Exaggerated and outdated photos literally false, court rules

Posted on July 6, 2015 by rtushnet
Spruce Environmental Technologies, Inc. v. Festa Radon Technologies, Co., 2015 WL 4038802, No. 15–11521 (D. Mass. July 2, 2015)
 
Spruce and Festa compete in the radon mitigation industry, selling products for testing and reducing indoor levels of the colorless and odorless radioactive gas radon.  Festa began using a catalog with a section titled “*Dare to Compare* U.S. versus THEM.” It compared a “7 year old AMG Fan v.[a] 5 year old fan from our competitor” and provided a photograph of a gray Festa fan next to a bright yellow Spruce fan. 
 

Further comparisons, with side by side photos, compared US (referring to Festa) and THEM (referring to Spruce)
 
1)      “Secure Lock Lever Nuts”
“Inexpensive Wirenuts”
2)      “Solid lid with four screws to ensure a watertight fit. Comes with 2 extra in case you drop one”
“Molded Plastic lid secured with only two screws”
3)      “Factory Sealed Motor Wire”
“Motor wire caulked to seal”
4) “Solid motor lead wires”
“Stranded motor lead wires”
5) “Factory Stamped, Dated, & Serialized”
“Generic–No Manufacture Info”
6) “Terminal Box With (4) Screw Holes With Brass Inserts To Prevent Stripping”
“Terminal Box With (2) Screw Holes. Screw Directly Into Plastic”
7) “Motor Mounted With (4) Mounting Screws. Allows For Better Stability And Quiet, Vibration Free Operation”
“Motor Mounted With only (2) screws”
8) “Capacitor With Factory Installed Lead Wires For Direct Connect”
“Capacitor Requires Wires Installed during assembly”
9) “Watertight Pivoting Grommet”
“Plastic Sleeve Requiring Caulking”
 
Festa put the same content on its website. Several of the images in Festa’s catalog portray products bearing labels indicating that they are both Home Ventilating Institute (“HVI”) and Energy Star certified.
 
The court evaluated five falsity claims, but didn’t go into detail on two so I won’t either.  The key claims: 1) depictions of Festa’s products as HVI and Energy Star certified when they are not, 2) claims that the Spruce fan motors are “Generic–No Manufacture Info” even though they do have a manufacturer’s label, and 3) implications that the Spruce fan casing will degrade and change into a yellow color after five years. Even if these weren’t literally false claims, Spruce argued, Festa’s intentional deception justified an inference of actual deception.
 
Festa responded that it engaged in comparative advertising only after Spruce’s sales representatives told customers that Festa’s radon mitigation fans were “garbage” and “junk.”
 
As for the yellowing issue, Festa submitted photos of Spruce fans that “have undergone pronounced yellowing after exposure to sunlight.”  However, at the hearing, Festa displayed the Spruce fan shown in Festa’s catalog.  “Although the fan certainly was discolored, it was not the bright shade of yellow portrayed in the photograph.” RT: Note the finding of literal falsity based on visual exaggeration—not unique, but worth highlighting (so to speak). The lack of apples-to-oranges comparison, discussed next, probably plays a role: “Defendant admitted that plaintiff’s fan was photographed with flash while defendant’s fan was not, which may have resulted in the enhanced brightness of the Spruce fan.” The court therefore found likely success on the merits as to this comparison.
 
As for the certifications, Festa acknowledged that there was a lapse in its Energy Star certification due to missing paperwork and that its fans had not been HVI certified since 2010. Festa submitted the necessary paperwork and expected to be Energy Star certified again shortly, but also removed references to Energy Star from its website and no longer places Energy Star stickers on its fans. The Court found that, even though the fans photographed in the catalog themselves were Energy Star certified, defendant was falsely representing that its fans were currentlyEnergy Star compliant, and likewise with older photos of fans showing an HVI sticker.
 
How about the description of the Spruce motor as “Generic–No Manufacturer Info”?  Festa argued that the motors appeared generic because the Spruce labels lacked a model number, product name, trademark and manufacturer name, and that one of the motor manufacturer’s own sales representatives did not recognize the motor because the product was not branded.  The court concluded that, though the motor was specifically made for Spruce by another company, the description wasn’t literally false, and that Spruce didn’t prove intentional deception.
 
Thus, Spruce was likely to succeed on its false advertising claim based only on the comparison of the colors of the fans and the Energy Star and HVI representations. 
 
The First Circuit measures irreparable harm on a sliding scale, in conjunction with likely success on the merits.  Spruce presented an email from a customer expressing concern over several aspects of its fans, including the discoloration issue because it suggests that “it is a cheap product casing.” The court concluded that money damages would mostly compensate Spruce, but that Spruce showed a “modicum” of irreparable harm to its goodwill and reputation.  Likewise, the balance of equities tipped somewhat in Spruce’s favor because the false representations weren’t egregious.  Festa argued that an injunction would be against the public interest because it would suppress competition, but consideration of Spruce’s potentially anticompetitive motives for suing would have to wait for a later stage; it was in the public interest to remove false advertising from the marketplace.  Thus, the court granted a limited preliminary injunction.
 
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Venable on notable NAD product name ruling

Posted on July 6, 2015 by rtushnet

Amy Mudge and Randall Shaheen explain the NAD’s take on product names: if you put two terms together, as in “Nourishing Coconut Shampoo,” the ingredient has to provide the benefit.  If not, it has to be called “Nourishing Shampoo with Coconut.” Also, if you tout your product as X-free, the ingredient you use to replace X can’t have the same negative qualities that lead people to avoid X.

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Clearblue’s pregnancy test gets the blues: recall ordered for false advertising

Posted on July 6, 2015 by rtushnet
Church & Dwight Co. v. SPD Swiss Precision Diagnostics,
GMBH, 2015 WL 4002468, No. 14–CV–585 (S.D.N.Y. July 1, 2015)
 
A good old-fashioned false advertising case about pregnancy
tests!  Prior
opinion, refusing to dismiss the claims as preempted in light of Pom Wonderful.
 
The parties are the leading makers of home pregnancy
tests.  SPD launched the Clearblue
Advanced Pregnancy Test with Weeks Estimator, which the FDA cleared for the
intended use of telling a woman (1) whether she is pregnant and, if she is
pregnant, (2) how many weeks have passed since she ovulated. The Weeks
Estimator provides an estimate of “weeks” that is two weeks less than the
standard convention: Doctors estimate pregnancy duration (gestational age)
based on how many weeks have passed since a woman’s last menstrual period (LMP)—not
weeks since ovulation.  (As my kids noticed when we discussed this case, you therefore start out two weeks pregnant—and we agreed
that a test that could detect pregnancy at one week would be very, very useful,
albeit unlikely in the Muggle world.)
 
The court didn’t need to decide when pregnancy begins “as a
biological matter.” It only needed to determine “whether SPD’s advertising
communicates the message that the Weeks Estimator provides an estimate of weeks
pregnant that is consistent with a doctor’s estimate of weeks pregnant and, if
so, whether this message is false.”  After
a two-week bench trial, the court agreed with C&D that SPD’s advertising
was false, and found SPD’s deception to be intentional and egregious, although
C&D failed to prove a breach of the parties’ prior settlement agreement.
 
A bit of biology review: a typical menstrual cycle lasts 28
days; the time from LMP to ovulation is generally two weeks, but variance in
this phase can be significant. The time from ovulation to the next menstrual
period is two weeks, subject to much less variance.  Sperm must fertilize an egg within 24 hours
of ovulation, and the resulting blastocyst must travel to the uterus and
implant in the lining of the uterus. 
Implantation occurs 6-9 days after ovulation. Once implantation occurs,
the blastocyst begins secreting human chorionic gonadotropin (hCG), a hormone
that signals to a woman’s body that she is pregnant and prevents menses.  Home pregnancy tests detect the presence or
absence of hCG in urine.
 
Tradition dictates the use of the date of LMP as
the start of pregnancy, on average 40 weeks before estimated date of delivery
at full term (38 weeks after fertilization).  Ultrasounds can now provide a more accurate
measure of gestational age, but those are generally done 8-10 weeks after LMP,
and the LMP is usually the only piece of data available in early pregnancy, so
it’s still the most commonly used method for estimating gestational age and
assigning a due date. Regardless of the reasons for adhering to this
convention, it remains “universal.” 
Indeed, even when professionals use other methods, such as ultrasound,
to determine gestational age, they still convert it to LMP-based dating when
communicating both to patients and to other medical professionals.  Ultrasound machines are programmed to automatically
use LMP to express an estimate of gestational age.  And even when a woman doesn’t remember her
LMP or her memory is inconsistent with the ultrasound, doctors will still assign her a LMP two weeks prior to conception as determined by the ultrasound.  The same thing happens with IVF.
 
This single convention makes sense because it allows
everyone involved to communicate easily. 
Also, pregnant women traditionally relied on doctors for an estimate of
pregnancy duration.  (Interesting
definition of tradition, but okay.) “SPD’s suggestion that women could figure
this out on their own based on their ‘own awareness of when they ovulated, had
intercourse, and other relevant facts; combined with knowledge drawn from ‘myriad
sources of information in books and on the internet regarding pregnancy
dating,’ is unpersuasive and does not change the fact that historically doctors
have been the authoritative source of information for women to find out how
many weeks pregnant they are.” The FDA even required SPD to state on all
product advertising: “Only your doctor can provide a reliable estimate of
gestational age and only your doctor can monitor pregnancy progression.”
 
The Weeks Estimator, unlike other pregnancy tests, provided
an estimate of the number of weeks since fertilization, because hCG levels rise
rapidly and predictably during early pregnancy and because fertilization occurs
within 24 hours of ovulation, so that the date of fertilization provides a
proxy for the date of ovulation. Depending on her hCG level, a pregnant woman
who used the Weeks Estimator would see “1–2,” “2–3,” or “3” on the screen—meaning,
she was pregnant and it had been 1–2, 2–3, or 3 weeks since ovulation.
 
Because home pregnancy tests are Class II medical devices,
SPD needed 510(k) preclearance for the Weeks Estimator.  Initially, the FDA objected that the “weeks
indicator feature may provide misleading information to lay population of users”
largely because “the output of this test is not aligned with gestational aging
done by healthcare professionals (i.e., it will under-estimate gestational age
by an average of 2 weeks).” The FDA required SPD to modify the “Indications for
Use” statement on product packaging to include:
 
This test cannot be used to
determine the duration of pregnancy or to monitor the progression of pregnancy.
Your doctor determines how many weeks pregnant you are based on the first day
of your last menstrual period and ultrasound results. This test provides a
different estimate that can not be substituted for a doctor’s determination of
gestational age.
 
SPD wanted to call the product “Conception Indicator,” but
the FDA rejected that and accepted “Weeks Estimator.” The FDA also requested that SPD remove the
statement “Also Tells You How Far Along You Are” from every area of the box. After
some additional back-and-forth, the FDA issued a Clearance Letter for the
Weeks Estimator. Among other things, the FDA instructed SPD (1) not to express
the product’s results as “weeks pregnant” and (2) to express the results only
as “the number of weeks that may have passed since ovulation.”
 
SPD then launched what was touted as the largest ad campaign
in this product category. “Despite FDA’s warnings, internal SPD marketing
documents described the ‘communication idea’ for this campaign as: ‘Clearblue
Advanced Digital Pregnancy Test with Weeks Estimator gives women the
reassurance of knowing much more of their pregnancy because it is the only test
that can also tell you how far along you are.’”  The launch advertising consistently
communicated the message that the product estimated “weeks pregnant,” “weeks
along,” and similar ideas, “while downplaying (or omitting) the message that
the product provides an estimate of weeks since ovulation or that the product’s
estimate of ‘weeks’ does not align with how a doctor would express an estimate
of weeks pregnant.”
 
The product launched with a box that was on store shelves from
August 2013 to February 2014. It showed four images of screens stating,
respectively, “Pregnant // 1–2 Weeks”; “Pregnant // 2–3 Weeks”; “Pregnant //
3  Weeks”; “Not Pregnant.” The word
“ovulation” didn’t appear anywhere on the front or back of the box.
 

The side panel contained a small-print, cramped version of
the full FDA-required Indications for Use statement, which said in part, “This
test cannot be used to determine the duration of pregnancy or to monitor the
progression of pregnancy. Your doctor determines how many weeks pregnant you are
based on the first day of your last menstrual period and ultrasound results.
This test provides a different estimate that cannot be substituted for a
doctor’s determination of gestational age.”
 

From August to December, SPD ran a TV ad that aired thousands
of times on at least 65 different networks and was projected to reach millions
of women aged 18–49 each month.  It
showed two women talking:
 
1st Woman: I’m pregnant.
2nd Woman: Really?
1st Woman: Two weeks.
2nd Woman: You already went to the
doctor?
1st Woman: Not yet, but I took this
new Clearblue test. It’s like two tests in one.
2nd Woman: Oh my God, I think I’m
going to cry!
 
As the first woman says “It’s like two tests in one,” an
image of the Weeks Estimator appears on screen with the digital screen
prominently displaying “Pregnant // 1–2 Weeks.*” After the next line, the
commercial cuts to an image for two seconds showing three large digital screens
(containing the words “Pregnant // 1–2 weeks,” “Pregnant // 2–3 weeks,” and
“Pregnant // 3  weeks”) in an arc over an
image of the product with the phrase “ESTIMATED WEEKS SINCE OVULATION (UP TO 3
)” in grayish blue font below the arc and above an image of the product. A
voiceover says: “The new Clearblue pregnancy test also estimates how many
weeks. Weeks Estimator. Only from Clearblue.” Beginning at 6 seconds into the ad,
small white font appears at the bottom of the screen stating:
 
*Word ‘weeks’ on display is for
illustration only. For home use only. Always consult a doctor if you suspect
you are pregnant and to confirm, date and monitor pregnancy. Not for multiple
pregnancies. Estimates weeks since ovulation up to 3  weeks. Do not use to monitor pregnancy
progress or duration.
 

Other launch advertising was similar, with unqualified use
of “weeks” and a prominent uniqueness/value message, such as “Knowing more
helps you prepare for the exciting future ahead—78% of women surveyed said they
believe it is important to know how far along they are.”  Mentions of ovulation were absent (as in web
banners) or buried.  A celebrity
spokesperson appeared as a guest on the television show “The Doctors” to
promote the Weeks Estimator; she said: “I am the new spokesperson for
Clearblue. It’s the pregnancy test. I am. I can’t wait to use it … because it
actually estimates how many weeks of pregnancy you’re in.” SPD argued that she
spoke “off script” and was not authorized to make this statement, but internal
emails revealed that SPD’s marketing firm was “beyond pleased with how well this
pitched placement delivered.”
 
After C&D complained, the FDA reached out to SPD with
concerns, noting it had informed SPD “not [to] talk about weeks pregnant” and
“[p]lacing ‘weeks’ in the result window is the same as saying weeks pregnant.”  SPD proposed adding language to the TV ad’s
disclaimer and removing dialogue about a doctor’s visit. The FDA found these
changes insufficient for failing to “clearly state that the device can only
estimate weeks since ovulation (and not weeks of pregnancy),” among other
things. The FDA required SPD to take the ad down in 6 days.  SPD revised the product’s package and made a
number of other changes to its ads.
 
The revised package, which hit stores in February 2014, put a
gray strip in the top right-hand corner stating: “Only Test That // Estimates
Weeks // Since Ovulation*.”  The asterisk
apparently referred to the side panel Indications for Use. The digital screens used
the words “Pregnant // 1–2”; “Pregnant // 2–3”; “Pregnant // 3 ”; and “Not
Pregnant,” but the phrase “Weeks Along” was below them. 
 

SPD’s TV ad was replaced with an internet-only ad with the
dialogue:
 
1st Woman: I have something to tell
you: I’m pregnant!
2nd Woman: Really?
1st Woman: I took this Clearblue
test. It’s like two tests in one.
Voice over: Only Clearblue tells
you if you are pregnant and estimates how many weeks since ovulation.
2nd Woman: Oh my God, I think I’m
going to cry!
Voice over: Weeks estimator, only
from Clearblue.
 
The commercial cut to the image of the digital screens with
“Pregnant // 1–2,” “Pregnant // 2–3,” and “Pregnant // 3 ” in an arc over an
image of the product with the phrase “ESTIMATED WEEKS SINCE OVULATION (UP TO 3
)” in grayish blue font below the arc and above the product. Then it cut to an
image of the Revised Package in the center of the screen with “Weeks Estimator”
in large, pink lettering jumping out of the box, distracting the eye from the
rest of the packaging. The commercial ended with the full Indications for Use
statement on screen for 15 seconds, but that was the only disclaimer.  Other advertising was revised similarly.
 
