted defendant’s motion for summary judgment.

Wing and Tricam compete in the market for multi-position
ladders. Wing alleged that Tricam violated the Lanham Act and the coordinate
Minnesota Deceptive Trade Practices Act by falsely advertising that its ladders
complied with ANSI A14.2, an industry safety standard that applies to metal
multi-position ladders. Wing alleged that Tricam’s ladders flunked the
requirement that the rung on a multi-position ladder have a “step surface of
not less than 1 inch.” Tricam’s allegedly false advertising appeared on: (1)
the label on the side of Tricam’s ladders, which reads “manufacturer certifies
conformance to OSHA ANSI A14.2 code for metal ladders,” (2) a statement on The
Home Depot’s website, which reads “ANSI Certified, OSHA Compliant,” and (3) a
statement on Tricam’s website, which reads “ANSI A14.2; OSHA.”

False advertising requires materiality, which frankly I
would think a jury could infer from the fact that it’s an industry safety standard,
but Wing had Hal Poret conduct two surveys.

The Importance Survey asked
respondents to rank the factors they consider important when purchasing a
ladder. The survey provided respondents with a list of factors, which included
“strength/duty rating,” “compliance with industry safety standards,” “hinge
lock size/style,” “feet material/style,” and “company name.” According to Mr.
Poret, the survey results showed that “compliance with industry safety
standards was ranked first as the most important factor by more respondents
(19%) than any other factor except for strength/duty rating” and that a “total
of 58% of respondents rated compliance with industry safety standards an
important factor.” From these results, Mr. Poret concluded that “compliance
with industry safety standards is the type of issue that is important to
consumers and would tend to … impact purchase decisions.”

The Labeling Survey showed a test group the side labeling of
a Gorilla Ladder containing the allegedly false ANSI statement as well as a
statement about OSHA compliance. A control group saw “an altered version” of
the labeling in which “all references to compliance with OSHA/ANSI standards
were removed.” While 69% of the test group members indicated that they were
“extremely or very likely to purchase the ladder with the OSHA/ANSI content
present,” only 55% of the control group did so, leading Poret to find “a
significant impact on reported likelihood of purchase.”

Tricam’s surveyor, by contrast, concluded that “only 2% of
the … respondents [in her survey] could have potentially been influenced by
the ANSI label,” though 67.5% of survey respondents “stated they had read the
side label before buying the ladder,” 42.4% of the respondents had heard of
ANSI, and 21.9% of the respondents clearly knew what ANSI was. Tricam’s
surveyor Triese also criticized Poret’s work for failing to “isolate the
effect, if any, of the ANSI” statement on consumers, focusing instead on the
effect of an ANSI-OSHA statement or on industry safety standards in general.

In apparent response to this criticism, Wing sought to add
OSHA compliance-related contentions, which the magistrate struck as untimely.
Based on that, the district court excluded Poret’s testimony about the surveys,
reasoning that they were “not relevant to the question of whether the
ANSI-conformance statement that is at issue in this case is material to
consumers’ purchasing decisions.” It reasoned that “[k]nowing that industry
safety standards in general are important to consumers’ purchasing decisions
does nothing to predict whether consumers might be dissuaded from buying a
ladder that does not meet current ANSI standards” because Mr. Poret did not
“ask about ANSI specifically.” Also, the surveys tested ANSI conformance in
combination with OSHA conformance, so they weren’t relevant. [This is part of a
trend of hyperspecificity in materiality requirements, which I think is
generally a very bad idea as well as inconsistent with the historical treatment
of materiality as “the kind of thing consumers care about.” Among other
things, consumers aren’t great at telling you exactly why they do what they do,
so demands for super-specificity can lead to lots of false negatives. If
falsity/misleadingness is established, then in general we shouldn’t take the
risk of allowing consumer harm unless there’s very good reason to think that
the difference between the advertising and the truth wouldn’t matter to
consumers.]

In addition, the court excluded the Labeling Survey because
it would confuse the jury, being premised “on the conclusion that the
OSHA-conformance statement is false,” and Tricam had lacked an opportunity to
take meaningful discovery on the interplay between ANSI and OSHA.

Without the survey, the district court found there was
insufficient evidence of materiality—testimony from a high-level Wing
executive, Tricam’s president, and the chairman of the ANSI Labeling Committee was
“too speculative.”

“Because Mr. Poret’s testimony concerning the Importance
Survey would have at least some tendency to make a fact of consequence more
probable than it would be without the evidence, and because such testimony is
not so unsupported that it would offer no help to the jury, we determine that
the district court abused its discretion in excluding Mr. Poret from testifying
about the Importance Survey.” Even if it doesn’t mention ANSI, “ANSI is
unquestionably an industry safety standard and is one of the two potential
industry safety standards relating to ladders in the United States.” Asking
about safety standards in general wasn’t irrelevant. Other courts have accepted
materiality surveys as relevant even when the surveys didn’t ask about “the
particular statement or product at issue.” Note: As well they should! Tricam
also argued that the survey didn’t show that consumers know that ANSI is an
industry safety standard. “This argument seems aimed more at the weight that
the Importance Survey’s results should be accorded than whether the survey is
relevant. Still, as the district court determined, ladder consumers could
potentially ascertain that ANSI is an industry safety standard based on how
Tricam displayed ANSI conformance.” Also, Tricam’s own survey results suggested
that consumers know that ANSI is an industry safety standard, and it was ok to
rely on the opposing party’s survey results for that proposition.

However, the district court didn’t abuse its discretion in
excluding the Labeling Survey, because compliance with OSHA wasn’t part of the
case and that was too intertwined with this survey, such that the jury would be
confused. Wing argued that the jury could be instructed that the survey was
only submitted for the materiality of the ANSI label, but the survey was still
premised on the conclusion that the OSHA-conformance statement was false; Poret
concluded that the survey showed that the “OSHA/ANSI content did have a
significant impact on reported likelihood of purchase” (emphasis added). Tricam
never had reason to explore in discovery the relationship between OSHA and ANSI
on which the survey was premised.

