Religion isn’t (yet) a defense to false advertising

Posted on December 8, 2014 by rtushnet
State v. Valerie Saxion, Inc., 2014 WL 6839970, No. 02–13–00227 (Tex. Ct. App. Dec. 4, 2014)
Valerie Saxion argued that her free speech (and RFRA) rights were being violated by the state’s pursuit of claims against her and her company for the false and misleading sale of dietary supplements.  Texas sued Saxion for violations of the Texas Food, Drug, and Cosmetic Act (TFDCA) and the Deceptive Trade Practices Act (DTPA), based on her claims about the ability of her dietary supplements to diagnose, mitigate, treat, cure, and prevent disease.  The state further alleged that Saxion’s promotion of herself as a “naturopathic” doctor, which Texas does not recognize, was deceptive, and stated that any use of terms like “Doctor” or “Dr.” her name on labels or advertising was false advertising.
Texas sought to enjoin Saxion from, among other things, misbranding, misrepresentation, and mislabeling by failing to disclose that claims to diagnose, mitigate, treat, cure, or prevent disease cannot legally be made for dietary supplements; representing that she had a sponsorship, approval, status, affiliation, or connection that she does not have by using the title “Doctor,” or the abbreviation “Dr.”; and making misleading claims, either explicitly or implicitly, to diagnose, mitigate, treat, cure, or prevent disease for dietary supplements through any means.  Examples of Saxion’s claims included: “CLA has been shown to have strong anti-cancer properties. Especially in inhibiting breast and prostate tumors as well as colorectal, stomach and skin cancer, including melanoma…. CLA even lowered cancer cell growth. CLA is an excellent inhibitor of tumor growth.”  The complaint also listed numerous other substances for which Saxion made numerous other equally aggressive claims.
Saxion contended that her statements were based on her sincerely held religious beliefs, though she admitted that these religious statements were “not contained on the labels of her products.”  She pointed to a book she wrote which stated:
1. Realize there is a problem! The first step to utilizing your spiritual authority over food or whatever has a hold on you is admitting you have a problem.
2. Ask for the Holy Spirit’s help! Ask the Holy Spirit to reveal anything that is not pleasing to Him. If you really want to be free, listen when he answers. You may be surprised what he reveals to you.
3. Repent! Ask the Lord to forgive you for allowing food to have such a strong hold on your life, and thank Him for [s]howing you this area of your life that needs work. Don’t beat yourself up over it. Just repent and receive God’s forgiveness and love.
…
God has placed herbs, minerals and vitamins for us to understand and utilize to maintain health and regain health[.] He [h]as instructed man through His Word on how to utilize these for our personal wellness.
Saxion sought a declaratory judgment that her rights would be violated if penalties were imposed against her, because her statements rested on religious doctrine or belief and her speech was therefore not just commercial speech.  She averred that she promoted dietary supplements to be used in conjunction with faith in God, that she was a regular on TBN’s Praise the Lord and hosted TBN’s Alternative Health, and that the attorney general’s office intended to silence her ministry and destroy her business.  Though her book told people to seek medical advice, none of the excerpts specifically mentioned the products at issue in this case, and she didn’t promote her products specifically on her shows, speaking instead of “vitamin C” and the like.  TBN apparently cancelled her alternative health programs “due to legal matters that are taking place within your ministry.” Saxion contended:
It strains credulity to imagine a person would dedicate her life to a theology contained in the book, The Gospel of Health, the A–Z Guide to Vibrant Health God’s Way, yet market her vitamins independent of any religious motivation. She does attempt to keep health claims off the labels. But maybe some do technically cross a line. She nevertheless cannot be stopped or punished. She avoids health claims on the labels to be respectful, not because she must.
Even in Texas, this did not fly.  For various reasons the procedural issues in this interlocutory appeal were tied up with the substance; Texas allows a member of the electronic or print media, or a person whose communication at issue appears in same, to appeal from an interlocutory order when the claim against it involves the free speech/free press clause of the First Amendment.  However, Saxion was not being sued by the State in the capacity of an author “or with regard to the statements made in her books and other media-related presentations but rather in the capacity of the owner of a business that manufactures and sells products that the State regulates.”  The communications at issue were labels, not libel.  “Saxion has not shown that her products’ allegedly improper and misleading labels appeared in or were published by the electronic or print media, and her own evidence shows that she kept her supplements business separate from her media activities.”  In addition, the law’s plain language didn’t include free exercise/freedom of religion claims.
Saxion claimed that the AG’s enforcement actions infringed on her free exercise rights.  If there was a burden on the free exercise of religion by interfering with an individual’s observance or practice of a central religious belief, the question was whether the burden was a substantial one, and if so, whether it was justified by a compelling governmental interest.  However, the practices challenged by the State didn’t seek to restrain Saxion from practicing any religious beliefs or expressing any religious opinions.  (This is a completely understandable conclusion, but query how it comports with Hobby Lobby: if she really has a sincere religious belief that she’s supposed to sell this stuff to cure cancer—and we’re not supposed to question her sincerity—why isn’t the state’s action suppressing a religious activity?  Of course I’d also find that there’s a compelling governmental interest—though note how, because she’s promoting these supplements to treat illness, the state doesn’t have to show that she’s wrong to show a violation of the state and federal food and drug laws.  Why shouldn’t the state have to bear that burden?)   
Tilton v. Marshall, 925 S.W.2d 672 (Tex. 1996), disallowed claims against a televangelist for conspiracy and intentional infliction of emotional distress but allowed claims with respect to fraud claims that did not involve allegedly fraudulent and deceitful presentations of religious doctrine or belief). In a plurality opinion, Tiltoncautioned that the trial court had to carefully consider each alleged misrepresentation and determine which fraud claims, if any, involved religious doctrines or beliefs, to ensure that the trier of fact did not hear evidence on them or pass on their veracity. In Saxion’s case, one of the labeling or other product-related issues involved any statements of religious belief.  Instead, the state was regulating the advertising and sale of dietary supplements “as a proper restraint on commercial speech necessary to protect the public.”  Saxion “failed to show how her religious calling to educate others on the health benefits of vitamins was substantially burdened when the part of her evidence that was undisputed by the State showed that she was able to separate her general message about vitamins and minerals from any promotion of a specific brand from her dietary-supplement business.”
Saxion had no federal RFRA claim because federal RFRA doesn’t apply to the states, and she failed to properly raise a state RFRA claim.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in commercial speech, consumer protection, first amendment, http://schemas.google.com/blogger/2008/kind#post | Leave a comment

