3d Circuit gets descriptiveness right: it’s a matter of both the term and the goods/services

Engage
Healthcare Communications, L.L.C. v. Intellisphere, L.L.C., — Fed.Appx. —-,
2019 WL 6170825, No. 19-1017 (3d Cir. Nov. 20, 2019)
Panels
in the Second and Ninth Circuits, which really ought to know better, have
occasionally reasoned that a term is not descriptive unless you can figure out
what the goods/services are just by looking at the term.  This is nonsense, and it’s nice to have an
appellate opinion, even unpublished, saying so outright. The proper inquiry, as
the PTO has long insisted, is whether, knowing the term and the goods/services,
some leap is required to figure out their relation; when the relation is obvious,
the term is at best descriptive.
Anyhow,
this is a trademark case between “strikingly similar” companies owned by two
brothers. The court of appeals affirmed a finding of noninfringement, though on
slightly different grounds with respect to the most interesting term, PEER-SPECTIVES.
Here
are the marks at issue

With the exception of PEER-SPECTIVES, they are all descriptive without any need
for further discussion, both asserted as service marks (for advertising) and
for the underlying publications etc. The
court of appeals agreed that “advertising service marks must be sufficiently
separate from the subject of the advertising, and must be used to identify
advertising services, not merely to identify the subject of the advertising,
and “an advertising service mark that merely describes the subject of its
advertising is a descriptive mark not entitled to service mark protection.”
Indeed, the assertion of the same marks as trademarks for the underlying industry
could be regarded as an admission of descriptiveness.
There
was not enough evidence to show that the alleged marks had achieved secondary
meaning either for advertising or for the underlying goods, which were online/print
publications in the fields of hematology and oncology. Plaintiffs argued that
the district court erred in finding the marks had not achieved secondary meaning
at the time of defendants’ alleged infringement, because there was no
definitive date in the record when the alleged infringement began.  But here “the operative issue is not when
defendants infringed its marks, but whether the alleged marks had achieved
secondary meaning at all, whether it be on the date of infringement, the date
of summary judgment, or even today.” There was not sufficient evidence that
they had done so. Courts use multiple factors to establish secondary meaning.
Here, plaintiffs could offer evidence only on six of the Third Circuit’s eleven
factors: “(1) the extent of sale and advertising utilizing Engage’s trademarks;
(2) length of use of Engage’s trademarks; (3) exclusivity of use of Engage’s
trademarks; (4) copying of Engage’s trademarks by Intellisphere; (5) the number
and amount of sale involving Engage’s trademarks; and (6) the number of
consumers privy to Engage’s trademarks through the use of those marks in
commerce.”
Vitally,
there was no evidence of consumer perception. Given that void, the alleged
extensive use and alleged copying by the defendants “do not alleviate their
burden of showing how consumers identify these marks as being synonymous with
the origin of their products, nor is the circumstantial evidence presented so
overwhelming as to imply consumer association.” It has to matter that the
plaintiffs were asserting such a smorgasbord of marks—if there’d been just one,
maybe it would have been more plausible that lots of advertising had worked,
but it’s just not convincing that all those descriptive terms served as marks
for plaintiffs, and thus it’s not convincing that any given one out of the
plethora stood out. But the degree of descriptiveness also played a big role:
By way of comparison, the court believed that “at least some producer can
readily make a strong showing on the six factors plaintiffs identified, through
its sale of ‘Belgian chocolates,’ but surely that producer would not be
entitled to trademark protection for that label no matter how long or pervasive
its use of that label; consumers will never be in danger of associating that
label with the producer.”
The
court treated Peer-Spectives differently because the district court deemed it suggestive.
The court of appeals disagreed, making several important and persuasive points:
The district court had reasoned that “a ‘mental leap’ is required to tie
PEER-SPECTIVES to online and in-person continuing medical education classes for
physicians. Absent this explanation, any link between the words and the
healthcare industry would not have been immediately apparent, a clear
indication that the mark is [ ] suggestive.” 
It’s
true that the line can be difficult to draw, but fortunately the Canfield
Third Circuit case resolved the issue: “chocolate fudge” was descriptive for
soda, and that’s the same kind of term that Peer-Spectives is. “It would be
readily apparent to the average consumer that ‘Peer-Spectives’ stands for ‘Peer
Perspectives.’ Indeed, defendants’ use of the phrase ‘Peers & Perspectives’
is the very phrase plaintiffs assert infringed on their alleged mark.” This is a vitally important point about validity’s interaction with scope! Deeming too
many terms suggestive eases monopolization of terms that convey useful information
to consumers, without proof that there is a corresponding benefit to consumers
in the form of protecting them from confusion. As the court explained, “[p]eer
perspective is a concept that most consumers immediately would recognize as a
generally descriptive term that can be used to describe many products and
applicable across a multitude of industries and markets, as is the term ‘chocolate
fudge.’” “Chocolate fudge” standing alone doesn’t create an immediate association
with diet soda, but that isn’t the test. 
It takes no “mental leap” for consumers to recognize its relevance
for diet sodas, once they see it applied thereto.
A
descriptive term need not be “tied to any particular industry or market.” If we
didn’t use that rule, “ ‘very creamy ice cream’ would be found to be clearly
descriptive, but ‘very creamy,’ because its link to ice cream would not be
immediately apparent, could nevertheless be trademarked by an ice cream maker.
Of course, it is reasonable to believe that such ice cream maker would then
attempt to enforce its trademark against every other ice cream maker who uses
the term ‘very creamy ice cream’ on its products, the very term that was deemed
clearly descriptive in the first place.”
Likewise,
extensive use of a generally applicable term in other markets supported
descriptiveness. “[I]ndeed, if the ‘mental leap’ required can be made in many
markets, perhaps it is not much of a leap at all…. Unsurprisingly, a Google
search of the term ‘peerspective’ returned over 12,000 results, with a slew of
examples of its use across many industries.”
There
was no better evidence of secondary meaning here than for any other term at
issue. Thus, the district court was affirmed not because the defendants didn’t
infringe, but because there was no enforceable mark.