With the one survey in, there was enough to survive summary
judgment. That survey “suggests that consumers consider compliance with
industry safety standards an important consideration when making a purchasing
decision.” Consumers could know that, as Tricam’s survey suggested.  Result: remand, which could consider some
other unsettled legal arguments.

 

from Blogger https://ift.tt/2EKpcZI

Posted in Uncategorized | Tagged , | Leave a comment

impersonating company to solicit intimate images for private use isn’t TM infringement/false advertising

AdoreMe, Inc. v. Watson, 2020 WL 5769083, No. CV 19-8830 FMO
(AGRx) (C.D. Cal. Jul. 14, 2020)

A fundamentally commercial cause of action can be a bad tool
to address even bad noncommercial behavior. AdoreMe sued Watson for trademark
infringement and false advertising under federal and state law, and an unfair
business practices claim under state law. Watson, who failed to respond,
allegedly operates a phishing scam through which he “preys on unsuspecting
women by (a) posing as a talent scout for Adore Me; (b) impersonating Lindsey
Hayes Kroeger (‘Ms. Kroeger’) – a well-respected talent scout – and/or
pretending to be affiliated with her; and (c) using, unlawfully and without
authorization, Adore Me’s name, trademark, and reputation to obtain nude and
intimate photographs from women.”

AdoreMe sought default judgment, which the court denied.
Even where well-pled allegations exist, “[t]he district court’s decision
whether to enter a default judgment is a discretionary one,” considering
factors including the merits of plaintiff’s substantive claim and the
sufficiency of the complaint.

Trademark infringement requires use “‘in commerce’ and ‘in
connection with the sale, offering for sale, distribution, or advertising of
any goods or services.’ ” (Citing cases that “noncommercial” uses don’t trigger
the Lanham Act.) The court found that AdoreMe’s allegations of commercial use
were conclusory and insufficient to state a claim.

[Query whether false advertising precedents could have been
any help: although offering goods/services without intent to sell them as
advertised is false advertising, that’s essentially always coupled with actual
sales of something else—bait and switch. Advertising something without the
intent to provide any services at all may not be the requisite “advertising,”
though courts have stretched the definition of use in commerce/commercial use
so far already that this seems like an odd place to stop. Indeed, one could
create a category of “fake commercial speech” and treat the defendant as engaged
in “advertising” of services while still robustly protecting ordinary noncommercial
speech.]

Likewise, the allegations that “Defendant has profited and
will continue to profit from his unlawful actions because the intimate
photographs of his victims are highly valuable and the private property of
those women” didn’t allege facts showing actual profit/plans to profit
(implicitly defined as profit monetarily). [Side note: under California
right of publicity law, the benefit to the defendant doesn’t have to be
commercial; Kroeger’s potential claims are easily the strongest here.]

So too with the Lanham Act false advertising claims. This
wasn’t plausibly “commercial advertising or promotion.” [Again, I might have attempted
to estop defendant from challenging commerciality, but that is innovation and I
can easily see why the court didn’t want to do that on a default judgment,
where it’s easy to make bad law.]

The state claims were the same. [I wonder whether you could
get something useful out of UCL “unfairness.” This seems like the kind of conduct
the FTC thinks is unfair.]

Finally, the court was skeptical of the sufficiency of the
support for plaintiff’s damages claims. “To recover damages after securing a
default judgment, a plaintiff must prove the relief it seeks through testimony
or written affidavit.” AdoreMe submitted only the declaration of its General
Counsel, which didn’t sufficiently establish her qualifications and competency
to assess and calculate AdoreMe’s damages. She also relied on potentially
inadmissible evidence, e.g., supporting the statement that “approximately 1% of
people who visit a company’s social media will ultimately make a purchase on
the company’s platform” with a citation to a link to a website “upon which the
court has no basis to rely.”

The court told AdoreMe to file an amended complaint and move
for default judgment quickly or have the case dismissed; to consider retaining
an expert to substantiate its damages calculations; and to consider limiting its claims. Given these instructions, it’s not incredibly surprising
that AdoreMe apparently instead abandoned the lawsuit. One hopes that social
media companies will nonetheless cooperate with shutting down such schemes.  

from Blogger https://ift.tt/36k3mYl

Posted in Uncategorized | Tagged , , | Leave a comment

restitution unavailable in fed ct when damages are adequate, no matter what Cal state cts say

Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir.
2020)

In this amended opinion (original
summarized here
), the court elaborates on its reasoning that Sonner couldn’t
abandon her damages claim on the eve of trial in this false advertising case
and seek only restitution, because equity requires that legal remedies be
inadequate and she abandoned her legal damages claim:

At bottom, “[t]hat a State may
authorize its courts to give equitable relief unhampered by” the “restriction[
]” that an adequate remedy at law be unavailable “cannot remove th[at] fetter[
] from the federal courts.” Guided by that instruction, we hold that the
traditional principles governing equitable remedies in federal courts,
including the requisite inadequacy of legal remedies, apply when a party
requests restitution under the UCL and CLRA in a diversity action.

Side note: I wonder how federal courts treat the “traditional
principles governing equitable remedies in federal courts” when it comes to
disgorgement in trademark cases. Disgorgement supposedly just became much
easier to get, and if courts continue to believe that trademark goodwill is a
mysterious entity, distinct from all the other parts of a business, then
perhaps they will routinely find damages inadequate. But that’s always been a
slogan rather than a reasoned decision, and plaintiffs pressing disgorgement
demands in marginal cases may lead courts to see that.