B&N almost entirely off the hook for copying backpack design

Posted on December 5, 2014 by rtushnet

Rubio v. Barnes & Noble, Inc., 2014 WL 6769150, No. 14–CV–6561 (S.D.N.Y Nov. 11, 2014)
Rubio sued her alma mater, the Fashion Institute of Technology (FIT) and Barnes & Noble, Inc. for copying her original drawing of a backpack, producing actual backpacks based on her design, and selling those backpacks using her name. Only her copyright claims survived.
Rubio studied accessory design at FIT; in 2010, she took a course in accessory drawing, one of the assignments for which was to create an original drawing for 30% of the course grade.  It was announced that each drawing would be automatically entered in a contest sponsored by defendant Barnes & Noble as part of its “Back–To–Campus” collaboration with FIT. FIT didn’t explain the terms or what would happen to the winning entry. Rubio’s drawing won.
Rubio’s drawing
B&N sent Rubio a letter in May 2011 congratulating her and announcing that backpacks based on her drawing would be sold in Barnes & Noble stores and on its website.  FIT, months later, asked Rubio to sign a consent form assigning her rights, but she didn’t.  Rubio became aware that B&N was selling backpacks based on her design with a hangtag that reads: “Backpack, FIT Fashion Institute of Technology, State University of New York, Diana Rubio, AAS Accessories Design 2011.” The description on the Barnes & Noble website states: “This canvas backpack is designed by F.I.T. student, Diana Rubio, exclusively for Barnes & Noble!”  Rubio sent a C&D in 2013, registered her copyright, and sued in August 2014.
hangtag using Rubio’s name