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e-cigarette sellers must substantiate greater population-level safety to make “safer” claims

Nicopure Labs, LLC v. Food & Drug Admin., No. 17-5196
(D.C. Cir. Dec. 10, 2019)
In the Tobacco Control Act, Congress gave the FDA additional
authority to regulate tobacco because previous measures “failed adequately to
curb tobacco use by adolescents.” Congress made a lot of findings about the
addictiveness of tobacco and its dangers to children. Instead of banning
tobacco and suffering the resulting black market, Congress took the
then-current market as a baseline for improvement. The TCA grandfathered
products that were on the market as of February 15, 2007. New products require
premarket authorization, requiring the FDA to assess their health effects on
the population as a whole in view of both the “likelihood that existing users
of tobacco products will stop using such products,” and the “likelihood that
those who do not use tobacco products will start.” Authorization shall be
denied if, among other things, there’s no showing that permitting the new
product would be appropriate for public health; the proposed labeling is false
or misleading; or the new product deviates from an existing tobacco product
standard without adequate information to justify the deviation.
Anything marketed as safer than existing tobacco products
(“modified risk” tobacco products) has to meet more stringent public-health
standards. A modified risk tobacco product is a product whose “label, labeling,
or advertising … represents explicitly or implicitly that … the tobacco product
presents a lower risk of tobacco-related disease or is less harmful than one or
more other commercially marketed tobacco products; … contains a reduced level
of a substance or presents a reduced exposure to a substance; or … does not
contain or is free of a substance”; or a product whose label, labeling, or
advertising uses “light,” “mild,” or “low” or similar descriptors; or whose
manufacturer “has taken any action directed to consumers through the media or
otherwise, other than by means of the tobacco product’s label, labeling, or
advertising . . . respecting the product that would be reasonably expected to
result in consumers believing that the tobacco product or its smoke may present
a lower risk of disease or is less harmful than one or more commercially
marketed tobacco products, or presents a reduced exposure to, or does not
contain or is free of, a substance or substances.” There’s a statutory
exemption allowing the use of “smokeless tobacco,” “smoke-free,” and similar
defined terms for chewing tobacco.
The marketing of a modified risk product must “enable the
public to comprehend the information concerning modified risk and to understand
the relative significance of such information in the context of total health
and in relation to all of the diseases and health-related conditions associated
with the use of tobacco products.” A product may be marketed as presenting a
lower risk only if “the applicant has demonstrated that such product, as it is
actually used by consumers,” will both significantly reduce harm/risk to
individual tobacco users and benefit the health of the population as a whole,
taking into account current users and current non-users. 
There’s a special rule with “a less demanding and more
targeted standard” for the subset of modified risk products that purport to
contain a reduced level or none of an identified substance (e.g., “no
diacetyl”). Such products aren’t required to “significantly” reduce harm or
risk to the individual user and must be only “expected” to benefit the health
of the population as a whole. Also, the substance identified as reduced or
absent must actually be harmful; the reduction must be substantial and accurate
as labeled; the product must not expose the consumer to increased levels of
other harmful substances; and consumer perception testing must show that
consumers will not misinterpret a specific claim as an assurance of relative
overall safety. A user of this rule must also “conduct postmarket surveillance
and studies” and submit the results to the FDA annually to allow it to
“determine the impact of the order on consumer perception, behavior, and health
and to enable the Secretary to review the accuracy of the determinations on
which the order was based.”
Smoking cessation products have to meet even more exacting
standards for a new drug or device. No e-cigarette has yet sought and received
clearance from the FDA under any of the three pathways. The industry didn’t
challenge either the new tobacco product or new smoking cessation product
approval pathways. It wanted to make health claims with fewer restraints than
those afforded by the modified risk pathway.
Nicopure, an e-cigarette manufacturer and distributor, and
an e-cigarette industry group, argued that the FDA violated the APA by not
providing an easier premarket authorization pathway for e-cigarettes. It didn’t
and I will say no more.  They also
challenged two provisions of the Tobacco Control Act as violating the First
Amendment: (1) the premarket review standards applicable to modified risk
tobacco products allegedly impermissibly burdened truthful, nonmisleading
statements about e-cigarettes and (2) the ban on distribution of free samples
of tobacco products, including e-cigarettes allegedly suppressed expressive
conduct. Both challenges failed.
Although the court mostly discusses the evidence in the
context of the APA challenge, it’s clearly relevant that both the numbers of
young users and adverse reactions to e-cigarettes are rising sharply. While the
evidence is insufficient about whether e-cigarettes reduce conventional
smoking—and some evidence suggests they’re a gateway for some users—the
industry wasn’t seeking approval of e-cigarettes as smoking cessation products,
nor was it instructing users on how to stop using nicotine.  “But e-cigarette manufacturers nonetheless
have actively marketed their products as if they were a safer, healthier
substitute for conventional cigarettes.” We just don’t yet know the long-term
impact on the general population.
Note: the following discussion largely assumes some of the
analytical moves, which makes it just like every other commercial speech
case.  Key among them: Can the government
decide that the meaning of “safer” is “safer for the population as a whole,”
rather than “safer for you than smoking tobacco would be, holding constant your
likelihood of doing that instead”?  That’s
a far more significant move than the general substantiation requirement—which
is in theory applicable to all commercial advertising subject to the FTC’s
jurisdiction, and which is bolstered here by a well-known and appalling history
of deadly industry lies. The court gets to finesse the “safer” definition
question by focusing on the substantiation requirement.  And I have my doubts that the industry could
substantiate that its “safer for you” claims, and most crucially their
limitations, are understood by most reasonable consumers.  But in the theoretical situation that
consumers did understand “this is safer for me than tobacco, but I could easily
end up worse off by using it because I probably wouldn’t have smoked tobacco in the first
place,” can the government ban that marketing? I think the answer is yes,
especially given all the uncertainties, but that is the strongest case in conventional First Amendment terms.  (It thus matters a lot that this is not an
as-applied challenge, since no one in the industry appears ready to
substantiate that consumers receive that risk message.)
The court held: The FDA can constitutionally bar advertising
of e-cigarettes as safer than existing products until that safety benefit has
been shown. “That conclusion is amply supported by nicotine’s addictiveness,