The court found intentional deception, which is presumed to
be effective.  “Time and again, SPD’s
staff recognized and understood that the Weeks Estimator’s result did not align
with how doctors express pregnancy duration and that this misalignment could
confuse consumers. Rather than clarify its product advertising, SPD’s staff
sought to exploit the confusion.”  In
what is perhaps a lesson on witness preparation as well as on what judges
dislike, the court commented:
 
SPD’s witnesses acknowledged at
trial—often with considerable reluctance—the existence of the LMP convention.
After one such longwinded explanation, the Court pointedly asked Dr. Joanna
Pike, SPD’s Senior Global Pregnancy Product Manager, “If someone says to you or
you read somewhere I am four weeks pregnant without any further explanation,
what would you assume that means?” Dr. Pike, withdrawing deeper into her chair,
provided a convoluted answer before finally acknowledging that “I think in
general you may—you may—this, it is time since LMP because it is widely used,”
which she hesitantly admitted was “[t]he truth.” The truth it was.
 
Given their awareness of the convention, SPD employees
recognized the resulting likelihood of confusion.  Dr. Pike wrote to her colleagues:
 
We should not suggest in U.S. that
the product tells you ‘Weeks Pregnant’ when we have been constrained by FDA to
say ‘weeks since ovulation’. Indeed, even outside of US, this product doesn’t
tell you weeks pregnant—if you are 1–2 weeks by [the Weeks Estimator] then you
are 3–4 weeks pregnant because the universal convention for dating pregnancy is
from the LMP not from ovulation…. I think FDA would NOT approve if we used
‘Weeks Pregnant’ in any materials and we are very likely to also confuse
consumers and might end up with challenge/complaint.
 
The court didn’t accept Dr. Pike’s explanation that she was
conveying the FDA’s views, not her own.
 
Members of SPD’s U.S. Advisory Board also highlighted the likelihood
of confusion. One Board member stated that it was “important not to contradict
this clinician-defined measurement,” while another raised concerns about the
digital display screens containing “Pregnant 1–2,” etc., noting: “Need to be
clearer what this means, i.e. from time of conception NOT LMP, we are Not
saying what we are doing.” Another indicated that they might change how
pregnancy was counted, but that it would be an uphill battle.
 
The TV ad was the “most glaring example.”  An internal SPD PowerPoint described the ad
as “Best Friends with the insight of knowing it before the doctor visit.”  SPD’s market research revealed that viewers
believed the product could tell a woman how far along she was before she went
to the doctor.  This necessarily implied
that the product would provide the same estimate one would get from a doctor’s
visit.
 
In another lesson about communicating risk, even internally,
ClearBlue’s Worldwide Marketing Director, Ryan Daly, told his colleagues: “I
know we are being told by some that the FDA will be waiting for this ad, but I
really struggle with that given their setup … they have a pharma ad division
but none for [over-the-counter products]. Net, I view the risk as low.” The
court interpreted this as a statement that “the likelihood of getting caught
airing an ad that contravened FDA requirements was minimal because the FDA did
not have resources to police advertising for over-the-counter products.” (Of
course, the FDA ultimately did object, despite its lack of resources.)  Daly was, however, concerned that the
networks would find the ad unsubstantiated because “some [networks] could get
shy should they read the entire intended for use statement. So for this, I
think we need to be very careful … I want us to see everything that we plan
to send the TV stations. Only give them what they ask for.”  So rather than give the networks the full
Indications for Use statement—less than a page long— SPD gave the networks a
substantially truncated version that omitted the warning: “Your doctor
determines how many weeks pregnant you are based on the first day of your last
menstrual period and ultrasound results. This test provides a different
estimate that can not be substituted for a doctor’s determination of
gestational age.” Daly could not explain how the ad communicated the message
that the product’s estimate is different from a doctor’s estimate.
 
Again, the court was unconvinced by Daly’s explanation at
trial that he was just concerned about overwhelming the networks with too much
information. Among other things, SPD also used the truncated version of the
Indications for Use as the “super” at the bottom of the screen.  The court also noted “his description of
something referred to internally as the ‘Bedford puke,’ an apparent shorthand
for the dangers of providing too much information to regulators and
broadcasters,” as well as his minimization of the extent of advertising by
saying that accused shelf trays were shipped only to a single retailer.  That retailer “just happened to be Target.”  
 
SPD’s employees also discussed creating a backup ad “that
correctly identified a key problem with the ad”: “Back up plan is Best Friends
with no mention of ‘knowing before doctor visit.’”  Clearblue’s Brand Manager Kirsten Suarez
responded “Can we not wait to receive a letter [from C&D] and then edit?
I’m guessing we’d have time between receipt of the letter and actual need to
traffic in new copy/pull from the networks.” Again, the court was unpersuaded
by her later explanation that she wanted to refer to a doctor to encourage
women to get prenatal care.  “[T]hese
communications show that SPD staff knew precisely what was false or misleading
about the commercial, but they chose to air it anyway.”
 
Suarez made “other troubling statements about the Weeks
Estimator’s advertising that suggest a deliberate attempt both to evade FDA
limitations and convey a false message about the product.”  E.g., “One last thing, we can’t actually link
together the weeks and pregnant in the way it was on the last couple. What you
can say is the only test that estimates weeks, or the only test that also
estimates weeks, then the consumer will see Pregnant 1–2 Weeks in the windows
and put it together.” The court therefore concluded that SPD “knew that placing
the word ‘pregnant’ in proximity to ‘weeks’ would suggest that the product
provides an estimate of weeks pregnant,” just as the FDA then told it. 
 
Suarez recognized that SPD couldn’t say the product
estimated “how far along” a woman was, but suggested including survey results
indicating that women want to know how far along they are because “[w]e can’t
say we’re doing it, just that women want to know.”  She responded to a suggested use of “Find out
how far along you are,” with: “This is a tricky one, but the FDA doesn’t
actually want us to say that. I think it can be phrased as a question as you
had, or we need to use the ‘estimate weeks’ language.”  Further evidence that marketers know and take
advantage of what Lanham Act jurisprudence often does not: there is no clear
express/implied distinction, and it’s easy to set up a message that works at
least as well, if not better, than an express claim.

SPD also understood that consumers didn’t have a good understanding of
ovulation.  As Suarez stated, “Trust me,
it doesn’t really make sense to [consumers]. … [T]hey don’t have a knowledge of
the right days, poor understanding of the details, etc. and it’s not common
vernacular of how we would talk anything.”  That’s why SPD didn’t want to use “ovulation”
other than as absolutely required.  (I
still don’t get why they didn’t just add 2 to their estimate, like everybody
else.) A summary of a meeting between SPD employees and its outside marketing
firm included the observation that “[o]verall lack of consumers’ understanding
of ovulation may cause confusion. Need to address the reason why [healthcare
providers] use different method without saying it is wrong or suggesting that
Weeks Estimator takes the place of seeing [a healthcare provider].”
 
SPD “repeatedly suggested that it had tried in vain to
include a conversion chart on the outside of the product’s packaging that would
mitigate consumers’ confusion regarding how the product’s estimate of weeks
differs from a doctor’s estimate of weeks pregnant.” SPD first said that the
FDA had forbidden it from doing this, then that it understood the FDA’s
instructions as requiring removal “of all performance information concerning
the estimation of weeks function, including the Conversion Chart.” Then SPD
said that this determination required a “deep” read of the FDA clearance
letter. 
 
“Because SPD often overstated other instances of the FDA and
broadcasters ‘requiring’ or ‘mandating’ as opposed to ‘permitting’ or ‘allowing’
certain conduct, the court didn’t credit SPD’s explanation, and the court’s own
reading of the clearance and hold letters didn’t indicate that the FDA intended
to prohibit SPD from including the conversion chart on the outside of the box.  Plus, SPD often pushed back against the FDA on
other changes, but didn’t ask it to clarify about the conversion chart or argue
to the FDA that the conversion chart would aid consumer understanding.  In any event, SPD’s own people were concerned
about confusion even when the conversion chart was on the outside of the
package.
 
The court also noted that “SPD’s intentional deception
extended to other aspects of its advertising not directly relevant here, such
as touting the fact to U.S. retailers that 15% of European purchasers of the
product had used the product to track their pregnancy despite the FDA’s
explicit restrictions on making such statements.”
 
C&D scored a hat trick: the ads were unambiguous and
literally false; even if the ads were ambiguous, SPD’s intentional deception
gave rise to a presumption of consumer confusion; and C&D presented
evidence of consumer confusion.
 
The literal falsity here was by necessary implication.  “Considered together, the name of the product
(‘Clearblue Advanced Pregnancy Test with Weeks Estimator’) and the digital
screens (‘Pregnant // 1–2 Weeks,’ etc.), without any clarification, necessarily
imply that the product tells a woman whether she is pregnant and, if she is
pregnant, how many weeks pregnant she is.” Further, the product was an OTC test
marketed to women for use before they see a doctor.  “[I]n the context of a home pregnancy test
that also provides an estimate of ‘weeks,’ the overriding message to consumers
is that this is an estimate of weeks pregnant that is consistent with a
doctor’s estimate of weeks pregnant.”  This unambiguous message was false.
 
The presence of the full Indications for Use statement on
the side of the package did not change the package’s literal falsity.  “[T]he entire statement is 206 words long,
separated into four paragraphs, and printed in minuscule font. Stacey Feldman,
C&D’s Vice President of Marketing for Women’s Health and Personal Care, credibly
testified that in her experience very few consumers will read the Indications
for Use statement on the side panel.” Many courts have disregarded a footnote
or disclaimer in fine print, and this one couldn’t fix the literal falsity.  Nor did the package insert fix the problem;
along with being in fine print, it was only available after a consumer bought
the product, and many consumers wouldn’t review it, especially because of the
extensive ad campaign to which they’d already been exposed.
 
C&D also met the standard for showing implied falsity
because of the deliberate deception. The burden shifted to SPD to show that
confusion was unlikely, but SPD didn’t.
 
Indeed, C&D had evidence of both actual confusion and
likelihood of confusion. An April 2014 CBS affiliate news report reported that
an expectant mother who had purchased the Launch Package believed the product
provided an estimate of weeks pregnant that was consistent with how her doctor
would estimate weeks pregnant. The woman became concerned, wondering if her
“baby was not developing correctly,” when her doctor told her that she was
further along in her pregnancy than the estimate provided by the product.  SPD knew about this story, but chose to do
nothing to address the confusion. 
However, the court disregarded 310 non-US complaints made to SPD’s
consumer care line; only 17 of the remaining 30 showed a mistaken belief that
the product estimated pregnancy duration the same way a doctor would. This was
a small percentage of the nearly 1.9 million Weeks Estimators sold in the US
over the relevant period, but that fact didn’t favor SPD either, “because many
deceived consumers may not even know about the care line or may not be inclined
to call it.”
 
C&D also presented a consumer survey concluding that
roughly 20% of consumers thought that the product’s estimate of weeks was the
same as a doctor’s estimate of weeks pregnant.  The export, Hal Poret, conservatively “assumed
that a respondent was deceived only if that respondent answered both that the Product
estimates the number of weeks a woman is pregnant and that the Product’s
estimate of weeks is the same as a doctor’s,” but even so this was a
substantial number of consumers.
 
The revised package and ads didn’t help.  Even disregarding the issue of whether
consumers understood the added references to “ovulation,” they were still
implicitly false.  SPD’s past intentional
deception mattered, even though “an advertiser who has learned the error of its
ways and has modified its advertising accordingly should not be forever held to
account for prior instances of bad conduct.” Still, “evidence of prior
intentional deception may be probative of whether subsequent corrections were
sincerely implemented.”  SPD added “since
ovulation” to the package, but it wasn’t prominent, consistent with SPD’s
dislike of the term.
 
Regardless, Poret’s surveys also showed that between
16-17.3% of consumers were still confused by the revised package, which was
enough for deception.
 
The court’s analysis of the other ads proceeded similarly.
In the TV ad, for example, “[t]he dialogue between the two women only further
augments this unambiguous message when the first woman states that she knows
she is two weeks pregnant despite not having gone to the doctor yet because she
used the Weeks Estimator. This exchange communicates to the viewer that the
woman received the same estimate of weeks pregnant from the product that she
would have received had she gone to the doctor—which is false.”  The super was of no use, not only because SPD
intentionally omitted clarifying language, but also because it was “in small,
whitish font that blends in to the white background such that even the Court
failed to notice it upon first viewing.”
 
After falsity, materiality was simple, given SPD’s marketing.
 
Injury: with literal falsity, no further extrinsic evidence
of injury to the plaintiff is required. Moreover, C&D provided evidence showing
a logical causal connection between SPD’s false advertising and its own sales
position. C&D’s market share in terms of dollar sales for its First
Response product had been steadily growing for over a decade. Clearblue’s
market share, by contrast, went from approximately 16 dollar share points at
the beginning of 2012 to 12.5 dollar share points in August 2013.  After SPD’s extensively advertised launch,
Clearblue gained significant market share while First Response lost it.  C&D’s expert credibly testified that this
sharp change couldn’t be attributed to any product feature other than the
central weeks estimator.  SPD’s internal
marketing documents agreed, as did C&D’s market research.
 
SPD argued that C&D should have conducted “rigorous”
regression analysis to control for independent variables.  This argument would be more appropriate in
the damages phase; C&D only needed to show a “logical causal connection”
and need not “come forward with specific evidence that [defendant’s] ads
actually resulted in some definite loss of sales.”
 
The court noted that, “at $2.6 million in annual sales per
dollar share point, even the loss of just one dollar share point is significant
in terms of revenue.”  Plus, it was
likely that C&D’s countervailing response, such as offering rebates,
mitigated the decline in its market share. 
SPD’s expert posited that the Weeks Estimator’s exciting new feature
grew the market as a whole, meaning that C&D’s dropping market share was
less harmful, but “[e]ven if the whole pie grew because of the new product, but
C & D’s share of that pie grew at a smaller rate than it would have in the
absence of SPD’s false advertising, C & D would still have lost sales on
account of the false advertising.”
 
A finding of false advertising here also furthered the
policy of having the Lanham Act and the FDCA complement each other, “allowing
the expertise, perspective, and resources of market competitors to augment
those of the FDA.”  SPD was willing to
take the risk here given its perception of limited FDA resources—a fact that
also came up in Pom Wonderful.  The trial confirmed Pom Wonderful’s statement that “competitors who manufacture or
distribute products have detailed knowledge regarding how consumers rely upon
certain sales and marketing strategies. Their awareness of unfair competition
practices may be far more immediate and accurate than that of agency rulemakers
and regulators.”  The FDA didn’t have the
benefit of C&D’s surveys and additional evidence, revealing additional
confusion.
 
On to permanent injunctive relief.  Irreparable injury/inadequacy of damages: The
parties compete directly, and there’s a logical link between SPD’s false
advertising and harm to C&D. Moreover, SPD’s disputes about C&D’s need
to control for numerous independent variables in establishing its damages “demonstrates
the difficulty of fully quantifying the loss of market share that C & D
suffered as a result of its direct competitor’s false advertising.” 
 
Plus, both parties position themselves as “innovators” in
the market.  SPD’s internal marketing
documents revealed that the TV ad produced a “halo effect” for the Clearblue
brand overall.  “[I]t is difficult if not
impossible to quantify the harm to C & D caused by SPD’s falsely
advertising its product as possessing an innovative feature that it did not in
fact possess.”  Further, false
advertising in a product category “may cause harm to that category as a whole.
Consumers who purchase the Weeks Estimator and then learn that it does not
actually estimate weeks pregnant the way a doctor does may lose confidence in
home pregnancy tests as a whole and may question innovative features offered by
other brands.” Thus, it would be hard to measure C&D’s loss of market
share, goodwill, and brand equity.
 
Balance of hardships: SPD had no protectable interest in its
false advertising.  Public interest:
greater clarity in advertising certainly wouldn’t harm the public interest.
 
Thus, SPN was permanently enjoined from “communicating—either
literally or impliedly—that the Weeks Estimator provides an estimate of weeks
pregnant that is the same as a doctor’s estimate of weeks pregnant.”  The parties were to meet and confer to see if
they could agree on specific language for the order.  The appropriate language would extend to
messages conveyed, not to specific pieces of advertising.  SPD was required to recall all initial and
revised packages currently on store shelves; this was a burdensome requirement,
but appropriate in light of the nature of the product and the degree of SPD’s
intentional deception.  The court would
also consider ordering a corrective advertising campaign “to explain the difference
between the product’s estimate of weeks since ovulation and a doctor’s estimate
of pregnancy duration based on weeks since LMP.”