Backpack as sold on B&N website
The court found it plausible that defendants copied the drawing in the course of making the actual backpacks, and thus the copyright infringement claim survived to the extent that it was based on copying the drawing itself.  But there was no claim based on production of the actual backpacks, which were useful articles.  Rubio didn’t identify conceptually separable elements, and the court couldn’t either.  (Nor can I.)
Rubio’s claim for violation of her right of privacy under Section 51 of the New York Civil Rights Law was barred by the one-year statute of limitations. New York uses the single publication rule, so a claim accrues on the first day the offending material is published, not upon each subsequent publication, and she sued too late.
Her state law claim for unjust enrichment was preempted.  Rubio argued that if the backpacks were uncopyrightable, then there was no preemption, but her claim was based on her rights in her drawing.  Congress’s choice not to accord copyright protection to useful articles derived from copyrighted images meant that preemption was exactly the right result.
Rubio’s Lanham Act false association claim failed because she has not alleged that she has any commercial interest in her name. While the Lanham Act’s protections are not limited to widely known celebrities, a plaintiff has standing under the statute only if his or her identity carries some “level of consumer recognition.” Rubio alleged that she was “a young, aspiring entrepreneur and fashion designer who, while holding a day job as a skincare professional, has been in the process of designing and launching her own fashion accessories since at least 2011.” But that failed to allege that her name carried any commercial value analogous to a trademark, or that it is recognized by consumers in the relevant market. So she lacked standing to assert a Lanham Act claim for false association.  (Query whether Lexmark analysis ought to have changed this in any way.)
Nor could her Lanham Act false advertising claim survive. She didn’t plausibly allege a false or misleading statement. The only statement at issue was the description of her backpack on the Barnes & Noble websites: “This canvas backpack is designed by F.I.T. student Diana Rubio, exclusively for Barnes & Noble!”  The court found this to be true: Rubio’s own allegations established that she designed the backpack while a FIT student, for submission to B&N.  “[T]he Drawing’s multiple references to ‘B & N’ and ‘Barnes & Noble’ belie any claim that it was not made specifically for Barnes & Noble.” Thus there was nothing false or misleading about the statement.  Note: Dastar might be needed to sew up the reasoning here.  The implication—perhaps even the necessary implication—of B&N’s statement is that Rubio willingly participated/authorized B&N to use her design; that part isn’t true, but it’s (1) unlikely to be material, and (2) the kind of implication Dastar may put off limits.
There’s no question that Rubio appears to have been badly treated.  FIT should have conducted itself much better, and B&N too.  The complaint indicates that Rubio found an initial settlement offer unpleasantly low; it’s hard to know from the outside what that means, but the inability to claim statutory damages or fees based on the infringement occurring pre-registration probably affected the amount she was offered.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in copyright, dastar, http://schemas.google.com/blogger/2008/kind#post, right of publicity, standing, trademark, unfairness | Leave a comment

No free lift: ad-as-contract claim survives

Posted on December 5, 2014 by rtushnet
Kearney v. Equilon Enterprises, LLC, No. 3:14–cv–00254, 2014 WL 6769697 (D. Or. Dec. 1, 2014)
Plaintiffs sued on behalf of a proposed nationwide class for breach of contract and violations of various state consumer protection statutes.  The court denied the motion to dismiss the breach of contract claims, but found that the consumer protection claims had to be pled with particularity and weren’t.
Shell service stations displayed this ad as part of Equilon’s Ski Free promotion:  