Anyway, “Sonner must establish that she lacks an adequate
remedy at law before securing equitable restitution for past harm under the UCL
and CLRA.” But she conceded that she sought the same sum in equitable
restitution as “a full refund of the purchase price”—$32,000,000—as she
requested in damages to compensate her for the same past harm. There was no
reason damages couldn’t be adequate, even if California state courts wouldn’t impose
the same rule.

from Blogger https://ift.tt/33ZNVBM

Posted in Uncategorized | Tagged , , , , | Leave a comment

“upcycling” isn’t infringement/counterfeiting when full disclosure is present

Hamilton International Ltd. v. Vortic LLC, No. 17-CV-5575
(AJN)(OTW) (S.D.N.Y. Sept. 11, 2020)

Champion Spark Plug still matters sometimes!
Hamilton, a Swiss watchmaker, sued Vortic for making watches incorporating
vintage Hamilton parts, alleging that this constituted trademark infringement,
counterfeiting, dilution, and unfair competition. After a bench trial, the
court found Vortic’s conduct unlikely to cause confusion and entered judgment
for defendants.

“Vortic is a watchmaker that specializes in restoring
antique pocket watches and converting them into wristwatches.”  It sold a watch called “The Lancaster,” named
after Lancaster, PA, where the Hamilton Watch Co. was originally located, that
was made with a historic, restored movement (here, internal mechanism with
hands and face attached) produced by the Hamilton Watch Company.

The “Hamilton” mark remains visible
on the antique face of the watch. The Lancaster has a Gorilla Glass back which
makes the internal workings visible, and “Hamilton” can also be seen on one
part of the movement. Around the ring in the rear of the watch is engraved
“Vortic,” along with “The Lancaster” and a serial number. In total, 58 watches
were either sold or gifted.

From Vortic’s website

Infringement: The Polaroid factors shouldn’t be
applied mechanically. “In cases such as this one, involving modified genuine
products, the Supreme Court has found whether the defendant adequately
disclosed the origins of the product to be dispositive.” In Champion, as
long as the repaired sparkplugs had “Repaired” or “Used” conspicuously stamped
on them and their packaging indicated that the defendant had done the
restoration, “[f]ull disclosure” of the products’ origins was “all the
protection to which [the plaintiff] was entitled.”

Since the sparkplugs were second-hand
goods and consumers would naturally expect a used or repaired good to be
inferior, conspicuously labeling the goods as used or repaired constituted full
disclosure. It was otherwise permissible for the goods to retain the Champion
trademark even if it means that the defendant benefits from plaintiff’s
goodwill or “gets some advantage from” plaintiff’s mark.  The Court cautioned that it would be possible
to imagine a case “where the reconditioning or repair would be so extensive or
so basic that it would be a misnomer to call the article by its original name,
even though the words ‘used’ or ‘repair’ were added.” Outside those rare
circumstances, however, a refurbished product may bear the original maker’s
mark.

Thus, the court focused on “adequacy of disclosure,”
treating the Champion rule “as a substitute or crucial supplemental
factor to a traditional Polaroid likelihood of confusion analysis.”
Subtle twist, though: “Full disclosure” matters if it prevents “numerous
ordinary prudent purchasers” from being “misled or confused as to the source of
the product.” That’s a twist because Champion didn’t suggest that
evidence of confusion was relevant; it was a rule about what the defendant
should do, not a rule about what consumers perceive. Is it now a presumption?
Is it only rebuttable with evidence of substantial consumer confusion?
Smuggling the rule into the definition of “ordinary prudent purchasers” is one
way to resolve these tensions—but then it’s hard to see why any evidence could
rebut the presumption, if reasonable consumer is a normative concept rather
than an empirical one.

Anyhow, the court gave “strong weight” to the “full
disclosure” factor while also running through the Polaroid factors, as
guided by the Second Circuit’s awful treatment of nominative fair use, sigh.

First, there was “full disclosure” per Champion, in
the ads and marketing materials, as well as the watch itself. All of the
advertising and marketing in the record “would accurately convey to the
ordinary prudent purchaser that the only connection of any kind between
Hamilton and Vortic is that Vortic used antique Hamilton watch movements and
parts for its Lancaster watch.” E.g, the website “clearly stated that the
Lancaster was one of ‘Vortic’s flagship line of watches’ and that ‘[a]ll of the
components (movement, dial, hands) between the two Gorilla Glass crystals ~100
years old and started their life in a Railroad-era pocket watch made by the
Hamilton Watch Company.’” The website stated that Vortic “meticulously restores
the inner workings in order to build a completely custom watch around” vintage
elements. “While the Hamilton mark is visible in a picture, Vortic’s logos
predominate.”  

A magazine ad likewise stated that “[e]ach piece is custom
fabricated using railroad era, American made pocket watch movements to create a
timeless one of a kind wristwatches.” “Any viewer of this advertisement would
come away with an accurate understanding of the relationship between Vortic and
Hamilton.”

The watch itself, “in isolation,” also provided full
disclosure. “[T]he watch obviously presents to a viewer as restored antique
pocket watch movement, face, and hands that have been reincorporated into a new
wristwatch. This would be true even if the watch was viewed only from the  front or only from the back, and even if the
viewer did not have any prior knowledge about the watch.” [Shades of what
happened after the initial reversal in the LV v. Dooney & Bourke case,
which prompted Judge Scheindlin on remand
to find no confusion even when “viewed ‘in public from a distance, in a store
window, from across a room, from a passing car, [ ] while walking in the
street,’ in an advertisement, or hanging off of a woman’s shoulder, by way of
examples.”]

The court ponted out that “the watch is much larger than the
typical wristwatch and that there is a large knob at the 12 o’clock position
which is immediately recognizable as being from a pocket watch, rather than a
wristwatch which usually has the movement at 3 o’clock.  Additionally, the hands, face, and movement
have a patina, style, and look that convey that they are restored antiques.”
Plus, the placement of the respective marks “would convey to any ordinary
prudent purchaser that the watch was made by Vortic and that the Hamilton mark
is only displayed because Hamilton created the original movement, face, and
hands that have subsequently been restored.” 
“Vortic,” “Lancaster,” and the serial number were all prominently
engraved on the case while the Hamilton mark is only visible inside the glass
case, “on a movement and face that appear obviously antique.”