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Clearblue’s pregnancy test gets the blues: recall ordered for false advertising

Posted on July 6, 2015 by rtushnet
Church & Dwight Co. v. SPD Swiss Precision Diagnostics, GMBH, 2015 WL 4002468, No. 14–CV–585 (S.D.N.Y. July 1, 2015)
 
A good old-fashioned false advertising case about pregnancy tests!  Prior opinion, refusing to dismiss the claims as preempted in light of Pom Wonderful.
 
The parties are the leading makers of home pregnancy tests.  SPD launched the Clearblue Advanced Pregnancy Test with Weeks Estimator, which the FDA cleared for the intended use of telling a woman (1) whether she is pregnant and, if she is pregnant, (2) how many weeks have passed since she ovulated. The Weeks Estimator provides an estimate of “weeks” that is two weeks less than the standard convention: Doctors estimate pregnancy duration (gestational age) based on how many weeks have passed since a woman’s last menstrual period (LMP)—not weeks since ovulation.  (As my kids noticed when we discussed this case, you therefore start out two weeks pregnant—and we agreed that a test that could detect pregnancy at one week would be very, very useful, albeit unlikely in the Muggle world.)
 
The court didn’t need to decide when pregnancy begins “as a biological matter.” It only needed to determine “whether SPD’s advertising communicates the message that the Weeks Estimator provides an estimate of weeks pregnant that is consistent with a doctor’s estimate of weeks pregnant and, if so, whether this message is false.”  After a two-week bench trial, the court agreed with C&D that SPD’s advertising was false, and found SPD’s deception to be intentional and egregious, although C&D failed to prove a breach of the parties’ prior settlement agreement.
 
A bit of biology review: a typical menstrual cycle lasts 28 days; the time from LMP to ovulation is generally two weeks, but variance in this phase can be significant. The time from ovulation to the next menstrual period is two weeks, subject to much less variance.  Sperm must fertilize an egg within 24 hours of ovulation, and the resulting blastocyst must travel to the uterus and implant in the lining of the uterus.  Implantation occurs 6-9 days after ovulation. Once implantation occurs, the blastocyst begins secreting human chorionic gonadotropin (hCG), a hormone that signals to a woman’s body that she is pregnant and prevents menses.  Home pregnancy tests detect the presence or absence of hCG in urine.
 
Tradition dictates the use of the date of LMP as the start of pregnancy, on average 40 weeks before estimated date of delivery at full term (38 weeks after fertilization).  Ultrasounds can now provide a more accurate measure of gestational age, but those are generally done 8-10 weeks after LMP, and the LMP is usually the only piece of data available in early pregnancy, so it’s still the most commonly used method for estimating gestational age and assigning a due date. Regardless of the reasons for adhering to this convention, it remains “universal.”  Indeed, even when professionals use other methods, such as ultrasound, to determine gestational age, they still convert it to LMP-based dating when communicating both to patients and to other medical professionals.  Ultrasound machines are programmed to automatically use LMP to express an estimate of gestational age.  And even when a woman doesn’t remember her LMP or her memory is inconsistent with the ultrasound, doctors will still assign her a LMP two weeks prior to conception as determined by the ultrasound.  The same thing happens with IVF.
 
This single convention makes sense because it allows everyone involved to communicate easily.  Also, pregnant women traditionally relied on doctors for an estimate of pregnancy duration.  (Interesting definition of tradition, but okay.) “SPD’s suggestion that women could figure this out on their own based on their ‘own awareness of when they ovulated, had intercourse, and other relevant facts; combined with knowledge drawn from ‘myriad sources of information in books and on the internet regarding pregnancy dating,’ is unpersuasive and does not change the fact that historically doctors have been the authoritative source of information for women to find out how many weeks pregnant they are.” The FDA even required SPD to state on all product advertising: “Only your doctor can provide a reliable estimate of gestational age and only your doctor can monitor pregnancy progression.”
 
The Weeks Estimator, unlike other pregnancy tests, provided an estimate of the number of weeks since fertilization, because hCG levels rise rapidly and predictably during early pregnancy and because fertilization occurs within 24 hours of ovulation, so that the date of fertilization provides a proxy for the date of ovulation. Depending on her hCG level, a pregnant woman who used the Weeks Estimator would see “1–2,” “2–3,” or “3” on the screen—meaning, she was pregnant and it had been 1–2, 2–3, or 3 weeks since ovulation.
 
Because home pregnancy tests are Class II medical devices, SPD needed 510(k) preclearance for the Weeks Estimator.  Initially, the FDA objected that the “weeks indicator feature may provide misleading information to lay population of users” largely because “the output of this test is not aligned with gestational aging done by healthcare professionals (i.e., it will under-estimate gestational age by an average of 2 weeks).” The FDA required SPD to modify the “Indications for Use” statement on product packaging to include:
 
This test cannot be used to determine the duration of pregnancy or to monitor the progression of pregnancy. Your doctor determines how many weeks pregnant you are based on the first day of your last menstrual period and ultrasound results. This test provides a different estimate that can not be substituted for a doctor’s determination of gestational age.
 
SPD wanted to call the product “Conception Indicator,” but the FDA rejected that and accepted “Weeks Estimator.” The FDA also requested that SPD remove the statement “Also Tells You How Far Along You Are” from every area of the box. After some additional back-and-forth, the FDA issued a Clearance Letter for the Weeks Estimator. Among other things, the FDA instructed SPD (1) not to express the product’s results as “weeks pregnant” and (2) to express the results only as “the number of weeks that may have passed since ovulation.”
 
SPD then launched what was touted as the largest ad campaign in this product category. “Despite FDA’s warnings, internal SPD marketing documents described the ‘communication idea’ for this campaign as: ‘Clearblue Advanced Digital Pregnancy Test with Weeks Estimator gives women the reassurance of knowing much more of their pregnancy because it is the only test that can also tell you how far along you are.’”  The launch advertising consistently communicated the message that the product estimated “weeks pregnant,” “weeks along,” and similar ideas, “while downplaying (or omitting) the message that the product provides an estimate of weeks since ovulation or that the product’s estimate of ‘weeks’ does not align with how a doctor would express an estimate of weeks pregnant.”
 
The product launched with a box that was on store shelves from August 2013 to February 2014. It showed four images of screens stating, respectively, “Pregnant // 1–2 Weeks”; “Pregnant // 2–3 Weeks”; “Pregnant // 3  Weeks”; “Not Pregnant.” The word “ovulation” didn’t appear anywhere on the front or back of the box.
 

The side panel contained a small-print, cramped version of the full FDA-required Indications for Use statement, which said in part, “This test cannot be used to determine the duration of pregnancy or to monitor the progression of pregnancy. Your doctor determines how many weeks pregnant you are based on the first day of your last menstrual period and ultrasound results. This test provides a different estimate that cannot be substituted for a doctor’s determination of gestational age.”
 

From August to December, SPD ran a TV ad that aired thousands of times on at least 65 different networks and was projected to reach millions of women aged 18–49 each month.  It showed two women talking:
 
1st Woman: I’m pregnant.
2nd Woman: Really?
1st Woman: Two weeks.
2nd Woman: You already went to the doctor?
1st Woman: Not yet, but I took this new Clearblue test. It’s like two tests in one.
2nd Woman: Oh my God, I think I’m going to cry!
 
As the first woman says “It’s like two tests in one,” an image of the Weeks Estimator appears on screen with the digital screen prominently displaying “Pregnant // 1–2 Weeks.*” After the next line, the commercial cuts to an image for two seconds showing three large digital screens (containing the words “Pregnant // 1–2 weeks,” “Pregnant // 2–3 weeks,” and “Pregnant // 3  weeks”) in an arc over an image of the product with the phrase “ESTIMATED WEEKS SINCE OVULATION (UP TO 3 )” in grayish blue font below the arc and above an image of the product. A voiceover says: “The new Clearblue pregnancy test also estimates how many weeks. Weeks Estimator. Only from Clearblue.” Beginning at 6 seconds into the ad, small white font appears at the bottom of the screen stating:
 
*Word ‘weeks’ on display is for illustration only. For home use only. Always consult a doctor if you suspect you are pregnant and to confirm, date and monitor pregnancy. Not for multiple pregnancies. Estimates weeks since ovulation up to 3  weeks. Do not use to monitor pregnancy progress or duration.
 

Other launch advertising was similar, with unqualified use of “weeks” and a prominent uniqueness/value message, such as “Knowing more helps you prepare for the exciting future ahead—78% of women surveyed said they believe it is important to know how far along they are.”  Mentions of ovulation were absent (as in web banners) or buried.  A celebrity spokesperson appeared as a guest on the television show “The Doctors” to promote the Weeks Estimator; she said: “I am the new spokesperson for Clearblue. It’s the pregnancy test. I am. I can’t wait to use it … because it actually estimates how many weeks of pregnancy you’re in.” SPD argued that she spoke “off script” and was not authorized to make this statement, but internal emails revealed that SPD’s marketing firm was “beyond pleased with how well this pitched placement delivered.”
 
After C&D complained, the FDA reached out to SPD with concerns, noting it had informed SPD “not [to] talk about weeks pregnant” and “[p]lacing ‘weeks’ in the result window is the same as saying weeks pregnant.”  SPD proposed adding language to the TV ad’s disclaimer and removing dialogue about a doctor’s visit. The FDA found these changes insufficient for failing to “clearly state that the device can only estimate weeks since ovulation (and not weeks of pregnancy),” among other things. The FDA required SPD to take the ad down in 6 days.  SPD revised the product’s package and made a number of other changes to its ads.
 
The revised package, which hit stores in February 2014, put a gray strip in the top right-hand corner stating: “Only Test That // Estimates Weeks // Since Ovulation*.”  The asterisk apparently referred to the side panel Indications for Use. The digital screens used the words “Pregnant // 1–2”; “Pregnant // 2–3”; “Pregnant // 3 ”; and “Not Pregnant,” but the phrase “Weeks Along” was below them. 
 

SPD’s TV ad was replaced with an internet-only ad with the dialogue:
 
1st Woman: I have something to tell you: I’m pregnant!
2nd Woman: Really?
1st Woman: I took this Clearblue test. It’s like two tests in one.
Voice over: Only Clearblue tells you if you are pregnant and estimates how many weeks since ovulation.
2nd Woman: Oh my God, I think I’m going to cry!
Voice over: Weeks estimator, only from Clearblue.
 
The commercial cut to the image of the digital screens with “Pregnant // 1–2,” “Pregnant // 2–3,” and “Pregnant // 3 ” in an arc over an image of the product with the phrase “ESTIMATED WEEKS SINCE OVULATION (UP TO 3 )” in grayish blue font below the arc and above the product. Then it cut to an image of the Revised Package in the center of the screen with “Weeks Estimator” in large, pink lettering jumping out of the box, distracting the eye from the rest of the packaging. The commercial ended with the full Indications for Use statement on screen for 15 seconds, but that was the only disclaimer.  Other advertising was revised similarly.
 
The court found intentional deception, which is presumed to be effective.  “Time and again, SPD’s staff recognized and understood that the Weeks Estimator’s result did not align with how doctors express pregnancy duration and that this misalignment could confuse consumers. Rather than clarify its product advertising, SPD’s staff sought to exploit the confusion.”  In what is perhaps a lesson on witness preparation as well as on what judges dislike, the court commented:
 
SPD’s witnesses acknowledged at trial—often with considerable reluctance—the existence of the LMP convention. After one such longwinded explanation, the Court pointedly asked Dr. Joanna Pike, SPD’s Senior Global Pregnancy Product Manager, “If someone says to you or you read somewhere I am four weeks pregnant without any further explanation, what would you assume that means?” Dr. Pike, withdrawing deeper into her chair, provided a convoluted answer before finally acknowledging that “I think in general you may—you may—this, it is time since LMP because it is widely used,” which she hesitantly admitted was “[t]he truth.” The truth it was.
 
Given their awareness of the convention, SPD employees recognized the resulting likelihood of confusion.  Dr. Pike wrote to her colleagues:
 
We should not suggest in U.S. that the product tells you ‘Weeks Pregnant’ when we have been constrained by FDA to say ‘weeks since ovulation’. Indeed, even outside of US, this product doesn’t tell you weeks pregnant—if you are 1–2 weeks by [the Weeks Estimator] then you are 3–4 weeks pregnant because the universal convention for dating pregnancy is from the LMP not from ovulation…. I think FDA would NOT approve if we used ‘Weeks Pregnant’ in any materials and we are very likely to also confuse consumers and might end up with challenge/complaint.
 
The court didn’t accept Dr. Pike’s explanation that she was conveying the FDA’s views, not her own.
 
Members of SPD’s U.S. Advisory Board also highlighted the likelihood of confusion. One Board member stated that it was “important not to contradict this clinician-defined measurement,” while another raised concerns about the digital display screens containing “Pregnant 1–2,” etc., noting: “Need to be clearer what this means, i.e. from time of conception NOT LMP, we are Not saying what we are doing.” Another indicated that they might change how pregnancy was counted, but that it would be an uphill battle.
 
The TV ad was the “most glaring example.”  An internal SPD PowerPoint described the ad as “Best Friends with the insight of knowing it before the doctor visit.”  SPD’s market research revealed that viewers believed the product could tell a woman how far along she was before she went to the doctor.  This necessarily implied that the product would provide the same estimate one would get from a doctor’s visit.
 
In another lesson about communicating risk, even internally, ClearBlue’s Worldwide Marketing Director, Ryan Daly, told his colleagues: “I know we are being told by some that the FDA will be waiting for this ad, but I really struggle with that given their setup … they have a pharma ad division but none for [over-the-counter products]. Net, I view the risk as low.” The court interpreted this as a statement that “the likelihood of getting caught airing an ad that contravened FDA requirements was minimal because the FDA did not have resources to police advertising for over-the-counter products.” (Of course, the FDA ultimately did object, despite its lack of resources.)  Daly was, however, concerned that the networks would find the ad unsubstantiated because “some [networks] could get shy should they read the entire intended for use statement. So for this, I think we need to be very careful … I want us to see everything that we plan to send the TV stations. Only give them what they ask for.”  So rather than give the networks the full Indications for Use statement—less than a page long— SPD gave the networks a substantially truncated version that omitted the warning: “Your doctor determines how many weeks pregnant you are based on the first day of your last menstrual period and ultrasound results. This test provides a different estimate that can not be substituted for a doctor’s determination of gestational age.” Daly could not explain how the ad communicated the message that the product’s estimate is different from a doctor’s estimate.
 
Again, the court was unconvinced by Daly’s explanation at trial that he was just concerned about overwhelming the networks with too much information. Among other things, SPD also used the truncated version of the Indications for Use as the “super” at the bottom of the screen.  The court also noted “his description of something referred to internally as the ‘Bedford puke,’ an apparent shorthand for the dangers of providing too much information to regulators and broadcasters,” as well as his minimization of the extent of advertising by saying that accused shelf trays were shipped only to a single retailer.  That retailer “just happened to be Target.”  
 
SPD’s employees also discussed creating a backup ad “that correctly identified a key problem with the ad”: “Back up plan is Best Friends with no mention of ‘knowing before doctor visit.’”  Clearblue’s Brand Manager Kirsten Suarez responded “Can we not wait to receive a letter [from C&D] and then edit? I’m guessing we’d have time between receipt of the letter and actual need to traffic in new copy/pull from the networks.” Again, the court was unpersuaded by her later explanation that she wanted to refer to a doctor to encourage women to get prenatal care.  “[T]hese communications show that SPD staff knew precisely what was false or misleading about the commercial, but they chose to air it anyway.”
 
Suarez made “other troubling statements about the Weeks Estimator’s advertising that suggest a deliberate attempt both to evade FDA limitations and convey a false message about the product.”  E.g., “One last thing, we can’t actually link together the weeks and pregnant in the way it was on the last couple. What you can say is the only test that estimates weeks, or the only test that also estimates weeks, then the consumer will see Pregnant 1–2 Weeks in the windows and put it together.” The court therefore concluded that SPD “knew that placing the word ‘pregnant’ in proximity to ‘weeks’ would suggest that the product provides an estimate of weeks pregnant,” just as the FDA then told it. 
 
