statements about market conditions aren’t about “nature, characteristics, or qualities” under 43(b)

Posted on January 17, 2025 by rtushnet

Nexus Pharmaceuticals, LLC v. Long Grove Pharmaceuticals,
LLC, 2025 WL 81877, No. 24-10444-MJJ (D. Mass. Jan. 13, 2025)

Nexus sued its competitor Long Grove under the Lanham Act,
alleging that Long Grove made false statements about a shortage of fluorescein,
a drug, which allegedly diverted consumers from buying Nexus’s fluorescein
product and preventing Nexus from converting customers. In a rare
interpretation of the “nature, characteristics, or qualities” language of
§43(a)(1)(B), the court found that “market conditions” were not encompassed in
that language, and thus Nexus failed to state a claim.

The FDA sometimes exercises “regulatory flexibility and
discretion” to “help[ ] to alleviate a drug shortage and to ensure access to
treatment options for patients in critical need.” Manufacturers authorized to
sell an unapproved drug in shortage may normally continue doing so for a grace
period after the shortage ends.

Fluorescein is a drug product used as part of a diagnostic
angiography or angioscopy of the retina and iris vasculature, which enables
X-ray-like images of veins. In early 2023, due to the previous manufacturer’s
bankruptcy, the nationwide supply of fluorescein sodium injection became low.
Long Grove bought the NDA and the remaining inventory from bankruptcy. Given
the shortage, the FDA exercised its enforcement discretion to permit Long Grove
to sell the old stock, and also required Long Grove to disseminate a “Dear
Healthcare Professional” Letter, which the FDA also posted on its website, about
the situation.

Later in 2023, Nexus received FDA approval for a generic
version, and the FDA declared the shortage resolved.  Nonetheless, Long Grove continued to
distribute and advertise its product with statements that a fluorescein
shortage existed, despite Nexus’s protests.

The court declined to reach Long Grove’s FDCA preemption
argument, because the challenged statement didn’t relate to either party’s
product. Nexus didn’t like Long Grove discounting the price of its old product
given its shorter expiration date, but Nexus didn’t allege that Long Grove made
a false or misleading statement about the actual age of the fluorescein drug or
the quality of the fluorescein drug itself. Statements about shortages relate to
“supply and demand phenomena,” and “market conditions surrounding fluorescein
that led FDA to exercise its enforcement discretion” rather than “any inherent
quality or characteristic of either party’s fluorescein drug product.” Indeed, “[e]ven
if Long Grove had stated … that fluorescein was ‘only available at Long Grove’ or
‘exclusively available at Long Grove,’ those more direct statements would still
be insufficient because they do not relate to the inherent quality or
characteristic of the product, as opposed to the market conditions (i.e., the
existence or non-existence) of the product.’” [I’m not sure I’d go that far!]
The court analogized to other cases holding that statements relating to a “marketing
method” are unrelated to actual qualities or characteristics of products, e.g.,
“exclusive T.V. offer” made “for the first time on T.V.,” false use of the ®
symbol, and false claims of legal entitlement to market a product.

from Blogger http://tushnet.blogspot.com/2025/01/statements-about-market-conditions.html

Posted in Uncategorized | Tagged | Leave a comment

are certificates of analysis and other technical specs commercial speech?

Posted on January 13, 2025 by rtushnet

Sweegen, Inc. v. Manus Bio Inc., No. 8:24-cv-01757-JVS-DFM, 2024
WL 5317280 (C.D. Cal. Dec. 19, 2024)

Sweegen is one of the largest suppliers of non-GMO
Rebaudioside M or “Reb M” sweetener, manufactured through bioconversion from
stevia leaves. Its competitor makes NutraSweetM Reb M. Sweegen alleged that Manus
falsely told its customers, mostly consumer packaged goods (CPG) companies,
that its NutraSweet M was made through extraction or bioconversion from stevia,
but Sweegen allegedly commissioned independent tests that show that Manus’s
sweetener is not produced by bioconversion. Although Manus argued this was a
typographical error, Manus allegedly continued to mislabel its product as
stevia leaf extract on its promotional materials and product description
statements.

Sweegen sued for violations of the Lanham Act and coordinate
state law. Reasoning, dubiously to me, that Manus wasn’t engaged in commercial
speech, the court grants the motion to dismiss.

Sweegen identified five types of documents: the Certificate
of Analysis supplied to customers; an order confirmation describing NutraSweetM
as stevia extract; Manus’s “Technical Specification”; the GRAS (Generally
Recognized as Safe) Notification submitted to the FDA; and the Confirmation of
non-GMO Ingredient Certificate; all of which stated that Manus’s NutraSweetM is
“stevia extract” or made through bioconversion.

Under Ariix, LLC v. NutriSearch Corp., 985 F.3d 1107 (9th
Cir. 2021), “commercial speech analysis is fact-driven,” and courts must “try
to give effect to a common-sense distinction between commercial speech and
other varieties of speech.”

Manus argued that these documents weren’t commercial speech because
there was no economic motivation to induce purchases through them; they were “solely
technical and procedural”—things like “a Certificate of Analysis or order
confirmations are routine documents used in the ordinary course of business,
provided after the purchase.”

Sweegen responded that these were still promotional in that they
were used to convince CPG companies to purchase Reb M, “who in turn make the
same misrepresentations to end-user consumers. The written materials are
directly used by CPG manufacturers to claim that their product is non-GMO or
made from stevia extract.” Although that would persuade me (except as to
materials submitted to the FDA), Manus persuaded the court. [Note that even
after Lexmark, Sweegen might have difficulty showing standing to sue the
CPG manufacturers who are repeating the false claims on their own ingredient
lists, even though that’s definitely advertising, given its reasoning on
causation below—so the court’s reasoning may allow false advertising
arbitrage.]

Ignoring that purchasers wouldn’t buy things that didn’t
meet their standards, the court reasoned:

Common sense suggests that
technical specifications, confirmation orders, and certificates are routine and
informational. The “primary purpose” of a Certificate of Analysis is to confirm
the contents of an order. Manus provides Technical Specifications primarily to
inform buyers of acceptable labels for NutraSweetM. … The argument that
Manus’s CPG customers use the information from Manus’s materials to promote its
Reb M as stevia extra is one step removed from finding that Manus provided the
documents with the primary purpose of reaping economic benefit.

Anyway, even if these materials were commercial speech, the
court wasn’t convinced that the purpose of the speech was to influence
consumers to buy Manus’s Reb M or that it was sufficiently disseminated to the
relevant purchasing public. Although the documents were integral to the sales,
the court reasoned that Manus’s documents were not created to influence
consumers to buy the product. And, though the facts seem to suggest a coordinated
campaign, the court didn’t think they were sufficiently disseminated if they
were only sent after purchase. (Although apparently the non-GMO certificate was
a “one-off”, as was the GRAS notification to the FDA, which I agree deserves
different treatment.) Perhaps this could be corrected by amendment: “The
required level of circulation to meet this element may vary by industry but no
additional facts are alleged to support that Manus’s materials were
sufficiently disseminated. Furthermore, the Complaint does not mention who the ‘relevant
purchasing public’ is and whether it includes the end-product users or just the
CPG companies.” Plus, I would think that the certificates etc. would be
important to potential repeat customers.