After buying ten gallons of fuel, a customer got a voucher with the receipt.  But the voucher couldn’t be exchanged for a free lift ticket. Instead it was a two for one coupon; you could only get a free ticket by buying another at full price, and there were various other restrictions.  (Note that, regardless of the fate of this lawsuit, this promotion would appear to violate FTC and similar state rules about “free” offers; consumer plaintiffs aren’t the only worries I’d have about this promotion.)
Equilon argued that its ad lacked sufficient specificity to be an offer, and therefore there could be no acceptance or meeting of the minds. The general rule is that an ad isn’t an offer, Leonard v. Pepsico, Inc., 88 F. Supp. 2d 116 (S.D.N.Y.1999), aff’d, 210 F.3d 88 (2d Cir. 2000), but rather requests to negotiate with incomplete terms.  But if an advertisement is “clear, definite, and explicit, and leaves nothing open for negotiation,” then the advertisement “constitutes an offer, acceptance of which will complete the contract.” Lefkowitz v. Great Minneapolis Surplus Store, 86 N.W.2d 689, 691 (1957).
Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777 (9th Cir. 2012), considered a tobacco rewards program that offered “C-Notes” along with cigarettes; these could be redeemed for merchandise after customers enrolled in the rewards program.  After years, RJR announced that it would end the program, giving customers 6 months to redeem their C-Notes.  Then, RJR didn’t allow redemption before the program’s termination, and customers sued.  On appeal, the court found that, while the plaintiffs had not adequately alleged the existence of an offer to enter into a bilateral contract, they had adequately alleged the existence of an offer to enter into a unilateral contract. “A bilateral contract consists of mutual promises made in exchange for each other by each of the two contracting parties,” while “a unilateral contract involves the exchange of a promise for a performance.”
In light of the totality of the circumstances, the court ruled, plaintiffs accepted RJR’s unilateral offer by saving their C–Notes and attempting to redeem them in accordance with the C–Notes catalogue’s terms. The totality of the circumstances included “the repeated use of the word ‘offer’ in the C–Notes; the absence of any language disclaiming the intent to be bound; the inclusion of specific restrictions in the C–Notes; the formal enrolment process …; and the substantial reliance expected from consumers.” Consumers’ substantial reliance was important because “a member of the public is unlikely to undertake substantial reliance in the absence of a binding commitment from the offeror—i.e., on the mere chance that the offeror will perform.”
There’s an exception to the general rule that an ad isn’t an offer for rewards, including offers of a reward for the redemption of coupons. That’s because the rule arose to address the problem of over-acceptance.  The issues were whether the advertiser clearly promised to perform in exchange for something requested by the advertiser, and whether the recipient “reasonably might have concluded that by acting in accordance with the request a contract would be formed.”
Construed favorably to plaintiffs, the ad here was the sign “buy 10 gallons of fuel, get a voucher for a free lift ticket!”  Equilon “in clear and positive terms, promised to render performance in exchange for the purchase of ten gallons of fuel.”  And a recipient reasonably might have concluded that by acting in accordance with the request a contract would be formed.
Nor did the contract fail for lack of consideration.  Equilon argued that the initial purchase of fuel was a separate contract from the purchase of ten or more gallons in return for a voucher, and past consideration can’t support a contract, nor did the price of the transaction overall vary whether or not the customer got a voucher.  But that assumed a bilateral contract, not a unilateral one.  A unilateral contract can be created by performing the act requested as acceptance and consideration.  Plaintiffs sufficiently alleged consideration when they stated that they purchased ten gallons of fuel at a participating Shell station with the intention of participating in the “Ski Free” promotion.
Then the court turned to the state law consumer protection claims: were they fraud-like? Fraud can be averred by specifically alleging fraud, or by alleging facts that necessarily constitute fraud even if the word “fraud’ is not used.”  Rule 9(b) is intended to protect reputation, and to provide adequate notice.  The relevant allegations were essentially that Equilon controlled the Ski Free promotion and that it didn’t provide the promised “free” ticket.  You might wonder why the absence of any intent allegation isn’t important, especially since one of the main reasons that consumer protection laws were enacted was to avoid the stringent scienter requirements of common-law fraud.  Anyway, I do.
But not this court!  “Although Plaintiffs do not allege that Defendant had knowledge of the advertisement’s falsity or ignorance of its truth directly, Plaintiffs do allege that Defendant conducted the advertisement program and approved all the marketing activities and plans.” And we can infer that Equilon intended the ad to be relied on, as the purpose of advertising is to induce reliance.  Thus, the claims sounded in fraud and had to be pled with particularity.
Note: this goes way further than most cases applying 9(b) to state consumer protection claims. In every other case of which I am aware, the plaintiff pled deliberate falsehood, not just falsehood, at least triggering the 9th Circuit’s standard.  Liability doesn’t depend on any scienter on the defendant’s part, and screwing this offer up could be negligence, at least.  I don’t get this result at all.
Because plaintiffs alleged a unified course of fraudulent conduct and relied entirely on that course of conduct as the basis for their claim, they had to satisfy Rule 9(b), and didn’t.  The “who” was “a Shell station located within the [relevant state].” The “what” was the Ski Free ad. The “when” was “within the class period.” The “where” was also “a Shell station located within the [relevant state].” The “how” is that the class representative purchased fuel at the Shell station with the intent of receiving a free lift ticket, but was instead provided a “buy one, get one free offer” with other various restrictions.
The court found the “who” and “where” insufficient, since there might be over a hundred Shell stations within each relevant state.  Even if Equilon reviewed its advertising, it might not know with specificity which station displayed the ad.  “Overall, simply alleging a generic Shell station within the relevant state does not state with particularity who engaged in fraudulent behavior.”
In addition, the “what” was disputed.  There was the alleged ad, and if that were all that “likely” would be enough to put Equilon on notice.  But plaintiffs also alleged that there were “various other signs or indications on or about the store property indicating in large bolded lettering that free products or services were being offered by the station under the Ski Free promotion,” and that “signage was consistent with signage contained on the http://www.skifreedeals.com website for various seasons during the class period.”  That might be enough under Rule 8, but it was shaky for 9(b); the court let it skate by.  The “how” was also sufficiently alleged.
The “when” was also insufficiently specified; plaintiffs never alleged the specific dates for the class period, which might be the 2012 ski season or might not, and anyway the ski season varies in length.  The one-year statute of limitations under Oregon law might kick in, depending on the facts.
Plaintiffs did, however, adequately plead reliance and causation.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in consumer protection, contracts, http://schemas.google.com/blogger/2008/kind#post | Leave a comment

How do you keep them in the library after they’ve seen Google?