Suarez recognized that SPD couldn’t say the product estimated “how far along” a woman was, but suggested including survey results indicating that women want to know how far along they are because “[w]e can’t say we’re doing it, just that women want to know.”  She responded to a suggested use of “Find out how far along you are,” with: “This is a tricky one, but the FDA doesn’t actually want us to say that. I think it can be phrased as a question as you had, or we need to use the ‘estimate weeks’ language.”  Further evidence that marketers know and take advantage of what Lanham Act jurisprudence often does not: there is no clear express/implied distinction, and it’s easy to set up a message that works at least as well, if not better, than an express claim.
SPD also understood that consumers didn’t have a good understanding of ovulation.  As Suarez stated, “Trust me, it doesn’t really make sense to [consumers]. … [T]hey don’t have a knowledge of the right days, poor understanding of the details, etc. and it’s not common vernacular of how we would talk anything.”  That’s why SPD didn’t want to use “ovulation” other than as absolutely required.  (I still don’t get why they didn’t just add 2 to their estimate, like everybody else.) A summary of a meeting between SPD employees and its outside marketing firm included the observation that “[o]verall lack of consumers’ understanding of ovulation may cause confusion. Need to address the reason why [healthcare providers] use different method without saying it is wrong or suggesting that Weeks Estimator takes the place of seeing [a healthcare provider].”
 
SPD “repeatedly suggested that it had tried in vain to include a conversion chart on the outside of the product’s packaging that would mitigate consumers’ confusion regarding how the product’s estimate of weeks differs from a doctor’s estimate of weeks pregnant.” SPD first said that the FDA had forbidden it from doing this, then that it understood the FDA’s instructions as requiring removal “of all performance information concerning the estimation of weeks function, including the Conversion Chart.” Then SPD said that this determination required a “deep” read of the FDA clearance letter. 
 
“Because SPD often overstated other instances of the FDA and broadcasters ‘requiring’ or ‘mandating’ as opposed to ‘permitting’ or ‘allowing’ certain conduct, the court didn’t credit SPD’s explanation, and the court’s own reading of the clearance and hold letters didn’t indicate that the FDA intended to prohibit SPD from including the conversion chart on the outside of the box.  Plus, SPD often pushed back against the FDA on other changes, but didn’t ask it to clarify about the conversion chart or argue to the FDA that the conversion chart would aid consumer understanding.  In any event, SPD’s own people were concerned about confusion even when the conversion chart was on the outside of the package.
 
The court also noted that “SPD’s intentional deception extended to other aspects of its advertising not directly relevant here, such as touting the fact to U.S. retailers that 15% of European purchasers of the product had used the product to track their pregnancy despite the FDA’s explicit restrictions on making such statements.”
 
C&D scored a hat trick: the ads were unambiguous and literally false; even if the ads were ambiguous, SPD’s intentional deception gave rise to a presumption of consumer confusion; and C&D presented evidence of consumer confusion.
 
The literal falsity here was by necessary implication.  “Considered together, the name of the product (‘Clearblue Advanced Pregnancy Test with Weeks Estimator’) and the digital screens (‘Pregnant // 1–2 Weeks,’ etc.), without any clarification, necessarily imply that the product tells a woman whether she is pregnant and, if she is pregnant, how many weeks pregnant she is.” Further, the product was an OTC test marketed to women for use before they see a doctor.  “[I]n the context of a home pregnancy test that also provides an estimate of ‘weeks,’ the overriding message to consumers is that this is an estimate of weeks pregnant that is consistent with a doctor’s estimate of weeks pregnant.”  This unambiguous message was false.
 
The presence of the full Indications for Use statement on the side of the package did not change the package’s literal falsity.  “[T]he entire statement is 206 words long, separated into four paragraphs, and printed in minuscule font. Stacey Feldman, C&D’s Vice President of Marketing for Women’s Health and Personal Care, credibly testified that in her experience very few consumers will read the Indications for Use statement on the side panel.” Many courts have disregarded a footnote or disclaimer in fine print, and this one couldn’t fix the literal falsity.  Nor did the package insert fix the problem; along with being in fine print, it was only available after a consumer bought the product, and many consumers wouldn’t review it, especially because of the extensive ad campaign to which they’d already been exposed.
 
C&D also met the standard for showing implied falsity because of the deliberate deception. The burden shifted to SPD to show that confusion was unlikely, but SPD didn’t.
 
Indeed, C&D had evidence of both actual confusion and likelihood of confusion. An April 2014 CBS affiliate news report reported that an expectant mother who had purchased the Launch Package believed the product provided an estimate of weeks pregnant that was consistent with how her doctor would estimate weeks pregnant. The woman became concerned, wondering if her “baby was not developing correctly,” when her doctor told her that she was further along in her pregnancy than the estimate provided by the product.  SPD knew about this story, but chose to do nothing to address the confusion.  However, the court disregarded 310 non-US complaints made to SPD’s consumer care line; only 17 of the remaining 30 showed a mistaken belief that the product estimated pregnancy duration the same way a doctor would. This was a small percentage of the nearly 1.9 million Weeks Estimators sold in the US over the relevant period, but that fact didn’t favor SPD either, “because many deceived consumers may not even know about the care line or may not be inclined to call it.”
 
C&D also presented a consumer survey concluding that roughly 20% of consumers thought that the product’s estimate of weeks was the same as a doctor’s estimate of weeks pregnant.  The export, Hal Poret, conservatively “assumed that a respondent was deceived only if that respondent answered both that the Product estimates the number of weeks a woman is pregnant and that the Product’s estimate of weeks is the same as a doctor’s,” but even so this was a substantial number of consumers.
 
The revised package and ads didn’t help.  Even disregarding the issue of whether consumers understood the added references to “ovulation,” they were still implicitly false.  SPD’s past intentional deception mattered, even though “an advertiser who has learned the error of its ways and has modified its advertising accordingly should not be forever held to account for prior instances of bad conduct.” Still, “evidence of prior intentional deception may be probative of whether subsequent corrections were sincerely implemented.”  SPD added “since ovulation” to the package, but it wasn’t prominent, consistent with SPD’s dislike of the term.
 
Regardless, Poret’s surveys also showed that between 16-17.3% of consumers were still confused by the revised package, which was enough for deception.
 
The court’s analysis of the other ads proceeded similarly. In the TV ad, for example, “[t]he dialogue between the two women only further augments this unambiguous message when the first woman states that she knows she is two weeks pregnant despite not having gone to the doctor yet because she used the Weeks Estimator. This exchange communicates to the viewer that the woman received the same estimate of weeks pregnant from the product that she would have received had she gone to the doctor—which is false.”  The super was of no use, not only because SPD intentionally omitted clarifying language, but also because it was “in small, whitish font that blends in to the white background such that even the Court failed to notice it upon first viewing.”
 
After falsity, materiality was simple, given SPD’s marketing.
 
Injury: with literal falsity, no further extrinsic evidence of injury to the plaintiff is required. Moreover, C&D provided evidence showing a logical causal connection between SPD’s false advertising and its own sales position. C&D’s market share in terms of dollar sales for its First Response product had been steadily growing for over a decade. Clearblue’s market share, by contrast, went from approximately 16 dollar share points at the beginning of 2012 to 12.5 dollar share points in August 2013.  After SPD’s extensively advertised launch, Clearblue gained significant market share while First Response lost it.  C&D’s expert credibly testified that this sharp change couldn’t be attributed to any product feature other than the central weeks estimator.  SPD’s internal marketing documents agreed, as did C&D’s market research.
 
SPD argued that C&D should have conducted “rigorous” regression analysis to control for independent variables.  This argument would be more appropriate in the damages phase; C&D only needed to show a “logical causal connection” and need not “come forward with specific evidence that [defendant’s] ads actually resulted in some definite loss of sales.”
 
The court noted that, “at $2.6 million in annual sales per dollar share point, even the loss of just one dollar share point is significant in terms of revenue.”  Plus, it was likely that C&D’s countervailing response, such as offering rebates, mitigated the decline in its market share.  SPD’s expert posited that the Weeks Estimator’s exciting new feature grew the market as a whole, meaning that C&D’s dropping market share was less harmful, but “[e]ven if the whole pie grew because of the new product, but C & D’s share of that pie grew at a smaller rate than it would have in the absence of SPD’s false advertising, C & D would still have lost sales on account of the false advertising.”
 
A finding of false advertising here also furthered the policy of having the Lanham Act and the FDCA complement each other, “allowing the expertise, perspective, and resources of market competitors to augment those of the FDA.”  SPD was willing to take the risk here given its perception of limited FDA resources—a fact that also came up in Pom Wonderful.  The trial confirmed Pom Wonderful’s statement that “competitors who manufacture or distribute products have detailed knowledge regarding how consumers rely upon certain sales and marketing strategies. Their awareness of unfair competition practices may be far more immediate and accurate than that of agency rulemakers and regulators.”  The FDA didn’t have the benefit of C&D’s surveys and additional evidence, revealing additional confusion.
 
On to permanent injunctive relief.  Irreparable injury/inadequacy of damages: The parties compete directly, and there’s a logical link between SPD’s false advertising and harm to C&D. Moreover, SPD’s disputes about C&D’s need to control for numerous independent variables in establishing its damages “demonstrates the difficulty of fully quantifying the loss of market share that C & D suffered as a result of its direct competitor’s false advertising.” 
 
Plus, both parties position themselves as “innovators” in the market.  SPD’s internal marketing documents revealed that the TV ad produced a “halo effect” for the Clearblue brand overall.  “[I]t is difficult if not impossible to quantify the harm to C & D caused by SPD’s falsely advertising its product as possessing an innovative feature that it did not in fact possess.”  Further, false advertising in a product category “may cause harm to that category as a whole. Consumers who purchase the Weeks Estimator and then learn that it does not actually estimate weeks pregnant the way a doctor does may lose confidence in home pregnancy tests as a whole and may question innovative features offered by other brands.” Thus, it would be hard to measure C&D’s loss of market share, goodwill, and brand equity.
 
Balance of hardships: SPD had no protectable interest in its false advertising.  Public interest: greater clarity in advertising certainly wouldn’t harm the public interest.
 
Thus, SPN was permanently enjoined from “communicating—either literally or impliedly—that the Weeks Estimator provides an estimate of weeks pregnant that is the same as a doctor’s estimate of weeks pregnant.”  The parties were to meet and confer to see if they could agree on specific language for the order.  The appropriate language would extend to messages conveyed, not to specific pieces of advertising.  SPD was required to recall all initial and revised packages currently on store shelves; this was a burdensome requirement, but appropriate in light of the nature of the product and the degree of SPD’s intentional deception.  The court would also consider ordering a corrective advertising campaign “to explain the difference between the product’s estimate of weeks since ovulation and a doctor’s estimate of pregnancy duration based on weeks since LMP.”
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UK ad regulator disapproves of negative puffery

Posted on July 1, 2015 by rtushnet

One big difference between the US and the EU in comparative advertising is that what we would consider negative puffery, like “overpriced,” the EU bans as not sufficiently objective.  In this ASA adjudication, the advertiser both ran a review site that looked too much like it was independent, despite a footer at the bottom of every page, and also slagged off the competition in ways the ASA concluded were not allowed:

We considered that, as reviews of competitors’ products on a site operated by Pandle, the content of those reviews were part of a marketing communication for Pandle and were therefore subject to the requirements of the CAP Code, which stated that comparisons with identifiable competitors must not be likely to mislead about either the advertised or competing product. The review of Crunch commented on a number of features of the product, including speed, reporting and price. We did not consider that it made clear the basis was for the various claims made for those features such as the speed being “slow”, the reporting capabilities as “small” and the price as “high” and the product as “overpriced” and that it was not obvious from the context. We considered that the subjective nature of the terms and language used meant their meaning was ambiguous, and that they were therefore likely to mislead traders about the features and price of the Crunch software.

The Code also stated that comparative ads must objectively compare one or more material, relevant, verifiable and representative feature of those products. The review of Crunch included subjective language such as “overpriced”, “A bookkeeper or other professional would not use this software for their clients, as they would probably lose money with the time it takes!”, “The pricing is high”, “we remain sceptical as to whether it’s just a novelty or does genuinely save time” and “overpriced compared to other options available” (as well as more positive comments such as “the software looks pleasing to the eye”). We considered that, in the context in which they appeared, those claims were neither objective nor capable of verification … and therefore concluded that the ad breached the Code.

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UK ad regulator disapproves of negative puffery

Posted on July 1, 2015 by rtushnet

One big difference between the US and the EU in comparative advertising is that what we would consider negative puffery, like “overpriced,” the EU bans as not sufficiently objective.  In this ASA adjudication, the advertiser both ran a review site that looked too much like it was independent, despite a footer at the bottom of every page, and also slagged off the competition in ways the ASA concluded were not allowed:

We considered that, as reviews of competitors’ products on a site operated by Pandle, the content of those reviews were part of a marketing communication for Pandle and were therefore subject to the requirements of the CAP Code, which stated that comparisons with identifiable competitors must not be likely to mislead about either the advertised or competing product. The review of Crunch commented on a number of features of the product, including speed, reporting and price. We did not consider that it made clear the basis was for the various claims made for those features such as the speed being “slow”, the reporting capabilities as “small” and the price as “high” and the product as “overpriced” and that it was not obvious from the context. We considered that the subjective nature of the terms and language used meant their meaning was ambiguous, and that they were therefore likely to mislead traders about the features and price of the Crunch software. The Code also stated that comparative ads must objectively compare one or more material, relevant, verifiable and representative feature of those products. The review of Crunch included subjective language such as “overpriced”, “A bookkeeper or other professional would not use this software for their clients, as they would probably lose money with the time it takes!”, “The pricing is high”, “we remain sceptical as to whether it’s just a novelty or does genuinely save time” and “overpriced compared to other options available” (as well as more positive comments such as “the software looks pleasing to the eye”). We considered that, in the context in which they appeared, those claims were neither objective nor capable of verification … and therefore concluded that the ad breached the Code.

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Trademark scholars roundtable: the consumer in different contexts

Posted on June 30, 2015 by rtushnet
Session 3:  The
Consumer in Different Trade Mark Contexts
Do the questions that we have looked at in the first two
sessions vary in different trademark and adjacent contexts? Is assessment of
the reaction of the average consumer in trade mark law the same assessment that
is performed in examining consumer reactions in the context of passing off or
unfair competition law or consumer protection or trade practices law? For
example, can we compare the doctrinal apparatus surrounding the “average
consumer” now at the heart of EU trade mark law with the means of determining
the reaction of a “substantial proportion of the public” test under common law
passing off jurisprudence? Is this useful? Does it tell us anything about the
(actual or potential) roles for complementary bodies of law in this space? Even
within the body of trade mark law proper, is the construct of the consumer
different in registration proceedings as opposed to infringement contexts?
 
Introduction:   Ansgar
Ohly: The notion of average consumer in unfair competition and right of
publicity/right of personality (German law). 
Unfair competition: development of the notion in European law and
relation to TM law.
 
Notion of average consumer has origins in unfair competition
law, 1984 Directive against misleading advertising, and also in cases involving
free movement of goods. W/o harmonization, standards for advertising were
different—protection very strict in Germany, 10-15% misled = sufficient for
misleading. Some saw this as undue restriction on free movement. ECJ decided it
was disproportionate to ban misleading advertising where an average consumer
wouldn’t be misled. Originally created as a harmonization device.
 
Some complain that average consumers aren’t as sophisticated
as ECJ assumes.  Directive on B2C
relations: defines average consumer as one who’s reasonably well informed and
reasonably attentive/circumspect, taking into account cultural and linguistic
factors. There must be consumer relevance: the consumer must be caused to take
a transactional decision which he or she otherwise wouldn’t have taken.  ECJ stresses Directive is committed to higher
level of consumer protection—much more protective than it used to be.  Purely
Creative/Office of Fair Trading about aggressive sales practices. Reminds
one of 1970s German case law: consumers ar easily misled.  Also, causing confusion is misleading advertising.
 
27 of 28 provide civil law remedies, except the UK, to
enforce the Directive, so competitors can bring a private action. Evident
problem of overlap in most countries. German SCt: Hard Rock Café in Heidelberg—not
licensed by the Hard Rock Group.  How can
this be?  He was there before they were,
early 1980s when there was only a London Hard Rock and not a protected TM. He
has older rights and also there’s an acquiescence issue. But if you ask whether
there’s an issue of consumer confusion, then yes: tourists particularly.  (German © law would not cover the Hard Rock
logo, which he used.)  Conflict b/t TM
logic and unfair competition law: German SCt decided that TM logic prevailed
and that TM logic needs to be taken into account in unfair competition
analysis, even though Directive does not have exceptions or provisions for
balancing competing interests.
 