Nicely, the court pointed out that complete disclosure about
the production process on the product itself isn’t required by Champion.
“ It was sufficient in that case that the sparkplugs clearly conveyed that they
were ‘used’ or ‘repaired.’  While the
watches in this case have been modified to a greater extent than the sparkplugs
in Champion, the Court finds that the Lancaster itself provides more disclosure
as to the extent of the modification and restoration.”

Since the Hamilton components had been restored, it was not
a misnomer to call the components bearing the Hamilton trademark by their
original name, and the disclosure “prevents undue interference with the ability
of Plaintiff to control its reputation.” Stamping “used” or “repaired” on the
watch wasn’t required as long as there was “full disclosure with sufficient
clarity and conspicuousness,” which was done here by overall design and the
engravings. (Citing Ford Motor Co. v. Ultra Coachbuilders, Inc., Case No. EDCV
00-00243-VAP, 2000 U.S. Dist. LEXIS 20173 (C.D. Cal. July 11, 2000) (stretch
limousine version of Ford automobile did not infringe on Ford’s trademark
because the modifications were “apparent”).)

Hamilton argued that the burden was on Vortic to show that
the disclosure worked. First, Vortic’s principal’s testimony “to the effect
that neither he nor his company encountered individuals who were confused about
the relationship or lack thereof between Vortic and Hamilton would seem to meet
this burden, particularly given Vortic’s small size.” But second, the case law
Hamilton cited wasn’t about modified genuine products. (Citing Home Box Office,
Inc. v. Showtime/The Movie Channel, Inc., 832 F.2d 1311, 1316 (2d Cir. 1987).)
Champion, which did involve a modified genuine product, did not place
such a burden on the defendants and neither have courts in this circuit that
have applied Champion.”

Second, Hamilton argued that the disclosure was insufficient
“because it fails to disclose particular modifications to the movement or that
Vortic sometimes uses parts from other antique Hamilton watch movements in its
restorations.” The uncontroverted evidence was that the modifications were
minor and didn’t alter the function of the movement; there was no reason to
believe that this was “particularly significant to consumers” or “somehow
material to a likelihood of confusion.” In terms of using parts from other
watches, “this is a technique that virtually anyone would expect in the
restoration of an antique watch movement.” (Citing Champion, 331 U.S. at 129
(“inferiority is expected in most second-hand articles.”).) Nor was it material
to likely confusion: “the watch still contains an antique Hamilton watch
movement with antique Hamilton watch parts.”

Third, Hamilton argued that post-sale confusion could occur.
A member of the general public, seeing a Lancaster on someone’s wrist, “would
not know that it was Vortic rather than Hamilton that had done the restoration
and modification.”  But third-party
confusion is “only relevant if their views are somehow related to the goodwill
of the aggrieved manufacturer.” There was no reason to conclude that the
appearance of the Hamilton mark “on the inner workings of the watch—visible
only upon close inspection—would result in initial interest confusion among
members of the public.” [Also, so what?]

With that out of the way, the Polaroid analysis
didn’t favor a finding of likely confusion. A number of the Polaroid factors weren’t
helpful: strength of mark and similarity doesn’t matter where there is a
modified genuine product with full disclosure. “Likewise, proximity of the
products, bridging the gap, and the quality of the product are all also
unhelpful, because application of these factors would penalize defendants who
have only lightly modified a genuine product. Yet, under Champion, these
are the defendants who have the lowest burden to meet the full disclosure
standard.”  Thus, only actual confusion,
the defendant’s good faith, and the sophistication of the buyers were relevant Polaroid
factors.

Even if the court considered all the Polaroid
factors, the result would be the same. The mark is relatively conceptually
strong (the court calls it “fanciful,” even though that’s clearly wrong), but
there was limited evidence of market strength, especially of such a kind as to
make the views of non-purchaser members of the public important to its
goodwill. Similarity, likewise, isn’t assessed in a vacuum, and so the context pointed
to dissimilarity. Proximity of the products was “a wash,” because of
presumptive variation within the watch market; Hamilton didn’t show that it
sold any watch similar to the Lancaster, “such as a wristwatch that looks like
a pocket watch or any kind of restored watches,” and bridging the gap was
irrelevant/Hamilton submitted no evidence. [Beautiful example of stampeding the
factors.] Product quality: There was no evidence about the quality of either
party’s actual watches.

Actual confusion: Hamilton relied on a single email sent to
a Canadian brand manager in 2015: “my friend is looking for a vintage hamilton
as per attached,” but Hamilton failed to establish that the attached was a
Vortic ad (as claimed), and anyway the email wasn’t clear about whether the
sender’s friend actually thought that Vortic’s product was made by/affiliated
with Hamilton.

The court found that Vortic acted in good faith, seeking to
“preserve American history” by salvaging and restoring the hearts of antique
pocket watches rather than to cause confusion. Its principal

viewed himself as “upcycling,”
restoring previously nonfunctional antique watch movements and parts, and
making them into something of “much greater value.” To be sure, Mr. Custer did
intend to gain some benefit from displaying the Hamilton mark, albeit more from
Hamilton’s historical significance rather than its modern-day reputation. But
the benefit Mr. Custer sought was no more than what he fairly believed he was
entitled to by including restored, genuine antique Hamilton movements, hands,
and faces. 

Finally, the customer base was highly sophisticated. The
Lancaster was “very expensive” and expensive-watch consumers are typically
discerning.

Counterfeiting: This requires that use of a counterfeit mark
is “likely to cause confusion, or to cause mistake, or to deceive.” That wasn’t
shown here. [Courts are of course super inconsistent about this. If there were
no genuine goods involved, even full disclosure “these are counterfeit” wouldn’t
work, but the ways that courts distinguish these situations are opaque at best.
Overall, we might be better off talking more openly about “unfair competition”
and what constitutes fairness.]