Posted on December 4, 2014 by rtushnet

Oral argument in the latest and possibly last round of the longstanding Authors Guild v. Google case apparently went reasonably well for Google.  I was struck by Judge Chin’s statement that his clerks use Google Books to do cite checks.  (So do I.)  If the general rule, illustrated by Sony v. Universal, that technology that judges themselves have become familiar with and find useful will not be found infringing holds here, that bodes well for fair use.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in google, http://schemas.google.com/blogger/2008/kind#post | Leave a comment

ABA Blawg 100: submitted for your consideration

Posted on December 3, 2014 by rtushnet

I’ve already mentioned my pleasure to be on the nominated list along with my coauthor Eric Goldman’s blog (under Tech for some reason).  Others well worth checking out in/around the advertising field include All About Advertising Law (Venable) and the FDA Law Blog (Hyman Phelps), both under Consumer Law.  Vote early and use your 13 votes wisely!

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in blogging | Leave a comment

Falsity of political ad irrelevant to constitutionality of public entity’s rejection

Posted on December 3, 2014 by rtushnet
American Freedom Defense Initiative v. Southeastern Pennysylvania Transportation Authority, No. 2:14-5335 (E.D. Pa. Nov. 25, 2014)
Plaintiffs sued SEPTA, arguing that it violated their First Amendment rights by refusing to post an ad on buses on the grounds that the ad was “patently false” and “offend the minimal civility standards.” The ad says: “Islamic Jew-Hatred: It’s in the Quran. Two Thirds of All US Aid Goes to Islamic Countries. Stop the Hate. End All Aid to Islamic Countries.” It also features a picture of Adolf Hitler meeting with Haj Amin al-Husseini, with the caption, “Adolf Hitler and his staunch ally, the leader of the Muslim world, Haj Amin al-Husseini.”
Scurrilous ad at issue
SEPTA’s ad standards bar “[a]dvertising that tends to disparage or ridicule any person or group of persons on the basis of race, religious belief, age, sex, alienage, national origin, sickness or disability.”  Plaintiffs successfully moved to exclude evidence of the ad’s falsity from the upcoming preliminary injunction hearing.  SEPTA wanted to submit expert testimony from Dr. Jamal J. Elias, Professor of Humanities at the University of Pennsylvania, “an eminent scholar of Islam and Muslim society.” Professor Elias concluded that referring to Haj Amin al-Husseini as the “leader of the Muslim word” was “manifestly false,” and that the statement “the Quar’an teaches Jew-Hatred” is “unfair and erroneous.”
SEPTA argued that, while laws banning false statements can violate the First Amendment (Alvarez), the issue here wasn’t a ban but a refusal to accept an ad.  It also invoked Illinois v. Telemarketing Associates, Inc., 538 U.S. 600 (2003), which held that the First Amendment does not bar fraud claims against charities for making false statements in an effort to solicit donations. Further, it argued that falsity went to defendants’ unclean hands, of relevance to injunctive relief.
This didn’t go well for SEPTA, as you can tell from the intro to the legal analysis:
Speech concerning public issues “has always rested on the highest rung of the hierarchy of First Amendment values.” N. A. A. C. P. v. Claiborne Hardware Co., 102 S. Ct. 3409, 3425 (1982). As such, “[i]f there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion.” W. Virginia State Bd. of Educ. v. Barnette, 319 U.S. 624, 642 (1943).
Alvarez makes clear that falsity alone doesn’t make speech unprotected.  Even Alito’s dissent said that  laws restricting false statements about issues of public concern, including religion and history, would present “a grave and unacceptable danger of suppressing truthful speech.” There might be true and false statements about those things, but “it is perilous to permit the state to be the arbiter of truth.”
Here, the speech at issue is “exactly the sort of political expression that lies at the heart of the First Amendment.”  Thus, the First Amendment applied to exactly the same extent whether the speech was true or false, and Professor Elias’ conclusions were irrelevant.
Nor was this a fraudulent charitable solicitation, even though the ad listed a website that redirected to another website that actively sought donations. “The advertisement is not fairly characterized as a solicitation simply because it contains a link which redirects traffic to a second webpage which in turn allows visitors to make donations.”
Nor would falsity mean unclean hands; the ad was protected regardless of its falsity, so the desire to have the ad run as submitted wasn’t bad faith.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in first amendment, http://schemas.google.com/blogger/2008/kind#post | Leave a comment