Sweegen did plead proximate causation since they compete for
the same CPG clients.

from Blogger http://tushnet.blogspot.com/2025/01/are-certificates-of-analysis-and-other.html

Posted in Uncategorized | Tagged , | Leave a comment

Call for Papers: Harvard/Yale/Stanford Junior Faculty Forum, June 2-3, 2025

Posted on January 13, 2025 by rtushnet

Request for Submissions

Harvard/Stanford/Yale Junior Faculty Forum

June 2-3, 2025, Harvard Law School

Harvard, Stanford, and Yale Law Schools are soliciting
submissions for the 2025 Harvard/Stanford/Yale Junior Faculty Forum, to be held
at Harvard Law School on June 2-3, 2025. Twelve to twenty junior scholars (with
one to seven years in teaching) will be chosen, through a double-blind
selection process, to present their work at the Forum. A senior scholar will
comment on each paper. The audience will include the participating junior
faculty, senior faculty from the host institutions, and invited guests. The
goal of the Forum is to promote in-depth discussion about particular papers and
more general reflections on broader methodological issues, as well as to foster
a stronger sense of community among American legal scholars, particularly by
strengthening ties between new and veteran professors.

TOPICS: Each year the Forum invites submissions on selected
topics in public and private law, legal theory, and law and humanities topics,
alternating loosely between public law and humanities subjects in one year, and
private law and dispute resolution in the next. For the upcoming 2025 meeting,
the topics will cover these areas of the law:

Administrative Law

Antidiscrimination Law and Theory

Constitutional Law—theoretical foundations

Constitutional Law—historical foundations

Criminal Law

Critical Legal Studies

Environmental Law

Family Law

Jurisprudence and Philosophy

Law and Humanities

Legislation and Statutory Interpretation

Public International Law

Workplace Law and Social Welfare Policy

A jury of accomplished scholars will choose the papers to be
presented. There is no publication commitment. Harvard Law School will pay
presenters’ travel expenses, though international flights may be only partially
reimbursed.

QUALIFICATIONS: Authors who teach law in the U.S. in a
tenured or tenure-track position as of the submission deadline (February 28,
2025) and have not been teaching at either of those ranks for a total of more
than seven years are eligible to submit their work. American citizens or
permanent residents teaching abroad are also eligible provided that they have
held a faculty position or the equivalent, including positions comparable to
junior faculty positions in research institutions, for less than seven years
and that they earned their last degree after 2015. We accept jointly authored
submissions, but each of the coauthors must be individually eligible to
participate in the Forum. Papers that will be published prior to the Forum are
not eligible. There is no limit on the number of submissions by any individual
author. Faculty from Harvard, Stanford, and Yale Law Schools are not eligible.

PAPER SUBMISSION PROCEDURE: Electronic submissions should be
sent to Rebecca Tushnet at rtushnet@law.harvard.edu with the subject line
“Junior Faculty Forum.” The deadline for submissions is February 28, 2025.
Remove all references to the author(s) in the paper. Please include in the text
of the email your name, the title of your paper, your contact email and address
through June 2025, and under which topic your paper falls. Each paper may only
be considered under one topic. Any questions about the submission procedure
should be directed to Rebecca Tushnet.

FURTHER INFORMATION: Inquiries concerning the Forum should
be sent to Christine Jolls (christine.jolls@yale.edu)
or Yair Listokin (yair.listokin@yale.edu) at Yale Law School, Rebecca Tushnet
(rtushnet@law.harvard.edu) at Harvard Law School, or Norman Spaulding
(nspaulding@stanford.law.edu) at Stanford Law School.

Christine Jolls

Yair Listokin

Rebecca Tushnet

Norman Spaulding

from Blogger http://tushnet.blogspot.com/2025/01/call-for-papers-harvardyalestanford.html

Posted in Uncategorized | Tagged | Leave a comment

literal falsity might not matter with sufficiently sophisticated customers

Posted on January 10, 2025 by rtushnet

G. W. Aru, LLC v. W. R. Grace & Co.-Conn., No.
JKB-22-2636, 2025 WL 45827 (D. Md. Jan. 7, 2025)

I’m skipping most of the patent parts, though they are very much
present in the case and interact with a falsity issue. The parties, GWA and
Grace, compete in the manufacture and sale of carbon monoxide (CO)-carbon
dioxide (CO2) combustion promoters, which are products used in the petroleum
refining process. GWA alleged that Grace copied GWA’s patented combustion
promoter technology and mounted a marketing campaign denigrating GWA’s products
to customers.

A combustion promoter is a small particle used in fluid
catalytic cracking (FCC), a process for refining crude oil into higher value
products such as gasoline. Combustion promoters help convert CO into CO2, which
is desirable because too much CO in an FCC unit can cause damage to FCC
equipment (“afterburn”). CO to CO2 combustion promoters consist of a porous
support particle, often made of alumina, impregnated with Group VIII noble
metals (typically platinum or palladium). The noble metals are the active component
in promoting the conversion of CO to CO2. GWA’s patent claims a combustion
promoter that requires less noble metal to achieve the same level of CO
combustion, using an “eggshell” distribution of noble metals instead of the
traditional homogenous distribution. This is allegedly beneficial because noble
metals are “very expensive,” and because it results in reduced emissions of
nitrogen oxides (NOx), heavily regulated pollutants.

The challenged claims were made in a trade magazine for the
petroleum industry; on a blog post on Grace’s website; and, sometimes with
greater elaboration, in direct outreach to certain customers. There were (1)
comparative performance claims; (2) lower NOx emissions claims; and (3) claims
about noble metal on the outer surface of the combustion promoter particles.

For the comparative performance claims, there was no genuine
dispute that the ads were literally false, and deception was presumed as a
matter of law, but there were still disputes about materiality and injury, so a
jury would have to decide liability. On the others, falsity and deception were
also in dispute.

Comparative performance claims: Grace claimed that a
customer trial showed that the usage rate for Grace’s product decreased by
62%64% compared to GWA’s (Grace told multiple customers that GWA was the
comparator). Unfortunately for Grace, this was a “tests prove” claim, and the
tests at issue undisputedly didn’t prove that. There were no data on afterburn.
(I guess I’m the sole holdout treating data as plural.) And at most, the claims
of 62/64% improvement were 52%/30%, respectively.

“Questions of who prepared the underlying data, what caused
the errors, and whether a defendant knew the statements were false at the time,
are of no moment to the question of falsity.” Grace cited Ony, Inc. v.
Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), for the
proposition that “in a false advertising claim, it is relevant whether the
alleged statements are fabricated or fraudulently created,” but that was
inapposite. Ony involved “a peer-reviewed scientific journal and
concerned an area of legitimate ongoing scientific debate.” “But here, there is
no contention that the analysis of the data on which Grace relied for the
comparative performance claims is the subject of legitimate scientific debate;
on the contrary, it seems that the analysis is fairly straightforward for
someone with the relevant technical knowledge. Moreover, Grace’s analysis was
not published in a peer-reviewed scientific journal, but rather in a trade
magazine and on its own website.”