State dilution: Only blurring was claimed; the factors are
similar to the confusion factors; so Vortic wins.

from Blogger https://ift.tt/33OLPVv

Posted in Uncategorized | Tagged | Leave a comment

court refuses to dismiss TM claims against NRA’s former PR agency

National Rifle Ass’n v. Ackerman McQueen, Inc., 2020 WL
5526548, No. 19-CV-2074-G (N.D. Tex. Sept. 14, 2020)

The NRA sued AMc, an advertising and PR agency, for various claims arising from the parties’ now-terminated relationship and
Ackerman’s statements about the relationship; the court granted in part and
denied in part a motion to dismiss. The temptation is to say “Go it, husband! Go it, bear!” but the NRA’s expansive claims are pretty worrisome from a “people are allowed to truthfully describe their own activities” perspective, so.

The NRA used AMc’s services from “at least the 1980s” until
2019, when the last of their agreements ended. AMc’s services included “public
relations and strategic marketing; planning and placement of media; management
of digital media and websites; and the management of NRATV, a digital-media
platform frequently perceived by the public as the ‘voice’ of the NRA.”

Despite the termination of the services agreement, AMc’s
website allegedly continues to “prominently feature[ ] unauthorized and
unlicensed NRA-owned photos and reference[ ]…the NRA with greater frequency
than any other AMc client.” The NRA alleged: (1) false association under the
Lanham Act (2) copyright infringement.; (3) conversion; (4) fraud; (5) breach
of fiduciary duties; (6) conspiracy to commit fraud and extortion; (7) breach
of the fiduciary duty of loyalty; and (8) breach of contract.

Defendants counterclaimed and moved to dismiss (though not
on the claim for breach of contract).

Consistent with the lack of weight that many courts give to
historical facts in trademark contexts, the court denied the motion as to the
false association claim.  “The crux of
the NRA’s false association claim is that AMc’s continued display of the name
NRA and the NRA’s ‘intellectual property on AMc’s website provides a strong
inference that wrongly suggests to the public—and creates consumer and customer
confusion—that the NRA presently endorses the services that AMc provides and
that the NRA is currently AMc[’s] client.’”

Rather than explicitly arguing Dastar and First
Amendment/nominative fair use, defendants argued that the NRA hadn’t alleged Lexmark
standing or identified any false or misleading content on AMc’s website. The
NRA properly alleged that it was within the Lanham Act’s zone of interests: its
alleged injuries fell within two of the Lanham Act’s enumerated purposes: the
purpose to “mak[e] actionable the deceptive and misleading use of marks in”
commerce within the control of Congress, and the purpose “to prevent fraud and
deception…by the use of reproductions…or colorable imitations of registered
marks.”

The complaint “provides a laundry list of instances in which
AMc’s website references or lists the marks NRA and NRATV, including a total of
fifteen references to the NRA and NRATV under headings entitled ‘Gallery’ and ‘Clients.’”
This allegedly confused the the public about whether the NRA remains an AMc
client and endorses the services provided by AMc.”

Likewise, the NRA properly alleged proximate cause. “This
perceived association between the NRA and AMc, the NRA argues, is harmful to
the NRA’s reputation, diminishes the value of the NRA’s trademarks, and causes
the NRA to lose out on royalties.” That was enough on a motion to dismiss.

And the NRA sufficiently pleaded misleadingness. It alleged
that “AMc continues to depict numerous photographs on AMc’s website that
contain the words ‘National Rifle Association’ written across the bottom.” AMc,
after suit was filed, altered the legends on these photographs such that they
now read “National Rifle Association (Legacy).” That might ultimately suffice,
but the NRA properly pled that the references to the NRA were misleading, since
misleadingness is a fact-specific inquiry “best left for decision after
discovery.”

Copyright infringement: The NRA failed to register the
photos before suing, so the claim was dismissed without leave to amend.

Conversion: This claim was based on defendants’ continued
use of and failure to remove various “creative works and intellectual property”
from AMc’s website, apparently meaning the same photos. Texas conversion law
covers only physical property, and even if Virginia law applied (as the NRA
argued because its HQ is in Virginia) its claim was preempted by the Copyright
Act.

Fraud/conspiracy: the allegations here aren’t IP-related;
the claims were dismissed for failure to plead with particularity. Breach of
fiduciary duty claims also weren’t sufficiently pled against the individual
defendants.

from Blogger https://ift.tt/3mM8Kt5

Posted in Uncategorized | Tagged , | Leave a comment

Second Circuit affirms flushable wipes damages class certification, disallows injunctive class

Kurtz v. Costco Wholesale Corporation, 818 Fed.Appx. 57,
Nos. 17-1856-cv, 17-1858-cv (2d Cir. Jun. 26, 2020)

This is a “flushable” wipes consumer protection class
action. The district court previously certified damages and injunctive relief
classes. On appeal, the Second Circuit required further clarification on the
predominance argument and remanded.  The
district court received additional evidence, including supplemental expert
reports, and conducted a hearing. On that basis, it reaffirmed its prior
certification decision, determining that Kurtz had demonstrated that he could
prove injury and causation with common evidence, satisfying Rule 23(b)(3)’s
predominance requirement. The court of appeals found no abuse of discretion,
though not on an injunctive relief class.

Kurtz showed adequacy and typicality, despite Kimberly-Clark’s
argument that he sacrificed potentially higher-value plumbing damages claims in
order to advance lower-value, but more easily certifiable, claims based on a
price premium theory. Given that the cost of litigating such plumbing damages
claims likely would have outweighed any recovery, the district court held that the
strategic decision to forgo plumbing damages and pursue statutory damages of
$50 per purchase under NY’s GBL §349 wasn’t a fundamental conflict of interest.
This was not an abuse of discretion. Nor was it a typicality problem that Kurtz
continued to buy the wipes after he learned that they were not flushable; his
theory of injury was predicated on the existence of a price premium, so the
harm he suffered occurred at the time of purchase. “Accordingly, his purchasing
history is largely irrelevant to typicality and does not warrant setting aside
the court’s certification order.”