B&B v. Hargis: just one reaction

Posted on December 3, 2014 by rtushnet

When I read the SG’s brief advocating for preclusion as an ordinary result, I was concerned that there was limited understanding of what a registration/opposition proceeding actually is compared to an infringement case.  For example, the SG assumed that in every case, the right at issue in an infringement case could only be bigger than the registration, because the right might also be based on uses on goods for which there wasn’t a registration.  This is of course completely wrong: the registration covers all the goods listed, traveling in all the channels in which such goods ordinarily travel unless there’s an explicit restriction, at any price, and also covers the mark as registered and does not include matter that’s not part of the registration.  Thus, it is both possible and indeed commonplace for a registration cited as a 2(d) bar to have a bigger footprint than it would in an infringement case, where differences in actual sales channels, price, house marks, and other marketplace features that in fact distinguish the two uses in question can prevent a finding of likely confusion.  See, e.g., J.T. Colby & Co. v. Apple Inc., No. 13-2227 (2d Cir. Sept. 29, 2014) (finding no likely confusion between Apple’s iBooks mark for electronic books and plaintiff’s ibooks mark for electronic books, because plaintiff’s mark was “frequently surrounded by contextual information that associates it with a publishing company, including the publishing company’s name and location, the title of a book and its author, and other copyright information, while Apple’s mark “appear[ed] exclusively on Apple-branded hardware.”).

But it got worse at oral argument, when the Assistant SG, who I’m sure was just doing his job but seems not to be a subject matter expert, talked about the role of consumer surveys and completely misstated the law:

The only other, I think, difference or purported difference identified in one of the amicus briefs was consumer surveys and the idea that they will only accept a consumer survey where it has the word on a blank card.  That’s true ­­ you know, just the word “Sealtite” on a blank placard.  That’s true when what is sought to be registered is a word mark, not a design mark with a particular color.  The idea being that you can’t skew the survey by adding colors and things when  actually what you’re seeking registration for is just the word.
But the same thing could happen in an infringement court.  If the defendant was sued based on their registered word mark, I think a factfinder in an infringement court would say a survey that has design elements ­­ color, font, and so forth ­­ when you’re asserting the right to use this word in any context, that sort of survey is not going to be as probative as a survey that just uses the word, since you’re seeking the right to just use the word.
Unfortunately for anyone depending on the SG for guidance, that’s just wrong.  Without presenting the mark as it’s actually used in context, your survey is not worth very much and might even face exclusion, since it doesn’t test the question at issue: will this use, with all its attendant circumstances, cause confusion? See, e.g., THOIP v. Walt Disney Co., 690 F. Supp. 2d 218 (S.D.N.Y. 2010) (“[T]he closer the survey methods mirror the situation in which the ordinary person would encounter the trademark, the greater the evidentiary weight of the survey results.”) (quoting 6 J. Thomas McCarthy, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION §§ 32:163 (4th ed. 2014)).

One could say that he’s talking about a defendant who has a registration (“their” word mark), but even if that’s true, he’s still wrong: the defendant’s registration, even if it can’t be cancelled, doesn’t give it the “right” to use the mark “in any context.”  Imagine, for example, Motorola using its registration of its word mark to argue that it could use McDonald’s golden arch for its M.  The defendant in an infringement case isn’t seeking the “right” to use its word mark in the abstract; it’s defending against a claim that it’s infringing somebody else’s mark, and that is a question about actual use.

Disclosure: I mooted respondent’s counsel, for which I was compensated.  My views, however, are entirely my own.

Side note: I’d be remiss not to note the classic Breyer hypo here.  

Suppose I want to [register a particular shade of green for dry cleaning pads, Qualitex] and I own the trademark, a junior person comes in and he has a different shade of green. Okay? Seems different. Can I introduce evidence that the people who use these particular kinds of dry cleaners are colorblind? And so they won’t recognize the difference. It has nothing to do with the use. It has only to do with the customers or the conditions in which they are used. Can I introduce that at the board or not?

Well, it makes more sense than the hairbrush shaped like a grape from Wal-Mart.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in trademark | Leave a comment