NOx claims: Grace advertised that:

The greater the percentage of
either palladium or platinum at the surface of the particle, the more
accessible the metals are to provide an effective activity response. By
incorporating a modified alumina, Grace’s optimised CO promoters (both platinum
and palladium based technologies) can provide the same CO promotion activity at
a lower metals level, with an additional benefit of lower NOx emissions. Based
on this new technology, Grace has commercialized Optimized CPP, a low-NOx CO
promoter that contains lower palladium levels while maintaining CO promotion
activity.

GWA argued that these statements were literally false
because Grace had no data supporting these claims. The court found a genuine
dispute of fact on literal falsity. There was no express reference to testing;
a reasonable jury could find that it wasn’t an establishment claim. It was not
enough for GWA to argue that the data on which Grace relied were insufficient;
anyway, there was a genuine issue of fact even on that. Grace argued that its
“Optimized CPP” product uses less palladium and that its testing showed that
decreasing the palladium level on the CPP additive resulted in lower NOx
emissions. Even if that testing was over ten years old, that could still be
supportive evidence.

Finally, the court noted that Grace did make more detailed,
“tests prove”–style claims in follow-up email communication to certain
customers. But the court wasn’t sure that such supplemental outreach
constituted “commercial advertising or promotion”; there was a factual question
on that for a jury.

Outer surface claims: Grace advertised:

The process Grace uses to
incorporate palladium and platinum onto the combustion promoter naturally leads
to a particle where the majority of the metals are located at the surface.
However, the advanced alumina used for the optimised CO promoters results in an
even higher proportion of the metals residing on the outer surface of the
particle.

The advertisement then goes on to tout the advantages of that.
In arguing literal falsity, GWA relied heavily on Grace’s statement in its
amended answer that Grace “admits that its CP® CO to CO: combustion promoter is
intended to have a uniform distribution of noble metal throughout the
promoter.” At the preliminary injunction stage, the court found that Grace’s
admission in its pleading supported a finding that the outer surface claims
were likely to be literally false. But that wasn’t binding at the summary
judgment stage:

If this case were simply a false
advertising action, then Grace’s admission would conclusively establish the
literal falsity of the “outer surface” claims. But GWA’s own claim for patent
infringement complicates the matter. To prevail on its patent infringement
claim, GWA must prove that Grace’s combustion promoter particle has a higher
concentration of noble metals in the outer region of the particle as compared
to the center. To prevail on the false advertisement claim, however, GWA must
prove something that is close to the exact opposite—that Grace’s particles do
not have a higher concentration of noble metals on the particle’s “outer
surface.” There is nothing wrong with pleading in the alternative, but the very
fact that GWA is intent on pursuing both theories suggests that summary
judgment on the question of the distribution of noble metals in Grace’s
products is premature.

To win its patent infringement claims, GWA argued that its
testing showed that there was a higher concentration of noble metals in the
“outer region” of Optimized CPP as compared to the center. But if that was true,
“then there is at least some basis for believing that there is also a higher
concentration of noble metals in the ‘outer surface’ of the particle. GWA argued
that there was a meaningful difference between “outer surface” and “outer
region,” but there was no clear explanation of “how one could distinguish the
outer surface of a microsphere from the outer region.” “[A]lthough testing by
GWA’s putative expert purports to show that there was no noble metal detected
on the outer surface of the accused product, a reasonable jury could find that
the testing is not conclusive, because the depth chosen to measure the ‘outer
surface’ was somewhat arbitrary.” Given a crucial disputed issue in the
case—whether Grace’s accused products have the kind of “eggshell” design
claimed in GWA’s patent—it would be premature to resolve the issue in the false
advertising part of the case.

What about materiality? There’s a circuit split on whether
literal falsity also carries a presumption of materiality; the Fourth Circuit
hasn’t weighed in, and the court assumed that materiality must still separately
be shown. At the preliminary injunction stage, the court found that “cost
efficiency” was likely to be material, and GWA provided testimony from industry
professionals that all three claims were material. “A reasonable jury may well
find this evidence convincing. But, Grace has produced countervailing evidence
that tends to show that the relevant customers are sophisticated industrial
firms that would likely do their own testing before implementing a new product.
In short, whether Grace’s challenged statements were likely to influence the
purchasing decision of the relevant consumers is a disputed factual question
that the Court cannot resolve now.”

Nonetheless, because literal falsity doesn’t require
evidence of deception, no further evidence that the ads deceived consumers
would be required, which strikes me as logically inconsistent with the
reasoning immediately prior; the whole literal/implicit falsity apparatus +
materiality has developed into a formalism that is probably at this point more
harmful than helpful to reaching just results.

from Blogger http://tushnet.blogspot.com/2025/01/literal-falsity-might-not-matter-with.html

Posted in Uncategorized | Tagged , | Leave a comment

“Target Clean” might certify specific qualities to reasonable consumers

Posted on January 2, 2025 by rtushnet

Boyd v. Target Corp., — F.Supp.3d —-, 2024 WL 4287669, No.
23-CV-02668 (KMM/DJF) (D. Minn. Sept. 25, 2024)

This interesting lawsuit relies on Target’s curatorial
reputation for the false advertising claim. Target is headquartered in
Minnesota and plaintiffs sought to represent a putative nationwide class over
certain products labeled “Target Clean.” Target allegedly represents that the
labeled products are “clean” because they are “free from ‘commonly unwanted’
chemicals or ingredients” and “ ‘formulated without ingredients [consumers] may
not want.’ ” The labeling is allegedly independent of manufacturer claims, and at
least some Target Clean products are not labeled or marked with a similar claim
or description by the manufacturer.

example of Target Clean store sign

Target allegedly uses a bright green hexagon within which is
Target’s typical “bullseye” logo and the word “clean.” Sometimes it’s on
individual shelf labels associated with particular products, and also on larger
display signs that offer a short explanation of the Target Clean program
including a brief explanation of Target’s criteria, as well as on a website. It
has identified 13 ingredients as being “banned” from Target Clean Beauty
Products. The complaint has details about the alleged harms of these
ingredients; generally, they allegedly have “known impacts on human health and
the environment.”

Target allegedly designed and describes the Target Clean
program as a shopping assistant for health-conscious consumers. A Target
merchandise executive allegedly described the program as “tak[ing] the
complications out of finding better-for-you product options,” conveying to the
consumer that Target has done that work for them. However, plaintiffs alleged
that some products do contain the banned ingredients, and that others contain
ingredients that are equally or more harmful to humans than the banned
ingredients.

Plaintiffs alleged common law breach of warranty, express
and implied; common law fraud; negligent misrepresentation; violations of the
Minnesota Consumer Fraud Act and Minnesota Uniform Deceptive Trade Practices
Act; and violations of Alabama, Arizona, California, Colorado, Florida,
Illinois, Indiana, Michigan, New Hampshire, New York, Oklahoma, and Washington
consumer fraud and protection statutes (on behalf of putative state
subclasses).

