“plant-based” is plausibly misleading without qualification; can asterisks save the day?

Posted on July 18, 2024 by rtushnet

Whiteside v. Kimberly Clark Corp., No. 23-55581, 2024 WL
3435308, — F.4th — (9th Cir. Jul. 17, 2024)

Whiteside alleged that KC’s “plant-based” baby wipes were
misleadingly advertised; the court of appeals revived some claims that the
district court had dismissed for failure to sufficiently plead misleadingness. The
same stresses that have caused courts to occasionally modify the (nontextually-based)
Lanham Act distinction between “explicitly false” and “misleading” here show up
with competing interpretations of what an “unambiguous” front-of-package claim
means. Just as the Lanham Act’s text does not make the distinctions courts have
adopted, consumer protection laws don’t use “ambiguous” in their text either.
In practice, “unambiguous” tends to mean “I think reasonable consumers could be
fooled by this.” That might be as good a rule as we can practically get unless
we want to restore caveat emptor, but it would be more useful for courts to write
in terms of “reasonable consumers could think they had all the information they
needed from the front of the package” than of “ambiguity.” The court here takes
useful steps in that direction.

Whiteside alleged that the words “plant-based wipes” (or
“plant-based ingredients”) and “natural care®” on the front label, together
with the nature-themed imagery displayed on the packaging, suggest that
Defendant’s baby wipes contain only “water, natural ingredients, and ingredients
that come from plants and that are not subject to chemical modification or
processing.” But they also contain synthetic ingredients that do not come from
plants and are subject to chemical modification or processing.

Examples of the packaging:

 

The district court distinguished (1) labels where an
asterisk was placed after “plant-based wipes*” and a corresponding qualifying
statement (“*70%+ by weight”) was present elsewhere on the front label (the
“Asterisked Products”); and (2) labels on which no asterisk or qualifying statement
appeared on the front label. For both, directly preceding the ingredients list
is a statement reading: “NATURAL AND SYNTHETIC INGREDIENTS.” Back label images:

 

closeup of ingredients list

After making the distinction, though, the court found that
both sets of labels were ambiguous and therefore it was unreasonable to be
fooled instead of consulting the back label.  The district court reasoned that when a
product’s front label is not “unmistakably clear about the facet for which she
seeks more information,” a reasonable consumer is expected to look to other
features of the packaging, such as the fine print on the back label. Anyway,
the term “plant-based” “plainly means mostly, not necessarily all, derived from
plants,” making the Unasterisked Products not misleading as a matter of law,
even without reference to the back label.

The court of appeals reversed as to the unasterisked
products. The Ninth Circuit has long held that reasonable consumers aren’t “expected
to look beyond misleading representations on the front of the box to discover
the truth from the ingredient list in small print on the side of the box.” Thus,
the rule is that, “if a product’s front label is plausibly misleading to
reasonable customers, then the court does not consider the back label at the
pleadings stage. Whether the back label ultimately defeats the plaintiff’s
claims is a question left to the fact-finder.”

On the other hand, if the front label is only plausibly
ambiguous, the back can resolve the ambiguity. Indeed, the Ninth Circuit has held
that “other contextual factors aside from the back label can defeat claims that
a product’s label is misleading,” specifically in its manuka
honey decision. In that case, the court said, the “foremost” reason for finding
only ambiguity was that, “given the foraging nature of bees, a reasonable honey
consumer would know that it is impossible to produce honey that is derived
exclusively from a single floral source,” and “[a] reasonable consumer would
not understand Trader Joe’s label . . . as promising something that is
impossible to find.” Its low price and use of a honey grading scheme also meant
that “100% New Zealand Manuka Honey” was not misleading. Here, the court says,
it was very important in that case that manuka honey is “a niche, specialty
product,” and that buyers were “undoubtedly more likely to exhibit a higher
standard of care than a parent walking down the dairy aisle in a grocery store,
possibly with a child or two in tow, who is not likely to study with great
diligence the contents of a complicated product package.”