the complex health risks tobacco products pose, and a history of the public
being misled by claims that certain tobacco products are safer, despite
disclaimers and disclosures.” Congress found that “modified risk tobacco
products may encourage new users to take up tobacco products, rather than
simply reduce risk to those who already use them.” Congress cited an FTC study
and found that advertisements that claim one tobacco product is less harmful than
another mislead consumers, even when the putatively less risky products contain
“disclosures and advisories intended to provide clarification.” It specifically
found that disclaimers and other “[l]ess restrictive and less comprehensive
approaches have not and will not be effective” in communicating risks
associated with tobacco products sold as safer. It concluded that “the only way
to effectively protect the public health from the dangers of unsubstantiated
modified risk tobacco products is to empower the Food and Drug Administration
to require that products that tobacco manufacturers s[ell] or distribute[] for
risk reduction be reviewed in advance of marketing, and to require that the
evidence relied on to support claims be fully verified.”
As an initial matter, the industry argued that the use of
advertising to identify what counts as a modified risk product burdened speech
in violation of the First Amendment.  Not
so.  “First, our precedent explicitly
approves the use of a product’s marketing and labeling to discern to which
regulatory regime a product is subject, and to treat it as unlawful insofar as
it is marketed under a different guise.” 
As with drug claims versus structure/function claims, or even whether
the FDA has any jurisdiction at all, how a product is marketed can tell you
what it is and therefore what regime applies to it. “Just as the government may
consider speech that markets a copper bracelet as an arthritis cure or a beach
ball as a lifesaving flotation device in order to subject the item to
appropriate regulation, so, too, the FDA may rely on e-cigarette labeling and
other marketing claims in order to subject e-cigarettes to appropriate
regulation.”
The industry wanted to pitch e-cigarettes as safer, arguing
that this would help current smokers who “routinely seek information that would
be helpful when attempting to move away from cigarettes and learn more about
the features of particular vapor products.”  But it wanted to do so without scrutiny based
on public health and without addressing the risk of greater uptake by current
nonsmokers. It argued that the FDA’s modified risk pathway regulated the
message itself, not the product.  But
that was wordplay. “Deliberately selling an e-cigarette as less risky without
going through the requisite regulatory review for reduced-risk tobacco products
renders the sale-as-labeled unlawful, just as selling saw palmetto extract as a
drug without FDA premarket approval was unlawful. It is well established that ‘commercial
speech related to illegal activity’ is not subject to constitutional protection.”
Even viewing the modified risk pathway as burdening speech,
it was a legitimate restriction on commercial speech. Manufacturers could make
accurate “less risky” claims, but only if substantiated with evidence of
overall public health effects and with evidence that consumers wouldn’t be
misled. “If a manufacturer shows its product is in fact safer, and shows that
consumer perception accurately grasps the nature and limits of any safety
claim, the product will be marketable. Because the Act withholds from market
only those tobacco product claims that, upon review, are found to be
misleading, it bars only commercial speech that by definition is unprotected by
the First Amendment.”
Under Central Hudson, the government had a
substantial interest in “ensuring that any modified risk statements are
accurate and non-misleading in order to protect consumers from buying a highly
addictive product with a false sense of the risks it presents,” before any
marketing began. This interest was especially powerful given the combination of
health risks and vulnerable young consumers.
And the modified risk product pathway directly advanced the
government’s substantial interest. Requiring a “significant[]” reduction of
harms and risks to individual users and a “benefit” to the population as a
whole directly advanced the government’s interests in accuracy and public
health. “Given that no tobacco product has ever been shown to be safe, Congress
ensured that the FDA will not lightly authorize the sale of tobacco products as
carrying reduced health risk.” The special rules for claims about specific
substances also directly advanced the government’s interest. “Each element of
the inquiry is targeted towards ensuring that any specific-substance claim that
consumers may understand as a relative safety claim is accurate and not
misleading.”
Finally, the regulation was “not more extensive than
necessary” to serve the government’s interest. In making a “fit” determination,
“the least restrictive means is not the standard; instead, the case law
requires a reasonable fit between the legislature’s ends and the means chosen
to accomplish those ends[.]” That standard was satisfied. Congress found that
“the only way to effectively protect the public health from the dangers of
unsubstantiated modified risk tobacco products is to empower the Food and Drug
Administration to require that products that tobacco manufacturers s[ell] or
distribute[] for risk reduction be reviewed in advance of marketing, and to
require that the evidence relied on to support claims be fully verified.”
And the rule for specific substances “reasonably tailors the
requisite substantiation to the type of product.” For products marketed as
generally less harmful, scientific studies must show that a “substantial
reduction in morbidity or mortality among individual tobacco users occurs” with
their use, whereas for those marketed only as less harmful because they contain
a reduced level of a substance, the manufacturer must show only that reduced
morbidity and mortality is “reasonably likely.”
The industry objected to premarket review because it
believed that its claims for healthfulness were accurate. “But modified risk
claims that might be technically accurate if viewed in isolation are in fact
often misunderstood by consumers. In particular, Congress specifically found
that consumers have been misled about the health consequences of claims that a
tobacco product did not contain or contained reduced level of a harmful
substance.” Just as with low tar and light cigarettes, “product labeling or
advertising that touts an e-cigarette as free of a specified ingredient may
mislead consumers to view the product as generally safer, even if other
chemicals it contains, such as formaldehyde, are equally or more harmful than
the disclaimed ingredient. The Industry’s claims of accuracy are
unsubstantiated, and it has yet to submit an application with appropriate
consumer-perception evidence.”
The court emphasized that misleadingness is based on the understanding
of a significant number of reasonable consumers, and not only on what is
explicitly said. Because the rationale supporting First Amendment protection of
commercial speech is “the informational function of advertising,” “[t]he
government may ban forms of communication more likely to deceive the public
than to inform it.” And, when the speech addresses matters on which the “public
lacks sophistication,” then “misstatements that might be overlooked or deemed
unimportant in other advertising may be found quite inappropriate.” That was
the case here: “Tobacco products are by definition harmful and addictive, and
choosing among them based on comparative safety is inherently risky and
complex, making the public especially susceptible to being misled and harmed.”