Standing to represent an injunctive relief class: no,
because there was no likelihood of future injury. Kurtz made no assertion that
he intended to purchase additional flushable wipes products—from Costco,
Kimberly-Clark, or any other company.

Predominance: The court of appeals initial decision
expressed “specific concern with the Plaintiffs’ proof that they can establish
the injury and causation elements of their claims at trial with common
evidence.” On remand, plaintiff’s expert “developed and performed hedonic
regression analyses” indicating “that there is a marketwide price premium for
wipes labeled as flushable,” rather than merely speculating that such a
regression could be run. Though defendants’ experts critiqued this expert
report, the district court deemed the testimony and analysis admissible, and
found that his regression satisfied the obligation to demonstrate predominance.

The “litany” of purported failings in the methodology was
unpersuasive. For example, defendants argued that the model “fails to account
for major variables, including attributes that consumers value most.” Though
some regressions may be “so incomplete as to be inadmissible as irrelevant,” this
model accounted for “a wide range of variables, some of which are substantial
drivers of consumer purchases.” The omitted variables were “arguably
significant,” but that went to weight rather than admissibility. So too with
defendants’ argument that there was no price premium “if the time frame is
shifted or if additional products are included in the underlying dataset.” While
cherry-picking data can render a model so unreliable that it is inadmissible,
the expert here 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 he used a sufficiently wide range of sources to
render the end-result “statistically reliable.” There was no abuse of
discretion in relying on his testimony.

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.” That’s exactly what this
model purports to measure: the price premium attributable to the “flushable”
label. Although plaintiffs’ claim might still fail, the model worked as “common
evidence of plaintiffs’ theory of injury.”

Ultimately, none of Defendants’ critiques demonstrates that
there exists “some fatal dissimilarity among class members that would make use
of the class-action device inefficient or unfair. Instead, what [Defendants] allege[
] is a fatal similarity—an alleged failure of proof as to an element of the
plaintiffs’ cause of action.” A factfinder might ultimately agree with
defendants’ critiques of the model, but that would make the class claims fail
as a unit.

from Blogger https://ift.tt/3kI1U6l

Posted in Uncategorized | Tagged , , , , | Leave a comment

“Keratin Caring” doesn’t convey keratin content to reasonable consumers

Devane v. L’Oréal USA, Inc., 2020 WL 5518484,  19 Civ. 4362 (GBD) (S.D.N.Y. Sept. 14, 2020)

Devane sued for breach of express warranty, breach of
implied warranty, fraud, and violations of the Florida Deceptive and Unfair
Trade Practices Act (FDUTPA), New York General Business Law (NYGBL), Florida
False Advertising Statute (FFAS), and Alabama Deceptive Trade Practices Act (ADTPA)
based on L’Oréal’s branding of its “EverSleek Keratin Caring” products that
allegedly misrepresented that they contained keratin, a protein naturally present
in human hair, skin, and nails. The court granted L’Oréal’s motion to dismiss. In
essence, it agreed with L’Oréal that it was unreasonable to assume that the products
themselves contained keratin, as they specifically stated that they “car[e] for
the essential protein and keratin that is found in hair.” The backs of the
bottles include ingredient lists—which do not include keratin; the front and
back indicate that the products are “Vegan,” and further the back says “[n]o
animal derived ingredients or by-products.” Under these circumstances, it wasn’t
reasonable to assume that a product contains a certain ingredient when it is
not listed in the ingredient list. The label said multiple times, including on
the center of the front labels, that they were “Keratin Caring” products, and
it was “reasonable to understand this to mean that it cares for the keratin
already found in the hair.” [This is the wrong framing: we need to know whether
it was unreasonable to read the label otherwise; there can be multiple
reasonable interpretations.] In conjunction with the “extremely clear” ingredient
list, that meant that plaintiff didn’t plausibly plead that a reasonable
consumer could understand that the product contained keratin.

The court rejected Devane’s argument that L’Oréal’s argument
wrongly “presupposes a higher level of knowledge on the part of the reasonable
consumer than is appropriate.” “Even if the average reasonable consumer is
unaware of what the word ‘vegan’ means, or did not previously know that keratin
is found in one’s hair, this nonetheless does not counter the number of times
that the label makes it clear that (1) keratin is not an ingredient, and (2)
the Products are intended to care for the keratin in one’s hair….
Reasonableness cannot be based solely on what the consumer might have known
prior to picking up the Products and examining the labels.”

from Blogger https://ift.tt/3kD5UEU

Posted in Uncategorized | Tagged , | Leave a comment

Fla district court rejects argument that “completely unsubstantiated advertising” is literally false on sj

Diamond Resorts U.S. Collection Development, LLC v. US Consumer
Attorneys, P.A., 2020 WL 5514158, No. 18-80311-CIV-REINHART (S.D. Fla. Jul. 31,
2020)

Another timeshare case. (Student note topic alert!)

Defendant Newton Group Transfers sent a mailer to Samuel
Street in West Chester, Pennsylvania, believing him to be the owner of a
timeshare. The mailer said (in relevant part): “We are attempting to contact
you because our records suggest that you are an owner who may be affected by
new Timeshare Laws allowing developers to raise maintenance fees with no
restriction.” Diamond argued that this statement was literally false as to Mr.
Street, whose timeshare is in Florida, which allegedly has no such laws. The
court disagreed. (There’s an interesting, unexplored “targeted v. untargeted”
issue here—to the extent that this was an individualized pitch, I think literal
falsity should be an option, just as a salesperson who represents that a
mortgage is the right choice for a particular individual should be held to a
higher standard than a general ad touting “the right mortgage for you!” which,
in an ad directed to the world at large, is puffery.)