KC argued that a front label was ambiguous if it can have
more than one possible meaning. Whiteside argued that a front label can be
unambiguous if it was plausible that a reasonable consumer would view the label
as having one unambiguous (and deceptive) meaning. Whiteside was correct. The
plaintiff doesn’t have to prove unambiguous deceptiveness to avoid dismissal at
the pleading stage. Instead, “a plaintiff must plausibly allege that the front
label would be unambiguously deceptive to an ordinary consumer, such that the
consumer would feel no need to look at the back label.” Thus, a front label is
ambiguous if “reasonable consumers would necessarily require more information
before they could reasonably conclude” that the front label was making a
specific representation. The California courts have followed this rule, for
example in the One-a-Day
case, which “acknowledged that some sophisticated consumers might not
interpret ‘One A Day’ literally and would inquire into the back label. But
other reasonable consumers might take the front label at face value and assume
that they needed to take only one vitamin daily. … Put another way, reasonable
consumers would not necessarily require more information before concluding that
they needed to take only one vitamin daily.”

The unasterisked products were plausibly misleading.  “Plant-based” “plausibly conveys a concrete
and unambiguous meaning to a reasonable customer: that the product is entirely
plant- based and exclusively contains ‘natural’ materials.” It was not an “all-but-meaningless
marketing term” like “Nature Fusion,” especially combined with allusions to
“natural care” and nature imagery

Although consumers could consult the back label, “[f]ront-label
ambiguity is determined not by whether a consumer ‘could’ look beyond the front
label, but whether they necessarily would do so.” The district court’s standard
would always require a consumer to consult the back label, which contradicts
controlling precedent.  Plus, baby wipes
aren’t a niche, specialty product. “[C]onsumers of everyday items are not
expected to study labels with the same diligence as consumers of specialty
products.”

The district court also reasoned that the products were in
fact “plant-based” because they contained at least 70% plant-based ingredients
by weight. But California prohibits both literally false and misleading ads.
And the district court’s definition of “plant-based” as “mostly, not
necessarily all, derived from plants” had little support.

Even if consumers understand “tomato-based sauce” to mean “mostly
but not all tomatoes,” that’s not helpful here, where the issue was not a
characterizing ingredient. “[T]here is no reason to assume that consumers
interpret all terms ending in ‘-based’ in the same way,” any more than they
interpret “100%” the same way in every label.

Reasonable consumers also
understand that meat does not grow on trees, yet technology has advanced such
that plant-based meat is now available. Consumers could reasonably suppose that
manufacturers have similarly devised a way to make baby wipes using only
plant-based compounds.… Unlike bees … , which are familiar to anyone who has
encountered vegetation,  most people
likely have  not contemplated how baby
wipes are made. Similarly, most consumers likely have not considered whether
synthetic ingredients are necessary to make wipes “shelf-stable,” a term that
is not part of

The court further pointed to the FTC’s “Green Guides,” which
warn that unqualified representations like “made with renewable materials” are
likely to mislead a reasonable consumer to believe that a product “is made
entirely with renewable materials.” Although the FTC has declined to provide
guidance on the term “plant-based” specifically, it’s the lack of qualification
that is significant here; the FTC recommends using percentages or other
qualifiers.

On the other hand, the use of an asterisk and the qualifying
statement “*70+% by weight” on the front label of the Asterisked Products
“ameliorate[s] any tendency of [the] label to mislead.” Those tracked the Green
Guides’ recommendation for qualifications and complied with California law
adopting the Green Guides. Even assuming that “70%+ by weight” is ambiguous, a
reasonable consumer would require more information from the back label, which
clarifies that the Products contain both “natural and synthetic ingredients.” “Even
before reading the back label, the presence of an asterisk alone puts a
consumer on notice that there are qualifications or caveats, making it
unreasonable to assume that the Products were 100% plant- based.” (I don’t
think the court thinks that it has taken back everything it said in the first
part of the case, but maybe it has. If you thought the message was clear, how
would you know that the asterisk related to the message you thought was clear
and not to some other or peripheral feature? That’s the FTC’s reasoning for why
asterisks and “disclosure” aren’t good qualifiers.)