The court pointed to Congress’s knowledge of the sordid,
deadly history of tobacco marketing as strong support for premarket approval of
modified risk products. The FDA has already found similar problems with
e-cigarette marketing, especially to young people. “Consumers have frequently
and erroneously read narrow safety statements about an identified substance as
materially complete claims that the product is safe overall.” Thus, the
modified risk pathway could require the “testing of actual consumer perception”
to show that “consumers will not be misled into believing that the product . .
. is or has been demonstrated to be less harmful” more broadly.
The industry suggested a bunch of supposedly less
restrictive alternatives. The court found none convincing.  First, required disclaimers: Congress
considered and rejected them because they’d been ineffective to prevent
deceptive tobacco marketing in the past. “The risk of misinterpretation
regarding a highly addictive product supports the FDA’s choice of preclearance
over a disclaimer requirement.” Second, post-market enforcement, putting the
onus on the government. But that would require the FDA
to investigate the harms of an
open-ended litany of substances that might appear in e-cigarettes, and to
continually test products for their presence. Restricting the government’s
regulatory options in that way is inappropriate for products containing harmful
and addictive substances about which the public is known to be easily misled
and about which the manufacturer has superior information. The FDA has already
noted inaccuracies in claims made by various e-cigarettes about their nicotine
content, and significant variability between labeled and actual content of
various chemicals. Once inaccurate or misleading information influences people
to start using a powerfully addictive substance, damage has been done.
The court also rejected the industry’s appeal to Sorrell v.
IMS Health Inc., 564 U.S. 552 (2011), which unconstitutionally restricted
“sophisticated and experienced consumers,” namely prescribing physicians, from
accessing “truthful, nonmisleading advertisements.” The targets here were
ordinary laypeople, including adolescents. And, unlike Sorrell, the
modified risk pathway didn’t ban information going to one speaker while
allowing its dissemination to others (like researchers). Not only was there no
absolute ban here, as in Sorrell—only a substantiation requirement—but
there was no non-e-cigarette group authorized to make the same claims in
connection with a commercial transaction. [This mishmash of speaker/recipient
isn’t the DC Circuit’s fault; it’s an effect of Sorrell’s own
incoherence about what’s protected and why.]
Nor was the special treatment of chewing tobacco and “smokeless”
or “smoke free” claims arbitrary, even though e-cigarettes couldn’t use the
same terms without preclearance as a modified risk product. Congress relied on
decades of use of the term “smokeless” to distinguish chewing tobaccco from
loose smoking tobacco, a rationale inapplicable to e-cigarettes. Moreover,
chewing tobacco isn’t inhaled. “To the extent that consumers may view ‘smokeless’
as a claim about relative pulmonary risk, decades of experience supports the
FDA’s allowance of that claim for chewing tobacco whereas the FDA lacks any
similar track record regarding e-cigarettes.”
Separately, the ban on free samples didn’t violate the First
Amendment.  The industry argued that,
since free samples are a marketing technique, they constituted expressive
conduct, and that, since the reason Congress banned free samples was to
decrease uptake, it was regulating based on the expressive effect of the
conduct. 
The reason that Congress banned free samples was “to
eliminate an easily accessible source for youth that are especially vulnerable
to the risks of tobacco use and addiction.” The ban targeted conduct, not
speech, and it wasn’t obviously expressive conduct either.  The industry failed to identify its “entirely
unstated” message. The industry argued that free samples were “expressive”
because they “convey[] important information to smokers who want to switch to
vapor products, including key consumer information about different e-liquid
flavors and device performance characteristics.”
“This extraordinary argument, if accepted, would extend
First Amendment protection to every commercial transaction on the ground that
it ‘communicates’ to the customer ‘information’ about a product or service.”
The Supreme Court long ago rejected the idea that conduct carried out with the
intent of expressing an idea is therefore speech. “[T]he seller’s intention that
those experiences leave consumers with helpful information that encourages
future purchases does not convert all regulation that affects access to
products or services into speech restrictions subject to First Amendment
scrutiny.”
Even if there were an incidental burden on speech, the
restriction on conduct was imposed “for reasons unrelated to the communication
of ideas,” and thus unproblematic. The free sample ban wasn’t about
communication of information, it was about the products themselves and the well-documented
danger that children would obtain and use them via free samples, given the
greater price sensitivity of young consumers. Expressions Hair Design v.
Schneiderman, 137 S. Ct. 1144 (2017), “recently reaffirmed that ordinary price
regulation does not implicate constitutionally protected speech,” and the ban
here was an ordinary price regulation: e-cigarette sellers can’t charge zero
dollars.  
Since this is rational basis review, it doesn’t matter that
the TCA allows distribution of free samples of chewing tobacco at “qualified,
adult-only” facilities:
Anyone with even basic awareness of
e-cigarettes and chewing tobacco, and their differential health consequences
for and uptake by youth, will readily discern rational reasons to treat free samples
of chewing tobacco differently from free samples of e-cigarettes. E-cigarettes
are discreet and trendy in a way that chewing tobacco is not. Additionally,
Congress’ limited exemption for free samples of chewing tobacco in specified,
controlled circumstances reflects Congress’ knowledge of youth access and usage
derived from years of experience. As the Industry concedes, no comparable
information exists for e-cigarettes. Additionally, users of e-cigarettes inhale
into their lungs myriad potentially hazardous substances not limited to those
derived from tobacco. Congress’ decision to exempt chewing tobacco but not
e-cigarettes from the free sample ban readily survives rational basis review.
The Sixth Circuit previously characterized a free sample ban
as “an attempt to regulate the ‘communicative impact’ of the activity, not the
activity itself.” But that case “addressed a regulation covering a range of
clearly communicative promotional activities—including the distribution of
tobacco- branded merchandise (t-shirts, baseball caps, bobblehead dolls) and
event sponsorships—together with a prohibition on free product samples, and its
First Amendment analysis grouped them together as ‘marketing bans.’” That was
wrong, but even so, the Sixth Circuit concluded that any burden on the
expressive element of free samples was easily justified by the FDA’s
“overwhelming evidence” of the danger that free samples could fall into the
hands of young people.  The industry
argued that e-cigarettes were different because “consumers are searching for
truthful information regarding a novel and potentially life-saving product
category.” “Given the relatively unknown and potentially grave risks of
e-cigarettes to all users, and their extraordinary allure to middle and high
school students, we cannot agree.” [Also, trying an e-cigarette provides
exactly zero information to the user about whether they are better, healthwise,
than cigarettes.]