Anyway, literal falsity requires assessment in context. “As
the meaning of a statement becomes less clear … and it becomes susceptible to
multiple meanings, the statement is more likely to be merely misleading.”

Diamond moved for partial summary judgment on falsity,
arguing that, under Florida law and Diamond’s timeshare contracts, (1) no
timeshare managing entity can raise maintenance fees without restriction and
(alternatively) (2) even if some managing entity can do it, a developer cannot.

Housekeeping: no partial summary judgment was available for
the other defendants because the evidence didn’t establish their legal
responsibility for the mailer.

Merits: “[T]he parties agreed that the threshold question of
literal falsity depends only on the text of the Mailer.” The mailer didn’t say
that Street actually owned a timeshare, where that was located, or reference
Florida/Florida law. The mailer therefore—implicitly treating this as
nontargeted advertising, which seems appropriate on this record—couldn’t be
literally false unless “at least, in or about the fall of 2017 when the Mailer
was sent, there were no new timeshare laws anywhere in the United States that
allowed a timeshare developer to increase maintenance fees without restriction.”
There was no such evidence in the record.

Diamond attempted to rely on the testimony of the corporate
representative for Newton Group Exit, LLC, that the mailer’s mention of “new
Timeshare Laws” was referring to amendments to Florida law, but Diamond didn’t
show why that was binding on Newton Group Transfers, LLC, a separate entity,
and regardless that’s not what the mailer said. Nor did Diamond cite evidence
that Street’s timeshare fell under the terms of the contracts in the record,
even assuming that those contracts could render the mailer literally false.

Finally, Diamond tried to get the court to adopt the rule of
Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm.
Co., 290 F.3d 578 (3d Cir. 2002), that “completely unsubstantiated advertising”
 is literally false, but the court declined.
Among other things, Novartis was an appeal from a grant of a preliminary
injunction; even though the movant had the burden of persuasion, a factfinder can
draw an adverse inference from the respondent’s failure to provide affirmative
evidence to refute the movant’s claim; that wouldn’t be appropriate here. I’m not sure I see the civil procedure distinction here–if anything accepting this inference for a PI seems like a bigger deal, but ok.

from Blogger https://ift.tt/32O5fKI

Posted in Uncategorized | Tagged | Leave a comment

FDA preemption/preclusion after Pom Wonderful: still powerful for drugs

Exela Pharma Sciences, LLC v. Sandoz, Inc., 2020 WL 5535026,
No. 19-cv-00318-MR (W.D.N.C. Sept. 15, 2020)

Exela sued Sandoz for unfair and deceptive trade practices
in violation of North Carolina law; tortious interference with prospective
business advantage; and Lanham Act false advertising and unfair competition. It sought a TRO etc. forcing Sandoz to recall its L-Cysteine product.

Exela makes an FDA-approved L-Cysteine injection product,
used for high-risk patients, such as preterm or low-weight newborns and
patients with severe liver disease, as part of a nutritional supplement regimen
(aka “total parenteral nutrition” or TPN). “Aluminum is a known contaminant of
TPN solutions, and aluminum toxicity can cause serious health problems
including dementia and impaired neurologic development among others. High-risk
infants who receive TPN are particularly susceptible to harm from excessive,
toxic amounts of aluminum, as they have immature kidneys, which impairs the removal
of aluminum from the body.”

Sandoz makes an L-Cysteine product in Canada with a label
stating that it contains as much as 5,000 mcg/L of aluminum; it’s not FDA-approved.
But starting in 2014, there was an L-Cysteine shortage in the US, so the FDA
asked Sandoz to import its product under the FDA’s “shortage program,” without requiring
FDA approval. On April 12, 2016, the FDA stated that it would not bring an
enforcement action for importing the product for 6 months if Sandoz followed
certain conditions, including distributing a “Dear Healthcare Provider” letter
alongside its L-Cysteine product that explained the product, the drug shortage,
and the lack of other similar FDA-approved products. The letters had to be
reviewed by the FDA before distribution.

Sandoz sought several extensions, each of which was granted.
The last Dear Healthcare Provider letter was approved on June 21, 2019,
instructing Sandoz to ensure that the “previously reviewed Dear Healthcare
Provider letter continues to accompany [its] L-Cysteine in distribution.” Every
version of the letter stated that “there are currently no FDA-approved
L-Cysteine Hydrochloride Injection products in the United States.”

However, Exela developed an L-Cysteine product with low
aluminum levels. The FDA wanted no more than 145
mcg/L of aluminum for permanent approval. In April 2019, the FDA approved Exela’s NDA. By late May 2019, Exela had manufactured sufficient inventory to meet the
entire market demand for L-Cysteine.

Exela made “numerous efforts” to get Sandoz’s product off
the market, including repeatedly asking the FDA to act. The FDA declared
an end to the shortage in September 2019, and asked Sandoz to stop importing
its product; Sandoz complied but continued distributing its existing
inventory. Exela’s marketing team “claims to have observed customers
buying or committing to buy up to a year’s supply” even after its product received
FDA approval. In October 2019, the FDA told Sandoz to stop distribution, which
it did. However, even with Exela’s sole-approved-product status, it has less
than 20% of the L-Cysteine market while Sandoz “maintain[s] over” 80%.

The FDCA gives the FDA “complete discretion” to “decide how
and when [its power] should be exercised.” This can’t be evaded by putting a
state law label on what is really a complaint about FDCA violation. [Note that
this discussion applies only to drugs/devices; the situation for food/supplements
has more leeway for states, consistent with the lesser federal regulation to
which they are subject.]  “The test for
determining whether a state law claim is impliedly preempted is whether or not
the claim would exist in the absence of the FDCA.”