from Blogger http://tushnet.blogspot.com/2024/07/plant-based-is-plausibly-misleading.html

Posted in Uncategorized | Tagged , , | Leave a comment

Plaintiffs win partial summary judgment on falsity/materiality in “made in US” tea case

Posted on July 17, 2024 by rtushnet

Banks v. R.C. Bigelow, Inc., No. 2:20-cv-06208-DDP-RAOx, 2024
WL 3330554 (C.D. Cal. Jul. 8, 2024)

The court here grants the consumer plaintiffs’ motion for
partial summary judgment on their theory of falsity of Bigelow’s “manufactured
in the USA” claim for its tea bags. All of the products at issue use tea leaves
grown and processed abroad. Processing ves includes plucking, withering,
rolling, oxidizing, drying, and sorting. “It is this processing which
determines the type of tea — black, green, or oolong.” Bigelow then imports the
tea leaves, blends and packages the tea into its tea bag products, and
distributes them. The logo on back of the packaging stated “MANUFACTURED IN THE
USA 100% AMERICAN FAMILY OWNED.” Plaintiffs received class action certification
as to (1) CLRA, (2) common law fraud and intentional misrepresentation, and (4)
breach of express warranty claims.

prominent Manufactured in the USA 100% claim on bottom right of back package

It was undisputed that all the tea leaves, and all the tea
leaf processing, occurred abroad, and that foreign processing both determines
type and renders the tea consumable. Still, Bigelow argued that “Manufactured
in the USA 100%” was not literally false because the tea bags were made in the
US. The court disagreed. California law makes unlawful the use of “Made in the
U.S.A.,” “Made in America,” or “similar words when the merchandise or any
article, unit, or part thereof, has been entirely or substantially made,
manufactured, or produced outside of the United States.” The court found no
substantive difference between the terms “made” and “manufactured” for the
purposes of a CLRA claim involving alleged misrepresentations of United States
origin; the words of the law suggested a legislative decision that the terms
were “largely interchangeable.” In addition:

Judges should not engage in
fashioning excessively nuanced exceptions to these consumer protection
statutes, such as finding some artificial distinction between the words made
and manufacture. Otherwise, the marketing industry will undoubtedly attempt to
sidestep consumer protection statutes and mislead consumers through clever and
ambiguous terminology, the very outcome these statues seek to prevent. Indeed,
the Legislature has specifically instructed that the CLRA is to be “liberally
construed and applied to promote its underlying purposes, which are to protect
consumers against unfair and deceptive business practices and to provide
efficient and economical procedures to secure such protection.”

Anyway, “manufacture” means “something made from raw
materials by hand or machinery” and “describe[s] the physical process of
transforming raw materials into goods.” A Made in the U.S.A. claim is false “if
a substantial or significant portion of the component parts of the product are
manufactured abroad.” The tea leaves, the “key component” of the tea bags, undergo
a “physical process” that “transforms” them from “raw” unconsumable tea leaves
into a consumable “good” of a distinct variety and flavor profile (black,
green, or oolong tea) outside of the United States. “The distinctive aspects of
tea, the flavor and quality, are made or destroyed during this process.
Defendant’s own promotional video refers to the actions which happen abroad as ‘the
steps of tea-making.’” The additional actions taken to create the tea bags didn’t
change the fact that the tea leaves “have already been processed abroad and are
no longer a raw material prior to import.” Even Bigelow’s Rule 30(b)(6)
designee acknowledged that manufacture includes a broader set of activities
than the blending and packaging that occurs in the United States. The tea
leaves were “vital” and “the very essence” of the tea bags; they were why
consumers buy the bags, which served as packaging for the product desired.