Notes of interest: Target argued that exact purchase dates, not
just year and month, were required to plead fraud with particularity; the court
disagreed:

While the Court can certainly
envision a scenario in which specific-date allegations are key to providing
notice, this is not such a case. For one, the Court is unpersuaded that
individual purchase dates are the relevant “when” in this matter, at all. Plaintiffs
do not allege discrete acts of deceit or fraud where Target’s purported
misrepresentations were unique to individual purchases on different dates.
Instead, Plaintiffs allege that Target Clean has induced sales through
misleading claims throughout the program’s entire existence. The fact that this
allegation is broad does not mean that it fails to provide notice to Target as
to “when” the fraud allegedly occurred. Moreover, as alleged in the Complaint,
the period in which Target made its misrepresentations is not particularly
long. According to the Complaint, the Target Clean program was launched in 2019
and continues to this day. This provides a “when” window of no more than four
years at the time of the filing of the Complaint.

The real issue of interest is the reasonable consumer
standard. Although the court was somewhat dubious, the early stage of the case
allowed the claim to proceed. Certainly the allegation that at least one
product literally contained an ingredient on the banned ingredients list had to
be accepted.

The court was more sympathetic to Target’s arguments that
“reasonable consumers would view Target’s posted definitions” to better inform
themselves about what the program does and does not claim and that “clean”
lacks any “accepted meaning [and] is too subjective and vague and wholly
dependent on an individual’s interpretation, and lacks an empirical benchmark
to provide any indicia of measurability to create a basis for a lawsuit …
based on reasonable consumer confusion.” But factual development was still
required. “Clean” was something of a moving target—plaintiffs alleged meanings
related to health; Target argued that Target Clean was a “proprietary” term and
therefore meaningless puffery, “embodying only its own exact terms and
conditions and communicating nothing more.”

At this stage, the court would not resolve the issue in
Target’s favor. “Target’s own case law suggests that ‘clean’ is being used in
cosmetics sales widely, and has at least some kind of consistent meaning apart
from whatever proprietary meaning Target wishes to assign to it.” Moreover, “Target’s
dependence on an idealized scenario of clear explanation and disclosure about
its own definition of Target Clean ignores Plaintiffs’ second-order assertions
about the Target Clean program—namely, that the program’s definitions about
itself are confusing and inconsistent.” Finally, “Target’s position requires
far too much assumption about what a Target Clean consumer would have
reasonably encountered or been told about this program at the time of their
purchases.”

The court noted that the last point made this case “unique” compared
to other facially similar cases:

Many of the cases cited by Target
dismissing consumer fraud actions can be fairly characterized as “product
cases,” meaning that a plaintiff has sued the manufacturer of a product for the
representations made about (and often literally on) that product. In this
relatively closed universe—featuring a directly proprietary representation
about a product, typically capable of being immediately verified or at least
scrutinized by the consumer—it makes more sense for a court to render early
legal conclusions about who the reasonable consumer is and what they have
perceived. But the situation presented in this case is much murkier because
this is not a typical products case. This is a case about a well-known national
retailer alleged to have independently curated a selection of products and then
presented those products to the consumer as being “Target Clean” through at
least several variations of representations. The central allegation presented
is that the Target Clean program itself is inherently deceptive, not merely any
one claim about any one product. In other words, by representing Target Clean
as a neutral tool to help consumers, Target is alleged to have used an
imprimatur of authority, as a retailer, to point health-conscious consumers
toward purchasing certain products.

Given this “broader Target marketing landscape,” plaintiffs
were entitled to more expansive inferences about reasonable consumers. “[W]hile
all of these positive representations about products communicate to the
consumer that someone would like to sell them something, only Target’s
representation that a product is ‘Target Clean’ suggests that Target has done
some work on their behalf”:

The independent curation also
effectively removes another key basis on which consumer deception cases are
dismissed under Rule 12: that a reasonable consumer understands the concept of
commercial puffery and knows they must verify the claims made about products.
This caveat emptor logic does not squarely apply here. It is one thing to
assume that a consumer expects a shampoo manufacturer to promote its own
products by any means necessary, and therefore require that consumer, as a
matter of law, to verify package labeling for abject dishonesty before claiming
to have been deceived. But it is another thing to assume what a consumer
reasonably expects when Target positions itself between the manufacturer’s
label and the consumer, promoting certain products on its shelves over others
as embodying certain standards. Here, the typical sales motivations are
altered, and indeed, at this stage the Court can imagine that a consumer might
reasonably assume that Target had independently made an assessment that some of
its products are cleaner than others in a way that is meaningful to its customers.
What follows from such an assumption (e.g., whether a reasonable consumer would
feel that Target had relieved them of the need to verify claims or whether the
reasonable consumer would view Target’s independent representations as being no
more trustworthy than those of the shampoo maker) remains opaque to the Court.
But assuming as true Plaintiffs’ well-pleaded allegation that Target Clean
products are not actually “cleaner” than others, that opacity forecloses a
quick dismissal on the merits of Plaintiffs’ fraud-based claims.

What about the next step in the chain of logic—that the
Target Clean program allows ingredients that are just as harmful as the “banned
ingredients”? “Plaintiffs implicitly suggest that a reasonable consumer would
understand the representation as identifying banned ingredients by kind rather
than with literal specificity.” That is, that “propylparaben is a banned
ingredient because it is a harmful endocrine disruptor, and not merely that
propylparaben is a banned ingredient.” Target argued that “the list of banned
ingredients speaks for itself and cannot impart any representation other than
its own, plain terms.” The court found this to be Target’s strongest argument,
but not on a motion to dismiss. (FWIW, I think it’s an incredibly weak argument—the
basic rules of implicature suggest that these ingredients are banned for a reason,
and the reason is that they’re bad for you; banning ingredients that are bad
for you while allowing others that are just as bad for you for the very same
reasons that the banned ones are bad for you is silly and counterintuitive.)

[T]he difference between the
representations and expectations alleged in the Complaint is not one of apples
and oranges. Furthermore, as discussed above, Target is alleged to have made
statements about the Target Clean program that arguably encourage broader expectations
than Target is willing to concede can arise out of the fine print. Indeed,
there is a fairly straight line between the alleged representation that Target
Clean products are “formulated without a group of commonly unwanted chemicals” or
“formulated without ingredients they may not want” and Plaintiffs’ assertion
that a reasonable consumer broadly expects Target Clean products to “be safe
and good for humans.”

The court also found the reasonableness of plaintiffs
position strengthened by the reference to the FTC’s Guides for the Use of
Environmental Marketing Claims (Green Guides), which state that “a truthful
claim that a product, package, or service is free of, or does not contain or
use, a substance may nevertheless be deceptive if: [ ] the product, package, or
service contains or uses substances that pose the same or similar environmental
risks as the substance that is not present.”

I won’t mention most of the other claim-specific issues, but
Target sought to strike class allegations arising under Alabama’s Deceptive
Trade Practice’s Act (ADTPA) because of a limitation written into the statute
by the Alabama legislature that purports to ban the formation of class actions:

A consumer or other person bringing
an action under this chapter may not bring an action on behalf of a class. The
limitation in this subsection is a substantive limitation and allowing a
consumer or other person to bring a class action or other representative action
for a violation of this chapter would abridge, enlarge, or modify the
substantive rights created by this chapter.