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lack of safety/higher failure rates plausibly meant products weren’t “compatible”

Straumann USA, LLC v. TruAbutment Inc., No.
8:19-cv-00878-JLS-DFM, 2019 WL 6887173 (C.D. Cal. Oct. 1, 2019)
The parties compete in the market for dental implants, which
are medical devices surgically implanted into the patient’s jaw bone to replace
natural teeth and function as artificial tooth roots. A connector, called an
abutment, is placed on the inside; it holds
and supports dental restorations, such as crowns or bridges. TruAbutment markets abutments as
“compatible” with implants produced by various manufacturers, including Straumann’s. I’ll
ignore the patent claims.
Abutments for use in dental implants are classified as Class
II medical devices, “medium to moderate risk.” 510(k) preclearance is required, but Straumann alleged
that TruAbutment hadn’t obtained 510(k) clearance for many of its abutments,
including for dozens of devices marketed as Straumann-compatible. Straumann further
alleged that TruAbutment products fail at an unusually high rate and that
non-adherence to the exact specifications of the original product or use of
different materials increase the chance that some combination of the implant,
abutment, or connecting screw will break. Device failure “typically requires
emergency surgery.” The failure of a non-Straumann abutment would allegedly unfairly
cast doubt on the reliability and safety of the implant with which it was
coupled.
The court found the Lanham Act claim sufficiently pled.
Although the FDCA provides no private right of action, the Lanham Act claim was
not dependent on lack of preclearance. Straumann alleged false statements about
compatibility, which could succeed without litigating any alleged underlying
FDCA violation. The complaint also satisfied Rule 9(b) by alleging that TruAbutment’s
products weren’t actually Straumann-compatible because they are unsafe and fail
at an unacceptably high rate, along with other allegations about the other
elements, including, for harm, that dental labs are likely to select and supply
cheaper third-party abutments to dentists if they are falsely advertised as
equivalent to Straumann’s. The California UCL claim therefore also survived.

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calling business duration into question could actionably disparage its honesty

Giannone v. Giannone, 2019 WL 6910151, No. 16-cv-911 (E.D.
Pa. Dec. 18, 2019)
“A lamentable father-son conflict over a family plumbing
business provides the backdrop for this Lanham Act case.” Joseph Giannone,
Senior, failed to get summary judgment on his Lanham Act trademark infringement
and unfair competition claims against his son, Joseph Giannone, Junior.
Although Senior registered the descriptive terms at issue (JOSEPH GIANNONE,
JOSEPH GIANNONE PLUMBING & HEATING, and a stylized JOSEPH GIANNONE PLUMBING
& HEATING mark with a pipe and wrench logo), Junior timely contested their
validity and Senior failed to show secondary meaning sufficiently to win
summary judgment.
 

Senior’s word + design marks
Junior once worked as Senior’s employee. In 2008, Junior
founded his own business—Joseph Giannone Heating & Air
Conditioning—operated out of Senior’s Philadelphia business office. Initially,
Junior’s business was confined to HVAC work and didn’t compete with Senior’s
plumbing business. They shared telephone lines, shop space, repair trucks, and
even employees. Both businesses used Senior’s marks. In 2013, after some
conflicts with Senior, Junior moved out, expanded into plumbing services that
competed with Senior’s business, and advertised using this logo:
 

Junior’s mark

Junior advertised heavily within the same Philadelphia zip
codes served by Senior’s plumbing business using that logo, and even put it on
the side of a building half a mile from Senior’s business. This lawsuit
followed.
Of possible interest: Senior argued that his JOSEPH GIANNONE
PLUMBING & HEATING and stylized marks were inherently distinctive because
of their additional elements. The court found these additions insufficient to
confer inherent distinctiveness. As to the standard character mark, “plumbing
and heating” were merely descriptive (and, though the court doesn’t mention it,
disclaimed in both this and the design plus word mark). (The court also didn’t
mention that the PTO apparently didn’t require any evidence of secondary
meaning for any of these registrations, which seems weird.) As to the design + word mark,
the pipe and wrench logo was also descriptive, especially since “other plumbers
in the industry have used the same exact pipe and wrench logo in their
marketing.”
Junior’s false advertising counterclaim survived summary
judgment based on one statement. Senior sent a letter stating that Junior’s
business had only been established for 5 years (2010) when it in fact had been
established in 2008, which cast doubt on Junior’s honesty. Senior argued that
this was de minimis, but “[a] reasonable jury could find that Senior’s false
statement in the letter not only strips Junior’s business of two years of
experience, but more importantly implies that Junior’s business misrepresents
itself. This false statement could reasonably cause a household consumer of
plumbing services to choose a different service provider, thereby causing
Junior to lose sales.” Also possible evidence of false advertising: Senior’s
website incorrectly states that (1) Joseph Giannone Plumbing & Heating was
founded in 1929; (2) Senior took over his father’s business in 1978; (3) and
the business has served the Philadelphia region for more than 85 years. Senior admitted
that he founded his business in 1983 (not 1929) and so all these statements
regarding Senior’s plumbing business were facially false. “A reasonable jury
could find that these statements were intended to deceive the consumer public
into believing that Senior’s business was more established than it was. A
reasonable jury could also find that such a belief could likely influence purchasing
decisions, including away from Junior’s more recently established business.”