Indeed, the fact that the tea was consumable increased the
need for consumer protection here. The court offered an example of a baby food
seller who “sourced peach puree from the Chernobyl area, then pasteurized that
puree in the United States and packaged it in a convenient pouch labeled ‘Made
in the USA’ or ‘Manufactured in the USA.’” Thus, the statement was literally
false.

Reliance: This can be presumed classwide from exposure plus
materiality, as long as the named plaintiff actually relied on the
representation. “[A] showing of class-wide exposure sufficient to establish
predominance at the class certification stage creates a rebuttable presumption
that there was in fact class-wide exposure.” That presumption was not rebutted.
Bigelow argued that the statement was just on the back of the box, but it was
prominent—set off to the side in bold type.

Materiality:  Bigelow
pointed to market research data indicating that consumers purchase tea for a
variety of reasons that are “overwhelmingly unrelated to the source of the
constituent tea leaves.” But “[t]hat other factors are material to a consumer’s
purchasing decision does not establish that the origin of the tea would be
immaterial to a reasonable consumer,” and Bigelow’s market data didn’t test
consumers’ reaction to origin or made in the USA statements. Bigelow also
offered a consumer survey purporting to show no effect on consumer purchasing behavior,
but plaintiffs’ expert calculated a price premium. That’s generally for a jury.
And the named plaintiffs may have purchased Bigelow tea before the statements
was added to the package, but whether it was material to them was also for a
jury.

Further, false or misleading U.S. origin claims are material
as a matter of law. “While materiality is generally a question of fact, when
the legislature has seen fit to specifically outlaw certain statements in order
to protect consumers, such statements are material as a matter of law.” This
was not a rebuttable presumption, so survey evidence wasn’t relevant. “When the
Legislature has deemed a particular statement material enough to warrant
legislative action, a defendant cannot rebut such a determination through
self-serving surveys and market research. Further, even if it were a rebuttable
presumption, Defendant’s above referenced evidence would be insufficient to
rebut the presumption.”

However, damages remained a jury question. Bigelow argued
that plaintiffs failed to show a price premium. But their expert’s testimony
was admissible, and punitive damages remained possible.

Bigelow’s knowledge and intent was also a jury question for fraud
and negligent misrepresentation, as well as punitive damages. “Plaintiffs point
to sufficient evidence from which a reasonable jury could conclude that Bigelow
knew that ‘Manufactured in the USA 100%’ was false or, at the very least, had
no reasonable grounds for believing it.” There was also evidence of intent to
induce reliance, “as the very purpose of advertising a particular statement on
a package is to induce reliance.”

 

from Blogger http://tushnet.blogspot.com/2024/07/plaintiffs-win-partial-summary-judgment.html

Posted in Uncategorized | Tagged , , | Leave a comment

court allows Nike’s legal theories and most of its expert testimony against StockX’s resales/NFTs

Posted on July 15, 2024 by rtushnet

Nike, Inc. v. StockX LLC, 2024 WL 3361411, No. 22-CV-0983
(VEC) (S.D.N.Y. Jul. 10, 2023)

Nike sued over StockX’s use of Nike trademarks on StockX NFTs
without Nike’s consent and alleged sales of counterfeit Nike sneakers despite allegedly
guaranteeing that all products sold by StockX were authentic. This opinion
deals with various Daubert motions, allowing at least some of the
testimony of eight challenged experts in.

Counterfeits background:

Unlike some other major resellers
like eBay, StockX acts as an active intermediary. Prior to listing a product
for sale on its website, StockX takes physical possession of that item and
purportedly vets it through “a proprietary, multi-step authentication process.”
According to StockX, no item is listed for sale unless it passes that test, a
fact that, prior to the filing of this complaint, StockX touted on its website
in support of its guarantee that all listed goods were “100% Verified
Authentic.” Nike claims that, despite those efforts, StockX sold a number of
Nike-branded shoes that were counterfeits.