But Rule 23 governs the formation of classes in federal
litigation. Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559
U.S. 393 (2010), as applied by the Eleventh Circuit to Alabama’s law, Lisk v.
Lumber One Wood Preserving, LLC, 792 F.3d 1331 (11th Cir. 2015), rejected the
claim that Alabama’s statutory ban on class action formation under the ADPTA
implicated any substantive right (against deceptive conduct) as a matter of
federal law. “The State of Alabama may organize consumer lawsuits in its own
courts differently, but cannot impose those preferences on the federal courts. …
[T]he nuanced analysis required under the Rules Enabling Act, as guided by Shady
Grove, does not hinge on whether a state simply says that a given law does
or does not implicate a substantive right.”]

from Blogger http://tushnet.blogspot.com/2025/01/target-clean-might-certify-specific.html

Posted in Uncategorized | Tagged , , | Leave a comment

“pure” chocolate may be deceptive if it has too much heavy metal

Posted on December 31, 2024 by rtushnet

In re Theos Dark Chocolate Litigation, 2024 WL 4336631, No.
23-cv-02739-HSG, — F.Supp.3d —- (N.D. Cal. Sept. 27, 2024)

Plaintiffs alleged that Theo’s dark chocolate bars
contained, or risked containing, the heavy metals cadmium, lead, and arsenic at
levels exceeding California’s then-governing Maximum Allowable Daily Level, as revealed
by Consumer Reports in December 2022 and subsequently confirmed by plaintiffs’
independent testing. These heavy metals allegedly cause “harmful effects,
particularly in children,” putting children at risk for lowered IQ, behavioral
problems (such as attention deficit hyperactivity disorder), type 2 diabetes, and
adults face an increased risk of “cancer, cognitive reproductive problems, and
other adverse conditions” from just a “modest amount” of exposure. Plaintiffs
alleged that because “[i]t is possible to reduce or even eliminate toxic heavy
metals in the Products,” “Theo could have implemented changes to its business
and manufacturing practices to control and eliminate the heavy metals in the
Products it sold to Plaintiffs and the public,” but that it has failed to do
so. Certain products’ outside labels promote the product as “pure,” which was
allegedly deceptive because it “suggest[s] the absence of adulterants in the
Products.” Plaintiffs also argued that the heavy metals were deceptively omitted
from the ingredient list. And some plaintiffs allegedly relied on the inside of
the wrapper, which stated that Theo “pay[s] higher prices for quality cacao
beans,” that the products are “from farm to bar to you,” and that they are
“organic chocolate you can feel good about” eating.

Plaintiffs sued for violations of Washington’s Unfair
Business Practices and Consumer Protection Act, the usual
California statutes, the New Jersey Consumer Fraud Act, and common law negligent
misrepresentation, unjust enrichment, breach of implied warranty of
merchantability, and breach of express warranties.

Article III standing was present because of the alleged
price premium paid. Standing for injunctive relief was present because of the alleged
inability to rely on the advertising/labeling in the future despite plaintiffs’
desire to purchase Theo dark chocolate bars if the claims suggesting the absence
of heavy metals were true, given that they explicitly allege that “[i]t is
possible to reduce or even eliminate toxic heavy metals in the Products,” and
discuss various ways that reduction and elimination may be accomplished. This
was made even more plausible by the allegation that “competing dark chocolate
producers are able to manufacture products” with lower levels of heavy metals.

Theo also argued that plaintiffs couldn’t bring claims on
behalf of nationwide class under the laws of 48 other states, but plaintiffs
argued that their nationwide claims were based on the law of Theo’s home state,
Washington, so that was ok for now.

Nor did the doctrine of primary jurisdiction bar the claims.
“This case is far less about the science of food safety than it is about
whether a product label is misleading. Plaintiffs present a deceptive labeling
case well within this Court’s domain, as ‘this is not a technical area in which
the FDA has greater technical expertise than the courts – every day courts
decide whether conduct is misleading.’” Furthermore, “[t]he Court has no reason
to believe that the FDA is currently conducting a binding investigation or
rulemaking process regarding heavy metals in dark chocolate that will conclude
soon, and therefore sees no reason to defer to the FDA’s jurisdiction on the matter.”

Nor did a consent judgment entered into under California’s
Proposition 65 with several chocolate manufacturers bar the claims. This was
not a claim of failure to warn under Proposition 65, but an independent false
advertising claim.

Statutory consumer protection claims survived; all three
states use the reasonable consumer standard. The theory of deception here involved
both affirmative misrepresentations and omissions. Any claims based on statements
on Theo’s website failed because plaintiffs didn’t plead reliance on those
alleged misrepresentations.

So, the relevant representations included the descriptor
“Pure” on the outside label, and the statements on the inside label that the products
are “from farm to bar to you,” contain “quality cacao beans,” and are “organic
chocolate you can feel good about” eating. Theo argued that “pure”/ “purity” was
just a product descriptor and differentiated products containing added
ingredients such as fruit and nuts from bars compromised solely of dark
chocolate, not communicate an absence of heavy metals. And it argued that the
other statements were just puffery.

The court agreed that “Farm to bar to you” and “chocolate
you can feel good about” were nonactionable puffery, as reasonable consumers
would not rely on these aspirational statements as reliable promises about the
cacao bean’s journey from seed to shelf or how a consumer might feel about
their chocolate. But “pay[s] higher prices for quality cacao beans,” was a
factual assertion that Theo was selective about its cacao beans and chose to
invest in a superior raw product; it didn’t understand Theo to have challenged “pure”
as puffery (rather than just as having a different factual meaning); and “quality
cacao bean” could plausibly mislead consumers about heavy metal content. A
reasonable consumer could conceivably understand these statements to suggest
the absence of contaminants like heavy metals. The court expressed its doubts
that plaintiffs would be able to prove this—but that’s not a question for the
motion to dismiss stage.

However, the omission of warnings about heavy metal content
wasn’t actionable. To plausibly allege a fraudulent omission, the omission must
either (1) “be contrary to a representation actually made by the defendant,” or
(2) “an omission of a fact the defendant was obliged to disclose.” “[A]
defendant only has a duty to disclose when either (1) the defect at issue
relates to an unreasonable safety hazard or (2) the defect is material,
‘central to the product’s function,’ and the plaintiff alleges one of four
situations established by California law.  As to safety, plaintiffs argued that no amount
of lead is safe and that even low levels of cadmium and “long-term ingestion of
even small amounts of arsenic” (in its inorganic form) can cause health
concerns. But they didn’t plead that the amounts of heavy metals that occur in
Theo’s products have caused harm or create an unreasonable safety hazard; they
didn’t show that the levels exceeded the limits imposed by California’s new
limits under the consent judgment mentioned above.

Under the second theory, plaintiffs alleged that the levels
of lead or cadmium in the Products affect the central functionality of the
products because “[t]he central function of food, even in the form of
chocolate, is to provide nutrition and this is contradicted by the presence of
heavy metals,” which plaintiffs allege are unsafe even in trace amounts. But
they didn’t plausibly plead that chocolate containing trace amounts of heavy
metals ceases to function as food – or ceases to provide any nutritional value.
So the omission theory failed.