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false claims about duration of business could be actionable

SPS Technologies, LLC v. Briles Aerospace, Inc., 2019 WL
6841992, No. CV 18-9536-MWF (ASx) (C.D. Cal. Oct. 30, 2019)
The parties compete in the market for high-strength aerospace
fasteners. SPS, using information that is allegedly confidential/proprietary to
it, makes the SLEEVbolt, which uses a tapered bolt and sleeve system that
allegedly offers significant benefits over competing aerospace fasteners.
Boeing is the primary SLEEVbolt customer—for more than forty years. In 2011,
SPS bought the assets of Paul R. Briles, Inc. (PB Fasteners), which included
the proprietary information and trade secrets necessary to make the SLEEVbolt.
Before then, Robert Briles was the President of PB Fasteners, and Michael
Briles worked as its Director of Sales and Marketing. Robert and Michael Briles
also allegedly entered into agreements with SPS about keeping confidential
information confidential, but, you will not be surprised to read at this point,
allegedly disclosed PB Fasteners’ proprietary information to Briles Aerospace,
which was founded shortly after the SPS acquisition. Briles Aerospace allegedly
agreed to sell more than 10% of Boeing’s SLEEVbolt requirements for Boeing’s
787 aircraft, contrary to Boeing’s contractual obligations to SPS, of which
Briles Aerospace knew. Boeing qualified Briles Aerospace and Lisi Aerospace as
additional manufacturers of the SLEEVbolt; allegedly, neither could have
obtained the necessary qualifications without misappropriating PB Fasteners’
proprietary information.
SPS also alleged that Briles falsely advertised on its
website and elsewhere by claiming: “Briles companies have been valued
Manufacturers of High Strength Aerospace Fasteners for over half a century” when
Briles Aerospace was founded in May 2012, allegedly misappropriating the
reputation and goodwill of PB Fasteners. These ads are allegedly likely to
influence the purchasing decision of customers in the aerospace fastener market
because they will believe that Briles Aerospace has extensive engineering
expertise and industry know-how, and Boeing and other customers allegedly relied
on such statements in choosing to do business with Briles Aerospace rather than
PB Fasteners.
Standing under California UCL: A business plaintiff claiming
injury by a competitor doesn’t have to allege that it relied on the
false advertising, so SPS had standing. Unlike the plaintiffs whose abuses
spurred the passage of Proposition 64 tightening UCL standing requirements, competitor-plaintiffs
actually do suffer an injury from false advertising that diverts consumers’
business, thus satisfying the injury requirement. Imposing a direct reliance
requirement would be inconsistent with the point of competitor false
advertising claims.
SPS also had a sufficient commercial interest under the
Lanham Act. (Somewhat oddly, SPS asserted that it only wanted a false
advertising claim; false association would have eased its burdens in terms of
commercial advertising/promotion and materiality, both of which might present
some issues here, and false association is not obviously a terrible claim on
these facts.)
Defendants argued that “Briles companies have been valued
Manufacturers of High Strength Aerospace Fasteners for over half a century” was
truthful, but didn’t explain why and also that didn’t deal with the allegation
that the statement misleadingly suggested that defendants had more than 50
years of experience manufacturing high-strength aerospace fasteners and that
Briles Aerospace had significant engineering expertise in the aerospace
fasteners industry. Nor could the court conclude that this was puffery as a
matter of law. While “valued” was opinion or puffery, the assertion that the
companies have been manufacturing the aerospace fasteners for “over half a
century” was “quantifiable” and “verifiably true or false.” [Interesting trade secret interaction: what if the advertising claim is true, but only because they took information that, according to the other allegations in the complaint, they had no right to take?]
Defendants argued that the allegations of reliance or consumer
deception were conclusory and unsupported by any actual facts. Not every court
would agree, especially in the context of a sophisticated customer base as
here, but the court concluded that no further evidence was required on a motion
to dismiss. Likewise, on materiality, defendants argued “that it is simply not
plausible that a highly sophisticated company like Boeing would rely on one
statement … in choosing to source critical parts for commercial airplanes.”
Discovery might reveal this to be true, and other allegations in the complaint
suggested that Boeing relied on other information and statements, but the
allegedly misleading statement need not be the only reason to work with
defendants as long as it contributed to the decision. [I mean, presumably Boeing knew it was contracting with a new company other than the one that had been its exclusive supplier for 40 years, so …]
Other claims also survived.

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you can’t plead false advertising to get around Dastar