NFT background:

In early 2022, StockX introduced
Vault NFTs, which featured Nike’s trademarks and provided the holder ownership
of an associated physical item. Many of the physical items were Nike sneakers.
Around the same time, Nike began releasing its own NFTs. As with the physical
sneakers, StockX claimed that its NFTs were “100% Authentic.” … The parties
dispute whether the StockX NFTs were separate, virtual products that conveyed
benefits beyond access to the physical good or merely receipts that allowed an
NFT holder to claim ownership of the underlying good without taking physical
possession.

StockX’s expert Sarah Butler surveyed consumers on the
effects of StockX’s authenticity statements as a rebuttal to Nike’s expert John
Hansen. “The test group was presented five pages from StockX’s website
featuring the Authenticity Statements, and the control group was presented with
similar webpages that featured versions of those statements that omitted
references to ‘authentication’ or substituted them with references to ‘inspection.’”
Butler found that there was no statistically significant difference in cells’
self-reported likelihood of purchasing shoes on StockX, suggesting lack of
materiality.

Nike’s criticisms warranted cross-examination, not
exclusion.

First, Nike argued, materiality was irrelevant because
literally false claims are conclusively presumed to be material. (The cases of
which I am aware say that literally false claims are presumed to be
material, not conclusively presumed—it seems reasonable to say that the
presumption should be rebuttable, and the Second Circuit’s holding in the NBA
v. Motorola case—which held that the statement that scores were updated “from
the arena” was immaterial because of its lack of prominence in/relevance to the
main ad claim—certainly implies rebuttability, even from context alone.) Rather
than treating the presumption as irrebuttable, however, the court here merely
said that literal falsity depends on context, and literal falsity of the authenticity
statements was still a contested issue, at least for now.

The rest of Nike’s objections went to reliability, which
generally goes only to the weight of the evidence. Surveying previous
purchasers from StockX was a potential weakness, but “not so egregious or clear
cut” as to warrant exclusion. Nike also alleged that the survey was tainted
with demand effects that “ ‘cued’ respondents that StockX was the survey’s
sponsor” and that “the correct answer” was to indicate a likelihood to purchase
from StockX. The putative sources were a screener question measuring current or
past interest in purchasing from StockX and the inclusion of StockX webpages
with “overwhelmingly positive content.” But the screener question offered StockX
as just one option in an order-randomized list of fifteen resellers, which wasn’t
a problem. As for the positivity of the ads, “consumer surveys in false
advertising cases commonly display the challenged advertisement.” (Surely a
highly negative control is not a very plausible ad.)

Nike also criticized the control as insufficiently distinct
from the test—“inspection” wasn’t sufficiently different from “authentication.”
Indeed, a handful of individuals in the control group said they were likely to
buy from StockX because of its authentication process. But this too was fodder
for cross-examination. And the fact that respondents responded very similarly
to both claims didn’t require a finding that the survey was flawed; the alternate
plausible explanation was that StockX was right about immateriality. The court
pointed out that Nike’s own complaint treated “authentication” and “inspection”
differently, claiming that the shoes were not properly authenticated, not that
they weren’t inspected. The dictionary agreed that “authentication” involves a
guarantee that the product is genuine; inspection does not. “Of course, a
survey respondent could have easily reached the conclusion that the ‘inspection’
process was designed to weed out counterfeit products. That is an obvious
ground for cross-examination but not exclusion.” (In the context of puffery,
courts often distinguish “designed to” from “guaranteed or confirmed to”; if
that’s the case—which I’m not sure it is, but that’s a problem with puffery
doctrine—then surely it must also matter in determining meaning.)

Nike’s complaints about the stimuli were also nitpicking;
stimuli must merely roughly simulate market conditions.  “Nike does not explain how the minor
differences in the layout of products and third-party advertisements, which
have no significant effect on the content or display of the Authenticity
Statements, render the survey results unreliable, let alone less probative than
prejudicial.”