TM law: in past, would’ve said TM was less fact specific and
more formal, looking at similarity of signs, similarity of goods, and
distinctiveness of the mark, and not much at what the consumer does in
particular circumstances.  However, TM
law might become more unfair competition-like: (1) keyword cases.  Needs to be inquiry into “adverse effect on
the origin function,” and such an effect is assumed if ad suggests commercial
link or is so unclear that consumer doesn’t know.  Duty of providing information = unfair
competition concept. (2) Specsavers: using factors external to the register are
taken into account in confusion inquiry. Less certainty.  Risk of overprotection. But also makes
clearer what the functions of a TM are and you may avoid overprotection/protect
only when there’s a real likelihood of harm.
 
Personality/merchandising rights: German law is much closer
to US law than English law.  German =
personality right protecting privacy and publicity at the same time, monistic.
UK = no right of publicity, so only way to protect Rihanna against sale of
T-shirts w/her image is to use passing off, which requires confusion.  Rihanna: High Court decided this was passing
off, on the merit of those particular facts, b/c there had been a previous
relationship w/Rihanna and Top Shop. So consumers might think she was behind
this particular campaign.  At pains to
stress this was very fact specific. 
Contrast b/t passing off approach and German law. He thinks: if you want
publicity rights you should say so; looking at the consumer clouds the issues
of a monopoly right over use of name/image. Doesn’t think consumers care
whether T-shirt is official or unofficial. 
Either choose IP or nothing.
 
Rebecca Tushnet

US: average consumer is target consumer; 10-15% can be sufficient.  Accidental convergence or rough justice at
least from a Western perspective?  Idea
of considering alternatives: what could the advertiser have done instead to
communicate its message?  In TM, we say
the alternatives are infinite so we don’t need to worry about losing
information from suppressing a particular use, but that might not be true. In
false advertising we should worry more: if there’s a truthful message received
by 50%, we might not want to suppress it if suppression reduces confusion to 5%
but also reduces comprehension of the truthful message to 5%. Richard Craswell’s
work on this is excellent.
 
Jennifer Davis persuasively argues that changing economic
and social conditions allowed the courts, in trade mark cases, to abandon a
view of consumers as heterogeneous and divided by class, education and income
and instead to assume the existence of an average consumer whose perceptions
were key.  I want to reiterate my call to
think of consumers and not the consumer—the plurality/bell curve concept is logically
independent of the idea of treating consumers differently in different
contexts, but I think that conceiving of consumers in the plural more easily
allows us to adjust to different contexts, such as the nuclear reactor not run
by Homer Simpson.  Also, though Barton
Beebe as usual insightfully criticizes the way that the shift to variations
among TMs, not variations among consumers, has become more central to TM tests,
I think there’s also a role for seeing the consumer change as she moves through
her day.  The marketing and psychological
evidence does suggest many contextual determinants of attention and choice,
though how that can fruitfully be translated into TM cases remains to be seen.
Indeed, I’ll suggest that the marketing evidence might disrupt the project of
TM law as distinguished from unfair competition/false advertising law law.
 
Surveys in false advertising cases: Part of a general
pattern of offering a rich account of the reasonable consumer and what s/he
cares about and what she doesn’t care about, even when the cases don’t involve
surveys.  Individual buyer testimony is
relatively more common, and the buyers get to tell their whole stories—why they
made the decisions they did, or at least why they think so though they may not have great insight into their own
motivations and they too are of course affected by what we’ve been calling the
Heisenberg principle that asking the consumer changes how the consumer
thinks.  But regardless, we do get a more
3D picture of the consumer in the false advertising cases because of the
concept of materiality: TM law structurally isn’t set up to offer this thicker
account of consumer decisionmaking.  One
reason, I think, is because many times the TM would be part of what doesn’t
matter to most consumers, so the account of the consumer compressed only into
her response to the TM is inherently contradictory: it is at least not
empirical.
 
US false advertising law has taken a very different approach
to surveys from US TM law, dividing cases sharply into those involving literal
falsity, where no other evidence of consumer reaction is required, and implicit
falsity where only survey evidence—and
usually not expert testimony or testimony from individual consumers—is considered
sufficient.  Doctrines exist to blunt the
force of this division and it doesn’t work that well in my opinion, but it’s
notable that this is essentially a cost management doctrine: surveys aren’t
worth their costs in many cases where the message is clear.  It’s not a normative decision but an
empirical one, in the division we’ve been using.  So the consumer is notionally the same
consumer as we confront in TM but we have different ideas about how to figure
out what she’s thinking when it comes to false advertising instead of TM.  We could instead try to ramp up the
evidentiary requirement in certain troubling infringement cases, as apparently
the European courts have done in dilution by requiring proof of an economic
effect on the mark—it wouldn’t be that the consumer differs, but that our
confidence in whether we can determine the outcome without a greater
investigation into the specifics of the plaintiff’s particular consumers
differs.
 
Another specific type of consumer I would like to discuss is
the consumer we reject: Found in the context of counterfeiting cases (or even
post-sale confusion cases, such as the Atmos clock case in the US).  She’s the bad consumer: the one who is seeking
counterfeits. Reaction of this consumer is generally excluded from our
averaging process—not a matter of comprehension, but a matter of valuation.  She knows quite well that she is not getting
the authentic version and doesn’t care. 
She fits on the “nonconfused” end of the spectrum, but it turns out that
we don’t just want a 2-dimensional spectrum; we exclude her and shift our
inquiry to the more easily confused. 
(She is also the only defendant-side consumer whose existence is
routinely acknowledged, which makes things even rougher on defendants, pace Mike Grynberg’s work.)
 
Primary Discussants:   
Graeme Austin: Typical C&D in NZ says we’ll get you for passing off,
TM infringement, and violation of consumer law. Many cases: courts just work
through those causes of action.  (Google
keywords was litigated as consumer protection matter, not private cause.)  Array of similar causes of action. 
 
Coherence: we lack a coherent approach to unfair
competition, but Australia wants coherence in all private law.  High Court has said this is an important
value.  We should try to achieve
coherence between common law and regulatory/statutory law.  In a case expanding TM owners’ rights,
Australian court said: policy of TM Act shifted balance of objectives of TM
more toward identification and protection of TM owners than the protection of
consumers, though that remains an objection. Misleading conduct laws also
protect consumers. Reasoning: consumer protection law does the necessary job of
protecting consumers, so TM can shift more to producers.  Jigsaw: different statutes doing different
things; TM is buffered by modern regulatory laws directed at consumer welfare.
 
Licensing arrangements/settlements: these can affect
consumer welfare, but we don’t police them against misleading/deceptive
conduct. Maybe, if those private arrangements result in misleading consumers,
we should look to consumer protection and not TM (RT: which would lead to the
end of the naked licensing doctrine). 
Divergences b/t Aust. and NZ: NZ law says consumer protection shouldn’t
override TM law, but Austl. allows consumer protection to pop up in copyright
etc.  History of consumer protection law
in Aust/NZ: NZ took the Australian Trade Practices Act prohibition against
deceptive practices, then added broader consumer protection laws, borrowed by
Aust. in recent laws—sense that traders should be subject to one body of law. Interestingly,
TM laws of both countries have some significant divergence; parliament is not
seeing TM as part of this jigsaw of consumer protection.
 
Compare statements of statutory purpose: TM statutes are
about TMs, not consumer protection. Reflects historical position that consumer
confusion isn’t the only game in town. 
 
What does this say about relationship b/t TM and consumers,
and fundamental purpose of TM law?  Dogan
described purpose as lowering search costs/enhancing competition.  Wonders if thinking about TM as part of a
cluster of laws that go to information in the marketplace would change
that.  Consumer information story: can it
be downplayed when there are other consumer protection laws surrounding it?
 
Remedies: seeing in IP flexibility in the remedies, and that’s
possibly a good thing for balance.
 
Finally: other torts, like negligent misstatement—there the
liability is conditioned on reasonable reliance by the recipient on the
information.  Normative tool for
balancing risks of speaking in the market: the speaker is not the insurer of
the recipient of the information. Something to borrow for TM law? The consumer
needs to do some work.
 
Stacey Dogan: Search costs v. other goals: struggling w/role
of search costs/competition in TM in the US. 
Can’t generalize, but thinks there’s a tension between economic model
and TM law in practice which reflects normatively impulses that can’t be
explained by the economic model—anti exploitation.  (She calls it economic model b/c if you say “search
costs” people get hung up on that and miss the ultimate goal.)  “Taking unfair advantage” doesn’t seem
explainable on any economic basis: more like natural rights. Parallels in US
law. Economic model is very appealing in that it suggests why we protect TMs
and also suggests limits on TM, but may be descriptively inaccurate for many
doctrines.
 
Annette Kur: procedures are not harmonized/type of
enforcement is diverse and different courts decide, so in practice
harmonization becomes very difficult. 
Better to have it all in one law. 
Coherence in the way Austin described works if the use of the TM owner
is regulated by consumer protection acts. 
Something that TM law allows the proprietor to do may still be
prohibited by consumer protection law. 
But what about Hard Rock? Much more difficult. TM law admits there is a
conflict, but there are rules, like priority. From a systemic point of view, we
accept the conflict w/unfair competition law. 
No good & coherent solution to be found if you have two different
legal acts regulating the same behavior. Need coordination beyond a general
principle of leaving consumer protection to other laws.
 
Austin: that was part of my point: we need to give more
attention to how TM fits into the consumer protection scheme.
 
Kur: the bad consumer—in European law we “solved” that
problem by saying we don’t care about her b/c we don’t need likely confusion by
applying special rules for counterfeits/double identity. Does that solve the
problem? It at least deals w/it practically.
 
Sir Robin Jacob: Ohly said TMs were less fact specific than
unfair competition; many times that must be so b/c the registered marks aren’t
in use, maybe on both sides. But once there is an actual mark in use suing
another use, they may look at the facts on the ground: which is what happened
in Specsavers.  But so many TM fights are indeed
shadowboxing. We should pay less attention to that kind of case. 
 
When you have TM comparisons, registries start developing
formulae for TM comparisons. And they tend to be ridiculous rules.
 
British perception of Germans: Germans thought any TM was an
infringement of another mark.  Terrapin
and Terranova: confusing?!  But that has
changed.  Introduction of average
consumer did send a message.  But we’ve
now made a hell of a mess about the average consumer, when really all the court
had in mind was to exclude outliers—there’s a range of average consumers.
 
10-15% is quite serious—6 million people in this
country!  Figure should be lower. But we
must be sure they are being deceived, b/c mostly consumers aren’t as stupid as
courts/TM offices think they are. 
 
Enforcement: we’ve made a mistake b/c the best person to
look after the deceived consumer is the deceived consumer; we need a cause of
action beyond malicious falsehood.  Must
allow advertisers to be a bit hyperbolic.
 
Dev Gangjee: Functional definition of consumer—consumer as
citizen where information is a tool; rational consumer in contract law;
etc.  Less pressure to go for a single
idea. But if we see TM as part of broader ecosystem, and it’s ok for other
areas to do the heavy lifting, what’s left of the idea of the consumer in
TM?  If meaningful engagement w/consumer
is happening elsewhere, are we back to consumer as alibi?
 
Bill McGeveran: Q of who is the victim in various areas of
law: in various areas, we’re no longer looking out for the consumer—e.g., right
of publicity.  Without consumer in TM, to
what extent would similar interventions have occurred to protect
producers/people currently deemed TM owners? 
Judge Frank in Haelan who
splits privacy and publicity rights and says we need to protect them both.  Nothing in that case on the effect on
purchasers of baseball cards.  What law
would remain w/o consumers? Would it look all that different?  Consumer may be post hoc
rationalization/stalking horse for other interests.
 
Laura Heymann: Hard Rock: was there any discussion of a
possible disclaimer?
 
Ohly: not an issue b/c court said TM law/acquiescence
trumped consumer protection. Few other cases mostly involving the internet did
use disclaimers.  We could end up in
Arsenal-type situation where we put up a sign and the ECJ says a clear
disclaimer is immaterial to TM law. But now it has effect in unfair
competition.
 
Heymann: though we know disclaimers are often ineffective.
 
Ohly: also very hard to do here specifically: the Hard Rock
logo is so recognizable that it’s hard to dissuade consumers.  Court distinguished b/t ongoing operation of
restaurant and sale of goods: each sale is a new infringement—so they can’t
sell merchandise any more b/c it’s a new TM infringement each time.
 
Kur: it’s true many TM conflicts are not real world
conflicts and the rights are broader in the books than in reality.  Brings us back to distinction between
registration and infringement.  But
should that lead to a situation where the legal principles we apply differ as
between the proceedings?  [RT: The way
this conversation is going indicates that we have been using the consumer as a
concept to pack in other issues; very little in this discussion is about the
consumer.]  For systemic reasons, we don’t
distinguish in our black letter law.  TM:
Like requiring a distance between cars to avoid crashing.   Unfair competition: geared towards a
materialized crash, thus geared more towards examining precise circumstances of
crash; scope of protection turns out to be smaller.  (RT: This metaphor raises the ‘congestion/we
are building too many highways/we are encouraging too many people to buy cars’
issue pretty clearly.)
 
Graeme Dinwoodie: if you took the consumer out, what would
happen?  We could shrink TM so it wasn’t
trying to protect the consumer, but maybe that would broaden the scope of TM
rights—paradoxical. 
 
McGeveran: my prediction as well.
 
Austin: More nuanced—protection of consumers remains an
objective, just shifted.  [RT: also
wouldn’t you still need the consumer to evaluate scope, if you were at all
interested in actual confusion or dilution?]
 
Dinwoodie: use can expand scope (Specsavers) or to
restrict/confine the scope of the mark. Should we have a unidirectional
rule?  Sanctity of register v. consumer
protection point in different directions. 
Without use after 5 years there’s no need to maintain stuff on the
register.
 
Barton Beebe: Does the US even have TM law, as defined by
this slightly more formal approach taken by Europe?  We seem to be unfair competition, very
fact-specific.  Much less shadowboxing.  More a question than a claim.
 
Dinwoodie: our casebook completely assimilated §§32 and 43—effectively
the same.
 
Litman: the first and second edition of our book came out
before Two Pesos; there were
different rules then.
 
Beebe: now we tell our students there’s no difference in
infringement standards between the two. 
(And they ask why we made them learn all the registration stuff!)  Jacob’s criticism of niggling rules for TM
offices; but wouldn’t it be worse without these rules?
 
Jacob: they’ve never had clients, they’re isolated—they’re a
kind of monastery.  But you have to
understand that the rules are artificial; general courts have less excuse [for
deferring to them?].
 
Beebe: we don’t squarely address commercial ethics/morality
in the US, possibly set to the side. TM law without God, secular and
utilitarian?  Or talking to God directly,
without rules.  At the same time,
morality sneaks back in through general sense of fairness. 
 
UK has no misappropriation law as such: you must show
misleadingness to win misappropriation; there’s no raw misappropriation.  What about fairness?
 
Jacob: it’s legitimate
appropriation.
 
Dirk Visser: or you come up with another thing to call it,
like the Rihanna case—just deny there’s a misappropriation theory underneath
it.
 
Jacob: old English libel case, Tolley v. Frye, 1935.  Amateur golfer and chocolate co. published an
ad implying endorsement, and golfer sued for libel saying people would think he
was taking money for that. He won.
 
Jennifer Davis: TM, unfair competition, and consumer
protection law are 3 quite different things in some ways.  UK 1862: first consumer protection law, while
unregistered TM law already existed to protect traders’ goodwill.  1875: first registry bill, b/c traders wanted
international reciprocity.  UK: w/out
registration, test is whether goodwill has been affected, and one way of
finding that is confusion, but there are different ways of thinking about
consumers reflected.  Though in practice
the confusion might be pretty much the same.
 
Jacob: I used to say that if there was no passing off there
was no infringement as a general rule. 
An unused registered mark was another matter.

Davis: empirical evidence: we have split cases deciding liability and then
damages.  One of the reasons we avoid
empirical evidence so much may be because in the first action we don’t have to
show any actual damage.
 
Jacob: have to show it’s likely.
 
Davis: but never have to quantify. [But this is also true in
the US, for injunctive relief.]
 
Jacob: most countries split liability and financial
compensation.  US often puts them
together which doubles the size of the case/changes the whole dynamic.
 
David Llewellyn: too bad for Hard Rock.
 
Ohly: but what about the consumers?
 