Focal Point Films, LLC v. Sandhu, 2019 WL 7020209, No.
19-cv-02898-JCS (N.D. Cal. Dec. 20, 2019) (magistrate, by consent)
Focal Point/Gibel sought a declaratory judgment that Gibel was
the sole author of a documentary film called Sign My Name to Freedom
about “a 94-year old African American woman who entered the public spotlight
when she became the oldest National Park Ranger serving in the United States.” Defendant
Arjot Sandhu, who met Gibel at a documentary filmmaker workshop and asked to
assist with the project, also worked on the film. Sandhu counterclaimed for a
declaratory judgment that she was a co-author and related counterclaims.
Gibel alleged that Sandhu worked “as an extra camera
operator during a handful of shoots, always under Gibel’s supervision and with
the understanding that Sandhu would be compensated on partially deferred basis.”
She also helped with fundraising. Gibel allegedly offered Sandhu an “Associate
Producer” credit for this work, but the parties were unable to reach agreement
on a written contract setting forth their arrangement. Sandhu allegedly snuck
unauthorized co-director and co-editor credits for herself into a “pitch deck”
for the film, and even after Gibel told Sandhu he was terminating her services
she allegedly continued to hold herself out as an authorized representative of
the film.
Sandhu disputed Gibel’s account and alleged that her
authorship included, among other things, “conception, creative direction,
content selection, directing scenes, overseeing the Film’s production,
supervising the work of editors, filming scenes, editing footage, pitching the
Film at film festivals, and collaborating on all other aspects of the Film’s
creation and promotion, including the overall arc and direction of the Film.” Gibel
allegedly publicly represented that she was a coequal partner in correspondence
with third parties and promotional materials until the fall of 2018, when Gibel
blocked her access to the film’s social media, to key documents, and to grant
funds jointly raised and awarded to the project. Sandhu counterclaimed for declaratory
judgment of authorship, unjust enrichment, intentional interference with
prospective economic advantage, and false advertising and unfair competition
under the Lanham Act and the UCL.
Under Dastar and Sybersound Records, Inc. v. UAV Corp.,
517 F.3d 1137 (9th Cir. 2008), the Lanham Act claims failed. Dastar
barred a reverse passing off claim, and Sybersound said that
misrepresentations about authorship aren’t actionable under §43(a)(1)(B).
Sandhu argued that §43(a)(1)(B) claims are still available when they’re based
on something more than failure to provide credit, and that her ownership of the
film by virtue of “sweat equity” was an actionable “characteristic” of the
relevant good, the film. She argued that Sybersound held merely that the
licensing status of a work wasn’t a “characteristic” for these purposes, and
that statements Gibel made to potential funders of the film about Sandhu
damaged her reputation in the Bay Area documentary filmmaking community. None
of that helped: this was a claim based on an alleged failure to give her
appropriate credit. Authorship, like licensing status, is not a
“characteristic” of a good.
Nor could Sandhu state a claim based on alleged injury to
her reputation under Lexmark. The specific facts she alleged made clear
that the alleged harm was the result of [both explicit and implicit]
representations by Gibel about her role as a coauthor of the film. “While it
may be possible to amend this claim to allege injury to a commercial interest
in reputation that is not a result of representations about Sandhu’s authorship
of the Film, she has not done so.” 
Note that this holding, while stemming
rather naturally from existing cases, also hits on a pressure point in Dastar,
which was about reverse passing off rather than passing off. When the defendant
does mention the plaintiff—what in trademark would be passing off, and
in false advertising would be a falsely negative statement about the plaintiff
as opposed to a falsely positive statement about the defendant—matters are
arguably different enough to demand different treatment. On the other hand, and
as the court recognized here, often enough there is no coherent way to
distinguish explicit from implicit statements about the plaintiff, especially
when the defendant is describing its own product (here, the film). The
situation for trademark can be the same, where the defendant has the right to,
e.g., reproduce a work in the public domain but the plaintiff claims trademark
rights in aspects of the public domain work such as the characters. To be
effective, Dastar sometimes has to be indifferent to whether the alleged
falsehood is explicit or implicit.
The UCL claim also failed. The “unlawful” claim failed to
the extent it was based on alleged Lanham Act violations; state law unfair
competition is “substantially congruent” to the Lanham Act. And as for
“unfair,” Sandhu didn’t allege any “incipient violation of an antitrust law, or
[conduct that] violates the spirit or policy of those laws because its effects
are comparable to or the same as a violation of the law, or otherwise
significantly threatens or harms competition.’ ” It was not enough to allege
that Gibel’s conduct has “misled…potential investors in the Film and members
of the documentary filmmaking community.”
Sandhu also failed to state a claim as to the counterclaim
for intentional interference with prospective economic relations because she
couldn’t identify an independent wrong other than the above.

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statutory Lanham Act standing exists when advertiser is advertising but not yet selling