Nike also argued that testing all the challenged statements
at once overwhelmed respondents, and that respondents were only required to
view the pages for a minimum of ten seconds. (This seems like an implicit
criticism of Nike’s own theory of deception; if they overwhelmed respondents,
how could they all be deceptive? There’s an answer, of course, which is probabilistic:
those who noticed a particular statement might have been deceived by it.) Regardless,
real consumers vary in their engagement with ads, and frequently only interact
with them for a short time. Cross-examination could address any deviation from
market conditions.

As for StockX’s economist damages expert, the court granted
Nike’s unopposed motion to exclude his affirmative opinion regarding other
factors that drive a consumer’s decision to purchase on StockX, but allowed it
as rebuttal testimony. “At bottom, a rebuttal expert need not proffer a
methodology or model, but only critique the opposing expert’s.”

StockX was also allowed to present the expert testimony of a
self-professed “sneakerhead,” who opines on sneakerhead culture and explains
how sneakerheads view the Vault NFTs and navigate the secondary market. His
testimony was based on his own experience and his conversations with others. This
was relevant to show the degree of sophistication of the sneakerhead community
and “contextualize the manner in which members of the sneakerhead subculture
approach their purchasing decisions.” His opinions that sneakerheads credit the
Authenticity Statements as improving the resale experience were “relevant to
the sophistication of at least this subset of StockX’s consumers and how likely
they are to be deceived by any falsehoods.” Nike acknowledged that at least
some of the Nike-branded sneakers purchased on StockX were bought by avid
collectors. However, if the statements were shown to be literally false, Nike
could re-raise its Daubert motion.

His methodology was also reliable, based as it was “on his
vast experience with the sneakerhead community, including his discussions with
other sneakerheads over the years.” Also, the fact that he acknowledged that there
were other definitions of “sneakerhead” and that the group is heterogeneous
wasn’t a “fatal” flaw meriting exclusion as opposed to cross-examination.

Nike’s expert Kari Kammel leads the Anti-Counterfeiting and
Product Protection Center at Michigan State University. Kammel opined on the
rise of counterfeiting generally and on platforms like StockX, as well as what
constitutes authentication. The court allowed Kammel’s testimony except for
testimony about (1) counterfeiting generally and (2) about shoes that Nike
claimed were counterfeit and sold on StockX, but that were not previously
disclosed to StockX.

Counterfeiting generally: Kammel opined that counterfeiting
can be tied to terrorist activity and results in lost jobs and tax revenue.
Nike argued that these opinions were important to contextualize the alleged
counterfeiting enabled by StockX, including the fact that a counterfeiting
operation based in China sold over 1800 products on StockX. “Even assuming that
Kammel could reliably connect these global forces to the parties in this case,
the jury does not need a primer on the complex global economics and geopolitics
of counterfeiting to understand the relatively narrow set of facts in dispute.
Nor is this testimony necessary to establish a factual basis for her opinion.”
In addition, “the lay public, particularly in New York, does not need expert
testimony to understand that luxury goods face high demand or that
counterfeiting is on the rise. The Second Circuit has made clear that district
courts should exclude expert testimony within the jury’s ken, including matters
that are frequently in the news.” Any minimal relevance was outweighed by the
risk of wasting the jury’s time.

However, Kammel could opine about “how StockX’s
authentication practices may make it vulnerable to counterfeiters and the types
of harms that companies like Nike experience from counterfeiting.” This opinion
was based on “a review of the discovery in this matter, discussions with Nike’s
Vice President for Brand Protection and Digital IP, her own experience, and
materials from trade associations.” In addition, her opinions on what constitutes
authentication, based on the International Organization for Standardization, were
“reliable and relevant to StockX’s state of mind.” She was also qualified to
opine in rebuttal on how consumers approach the risks of encountering
counterfeits in the market.

Nike’s damages expert John Hansen, a forensic accountant,
sought to quantify a potential disgorgement award. StockX moved to exclude it
because his calculations were based on StockX’s profits from all of its sales
of Nike sneakers, not just sales attributable to the allegedly false
advertisements. The court rejected that argument: Nike must demonstrate “
‘economic or reputational injury’ proximately caused by the alleged false
advertisement” to establish a false advertising claim. But once that’s
established, the court may “award a defendant’s full profits,” not just those
directly tied to the violation.