Llewellyn: consumer protection law, the consumer is a party
or there’s a representative body there for her. We shouldn’t forget that the
consumer isn’t represented by the TM owner; not a party to the litigation. This
is a commercial dispute; consumer protection law is philosophically very
different, and we shouldn’t elide the legal differences.
 
Cases treat passing off as an add-on.  But statute says likelihood of confusion for
infringement; passing off is about/should be about deception, not likelihood.
There is a conceptual coherence if you look at them as serving their own
functions.  But judges here throw them
all in and in the US they do too. 
Complete mess.  [Though §43(a) says
likely confusion too!]
 
Mid-point summary:   Robert
Burrell: TM infringement as precautionary principle: When you’re acting as an
attorney you think you’re acting on the precautionary principle, trying to
carve out a space for your clients just in case. So when you register for “software”
in general, you think you’re protecting your client, not massively
inconveniencing other traders who make completely different kinds of software.
 
TM law and other actions: registration based systems: quite
often when we want to expand protection we jettison discussion of consumers and
talk about property rights/fairness/dislike of copying.  Confusion is usually the end of discussion
when we talk about consumers, but what happens when we want to impose a
limiting doctrine?  We use the average
consumer to say there’s no liability, but really she might be and we just don’t
care. Lack that vocabulary.
 
Excision of class distinctions in average consumers.  Need to be careful—illiteracy still exists.
If we try to unite consumer protection & TM, keep in mind the other
functions of consumer protection law, like regulating payday loans. Careful
about letting difficult-to-confuse consumer in TM filter back to consumer
protection so the consumer is expected to read and understand a bunch of
6-point type.  [Confusion about what? That
question can really help, I think—numeracy is generally low, but brand
understanding may be high.]
 
There is a technocratic element to TM law. When judges are
setting rules, they have to be applied by lawyers and bureaucrats, and common
understandings develop.  Don’t pretend a
small/medium enterprise routinely looks through the TM register; it’s
lawyers.  So when we think about rules,
bear in mind the rules are applied by people who are immersed in the sytem to
people who are not.  Having 3 clear
factors is better than “just look at it” given 10s of 1000s of marks and the
desire for some consistency.  Also
remember the speed at which examiners turn over.  Examiners are often there for only a year or
two; they need a set of rules to apply.
 
Double identity: you abstract away from the actual use sign;
you abstract away from the goods to the registered goods; then we have double
identity; then we have likely confusion—we’ve gone very far in our
precautionary principle—too many layers of precaution.  Practice of industry: lawyers register
everything possible; then next layers of precaution pile on.
 
Michael Grynberg: Problem of multifaceted consumer. The
empirical consumer might be the metric of liability, or delineation of property
boundary; the consumer as end or policy goal. “Public” or “citizens” might be a
better term. Intermingling of conceptions of how consumer should be—divorcing policy
priors from that construction is difficult. Go to another regime, raise
independent question of what we want that law to do and whether that affects the conception of the consumer.
 
Another issue: transparency. If we have an IP right, we
shouldn’t dress it up as unfair competition, as Ohly says, when the confusion narrative
doesn’t hold up.
 
Coherence: do doctrines fit or overlap [or conflict]. Do we
need to interpret different regimes in light of each other and do we need
different consumer constructs for each? 
[The more I hear this the more troubled I get. The consumer is the same
person facing the different regimes. If we want any empirical element, we need
to deal with that.]  We don’t always need
the construct of the consumer even if the consumer’s public/policy face is
present—that’s one role of shortcuts in some doctrines.  We don’t necessarily need to evaluate ideal
consumer’s likely confusion.  Given the
difficulty courts have of isolating what they mean when they say ‘consumer,’
this multifaceted consumer does need to be contained. One way: doctrines that
act as constraint—we don’t go to false advertising surveys if we have literal
falsity.  ACPA: doesn’t require consumer
confusion if there’s cybersquatting.
 
Even if courts stop playing games w/ consumers, there are
plenty of other heuristics to play with. Even if we had a vision of the
consumer we all accepted, the uncertainty/fudging could be shifted to another
realm, like confusion.
 
Michael Handler: Feedback effect: TM expands to consider
passing off issues in Australia, then passing off expands to catch things like
character merchandising.  Complicates a
clean delineation of what the statutes are intended to do. 
 
What it means for registration in Aust.: The standard of
confusion for registered marks is if consumers would “wonder” if there was a
connection—very low standard.  Often the
case that 250-paragraph judgment with 220 paragraphs looking at market and
finding no passing off; then a few more para. saying the standard is lower for
registration and thus there’s TM infringement.
 
Jacob: suing for registered TM infringement v. also adding
passing off is a huge decision.  Arsenal
case: Arsenal should never have sued in passing off, because they didn’t have
evidence of deception.  If they’d done it
on TM infringement alone, they’d have needed no evidence—same mark, same goods,
done.   Favorable facts: then you add passing off and
get emotional impact.
 
Discussion of protection for generic/descriptive terms
against confusion: McGeveran: American example of Blinded American
Veterans.  If there really is confusion,
should the law act?  Then-Judge Ginsburg
used unfair competition principles to say it’s generic, but there’s bad will
and resulting confusion.  But this isn’t
a pop-up enterprise; it has long established goodwill/attempt to divert it.
 
Heymann: Remedies—you can use the term but you need a
disclaimer. Similar with Murphy bed—you can use the name, but can’t call it the
“original.”
 
McGeveran: pointed to as example of why you need some rump
non-TM unfair competition law, whereas in most cases there’s complete overlap.
 
Dirk Visser: is intent more important or likely confusion?
 
McGeveran: Good question—case talks about both.  (RT: NY Ct App case in famous marks case of Bukhara requires bad faith; confusion
alone wouldn’t be enough and that’s an analogous situation.)
 
Grynberg: more cited by law reviews than cases; extreme
situation.
 
Litman: incoherence: secondary meaning doesn’t count b/c it’s
generic, but secondary meaning also produces unfair competition remedy.
 
Jacobs: Menswear shop called Cording; breakaway director
started Gnidroc.  Bad faith?  No one would be confused.  But if D is trying to get trade, court will
presume he’s succeeded in his intent—D knows best the mysteries of his
business.
 
Sentfleben: if one field becomes more empirical, does that
create pressure on other related fields to become more normative?  Fine tuning w/unfair competition/passing
off.  Apply hard rules on genericism to
prevent TM rights, but then unfair competition.
 
Visser: if you prohibit any IP right, it pops up again under
unfair competition whether you like it or not.
 
Dinwoodie: German law—TM law was supposed to be normative
and unfair competition empirical—is this switching places?
 
Kur: German unfair competition law is also normative to an
extent, but at the core the risk of misleadingness would lead Germans to look
more to empirics/facts of the case, rather than an abstract kind of space
around a given TM. The rule that stronger marks get more protection is
normative everywhere.
 
Burrell:  Not
everywhere.  Reputation can be a double-edged
sword: recognition will be improved so proof of infringement will be harder in
Austl.
 
Visser: in many countries choice between TM or unfair
competition can be triggered by other considerations—France has separate courts
and separate remedies. Netherlands: cost award requirement only applies to TM,
not unfair competition, so everyone goes for TM; same issue w/intermediate
remedies. Don’t look for the theoretically best cause of action, but the practically
best. That’s a big reason different countries choose different paths.
 
Jennifer Davis: People may fear losing registration—if the
mark is descriptive.  Unfair competition
may be more expansive way to go, not
less as we [Europeans] often perceive it.
 
Jacob: the rule of ECJ, fame equals more protection, is
obviously factually incorrect. It must
be a rule of law.
 
Grynberg: Going back to Blinded American Veterans, Ginsburg
never ordered any of the remedies we’ve discussed; said the district court
could work it out.  Look at their
webpages today: no disclaimers. The equitable bailout in US TM law is really
very narrow.
 
Llewellyn: the passing off and registered TM infringement
causes of action have converged in Singapore. 
Some people suggested that there should be no protection for
unregistered marks—that’s one way of approaching the issue, though it didn’t
get very far.
 
Kur: our approach to the conflicts may differ by which rules
we’re trying to navigate. If we say the consumer is the same, we just transform
those issues into the way in which we assess confusion.
 
McGeveran: There are some of these claims where we disregard
the consumer of entirely—right of publicity.
 
Dinwoodie: Legal transplants: the ECJ taking the advertising
notion of the consumer and transplanting it into TM will be harmful unless they
reconstruct it w/attention to the different goals.  But we can get comfortable w/messiness if we
take that care.

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Trademark scholars roundtable: the consumer in different contexts

Posted on June 30, 2015 by rtushnet
Session 3:  The Consumer in Different Trade Mark Contexts
Do the questions that we have looked at in the first two sessions vary in different trademark and adjacent contexts? Is assessment of the reaction of the average consumer in trade mark law the same assessment that is performed in examining consumer reactions in the context of passing off or unfair competition law or consumer protection or trade practices law? For example, can we compare the doctrinal apparatus surrounding the “average consumer” now at the heart of EU trade mark law with the means of determining the reaction of a “substantial proportion of the public” test under common law passing off jurisprudence? Is this useful? Does it tell us anything about the (actual or potential) roles for complementary bodies of law in this space? Even within the body of trade mark law proper, is the construct of the consumer different in registration proceedings as opposed to infringement contexts?
 
Introduction:   Ansgar Ohly: The notion of average consumer in unfair competition and right of publicity/right of personality (German law).  Unfair competition: development of the notion in European law and relation to TM law.
 
Notion of average consumer has origins in unfair competition law, 1984 Directive against misleading advertising, and also in cases involving free movement of goods. W/o harmonization, standards for advertising were different—protection very strict in Germany, 10-15% misled = sufficient for misleading. Some saw this as undue restriction on free movement. ECJ decided it was disproportionate to ban misleading advertising where an average consumer wouldn’t be misled. Originally created as a harmonization device.
 
Some complain that average consumers aren’t as sophisticated as ECJ assumes.  Directive on B2C relations: defines average consumer as one who’s reasonably well informed and reasonably attentive/circumspect, taking into account cultural and linguistic factors. There must be consumer relevance: the consumer must be caused to take a transactional decision which he or she otherwise wouldn’t have taken.  ECJ stresses Directive is committed to higher level of consumer protection—much more protective than it used to be.  Purely Creative/Office of Fair Trading about aggressive sales practices. Reminds one of 1970s German case law: consumers ar easily misled.  Also, causing confusion is misleading advertising.
 
27 of 28 provide civil law remedies, except the UK, to enforce the Directive, so competitors can bring a private action. Evident problem of overlap in most countries. German SCt: Hard Rock Café in Heidelberg—not licensed by the Hard Rock Group.  How can this be?  He was there before they were, early 1980s when there was only a London Hard Rock and not a protected TM. He has older rights and also there’s an acquiescence issue. But if you ask whether there’s an issue of consumer confusion, then yes: tourists particularly.  (German © law would not cover the Hard Rock logo, which he used.)  Conflict b/t TM logic and unfair competition law: German SCt decided that TM logic prevailed and that TM logic needs to be taken into account in unfair competition analysis, even though Directive does not have exceptions or provisions for balancing competing interests.
 
TM law: in past, would’ve said TM was less fact specific and more formal, looking at similarity of signs, similarity of goods, and distinctiveness of the mark, and not much at what the consumer does in particular circumstances.  However, TM law might become more unfair competition-like: (1) keyword cases.  Needs to be inquiry into “adverse effect on the origin function,” and such an effect is assumed if ad suggests commercial link or is so unclear that consumer doesn’t know.  Duty of providing information = unfair competition concept. (2) Specsavers: using factors external to the register are taken into account in confusion inquiry. Less certainty.  Risk of overprotection. But also makes clearer what the functions of a TM are and you may avoid overprotection/protect only when there’s a real likelihood of harm.
 
Personality/merchandising rights: German law is much closer to US law than English law.  German = personality right protecting privacy and publicity at the same time, monistic. UK = no right of publicity, so only way to protect Rihanna against sale of T-shirts w/her image is to use passing off, which requires confusion.  Rihanna: High Court decided this was passing off, on the merit of those particular facts, b/c there had been a previous relationship w/Rihanna and Top Shop. So consumers might think she was behind this particular campaign.  At pains to stress this was very fact specific.  Contrast b/t passing off approach and German law. He thinks: if you want publicity rights you should say so; looking at the consumer clouds the issues of a monopoly right over use of name/image. Doesn’t think consumers care whether T-shirt is official or unofficial.  Either choose IP or nothing.
 
Rebecca Tushnet
US: average consumer is target consumer; 10-15% can be sufficient.  Accidental convergence or rough justice at least from a Western perspective?  Idea of considering alternatives: what could the advertiser have done instead to communicate its message?  In TM, we say the alternatives are infinite so we don’t need to worry about losing information from suppressing a particular use, but that might not be true. In false advertising we should worry more: if there’s a truthful message received by 50%, we might not want to suppress it if suppression reduces confusion to 5% but also reduces comprehension of the truthful message to 5%. Richard Craswell’s work on this is excellent.
 
Jennifer Davis persuasively argues that changing economic and social conditions allowed the courts, in trade mark cases, to abandon a view of consumers as heterogeneous and divided by class, education and income and instead to assume the existence of an average consumer whose perceptions were key.  I want to reiterate my call to think of consumers and not the consumer—the plurality/bell curve concept is logically independent of the idea of treating consumers differently in different contexts, but I think that conceiving of consumers in the plural more easily allows us to adjust to different contexts, such as the nuclear reactor not run by Homer Simpson.  Also, though Barton Beebe as usual insightfully criticizes the way that the shift to variations among TMs, not variations among consumers, has become more central to TM tests, I think there’s also a role for seeing the consumer change as she moves through her day.  The marketing and psychological evidence does suggest many contextual determinants of attention and choice, though how that can fruitfully be translated into TM cases remains to be seen. Indeed, I’ll suggest that the marketing evidence might disrupt the project of TM law as distinguished from unfair competition/false advertising law law.
 
Surveys in false advertising cases: Part of a general pattern of offering a rich account of the reasonable consumer and what s/he cares about and what she doesn’t care about, even when the cases don’t involve surveys.  Individual buyer testimony is relatively more common, and the buyers get to tell their whole stories—why they made the decisions they did, or at least why they think so though they may not have great insight into their own motivations and they too are of course affected by what we’ve been calling the Heisenberg principle that asking the consumer changes how the consumer thinks.  But regardless, we do get a more 3D picture of the consumer in the false advertising cases because of the concept of materiality: TM law structurally isn’t set up to offer this thicker account of consumer decisionmaking.  One reason, I think, is because many times the TM would be part of what doesn’t matter to most consumers, so the account of the consumer compressed only into her response to the TM is inherently contradictory: it is at least not empirical.
 
US false advertising law has taken a very different approach to surveys from US TM law, dividing cases sharply into those involving literal falsity, where no other evidence of consumer reaction is required, and implicit falsity where only survey evidence—and usually not expert testimony or testimony from individual consumers—is considered sufficient.  Doctrines exist to blunt the force of this division and it doesn’t work that well in my opinion, but it’s notable that this is essentially a cost management doctrine: surveys aren’t worth their costs in many cases where the message is clear.  It’s not a normative decision but an empirical one, in the division we’ve been using.  So the consumer is notionally the same consumer as we confront in TM but we have different ideas about how to figure out what she’s thinking when it comes to false advertising instead of TM.  We could instead try to ramp up the evidentiary requirement in certain troubling infringement cases, as apparently the European courts have done in dilution by requiring proof of an economic effect on the mark—it wouldn’t be that the consumer differs, but that our confidence in whether we can determine the outcome without a greater investigation into the specifics of the plaintiff’s particular consumers differs.
 
Another specific type of consumer I would like to discuss is the consumer we reject: Found in the context of counterfeiting cases (or even post-sale confusion cases, such as the Atmos clock case in the US).  She’s the bad consumer: the one who is seeking counterfeits. Reaction of this consumer is generally excluded from our averaging process—not a matter of comprehension, but a matter of valuation.  She knows quite well that she is not getting the authentic version and doesn’t care.  She fits on the “nonconfused” end of the spectrum, but it turns out that we don’t just want a 2-dimensional spectrum; we exclude her and shift our inquiry to the more easily confused.  (She is also the only defendant-side consumer whose existence is routinely acknowledged, which makes things even rougher on defendants, pace Mike Grynberg’s work.)
 
Primary Discussants:    Graeme Austin: Typical C&D in NZ says we’ll get you for passing off, TM infringement, and violation of consumer law. Many cases: courts just work through those causes of action.  (Google keywords was litigated as consumer protection matter, not private cause.)  Array of similar causes of action. 
 