CareDx, Inc. v. Natera, Inc., 2019 WL 7037799, No.
19-662-CFC-CJB (D. Del. Dec. 20, 2019) (magistrate)
A nicely reasoned opinion about impending competition as
sufficient to find likely harm from false advertising.
CareDx makes AlloSure, a patented kidney transplant
surveillance diagnostic test that allegedly detects active kidney rejection in
kidney transplant patients using cell-free DNA detection.  CareDx’s clinical trial allegedly
demonstrated that AlloSure “markedly outperformed” the current standard of care
for detecting kidney transplant rejection (serum creatinine testing). Natera
allegedly developed a competing cell-free DNA kidney transplant rejection test,
Prospera. It had allegedly “begun significant marketing efforts,” such as by
making the test available for use in clinical trials and marketing it to major
clinical centers and sponsoring a clinical study. The study allegedly involved
“retrospectively select[ing] samples that had been collected for unrelated
purposes by a single clinical center and archived.” The results were published
in the December 23, 2018 issue of the Journal of Clinical Medicine.
Natera made statements comparing the parties’ studies’
results, e.g. “compares favorably against competition,” particularly in sensitivity,
citing the CareDX study. CareDx alleged that because the two studies did not
involve “head-to-head clinical trials comparing the two [companies’]
products[,]” and because the Natera Study suffers from “substantial material
flaws[,]” Natera’s statements comparing Prospera’s performance to AlloSure’s
performance were “literally false and entirely misleading.”
Natera argued that since its product hadn’t yet launched, it
couldn’t proximately cause harm. First, proximate harm is a 12(b)(6) issue and
not a subject matter jurisdiction issue, per Lexmark. Natera argued that
since it had never sold a competing product, it was impossible for consumers to
have been deceived and to have withheld business from CareDx.
Under these circumstances, CareDx pled proximate cause. Past
harm due to lost sales is not required; the language of the law protects any
person “who believes that he or she is or is likely to be damaged” by
the defendant’s false advertising. In a footnote, the court elaborated: the
statutory language “aligns with how ‘unfair competition’ claims were
historically viewed, as being concerned ‘with injuries to business reputation
and present and future sales’” (citing Lexmark).  It is not required to allege that “the
defendant’s statements have already caused consumers to buy defendant’s product
instead of the plaintiff’s product,” even if that is the ordinary path.  Thus, “if a plaintiff pleads facts plausibly
indicating that a defendant’s statements about the plaintiff’s product will
likely cause the plaintiff economic harm in the future (or that it has or will
otherwise cause the plaintiff reputational harm), that could well satisfy the
proximate cause requirement, even if there has been no sales yet lost to the
defendant’s product.”
Par Sterile Prods., LLC v. Fresenius Kabi USA LLC, No. 14 C
3349, 2015 WL 1263041 (N.D. Ill. Mar. 17, 2015), reached the same conclusion
where it was the plaintiff’s product that was FDA-approved and ready for market
but not yet being sold and the defendant’s that was already marketed, allegedly
misrepresenting that it was FDA-approved. In Par, the plaintiff’s
product was a “concrete competing product to compare with” the defendant’s
product, and the same was true here. Although proximate causation is usually
thought of in past tense, it can be—and, according to the language of the
Lanham Act, must be—considered in the future as well. What are required are
allegations showing that the likelihood of harm is concrete and imminent. It
sufficed to allege that Prospera was mid-launch, that Natera was actively advertising
and seeking Medicare coverage for Prospera, and that Natera had begun
significant marketing efforts for Prospera, including by making it available
for use in clinical trials and marketing it to major clinical centers for such
use.”  According to the complaint, “Prospera
is not some speculative, who-knows-if-it-will-ever-be-developed product,”
contrasted to other cases in which alleged harm was “remote, speculative and
ill-defined.”
Natera also challenged the sufficiency of the falsity
allegations. CareDx didn’t allege that the study data were falsely reported,
and Natera argued that scientific disagreement wasn’t enough for a false
advertising claim. CareDx argued that the challenged statements were
establishment claims, and that it successfully alleged that “the tests referred
to in the advertisement were not sufficiently reliable to permit one to
conclude with reasonable certainty that they established the proposition for
which they were cited.”  “Critically, the
Complaint also includes detailed allegations as to why CareDx believes the Natera
Study to be flawed and unreliable,” including use of unrepresentative samples, inclusion
of “suspicious” results, improperly mixed population sets and violations of
well-known criteria for the diagnosis of kidney rejections. The complaint also
alleged how its own study was robust and reliable. Taken together, this was
sufficient to plausibly allege falsity.
Natera implausibly argued that there was no express
comparison of “Prospera” and “AlloSure,” but only of study results not naming “AlloSure.”  [Someone in this process had a misconception
about whether you can avoid a problem by not naming the product you’re very
clearly talking about: you can’t.]  The
challenged statements expressly compared the assays directly tied to each
product.  It was thus likely that the
audience would link them to the parties’ respective tests [indeed, on these
alleged facts, no reasonable person could fail to make the link].
Natera relied on ONY, Inc. v. Cornerstone Therapeutics,
Inc., 720 F.3d 490 (2d Cir. 2013) and Johnson & Johnson Vision Care, Inc.
v. 1-800 Contacts, Inc., 299 F.3d 1242 (11th Cir. 2002), to argue that a false
advertising claim cannot be premised on matters about which there is legitimate
ongoing “scientific disagreement.”  But
whatever the merits of ONY, CareDx wasn’t challenging the Natera’s study
publication itself, as ONY did, but rather challenging statements made in
Natera’s press releases and other advertising materials that compared the
results of the studies (which, among other things, meant that full disclosure
of the data and its limitations wasn’t present). “Advertisements are not immune
from Lanham Act protection just because their claims may have some relation to
areas of scientific debate” (citing Eastman Chem. Co. v. Plastipure, Inc., 775
F.3d 230 (5th Cir. 2014)). Likewise, in the J&J case, the plaintiff
didn’t contest the reliability of the surveys cited in the challenged ad,
whereas unreliability was CareDx’s entire claim.
Deception and materiality: also sufficiently alleged.  The complaint alleged that “Natera’s false
and misleading statements likely have (and, unless stopped, will continue to)
deceive healthcare providers, insurance companies, patients, and the general
public about the capabilities and accuracy of AlloSure…. Natera’s false and misleading statements are material and
will affect the purchasing and investment decisions of healthcare providers,
patients, and insurance companies.”  CareDx also argued that, since it alleged
literal falsity, it was entitled to a presumption of deception.
Natera responded that literal falsity was a misnomer since
CareDx didn’t allege that Natera “misstated the published findings” of its
study. While “the line between literal falsity and misleading statements can
seem a fine one,” courts in establishment claim cases have repeatedly held that
“when a defendant makes comparative statements based on testing that is flawed
and unreliable, those statements … are appropriately viewed as literally false
statements.” At this stage, the court would not reject a literal falsity claim.
Materiality: Natera again tried to argue that, with no
sales, there could be no materiality, but that doesn’t make sense. “Indeed,
courts generally do not require that a plaintiff demonstrate an actual effect
on purchasing decisions; rather, a ‘likely’ effect on consumer choice is
sufficient.” It was plausible that the allegedly false claims would affect
future purchasing decisions, since correctly detecting kidney rejection is the
reason consumers would use one of the tests.
Delaware common law unfair competition claims require “a
reasonable expectancy of entering a valid business relationship, with which the
defendant wrongly interferes, and thereby defeats the plaintiff’s legitimate
expectancy and causes him harm.” This was also sufficiently pled.
Delaware Unfair or Deceptive Trade Practices Act: This was
insufficiently pled, not only because CareDx didn’t specifically identify the
relevant statutory subsections, but also because the allegations of that count
were too bare-bones. E.g., it alleged that Natera made “false and misleading
statements [that] represent that Prospera has uses or benefits that it does not
have.” But it wasn’t clear what those “uses or benefits” were or what
“statements” CareDx meant.  [Sounds like
the count tracked the language of some statutory subsections but didn’t hook
them back up to the allegations above, which probably would fit.] Dismissed
with leave to amend.

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