Negligent misrepresentation and unjust enrichment claims
survived (for now); breach of implied warranty claims failed because plaintiffs
didn’t plead the products were unfit for use as food; but express warranty
claims survived because of the affirmative misrepresentation theory above.

UCL unlawful claim: Theo argued that it wasn’t “required to
list the possible presence of heavy metals as separate ingredients in the
Products’ ingredients lists” and need not disclose “incidental additives.” The
FDA exempts manufacturers from the obligation to disclose “[i]ncidental
additives that are present in a food at insignificant levels and do not have
any technical or functional effect in that food.” “Incidental additives”
include “[s]ubstances migrating to food from equipment or packaging or
otherwise affecting food” provided they are “not food additives,” or, if they
are food additives, “are used in conformity with regulations established
pursuant to [the Federal Food, Drug, and Cosmetic Act (FDCA)].”

But plaintiffs alleged that the levels are significant—both
to consumers and in numerical quantity. This was a factual question that couldn’t
be resolved at this stage.

Nor was the issue expressly preempted by the FDCA. Plaintiffs
brought their unlawful misbranding claim under California’s Sherman Law, “which
expressly adopts federal labeling requirements in their entirety and without
modification.” But Theo argued that heavy metals are not “ingredients” or
“incidental additives” at all and are thereby exempt from federal labeling
disclosure requirements, which would make plaintiffs’ theory non-identical to
federal law. The court rejected that argument:

While Defendant may disagree with
Plaintiffs as to the meaning of the FDA requirements at issue and whether its
products conform to those requirements, that disagreement does not mean that
Plaintiffs are trying to impose additional requirements. Moreover, according to
Plaintiffs’ allegations, Heavy Metals “get into cacao after beans are
harvested,” during “post-harvest processing,” and when the beans are cleaned at
factories. Therefore, as alleged, the Heavy Metals are plausibly incidental
additives, potentially subject to disclosure under FDA regulations.

At this stage, the court also declined to dismiss plaintiffs’
claims for equitable remedies; they alleged that the available legal remedies
are inadequate, especially for prospective harms.

from Blogger http://tushnet.blogspot.com/2024/12/pure-chocolate-may-be-deceptive-if-it.html

Posted in Uncategorized | Tagged , | Leave a comment

Reading list: The Patterns of Digital Deception, Gregory Dickinson

Posted on December 30, 2024 by rtushnet

B.C.L.R. (2024). From the introduction:

… In contrast with the mass emails of old, scammers now
stalk and target their victims with expert precision. … To bolster the FTC’s
traditional, case-by-case approach to combating unfair competition, lawmakers
have proposed (and in some instances enacted) new statutes and regulations to
restrict the digital technologies that power online deception. The idea is to
preserve the FTC’s scarce enforcement resources by enacting prophylactic
restrictions on the technologies that drive deception instead of waiting to
pursue wrongdoers after the fact.

This Article warns that that approach is a mistake for two
reasons. First, what is new and dangerous about technology-powered scams is not
any special power to deceive but their unprecedented efficiency.  …

Second, although across-the-board restrictions on digital
technologies might have some effect on online fraud, they would do so only at a
major cost to innovation…. Across-the-board regulation of key technologies would
increase costs and reduce product quality for everyone, for a comparatively
minor benefit: scammers would be forced to adopt new tools or, more likely, to
ignore the restrictions altogether.

Instead of enacting new technology restrictions, this
Article argues, regulators should bolster enforcement efforts in a different
way—by coordinating governmental enforcement efforts with those of private
litigants….

In particular, four types of online schemes—what this
Article identifies as the patterns of deception—have been especially resistant
to private enforcement efforts: (1) fly-by-nighters, whose highly mobile
operations or location in foreign jurisdictions makes private enforcement
difficult; (2) nickel-and-dimers, who operate at a large scale but extract
small sums of money from people who individually lack sufficient interest to
pursue litigation; (3) user-interface shapeshifters, whose varied and quickly
changing user interfaces pose an obstacle to aggregate litigation; and (4)
calculated arbitrators, whose terms of service include agreements requiring
individualized arbitration of claims and barring consumers from seeking class
relief.

… Focus on these legal patterns of deception will offset the
procedural limitations of private litigation, thereby enhancing the overall
effectiveness of efforts to combat online fraud, while avoiding the
impediments to technological innovation that would come from across-the-board
technology restrictions.

from Blogger http://tushnet.blogspot.com/2024/12/reading-list-patterns-of-digital.html

Posted in Uncategorized | Tagged , , | Leave a comment

false advertising claim survives because math is hard for reasonable consumers

Posted on December 24, 2024 by rtushnet

Robertson v. Clean Control Corp., No. 5:24-cv-01478-SSS-DTBx,
2024 WL 5193852 (C.D. Cal. Dec. 18, 2024)

Robertson bought Odoban, a concentrated multi-purpose
cleaning product, which states “Makes up to 32 Gallons” on the front label. That
principally describes Odoban as a “Disinfectant” usable as “Laundry & Air
Freshener.” When using Odoban for nine of its ten advertised uses, the
concentrate does not produce up to 32 gallons. When using Odoban for laundry,
it only produces one gallon, and when using Odoban as an air freshener, it
produces 6.8 gallons. Only when using Odoban as a “cleaning solution” does the
product deliver up to 32 gallons. Robertson brought CLRA
and UCL claims, as well as breach of express warranty claims, seeking
monetary and injunctive relief.

Odoban argued that the back of the label clarified what “up
to” meant by providing instructions and stating that some uses “require more
concentrate” and “will provide less than the maximum yield.” But a front label
is only ambiguous enough to require a reasonable consumer to read the back
label “if ‘reasonable consumers would necessarily require more information
before they could reasonably conclude’ that the front label was making a
specific representation.” Here, “a reasonable consumer would likely conclude
the concentrate produces ‘up to 32 gallons’ of laundry and air freshener, the
only two cleaning uses named on the front-label.” That’s not true, and it’s not
true by a lot: Odoban can only make 1 gallon of laundry detergent and 6.8
gallons of air freshener. “Makes up to 32 Gallons,” like “One a Day,” states a
“concrete number” which “carries a tangible meaning to a reasonable consumer.” “Though
reasonable consumers may wonder which of Odoban’s many uses will result in 32
gallons of cleaning product, it is reasonable to assume the only two named uses
on the front-label –laundry and air freshener – would, at the bare minimum,
produce a quantity in the ballpark of 32 gallons. Some reasonable consumers may
even assume the majority of Odoban’s uses would result in 32 gallons.”

The court also noted an FTC report attached to the complaint
that studied the effects of “up to” in ads, which found that “a significant
proportion of people” exposed to “up to” advertisements “saw the ad as
communicating that [product] users would typically” reach the “up to” quantity.

Further, even with the back label, it was plausible that a
“significant portion of the general consuming public … could be misled.” “Understanding
which cleaning uses result in 32 gallons, and which result in substantially
less, requires math more complicated than a reasonable consumer should be
expected to calculate.”

The front label has the “up to” representation and states
that a bottle has “1 Gallon (3.79 L[iters]).” The back label instructs
consumers to mix a certain number of ounces of Odoban per gallon of water.