Coherence: we lack a coherent approach to unfair competition, but Australia wants coherence in all private law.  High Court has said this is an important value.  We should try to achieve coherence between common law and regulatory/statutory law.  In a case expanding TM owners’ rights, Australian court said: policy of TM Act shifted balance of objectives of TM more toward identification and protection of TM owners than the protection of consumers, though that remains an objection. Misleading conduct laws also protect consumers. Reasoning: consumer protection law does the necessary job of protecting consumers, so TM can shift more to producers.  Jigsaw: different statutes doing different things; TM is buffered by modern regulatory laws directed at consumer welfare.
 
Licensing arrangements/settlements: these can affect consumer welfare, but we don’t police them against misleading/deceptive conduct. Maybe, if those private arrangements result in misleading consumers, we should look to consumer protection and not TM (RT: which would lead to the end of the naked licensing doctrine).  Divergences b/t Aust. and NZ: NZ law says consumer protection shouldn’t override TM law, but Austl. allows consumer protection to pop up in copyright etc.  History of consumer protection law in Aust/NZ: NZ took the Australian Trade Practices Act prohibition against deceptive practices, then added broader consumer protection laws, borrowed by Aust. in recent laws—sense that traders should be subject to one body of law. Interestingly, TM laws of both countries have some significant divergence; parliament is not seeing TM as part of this jigsaw of consumer protection.
 
Compare statements of statutory purpose: TM statutes are about TMs, not consumer protection. Reflects historical position that consumer confusion isn’t the only game in town. 
 
What does this say about relationship b/t TM and consumers, and fundamental purpose of TM law?  Dogan described purpose as lowering search costs/enhancing competition.  Wonders if thinking about TM as part of a cluster of laws that go to information in the marketplace would change that.  Consumer information story: can it be downplayed when there are other consumer protection laws surrounding it?
 
Remedies: seeing in IP flexibility in the remedies, and that’s possibly a good thing for balance.
 
Finally: other torts, like negligent misstatement—there the liability is conditioned on reasonable reliance by the recipient on the information.  Normative tool for balancing risks of speaking in the market: the speaker is not the insurer of the recipient of the information. Something to borrow for TM law? The consumer needs to do some work.
 
Stacey Dogan: Search costs v. other goals: struggling w/role of search costs/competition in TM in the US.  Can’t generalize, but thinks there’s a tension between economic model and TM law in practice which reflects normatively impulses that can’t be explained by the economic model—anti exploitation.  (She calls it economic model b/c if you say “search costs” people get hung up on that and miss the ultimate goal.)  “Taking unfair advantage” doesn’t seem explainable on any economic basis: more like natural rights. Parallels in US law. Economic model is very appealing in that it suggests why we protect TMs and also suggests limits on TM, but may be descriptively inaccurate for many doctrines.
 
Annette Kur: procedures are not harmonized/type of enforcement is diverse and different courts decide, so in practice harmonization becomes very difficult.  Better to have it all in one law.  Coherence in the way Austin described works if the use of the TM owner is regulated by consumer protection acts.  Something that TM law allows the proprietor to do may still be prohibited by consumer protection law.  But what about Hard Rock? Much more difficult. TM law admits there is a conflict, but there are rules, like priority. From a systemic point of view, we accept the conflict w/unfair competition law.  No good & coherent solution to be found if you have two different legal acts regulating the same behavior. Need coordination beyond a general principle of leaving consumer protection to other laws.
 
Austin: that was part of my point: we need to give more attention to how TM fits into the consumer protection scheme.
 
Kur: the bad consumer—in European law we “solved” that problem by saying we don’t care about her b/c we don’t need likely confusion by applying special rules for counterfeits/double identity. Does that solve the problem? It at least deals w/it practically.
 
Sir Robin Jacob: Ohly said TMs were less fact specific than unfair competition; many times that must be so b/c the registered marks aren’t in use, maybe on both sides. But once there is an actual mark in use suing another use, they may look at the facts on the ground: which is what happened in Specsavers.  But so many TM fights are indeed shadowboxing. We should pay less attention to that kind of case. 
 
When you have TM comparisons, registries start developing formulae for TM comparisons. And they tend to be ridiculous rules.
 
British perception of Germans: Germans thought any TM was an infringement of another mark.  Terrapin and Terranova: confusing?!  But that has changed.  Introduction of average consumer did send a message.  But we’ve now made a hell of a mess about the average consumer, when really all the court had in mind was to exclude outliers—there’s a range of average consumers.
 
10-15% is quite serious—6 million people in this country!  Figure should be lower. But we must be sure they are being deceived, b/c mostly consumers aren’t as stupid as courts/TM offices think they are. 
 
Enforcement: we’ve made a mistake b/c the best person to look after the deceived consumer is the deceived consumer; we need a cause of action beyond malicious falsehood.  Must allow advertisers to be a bit hyperbolic.
 
Dev Gangjee: Functional definition of consumer—consumer as citizen where information is a tool; rational consumer in contract law; etc.  Less pressure to go for a single idea. But if we see TM as part of broader ecosystem, and it’s ok for other areas to do the heavy lifting, what’s left of the idea of the consumer in TM?  If meaningful engagement w/consumer is happening elsewhere, are we back to consumer as alibi?
 
Bill McGeveran: Q of who is the victim in various areas of law: in various areas, we’re no longer looking out for the consumer—e.g., right of publicity.  Without consumer in TM, to what extent would similar interventions have occurred to protect producers/people currently deemed TM owners?  Judge Frank in Haelan who splits privacy and publicity rights and says we need to protect them both.  Nothing in that case on the effect on purchasers of baseball cards.  What law would remain w/o consumers? Would it look all that different?  Consumer may be post hoc rationalization/stalking horse for other interests.
 
Laura Heymann: Hard Rock: was there any discussion of a possible disclaimer?
 
Ohly: not an issue b/c court said TM law/acquiescence trumped consumer protection. Few other cases mostly involving the internet did use disclaimers.  We could end up in Arsenal-type situation where we put up a sign and the ECJ says a clear disclaimer is immaterial to TM law. But now it has effect in unfair competition.
 
Heymann: though we know disclaimers are often ineffective.
 
Ohly: also very hard to do here specifically: the Hard Rock logo is so recognizable that it’s hard to dissuade consumers.  Court distinguished b/t ongoing operation of restaurant and sale of goods: each sale is a new infringement—so they can’t sell merchandise any more b/c it’s a new TM infringement each time.
 
Kur: it’s true many TM conflicts are not real world conflicts and the rights are broader in the books than in reality.  Brings us back to distinction between registration and infringement.  But should that lead to a situation where the legal principles we apply differ as between the proceedings?  [RT: The way this conversation is going indicates that we have been using the consumer as a concept to pack in other issues; very little in this discussion is about the consumer.]  For systemic reasons, we don’t distinguish in our black letter law.  TM: Like requiring a distance between cars to avoid crashing.   Unfair competition: geared towards a materialized crash, thus geared more towards examining precise circumstances of crash; scope of protection turns out to be smaller.  (RT: This metaphor raises the ‘congestion/we are building too many highways/we are encouraging too many people to buy cars’ issue pretty clearly.)
 
Graeme Dinwoodie: if you took the consumer out, what would happen?  We could shrink TM so it wasn’t trying to protect the consumer, but maybe that would broaden the scope of TM rights—paradoxical. 
 
McGeveran: my prediction as well.
 
Austin: More nuanced—protection of consumers remains an objective, just shifted.  [RT: also wouldn’t you still need the consumer to evaluate scope, if you were at all interested in actual confusion or dilution?]
 
Dinwoodie: use can expand scope (Specsavers) or to restrict/confine the scope of the mark. Should we have a unidirectional rule?  Sanctity of register v. consumer protection point in different directions.  Without use after 5 years there’s no need to maintain stuff on the register.
 
Barton Beebe: Does the US even have TM law, as defined by this slightly more formal approach taken by Europe?  We seem to be unfair competition, very fact-specific.  Much less shadowboxing.  More a question than a claim.
 
Dinwoodie: our casebook completely assimilated §§32 and 43—effectively the same.
 
Litman: the first and second edition of our book came out before Two Pesos; there were different rules then.
 
Beebe: now we tell our students there’s no difference in infringement standards between the two.  (And they ask why we made them learn all the registration stuff!)  Jacob’s criticism of niggling rules for TM offices; but wouldn’t it be worse without these rules?
 
Jacob: they’ve never had clients, they’re isolated—they’re a kind of monastery.  But you have to understand that the rules are artificial; general courts have less excuse [for deferring to them?].
 
Beebe: we don’t squarely address commercial ethics/morality in the US, possibly set to the side. TM law without God, secular and utilitarian?  Or talking to God directly, without rules.  At the same time, morality sneaks back in through general sense of fairness. 
 
UK has no misappropriation law as such: you must show misleadingness to win misappropriation; there’s no raw misappropriation.  What about fairness?
 
Jacob: it’s legitimateappropriation.
 
Dirk Visser: or you come up with another thing to call it, like the Rihanna case—just deny there’s a misappropriation theory underneath it.
 
Jacob: old English libel case, Tolley v. Frye, 1935.  Amateur golfer and chocolate co. published an ad implying endorsement, and golfer sued for libel saying people would think he was taking money for that. He won.
 
Jennifer Davis: TM, unfair competition, and consumer protection law are 3 quite different things in some ways.  UK 1862: first consumer protection law, while unregistered TM law already existed to protect traders’ goodwill.  1875: first registry bill, b/c traders wanted international reciprocity.  UK: w/out registration, test is whether goodwill has been affected, and one way of finding that is confusion, but there are different ways of thinking about consumers reflected.  Though in practice the confusion might be pretty much the same.
 
Jacob: I used to say that if there was no passing off there was no infringement as a general rule.  An unused registered mark was another matter.
Davis: empirical evidence: we have split cases deciding liability and then damages.  One of the reasons we avoid empirical evidence so much may be because in the first action we don’t have to show any actual damage.
 
Jacob: have to show it’s likely.
 
Davis: but never have to quantify. [But this is also true in the US, for injunctive relief.]
 
Jacob: most countries split liability and financial compensation.  US often puts them together which doubles the size of the case/changes the whole dynamic.
 
David Llewellyn: too bad for Hard Rock.
 
Ohly: but what about the consumers?
 
Llewellyn: consumer protection law, the consumer is a party or there’s a representative body there for her. We shouldn’t forget that the consumer isn’t represented by the TM owner; not a party to the litigation. This is a commercial dispute; consumer protection law is philosophically very different, and we shouldn’t elide the legal differences.
 
Cases treat passing off as an add-on.  But statute says likelihood of confusion for infringement; passing off is about/should be about deception, not likelihood. There is a conceptual coherence if you look at them as serving their own functions.  But judges here throw them all in and in the US they do too.  Complete mess.  [Though §43(a) says likely confusion too!]
 
Mid-point summary:   Robert Burrell: TM infringement as precautionary principle: When you’re acting as an attorney you think you’re acting on the precautionary principle, trying to carve out a space for your clients just in case. So when you register for “software” in general, you think you’re protecting your client, not massively inconveniencing other traders who make completely different kinds of software.
 
TM law and other actions: registration based systems: quite often when we want to expand protection we jettison discussion of consumers and talk about property rights/fairness/dislike of copying.  Confusion is usually the end of discussion when we talk about consumers, but what happens when we want to impose a limiting doctrine?  We use the average consumer to say there’s no liability, but really she might be and we just don’t care. Lack that vocabulary.
 
Excision of class distinctions in average consumers.  Need to be careful—illiteracy still exists. If we try to unite consumer protection & TM, keep in mind the other functions of consumer protection law, like regulating payday loans. Careful about letting difficult-to-confuse consumer in TM filter back to consumer protection so the consumer is expected to read and understand a bunch of 6-point type.  [Confusion about what? That question can really help, I think—numeracy is generally low, but brand understanding may be high.]
 
There is a technocratic element to TM law. When judges are setting rules, they have to be applied by lawyers and bureaucrats, and common understandings develop.  Don’t pretend a small/medium enterprise routinely looks through the TM register; it’s lawyers.  So when we think about rules, bear in mind the rules are applied by people who are immersed in the sytem to people who are not.  Having 3 clear factors is better than “just look at it” given 10s of 1000s of marks and the desire for some consistency.  Also remember the speed at which examiners turn over.  Examiners are often there for only a year or two; they need a set of rules to apply.
 
Double identity: you abstract away from the actual use sign; you abstract away from the goods to the registered goods; then we have double identity; then we have likely confusion—we’ve gone very far in our precautionary principle—too many layers of precaution.  Practice of industry: lawyers register everything possible; then next layers of precaution pile on.
 
Michael Grynberg: Problem of multifaceted consumer. The empirical consumer might be the metric of liability, or delineation of property boundary; the consumer as end or policy goal. “Public” or “citizens” might be a better term. Intermingling of conceptions of how consumer should be—divorcing policy priors from that construction is difficult. Go to another regime, raise independent question of what we want that law to do and whether that affects the conception of the consumer.
 
Another issue: transparency. If we have an IP right, we shouldn’t dress it up as unfair competition, as Ohly says, when the confusion narrative doesn’t hold up.
 
Coherence: do doctrines fit or overlap [or conflict]. Do we need to interpret different regimes in light of each other and do we need different consumer constructs for each?  [The more I hear this the more troubled I get. The consumer is the same person facing the different regimes. If we want any empirical element, we need to deal with that.]  We don’t always need the construct of the consumer even if the consumer’s public/policy face is present—that’s one role of shortcuts in some doctrines.  We don’t necessarily need to evaluate ideal consumer’s likely confusion.  Given the difficulty courts have of isolating what they mean when they say ‘consumer,’ this multifaceted consumer does need to be contained. One way: doctrines that act as constraint—we don’t go to false advertising surveys if we have literal falsity.  ACPA: doesn’t require consumer confusion if there’s cybersquatting.
 
Even if courts stop playing games w/ consumers, there are plenty of other heuristics to play with. Even if we had a vision of the consumer we all accepted, the uncertainty/fudging could be shifted to another realm, like confusion.
 
Michael Handler: Feedback effect: TM expands to consider passing off issues in Australia, then passing off expands to catch things like character merchandising.  Complicates a clean delineation of what the statutes are intended to do. 
 
What it means for registration in Aust.: The standard of confusion for registered marks is if consumers would “wonder” if there was a connection—very low standard.  Often the case that 250-paragraph judgment with 220 paragraphs looking at market and finding no passing off; then a few more para. saying the standard is lower for registration and thus there’s TM infringement.
 
Jacob: suing for registered TM infringement v. also adding passing off is a huge decision.  Arsenal case: Arsenal should never have sued in passing off, because they didn’t have evidence of deception.  If they’d done it on TM infringement alone, they’d have needed no evidence—same mark, same goods, done.   Favorable facts: then you add passing off and get emotional impact.
 
Discussion of protection for generic/descriptive terms against confusion: McGeveran: American example of Blinded American Veterans.  If there really is confusion, should the law act?  Then-Judge Ginsburg used unfair competition principles to say it’s generic, but there’s bad will and resulting confusion.  But this isn’t a pop-up enterprise; it has long established goodwill/attempt to divert it.
 
Heymann: Remedies—you can use the term but you need a disclaimer. Similar with Murphy bed—you can use the name, but can’t call it the “original.”
 
McGeveran: pointed to as example of why you need some rump non-TM unfair competition law, whereas in most cases there’s complete overlap.
 
Dirk Visser: is intent more important or likely confusion?
 
McGeveran: Good question—case talks about both.  (RT: NY Ct App case in famous marks case of Bukhara requires bad faith; confusion alone wouldn’t be enough and that’s an analogous situation.)
 
Grynberg: more cited by law reviews than cases; extreme situation.
 
Litman: incoherence: secondary meaning doesn’t count b/c it’s generic, but secondary meaning also produces unfair competition remedy.
 
Jacobs: Menswear shop called Cording; breakaway director started Gnidroc.  Bad faith?  No one would be confused.  But if D is trying to get trade, court will presume he’s succeeded in his intent—D knows best the mysteries of his business.
 
Sentfleben: if one field becomes more empirical, does that create pressure on other related fields to become more normative?  Fine tuning w/unfair competition/passing off.  Apply hard rules on genericism to prevent TM rights, but then unfair competition.
 
Visser: if you prohibit any IP right, it pops up again under unfair competition whether you like it or not.
 
Dinwoodie: German law—TM law was supposed to be normative and unfair competition empirical—is this switching places?
 