Lack of affirmative statement dooms Lanham Act claim

Posted on December 1, 2014 by rtushnet
FMC Corp. v. Summit Agro USA, LLC, 2014 WL 6627727,  No. 14–51 (D. Del. Nov. 14, 2014) (magistrate judge)
FMC and Summit Argo compete in the herbicide market.  Herbicides are sold by manufacturers to distributors, thence to retailers, thence to farmers/growers.  According to Summit Argo’s witness, this isn’t like grocery shopping; growers tend to work one-on-one with salespeople employed by retailers, or with independent agricultural consultants.  Thus, growers rarely view product packaging or labeling before buying, though sometimes they may read product labels on shipping boxes or individual jugs when shopping at a retailer.  Growers may also apply the herbicide themselves or contract with a third-party applicator; in the latter case, the grower often won’t ever see the product or its packaging.  Defendants’ expert Fowler testified that “where and how the active ingredient [in a herbicide product] was made is irrelevant to a grower’s purchasing decisions.”  He identified a number of relevant considerations, including price, expected crop value, spectrum and duration of weed control, method and timing of application, ease of use, volatility, product safety and product reliability.  Two herbicides are rarely ever equal; they offer different mixes of benefits.
FMC did provide evidence of “consumer ethnocentrism” from Professor Naveen Donthu. He testified that consumers prefer to purchase domestically-manufactured products, in order to assist the domestic economy, increase domestic jobs and further a sense of patriotism.  The largest market for herbicides in the US is Midwestern farmers. Donthu studied U.S. citizen adult consumers in the American Midwest and found that consumers who exhibited each of three “cultural variables (collectivism, masculinity and uncertainty avoidance)” reacted negatively to the perceived quality of Japanese products, exhibited less intention to purchase such products and owned fewer such products.  He also cited sources supporting claims that rural Midwesterners tend to be collectivist and uncertainty avoidant, and that a high percentage of people running Midwestern farms are men.  Thus, he opined that, all things being equal, American farmers would prefer domestically produced goods versus goods produced in China. Thus, a label falsely indicating or implying domestic manufacture would deceive consumers.
When Summit began shipping its product in mid-2013, the boxes containing the gallon jugs of the product didn’t indicate Chinese origin.  After October 2013, they did, but the actual jugs have never been so labeled.
The judge concluded that FMC didn’t identify any actionable misrepresentation, even if Summit violated the Tariff Act, which requires that “[E]very article of foreign origin (or its container …) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.” 19 U.S.C. § 1304(a).  
First, the court rejected cases holding that violations of the Tariff Act per se violate the Lanham Act (a variant of falsity by necessary implication based on the background rule that foreign goods are labeled as such, creating the conditions under which consumers examine unlabeled goods).  See, e.g., Alto Prods. Corp. v. Ratek Indus. Ltd., No. 95 Civ. 3314 (LMM), 1996 WL 497027 (S.D.N.Y. Sept. 3, 1996). Alto held that “[l]ogic dictates” that a consumer viewing such a label will necessarily “assume that [the goods] are American-made, thus creating a likelihood of confusion with goods which are, in fact, American-made,” and that this was material.
But §43(a) imposes no affirmative duty of disclosure; it requires a “false designation of origin” that amounts to a “misrepresent[ation],” which “appears to require that a defendant make an actionable affirmative statement in order to have violated the statute.”  A statement is actionable if it’s misleading or untrue as a result of failure to disclose a material fact, but “in and of itself an omission is insufficient; the plaintiff must also point to an actionable affirmative statement in order to breathe life into such a claim.”
Moreover, the judge didn’t agree with Alto’s reasoning about what a consumer looking at an unlabeled good would necessarily think, given that foreign-made goods are often sold in the US.  (But they are sold labeled, which is the point.  A product on the shelves at Target is presumptively new; a product on the shelves at Goodwill is presumptively used.  Context provides important information.  I find Alto’s reasoning—“this is an X” presumptively communicates “this is an X made in the US” unless otherwise labeled—persuasive.)  At the very least, since this is implied, actual evidence of consumer deception would be required.  Plus, if a violation of the Tariff Act automatically violated the Lanham Act, that would conflict with the idea that there’s no private cause of action for violations of the Tariff Act.
The jug labels at issue didn’t have literally false statements of origin.  True, the label said “Distributed by: Tenkoz, Inc. 1725 Windward Concourse, Suite 1410 Alpharetta, GA 30005[.]” But this was literally true.  Nor did it necessarily imply US origin of the active ingredient.  Instead, consumers would have to make a number of mental leaps to conclude that US-based distributors distribute only US-made goods.
Without a survey or other evidence of actual deception, FMC couldn’t win.  Its expert declaration wasn’t enough.  Professor Donthu didn’t speak to whether any Midwestern farmer was actually confused or would be confused by a similar label.  Instead, Donthu focused on Midwesterners’ desire to buy American.  His declaration assumed a label falsely implying American origin.  Plus, the evidence cut against the idea that farmers even see the labels before buying; Summit’s evidence was more detailed on this point.  The record evidence indicated that, while some farmers read product labels before purchase, mostly they don’t.  Unread labels couldn’t deceive a substantial portion of the intended audience.  (Seems like there’s a theory here for deceiving the consultants and third parties who guide farmers’ purchases.)
Also, FMC didn’t show materiality.  Donthu’s conclusions relied on an earlier article he wrote, but that article examined Midwesterners generally, not farmers or agricultural employees, or even businesspersons.  It looked at their views about cars and consumer electronics, not herbicides or agricultural products, and it related to Japanese origin, not Chinese, around 2005, not 2013.  Donthu conceded that these differences could be significant. Plus, Donthu wasn’t an expert on farmers, and he relied on data “presented at a high level of generality,” such as data for all US farmers instead of those who purchased the relevant products.  This was significant because the evidence indicated that herbicide purchases depend on a number of specific factors; “when Kasper, FMC’s Commercial Director, was asked at his deposition to identify important factors going to farmers’ herbicide purchasing decisions, he did not even mention country of origin as one such factor.”  And Donthu’s ultimate conclusion relied on all other things being equal, which they weren’t when herbicides were at issue.
Thus, FMC didn’t show likely success on the merits.  For much the same reasons, the judge recommended granting Summit’s motion to dismiss—FMC didn’t plead an affirmative misrepresentation.  This also doomed the Delaware Deceptive Trade Practices Act claim, and the common-law unfair competition claim failed to allege a particular valid business relationship with which Summit interfered.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in http://schemas.google.com/blogger/2008/kind#post | Leave a comment