Thus, to understand how many
gallons of cleaning product a bottle of Odoban produces, a consumer would need
to (1) know how many ounces are in a gallon (i.e., 128 ounces), and (2) divide
that number by ounces of Odoban used per cleaning product (ex. 22 ounces per
gallon of water for air freshener) to arrive at the number of gallons of
specified cleaning product (ex. 5.8181811). “Barring a consumer’s exceptional
skill” at long division, “it is difficult to imagine how a consumer could
generate an accurate estimate” of which cleaning products make up to 32
gallons.

Indeed, the court noted, the complaint pled that one gallon
of Odoban produces 6.8 gallons of air freshener when using Clean Control’s
suggested 22 ounces per gallon of water. But 128 divided by 22 is 5.818181. “Robertson’s
mathematical error further underscores how unreasonable it is to expect
consumers, much less those with professional degrees, to calculate the gallons
of cleaning product Odoban can produce.” (Or is it that you get 6.8 gallons of
air freshener comprised of 5.8 gallons of water and 1 gallon of Odoban? Anyway,
the court’s point is made either way, it seems to me.) “Odoban’s label does not
clarify which of its ten advertised uses produces 32 gallons of cleaning
product, instead relying on consumers to conduct long division in the aisle of
a general store.”

Likewise, “Makes up to 32 Gallons” is a specific promise to
consumers, one with a set meaning, such that Odoban’s label creates an express
warranty.

And, for similar reasons, Robertson had standing to pursue
injunctive relief, because there was still a threat of future harm.  She might reasonably, but incorrectly, assume
the product was improved in the future.

from Blogger http://tushnet.blogspot.com/2024/12/false-advertising-claim-survives.html

Posted in Uncategorized | Tagged , | Leave a comment

Two recent amicus briefs: Santos v. Kimmel and Sedlik v. Von Drachtenberg

Posted on December 23, 2024 by rtushnet

 In the Second Circuit, supporting fair use on a motion to dismiss in Santos v. Kimmel, and in the Ninth Circuit, supporting the jury’s verdict of lack of substantial similarity in Sedlik v. Von Drachtenberg. 

from Blogger http://tushnet.blogspot.com/2024/12/two-recent-amicus-briefs-santos-v.html

Posted in Uncategorized | Tagged , | Leave a comment

Celebration on Rimini Street as it achieves significant (c)/Lanham Act victories in 9th Circuit

Posted on December 18, 2024 by rtushnet

Oracle Int’l Corp. v. Rimini Street, Inc., — F.4th —-, No.
23-16038, 2024 WL 5114449 (9th Cir. Dec. 16, 2024)

Rimini Street gets a reasonably substantial victory in its
long-running battle with Oracle in this appeal.

Prior rulings held that Rimini’s processes for serving
clients who use Oracle’s software programs infringed on Oracle’s copyrights.
Rimini therefore developed new processes for servicing its Oracle-using
clients. After a bench trial, the district court ruled that many of these new
processes still infringed Oracle’s copyrights and found that certain
security-related statements violated the Lanham Act. The court of appeals
vacated in part, reversed in part, and remanded.

Oracle’s programs include PeopleSoft, which can be
customized to manage all sorts of business processes, including HR processes
such as timekeeping, benefits administration, and recruitment and financial
processes such as expense tracking and payroll. Oracle also provides optional
software support for PeopleSoft, including updates to reflect changes to tax
laws and other regulations. Customers can also modify and customize the
software themselves or through third-party providers.

“Rimini Street is a third-party provider and direct
competitor with Oracle in the support-services market.” Its services include
troubleshooting support and software updates, including creating files that
only work with Oracle’s products. After the first Oracle lawsuit in 2010, the
court found that Rimini infringed Oracle’s copyrights by engaging in
“cross-use” and creating copies of Oracle’s materials on Rimini’s computer
systems. The court of appeals largely affirmed the district court’s permanent
injunction. The district court later found that Rimini violated the injunction
and held it in contempt on five issues, four of which the court of appeals
upheld. Rimini changed aspects of its business model and sought declaratory
judgment that its revised process, “Process 2.0,” did not infringe. Oracle
counterclaimed for copyright infringement and violations of the Lanham Act. The
district court held that Rimini had, in fact, infringed by engaging in
cross-use prohibited by PeopleSoft license agreements and that an update
created for the City of Eugene’s PeopleSoft software environment was a
“derivative work.” After Oracle abandoned claims for monetary relief, the
district court held a bench trial and additionally found that Rimini (1)
created infringing derivative works, (2) violated Oracle’s PeopleSoft and
Database licensing agreements, and (3) made several statements violating the
Lanham Act.

Derivative works: The court says several useful things, in
line with Pam
Samuelson’s exposition of the derivative works right. (I note amicus
support from, among others, EFF, Glynn Lunney, and Betsy Rosenblatt.) The
district court held that Rimini’s Process 2.0 files and updates were infringing
derivative works because they “only interact[ ] and [are] useable with” Oracle
software. But this was the wrong test.  

The Copyright Act defines a “derivative work” as:

a work based upon one or more
preexisting works, such as a translation, musical arrangement, dramatization,
fictionalization, motion picture version, sound recording, art reproduction,
abridgment, condensation, or any other form in which a work may be recast,
transformed, or adapted.

This “broad” language nonetheless has limits. The text
starts with examples. Although “such as” means the list isn’t exhaustive, it
still indicates the “kind” of works covered. Thus, “based upon” requires “copying
of the kind exhibited in translations, movie adaptations, and
reproductions. Mere interoperability isn’t enough.” I would have thought that
this was the canon of noscitur a sociis, which means we define a term by
“the company it keeps,” but the court treats that as a second principle: “[t]he
examples of derivative works provided by the Act all physically incorporate the
underlying work or works.” Thus, a derivative work “must be in the subset of
works substantially incorporating the preexisting work.” That substantiality
can be literal or nonliteral, in total concept and feel.

Here, though there were several examples of literal copying,
Rimini challenged only the ruling that Rimini’s programs were derivative works
“even if the work[s] do[ ] not contain any of [Oracle’s] copyrighted code … because
they interact only with PeopleSoft,” “are extensions to and modifications of
Oracle’s copyrighted software” and they “cannot be used with any software
programs other than PeopleSoft.” But without more, “derivative status does not
turn on interoperability, even exclusive interoperability, if the work doesn’t
substantially incorporate the preexisting work’s copyrighted material.” Because
the district court applied the wrong legal standard, the court remanded and
didn’t reach Rimini’s alternative argument that Oracle’s licensing agreements
nonetheless authorize any derivative work or analyze whether Rimini’s programs
incorporated protectable nonliteral elements of Oracle’s programs.

In addition, the district court applied the wrong legal
standard on Rimini’s § 117(a) defense, which provides that it’s not infringing
when an “owner of a copy of a computer program … mak[es] … another copy or
adaptation of that computer program” for certain purposes, such as when it’s an
“essential step” in using the program. At the pleading stage, the district
court struck this affirmative defense because it found that “Oracle’s customers
only license, rather than buy, Oracle’s copyrighted software.”