Kur: German unfair competition law is also normative to an extent, but at the core the risk of misleadingness would lead Germans to look more to empirics/facts of the case, rather than an abstract kind of space around a given TM. The rule that stronger marks get more protection is normative everywhere.
 
Burrell:  Not everywhere.  Reputation can be a double-edged sword: recognition will be improved so proof of infringement will be harder in Austl.
 
Visser: in many countries choice between TM or unfair competition can be triggered by other considerations—France has separate courts and separate remedies. Netherlands: cost award requirement only applies to TM, not unfair competition, so everyone goes for TM; same issue w/intermediate remedies. Don’t look for the theoretically best cause of action, but the practically best. That’s a big reason different countries choose different paths.
 
Jennifer Davis: People may fear losing registration—if the mark is descriptive.  Unfair competition may be more expansive way to go, not less as we [Europeans] often perceive it.
 
Jacob: the rule of ECJ, fame equals more protection, is obviously factually incorrect. It mustbe a rule of law.
 
Grynberg: Going back to Blinded American Veterans, Ginsburg never ordered any of the remedies we’ve discussed; said the district court could work it out.  Look at their webpages today: no disclaimers. The equitable bailout in US TM law is really very narrow.
 
Llewellyn: the passing off and registered TM infringement causes of action have converged in Singapore.  Some people suggested that there should be no protection for unregistered marks—that’s one way of approaching the issue, though it didn’t get very far.
 
Kur: our approach to the conflicts may differ by which rules we’re trying to navigate. If we say the consumer is the same, we just transform those issues into the way in which we assess confusion.
 
McGeveran: There are some of these claims where we disregard the consumer of entirely—right of publicity.
 
Dinwoodie: Legal transplants: the ECJ taking the advertising notion of the consumer and transplanting it into TM will be harmful unless they reconstruct it w/attention to the different goals.  But we can get comfortable w/messiness if we take that care.
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DMCA exemption followup

Posted on June 30, 2015 by rtushnet
The
OTW/EFF response to the Copyright Office’s additional questions, filed
yesterday, is now available.  Of note,
the Copyright Office asked us about the extent to which K-12 students and
teachers were covered by the existing noncommercial exemption.

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Fourth Circuit destroys literal falsity

Posted on June 30, 2015 by rtushnet
In re GNC Corp., — F.3d –, 2015 WL 3798174 (4th
Cir. June 19, 2015)
 
Well, this is a terrible opinion that makes no sense.  In the Fourth Circuit, if reasonable experts
disagree, it’s now impossible for one to be wrong, and therefore impossible for
there to be literal falsity.  No more
preponderance of the evidence. Perhaps worse, this standard is stated as being
the standard for the Lanham Act in a state law consumer protection case, with
citation of but no apparent comprehension of the difference between literal
falsity and literal truth that is nonetheless misleading.  Of course class action jurisprudence of late
represents a general hostility to consumer protection, but that’s mostly done
procedurally—this is a deep substantive wound.
 
Appellants bought joint health supplements produced and sold
by GNC and Rite Aid. The accused products all contain glucosamine and
chondroitin, and most contain additional purportedly active ingredients.  Appellants alleged violations of various state
consumer protection laws because, they alleged, many scientific studies have
shown that glucosamine and chondroitin are no more effective than a placebo in
treating the symptoms of osteoarthritis, contradicting the labels’ health
claims. Those claims include that various products will, e.g.: “promote[ ]
joint mobility & flexibility,” “protect[ ] joints from wear and tear of
exercise,” “rebuild[ ] cartilage and lubricate[ ] joints,” and provide
“[m]aximum strength joint comfort.” The product label for TriFlex Fast–Acting represents
that the product was “[c]linically studied” by means of a “12–week
multi-center, randomized, double-blind, placebo controlled study of 60 adults
… taking 250 mg/day of the GNC TriFlex Fast–Acting Blend” and was “shown to
improve joint comfort and function,” and also promises 20% improvement in joint
function and 25-30% improvement in joint flexibility.
 
The court of appeals affirmed the dismissal of the complaint
because “marketing statements that accurately describe the findings of duly
qualified and reasonable scientific experts are not literally false.”

 
I’m going to go Scalia one better and insert some reaction gifs here.

 
Plaintiffs alleged that “the vast weight of competent and
reliable scientific evidence” indicated that glucosamine and chondroitin do not
provide the promised health benefits. They cited a number of peer-reviewed
studies to this effect, which experts in the field allegedly deemed to be
appropriate proxies for users. However, the complaint didn’t contain any
allegations about the ineffectiveness of herbal compounds found in some of the
products. 
 
“[T]he district court held
that a manufacturer cannot be liable for false advertising so long as at least
one qualified expert opines that the representations made are truthful, even if
the overwhelming weight of scientific evidence is to the contrary.”
 
Procedural wrangling omitted. 
 
The court of appeals found the district court’s ruling
accurate “while incorrect in its specific formulation.”  The complaint’s reference to specific studies
didn’t matter, since a plaintiff doesn’t need to “forecast” evidence sufficient
to prove its case.  Studies cited in the
complaint may be statements of fact that make a claim plausible, but don’t
comprise the full body of evidence that would ultimately be coinsulted. “[T]he
question of falsity hinges on the existence (or not) of scientific consensus
and not on the conclusions that hypothetical scientists might draw from those
studies referenced in the [complaint].”
 
Though the Lanham Act didn’t control here, Lanham Act
precedent was “instructive” in construing the state laws here.  (This is not so, for a variety of historical
and drafting reasons; state UDAP/UCL acts have different purposes—specifically and
most notably consumer protection directly, with consumer standing to sue and
often to receive statutory/enhanced damages—and state consumer protection cases
have essentially never used the Lanham Act explicit/implicit falsity division
except when cases are brought by competitors asserting both state and federal
claims and the parties don’t dispute that the state test ought to be the same
for competitor plaintiffs.)  Lanham Act
false advertising cases divide into literally false claims and literally true
but misleading claims, the latter of which require extrinsic evidence of actual
consumer confusion.  So too here.  “Every statute at issue here imposes
liability for misleading representations. Although each state supplies its own
test for determining whether true statements are misleading, statements that
are literally false are necessarily misleading within the meaning of all of the
statutes.” Plaintiffs consistently argued literal falsity, not misleadingness.
 
Plaintiffs’ theory of the case was a syllogism: “(i) the
Companies represent that the products improve joint health; (ii) scientific
evidence will show that glucosamine and chondroitin do not improve joint health
more than a placebo would; (iii) therefore, the representations must be false
because the products do not and cannot improve joint health.”  But that’s not enough, because the complaint
failed to allege that “all scientists
agree that glucosamine and chondroitin are ineffective at providing the
promised joint health benefits” (emphasis added).  Instead, it alleged that the “vast weight”
and the “overwhelming weight” of the evidence favored plaintiffs.  This necessarily concedes that some reasonable
experts believe that glucosamine and chondroitin can provide the promised
symptom relief. This means that the scientific evidence of efficacy is
equivocal.  And that means that plaintiffs failed to allege literal falsity. 
 
Plaintiffs said, quite reasonably, that the court shouldn’t
resolve a battle of the experts on the pleadings.  But the court rejoined that it didn’t have
to: having determined that there was
a battle, the court was confident that the complaint therefore failed to plead
literal falsity:
 
When litigants concede that some
reasonable and duly qualified scientific experts agree with a scientific
proposition, they cannot also argue that the proposition is “literally false.” Either
the experts supporting the Companies are unreasonable and unqualified (in which
case, there is no real battle of the experts to begin with) or they reflect a
reasonable difference of scientific opinion (in which case the challenged
representations cannot be said to be literally false).
 

False advertising cases could still survive if plaintiffs
can, after due diligence, plead that no reasonable scientist would agree with
the challenged representations. “Moreover, plaintiffs remain protected from
dubious experts by the Federal Rules of Evidence, which ‘ensure that any and
all scientific testimony … is not only relevant, but reliable.’”
 
And the court promised that it wasn’t insulating supplement
makers from liability.  “A manufacturer
may not hold out the opinion of a minority of scientists as if it reflected
broad scientific consensus.” (But what does it mean to “hold out the opinion of
a minority of scientists as if it reflected broad scientific consensus”?  Apparently it can’t be false to state that
minority’s opinion as if it were established fact.)  Anyway, the court need not decide whether the
claims could be misleading, because plaintiffs never pled misleadingness. 
 

“In sum, we hold that in order to state a false advertising
claim on a theory that representations have been proven to be false, plaintiffs
must allege that all reasonable experts in the field agree that the
representations are false.”
 

[That’s not what “proof” means.] Also, the complaint failed to allege that the other herbal ingredients,
present in almost all the products, didn’t work. This failure was independently
fatal, since most of the challenged representations referred to the products as
a whole.
 
The court did reject some grounds for affirmance: defendants
argued that the studies cited in the complaint weren’t specific enough to the
challenged products to raise any plausible inferences about their efficacy.
This argument was “unpersuasive and inconsistent with notice pleading.”  Defendants argued that the studies only
looked at people with arthritis, not people who only experience joint pain and
stiffness, but the court had to take as true the complaint’s allegation that
experts in the field deemed such studies to be appropriate proxies for
non-arthritic people as well.  “It may
well be that glucosamine and chondroitin work differently in people with
arthritis than in people without arthritis, but such a factual dispute is not
susceptible to resolution at the motion-to-dismiss stage.”
 
Plus, the defendants argued that the scientific studies
weren’t sufficient evidence of falsity because they didn’t assess “the specific
formulations used in the products or the synergistic effects between the products’
ingredients.” But that wasn’t an appropriate inquiry at the motion to dismiss
stage.
 
Okay, deep breaths.
 

The court of appeals made a category error: reasonability
and correctness are not the same, and deliberately so in most of the legal
system.  We recognize that reasonable and
scientifically accepted methods are sometimes applied wrongly, or sometimes simply
produce wrong results—that’s what it means to have an error rate.  Having at least one admissible expert opinion
in your defense means that you should be able to fight the charge of falsity in
front of a jury, not that you should be able to get the claim dismissed before
anyone evaluates the competing expert opinions. 
If a reasonable expert is nonetheless wrong in a particular case, the claim that the expert supports is
not misleading, it is untrue, that is, false.
 
Compare: based on intelligence that meets ordinary standards
for action, a drone strike hits a building that turns out not to have the
target inside it.  Was the statement “our
target is inside this building” merely misleading, or was it false?  If you don’t like “false” because of its
implication of intent, you’ve already lost that battle in the consumer
protection context, but would you accept “that statement was not true, though
we reasonably thought it was at the time we said it”?  By contrast, misleadingness relies on
inference to complete or extend a claim that is true on its face.  Suppose the claim on the supplement at issue
here was “Tired?  Iron can remedy anemia
that causes tiredness.”  Surely most if
not all reasonable scientists would agree that this is true.  Now suppose that most tiredness does not come
from anemia.  Is the claim “iron can
remedy anemia that causes tiredness” misleading on a product marketed to
consumers in general?  Of course it is, because of implicature,
specifically the rule of relevance: connecting it with the nonfactual question
“tired?” implies that iron will treat tiredness in general. 
 
The difference between falsity and misleadingness is not
whether reasonable experts can disagree—in the drone/falsity example, they might
have disagreed, given how the relevant evidence is interpreted, whereas in the
iron example, they are unlikely to disagree at all.  The difference is whether the statement
requires consumers who accept that the
statement is true to make further inferential leaps to reach the conclusion
that benefits the advertiser.  In some
cases, those inferential leaps may be so likely that we say that a claim is
false by necessary implication. 
(Relatedly, the court of appeals’ new standard makes an unintelligible
hash of falsity by necessary implication, recognized in every circuit to
consider it.  Under the new standard, if
lots of experts disagree with a challenged claim but one agrees with it, is
that falsity by necessary implication? 
Is it a percentage standard now? 
This is one reason that (a) Lanham Act cases shouldn’t have a rigid
falsity/misleadingness divide, and (b) one ought to be careful before importing
Lanham Act doctrines into consumer protection cases, given the different
considerations regularly at issue.)
 

At a minimum, this holding on literal falsity puts the 4th
Circuit in conflict with everyone else’s definition of literal falsity, where
juries are routinely allowed to resolve battles of the experts in finding
literal falsity. E.g., Hot Wax, Inc. v. S/S Car Care, 1999 WL 966094 (N.D. Ill.
1999) (where a product containing mineral seal oil was sold as “wax” for cars,
a jury found the claim literally false, rejecting several experts’ testimony
that “wax” could be defined broadly, in favor of the plaintiff’s expert
testimony that mineral seal oil was plainly not “wax” because it lacked the basic
characteristics of wax); Eastman Chemical Co. v. Plastipure, Inc., 775 F.3d 230
(5th Cir. 2014) (taking one side in a scientific debate can be literally false
when the ads are directed to the general public, not to experts to whom the
details and limitations of a study are disclosed); Kraft General Foods, Inc. v.
Del Monte Corp., 28 U.S.P.Q.2d 1457 (S.D.N.Y. 1993) (featuring competing expert
definitions of the word “gelatin”). 
Literal falsity should be determined by a two step process: (1) what
unambiguous message does the ad convey, if any? (2) is that unambiguous message
false?   E.g. United Indus. Corp. v.
Clorox Co., 140 F.3d 1175 (8th Cir. 1998) (ambiguity is the key divide between
explicit and implicit falsity). That has nothing to do with the presence of
scientific debate. 
 
Indeed, the very case that the GNC court here cites to explain literal falsity holds exactly that:
 
Castrol presented affirmative
evidence to prove the literal falsity of Pennzoil’s claims and … [the district
judge] did not find Pennzoil’s evidence to rebut Castrol’s proof persuasive.
The dissent asserts, however, that a defendant need only establish a reasonable
basis to support its claims to render the advertisement literally true. We
disagree. Rather, the test for literal falsity is simpler; if a defendant’s
claim is untrue, it must be deemed literally false.
 
Castrol v. Pennzoil Co. 987 F.2d 939, 944 (3rd Cir.1993). GNC cites Castrol to define literal falsity, but neglects its explanation of
what literal falsity is; Design Resources, Inc. v. Leather Industries of
America, — F.3d —-, *7 (4th Cir. June 18, 2015), also relies on Castrol for falsity by necessary
implication.
 
Other consumer protection cases as well have easily
recognized that falsity means wrongness, not global consensus on wrongness.  For a sampling of cases where a consumer
plaintiff’s allegations sufficed by alleging falsity, not total scientific
consensus: Zakaria v. Gerber Products Co., No. 15–00200, 2015 WL 3827654 (C.D.
Cal. June 18, 2015) (affirmative misrepresentation is actionable when its
falsity is properly alleged, as opposed to lack of substantiation for the
claim); Bezdek v. Vibram USA Inc., 2013 WL 639145, No. 12–10513 (D. Mass. Feb.
20, 2013); In re Clorox Consumer Litigation, 894 F. Supp. 2d 1224 (N.D. Cal.
2012); Cardenas v. NBTY, Inc., 870 F. Supp. 2d 984 (E.D. Cal. 2012); Prohias v.
Pfizer, Inc., 490 F. Supp. 2d 1228 (S.D. Fla. 2007).
 
Oh, and—what exactly would the extrinsic evidence of
confusion be directed to?  The logic of
the ruling implies that it would have to be “consumers are confused into
thinking there’s a scientific consensus about this claim,” but that doesn’t
make sense. (Consider what the court of appeals could want the survey to show:
the reception of the explicit messages on the packages, that the supplements
improve joint health etc.?  But that’s
just a reading test: those are the explicit messages on the packages.  The reason that explicitly false claims don’t
require further evidence of consumer reception is that it’s pointless and
wasteful to require a survey to see if consumers can read.)  The thing that consumers are deceived by, and
likely to think about, is the underlying truth of the claim, not the degree of consensus
about it. Those two perceptions are probably reasonably close together to the
extent that consumers consider consensus at all, but consensus is a proxy for
the fact of interest: truth or falsity of the health claim. The only way this
holding can be coherent (if still wrong) is if it is no longer false or misleading to make any claim against
which there is no “consensus,” no matter what message consumers receive.
 
To put it another way: under this rule, what is the
remaining place of a battle of the experts in a false advertising case? We
regularly expect that some experts are wrong and some are right.  But that’s a matter of evaluating the
evidence presented by the experts. 
Evidence of consumer perception, collected via a survey, would not help
us evaluate the evidence presented by the experts in any way.  But it’s the survey requirement that divides
explicit from implicit falsity.  Is the court’s idea that we should do
a pointless survey so we can then have the actual battle of the experts?

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