Disparagement to suppliers doesn’t trigger Lanham Act

Posted on December 1, 2014 by rtushnet
Neonatal Product Group, Inc. v. Shields, No. 13–CV–2601, 2014 WL 6685477 (D. Kan. Nov. 26, 2014)
This is largely a patent case, in which defendants threatened Neonatal (dba Creche) with a lawsuit for patent infringement.  Creche sought a declaratory judgment of noninfringement, as well as making affirmative claims against defendant Janice Shields, individually, for false advertising and tortious interference with a business relationship.
Creche makes and sells products used to care for newborn infants in hospital neonatal units.  Shields and Paul Shields patented a “Neonatal Substrate Warmer” and granted Creche an exclusive 20–year license (governed by Kansas law) to use the patent. Defendants are in California.  After more than six years, Creche allegedly determined that its products weren’t covered by the patent and stopped making royalty payments.  Negotiations were unsuccessful.  In November 2013, Shields sent an e-mail to a supplier of plaintiff’s product:

[I] wanted to warn you that there will more than likely be a ‘Cease and Desist’ letter to you from my lawyers to not supply bags to Creche. [Creche is] still selling my warmer and refusing to pay me royalties on it. That means all suppliers will have to stop selling to Creche until the case is a[d]judicated. * * *

I will be making the bags and selling them too. I have the only patent on the bags you supply. * * *

Creche is most obviously using my patent, and they will not win in court.

This lawsuit followed.  The first issue was personal jurisdiction, since warning letters and negotiations for a license can’t, without more, support personal jurisdiction in an action for a declaratory judgment of patent invalidity and noninfringement.  The court determined that the preexisting license agreement provided the necessary “more,” establishing personal jurisdiction.  This also provided pendent jurisdiction over the nonpatent claims because they formed part of the same case or controversy.
On failure to state a claim, I didn’t know this but the Federal Circuit takes the position that the Forms in the Federal Rules of Civil Procedure create different pleading requirements for patent infringement (and thus noninfringement) claims and override/supplant Iqbal and Twombly.  (Is that ok or just another Federal Circuit underruling of the Supreme Court?)  Thus, alleging that Creche’s products didn’t infringe and that it sought a declaration of noninfringement was sufficient.  However, Twiqbal did apply to the declaratory claim for invalidity, and they’d need to replead with facts to pass.  (The court here rejected the reasoning of a different court that a request to declare a patent invalid is really an affirmative defense to a potential infringement suit, not an independent claim, and that Iqbal and Twombly do not apply to affirmative defenses.)
False advertising: The court found that Creche failed to allege commercial advertising or promotion.  There were only two communications alleged: First, the email to one of Creche’s suppliers (not customers), which was not disseminated sufficiently to the relevant purchasing public to constitute advertising or promotion.  Second, Creche alleged damages in the form of lost business from a potential partner that Shields convinced not to work with Creche until it obtained a license. Again, there was no allegation that this threat reached any members of the purchasing public.
Tortious interference: Creche alleged that the supplier email and discouragement of a potential partner was tortious interference, along with attempting to file a “specious trademark application” knowing of Creche’s marks.  However, Creche never alleged that the relationship with the supplier was actually disrupted, a necessary element.  Nor did the trademark allegations explain how this damaged an existing business relationship.  As for the potential partner, Creche didn’t properly allege a probable expectancy of business; “potential” isn’t enough.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in commercial speech, http://schemas.google.com/blogger/2008/kind#post, patent, procedure | Leave a comment

Garcia v. Google briefs

Posted on November 26, 2014 by rtushnet

Going up at the Ninth Circuit’s site.  The Organization for Transformative Works filed a brief arguing that the injunction wrongly circumvented the protections of CDA 230 and the DMCA, available here.

http://tushnet.blogspot.com/feeds/posts/default?alt=rss
Posted in 230, dmca, google, http://schemas.google.com/blogger/2008/kind#post | Leave a comment