In the Ninth Circuit, courts look for “sufficient incidents
of ownership” to distinguish a license to a copy from ownership of the copy.
Mere labeling of an arrangement as a license, while relevant, is not itself
dispositive. Courts also consider whether the parties’ arrangement
“significantly restricts the user’s ability to transfer the software” and
whether the agreement “imposes notable use restrictions.” Because the concern
is ownership of the copy of the copyright, not of the copyright itself, use
restrictions that only protect against the infringement of the copyrighted
material are less relevant. Instead, courts should attend to use restrictions
that affect using the copy of the computer program, such as limiting the
user to “one working and one back up copy of the software,” forbidding the
“examination, disclosure, copying, modification, adaptation, and visual display
of the software,” and permitting the “software use on [a] single computer,
[while] prohibit[ing] multicomputer and multi-user arrangements, and
permitt[ing] transfer to another computer no more than once every thirty days.”
Other “incidents of ownership” may be considered, including whether the user
paid “significant consideration to develop the programs for [the user’s] sole
benefit” and whether the user could use the “programs ‘forever,’ regardless of
whether the parties’ relationship terminated.”

The district court seemed to rely only on the labeling of
the agreements between Oracle and its customers as a “license,” and that wasn’t
enough. Remand again, both on ownership and on the other elements of the §117
“required step” defense.

The court of appeals also found that the Oracle Database
licensing agreement did not prohibit third-party support providers, like
Rimini, from possessing a copy of Oracle’s software to further a client’s
“internal business operations,” requiring reversal of the district court’s
conclusion that it infringed Oracle’s copyright in Database.

A similar ruling about Rimini’s delivery of PeopleSoft
updates to clients was intertwined with the derivative works ruling above and
needed further sorting out.

Lanham Act: The district court found that Rimini engaged in
false advertising; Rimini challenged whether 12 statements about its security
services could be found to be misleading.

Oracle provides periodic security patches, aka “Critical
Patch Updates,” to customers who buy Oracle software support. Rimini offers its
own security service using a technology called “virtual patching.” Unlike
Oracle’s patches, virtual patching does not modify source code. Instead, it
acts as a firewall for software programs, attempting to intercept and block any
exploits. Rimini’s statements covered: (1) statements about the relative
security of the parites’ services; (2) statements that Rimini offers “holistic”
security; and (3) statements about the need for software patching.

(1)  “Relative
security” statements

• “Security professionals have found that traditional vendor
security patching models are outdated and provide ineffective security
protection.”

• Oracle’s [Critical Patch Updates] are unnecessary to be
secure.

• It is not risky to switch to Rimini and forgo receiving
[Critical Patch Updates] from Oracle.

• Virtual patching can serve as a replacement for [Oracle]
patching.

• “Virtual patching can be more comprehensive, more
effective, faster, safer, and easier to apply than traditional [Oracle]
patching.”

• “Rimini Security Support Services helps clients
proactively maintain a more secure application compared to [Oracle’s] support
program which offers only software package-centric fixes.”

• Rimini provides more security as compared to Oracle.

• Rimini’s [Global Security Services] can “pinpoint and
circumvent vulnerabilities months and even years before they are discovered and
addressed by the software vendor.”

These statements were puffery.

Comparative assertions about
effectiveness, riskiness, and security are the kinds of generalized statements
of product superiority that we have routinely found to be nonactionable. Here,
neither Oracle nor the district court provided any objective, quantifiable metric
to measure software’s security, risk to vulnerabilities, or security protocols’
effectiveness to prove the falsity of Rimini’s statements. Indeed, the
possibility of exploitation by hackers always exists. No product can offer
complete “security” or eliminate all “risk.” Without an objective measure of
the difference between perfect security and the security programs offered by
Rimini’s and Oracle’s products, any statement about comparative security is
necessarily tinged with subjectivity. As Oracle’s security expert acknowledged,
“security experts can reasonably disagree on what constitutes adequate
security.”

The district court held that Rimini’s statement that its
security services could “pinpoint” future vulnerabilities “before they even
exist” was literally false because such technology is “not technically
feasible.” But “Rimini never claimed clairvoyance in spotting vulnerabilities;
instead, it was merely claiming that its products can spot problems before they
are ‘discovered and addressed by the software vendor.’” That was “a comparative
statement of superiority—not a statement of psychic ability. Indeed, Rimini
presented evidence that it had identified and addressed specific
vulnerabilities before Oracle released a patch to address them.” Reversed.

(2)  The
claim that Rimini offers “holistic security” solutions for Oracle software for
enterprises

The district court found that “holistic security” is a term
of art within the world of software security that refers to “a comprehensive
approach to security at all layers of a system, and includes security patching
at the software level.” Because “industry standards can provide objective
meaning to otherwise subjective or ambiguous terms in particular contexts,” the
statement was actionable.

If “holistic security” means “multi-layered security
protection including at the source-code level” that’s a “binary determination”
with “falsifiable criteria.” The district court found that Rimini doesn’t offer
multi-level security, so the court of appeals affirmed.

(3)  “No
need for software patching” statements

• Oracle’s [Critical Patch Updates] provide little to no
value to customers and are no longer relevant.

• Once an Oracle ERP platform is stable, there is no real
need for additional patches from Oracle.

• If you are operating a stable version of an Oracle
application platform, especially with customizations, you probably cannot apply
or do not even need the latest patches.

The district court held that these statements were
misleading because the “security community recognizes that software-level
patching is one of the most important aspects of any modern IT security
strategy.” These too were puffery.

The record showed that Oracle’s
customers are “some of the most sophisticated companies in the world” and “take
the security of their systems seriously.” Whether to deploy or skip software
patching is a matter of subjective discretion. One Oracle customer testified
that it made the decision not to apply Oracle’s Critical Patching Updates
because it focused on its firewall security and believed that the patches could
introduce new problems—all before it considered signing up with Rimini. Thus,
it is doubtful that any of Oracle’s customers would be fooled about its own
security needs merely based on Rimini’s fanciful but vague statements. Indeed,
Oracle could not identify “any customers that left Oracle and went to Rimini
because of a statement about security.” Nor did Oracle present any evidence of
a security breach suffered by a Rimini client. So while these statements border
on falsehood, we cannot say that they are so specific and measurable to become
actionable under the Lanham Act. We thus reverse.

All this also required the district court to reconsider the
scope of the injunction.

Judge Bybee dissented in part, and would have found that the
statement “Oracle’s [Critical Patch Updates] provide little or no value to
customers and are no longer relevant” was not puffery.  “Little or no value” and “no longer relevant”
were “absolute characteristics” that could be “falsified”—Oracle’s product was
either valueless and irrelevant or not, even if using software patching is a
discretionary decision, and even if Oracle’s “sophisticated” customers would
not be “fooled” by this statement. Rimini “internally acknowledges that
patching … is necessary,” and has said that “no one is thinking of not
applying patches at all.” Most of Rimini’s statements were puffery because they
used qualifiers like “probably,” “can,” and “more”—and made generalized
statements. [FWIW, the “qualifiers” justification doesn’t persuade me—most
studies I’ve seen show that consumers don’t distinguish in that way.]

from Blogger http://tushnet.blogspot.com/2024/12/celebration-on-rimini-street-as-it.html

Posted in Uncategorized | Tagged , | Leave a comment