NC unfair/deceptive practices: the allegedly violative
action was selling the unapproved product and “stuff[ing]” the distribution
channels, including failing to update its 2018 Dear Healthcare Provider letter
after the FDA approved the Exela product, failing to warn its customers about
its product’s aluminum content, and misusing “its incumbent status in the
market and its huge market power and reach to block hospitals and distributors
from switching.”

The complaint fundamentally
challenged “the FDA’s decision not to bring enforcement proceedings against the
Defendant under the FDCA for importing and selling an unapproved and unsafe
drug.” That was preempted under conflict preemption, including claims about the
safety of Sandoz’s product. Even after Exela received FDA approval, the FDA
still had to account for the risk that it might not be able to meet the entire
market demand for L-Cysteine, the risk of supply chain issues during the
transition, other associated risks, and the parties’ interests (including
Sandoz’s interests in selling “inventory it created in response to the FDA’s
requests to help with the drug shortage.” Unlike failure-to-warn cases that escape
preemption, the only way to comply with state law would have been for Sandoz to
leave the market.

Similar analysis applied to the associated claims. The FDA regularly “weans unapproved products off the market once a
competing product has been approved.” In fact, it gave Sandoz only six months, not
the year it has suggested in the past; and Exela did not even allege that it had
sufficient production to satisfy the market for a significant portion of that
period.

Failing to update the “Dear Healthcare Provider” letter to
disclose the approved Exela product was also ok, even though it said “there are
currently no FDA-approved L-Cysteine Injection products in the United States.” The letters were “mandated, overseen, and preapproved
by the FDA,” and the last renewal was approved by the FDA after it approved
Exela’s product; the 2019 renewal “mandated (under threat of enforcement action)” the use of the
previously approved letter. Preemption was appropriate given that, “when a
party cannot satisfy its state duties without the Federal Government’s special
permission and assistance, which is dependent on the exercise of judgment by a
federal agency, that party cannot independently satisfy those state duties for
pre-emption purposes.” And state law likewise couldn’t require Sandoz to send
other letters “contradicting” the FDA-approved letters.

Failure to warn about aluminum content, even though the
aluminum content “far exceed[s]” the standard the FDA required Exela to meet: The
FDA didn’t set upper limits on the aluminum content of these products, and the
FDA later responded to Exela that Sandoz’s product had aluminum levels that
were “well within the standards agreed upon with FDA” and that “[i]t is thus
inappropriate to suggest that the Sandoz product is somehow unsafe.” And anyway,
“a merchant’s failure to inform its customers as to how its product compares
unfavorably to a competitor’s product” isn’t itself deceptive.

Ultimately, Sandoz “imported, marketed, and sold a product that it was
permitted by the FDA to import, market, and sell, and in quantities that did
not exceed that permission.”

Tortious interference claims fared similarly.

Lanham Act: The false/misleading representations were
similar to those discussed above. Unless an omission makes an affirmative
statement misleading, the Lanham Act doesn’t require disclosures. Although the
Dear Healthcare Provider letters were plausibly “commercial advertising or
promotion,” this was still a case where bringing a Lanham Act claim would
interfere too much with the FDCA, even after Pom Wonderful, which held
out the possibility of precluding a Lanham Act claim if “it turns on the
content” of something that has been “previously preapproved by the FDA” or
conflicts “with an affirmative policy judgment by the FDA.” Both scenarios
applied here.

from Blogger https://ift.tt/2RJgNZD

Posted in Uncategorized | Tagged , , | Leave a comment

expert testimony isn’t always required for literal falsity or even misleadingness

Ecore Int’l, Inc. v. Downey, No. 11-6843, 2020 WL 5501206
(E.D. Pa. Sept. 11, 2020)

The court denies Ecore’s motion in limine seeking to exclude
any evidence related to the falsity or misleading nature of its advertising for
purposes of defendant Pliteq’s Lanham Act/common law unfair competition
counterclaims. (There are about 20 claims and counterclaims “related to a hotly
contested commercial dispute between the parties.”) Ecore allegedly made false
and misleading statements about Pliteq’s “GenieMat” products and its own “QT”
products, which are competing sound dampening products: (1) claims of
equivalence as to quality, performance, and testing; (2) wrongly implying that
Pliteq’s products use a rubber cleaning and processing method involving sulfur,
and that the products accordingly have an unpleasant odor; and (3) claims that
Ecore “originated the new method of using two layers of floor underlayment,
when this is not the case.” That last sounds Dastar-problematic, but the
court doesn’t address that aspect of the claim.

Ecore argued that expert testimony was required on falsity
and likely confusion. The court agreed that lay witnesses might be able to do
so, including with the testimony of defendant Downey, “who has extensive
experience in the sound insulation field and can testify as to these issues
based on his personal knowledge and observations,” although he hadn’t been
identified as an expert on these issues.

The court noted that “[t]he type of proof needed to prove
literal falsity varies with the type of advertising claim being made,” and
further that whether expert testimony is necessary to a literal falsity claim
is also case specific, which seems all but self-evident.  Pliteq might be able to show literal falsity
of these particular claims without evidence that “requires scientific or
technical knowledge not appropriate for a lay witness.” The allegedly false statements
“do not refer to any scientific tests and do not otherwise contain such
technical implications that expert testimony would be needed to establish their
falsity. To the contrary, information regarding a product’s odor and who came
up with an idea is perfectly amenable to lay testimony.”

Second, even without literal falsity, an expert or consumer
survey isn’t absolutely required to prove deception. Courts have mentioned
“consumer surveys, market research, expert testimony, or other evidence,” even if
surveys are the “usual[]” method. [Imagine a very small market where all the
customers testify they were deceived—clearly no survey would be required.]
Without a full evidentiary record, the court wasn’t going to reject Pliteq’s
theories or prohibit Pliteq from attempting to prove its claims via lay
witnesses.

from Blogger https://ift.tt/2Ry6hnN

Posted in Uncategorized | Tagged , | Leave a comment