However, his opinion with respect to direct harms to Nike
was unreliable and didn’t apply any expert methodology. Lay witnesses and
documentary evidence, and the inferences to be drawn from that evidence, could be
argued by Nike’s lawyers to establish direct harm to Nike.

Another Nike witness was allowed; he sampled shoes and
opined that, in the year prior to his opinion, StockX sold “at least 200,000
shoes … that were simultaneously offered by Nike for retail sale.”

And a Nike NFT witness was allowed in part. He studied
blockchain and cryptocurrency at MIT and has extensive experience in the
cryptocurrency sphere. He opined that, while the Vault NFTs were marketed and
understood by consumers to be NFTs, they were not true NFTs. He compared the
prices of the Vault NFTs to the underlying shoe to argue that consumers
believed the Vault NFTs carried additional benefits.

He would be allowed to testify about the technology
underlying NFTs, which was appropriate expert testimony subject matter. But his
pricing opinion wasn’t based on an explained methodology. He didn’t explain why
subtracting the price maxima on possibly different dates was a reliable method
of valuing the benefits of the Vault NFTs beyond providing access to the
physical shoe; he hadn’t used the approach before nor did he connect it to an
accepted method of comparative valuation. His opinion that it was “illogical”
for consumers to pay a premium for storing their sneakers with StockX was
insufficient. Nike could establish a price premium through documentary evidence
and basic logical arguments. Likewise, his opinion on consumer perception of
StockX’s Vault NFTs were not based on expert methodology; he relied on StockX
documents, including internal materials, and social media posts. This wasn’t
beyond the ken of a lay juror; the documents spoke for themselves.

Finally, Nike’s survey witness Itamar Simonson was allowed;
he conducted two surveys based on a variation of Eveready that sought to
measure whether consumers understood the Vault NFTs to be sold or endorsed by
Nike. StockX argued that his methodology wasn’t adaptable to the resale context
where resellers may use the original producer’s trademark to describe the
product being resold. But resellers don’t have “carte blanche” to use another
company’s trademarks, and maybe the use on the Vault NFTs wasn’t permissible.
Anyway, even if “Simonson failed to account for the fact that consumers may not
be able accurately to identify a seller when presented with more than one
trademark, or that the inclusion of more than one trademark may be permissible,”
that wouldn’t justify exclusion.

Likewise, his use of a broad universe—people who, inter
alia, (1) owned or expected to purchase sneakers; (2) were looking for new
investment or collection opportunities; (3) were interested in investing in
NFTs, buying collectibles, or investing in cryptocurrency; and (4) previously
purchased new products from online resale marketplaces—sufficiently
approximated the appropriate population such that this just affected the weight
to be given his surveys.

The court didn’t think that the use of “products” when
referring to a list that included pictures of four shoes (including one Nike
shoe), a watch, a trading card, and an action figure, then repeating the term when
asking the test group to describe which company offered the depicted “product /
NFT” primed respondents to respond that Nike offered the shoe. Even if it was
leading, that again went to weight.

The court also allowed Simonson’s testimony that the Vault
NFTs represent an “unauthorized extension of the Nike Brand into [a] new
category.” This was offered as a rebuttal to the opinion of StockX’s expert
Scott Kominers that the Vault NFTs are not “ ‘digital brand’ NFTs” that serve
“as a springboard for establishing a broader product … brand,” and that to
the extent that the Vault NFTs do have a digital brand, “the digital brand is
unambiguously that of StockX alone.” This didn’t improperly embrace the ultimate
legal issue of whether StockX needed Nike’s permission to sell the Vault NFTs,
since his opinion that unauthorized brand extensions caused brand owners to “lose
control” of the brand didn’t “purport to opine as to whether such authorization
was legally required.”

from Blogger http://tushnet.blogspot.com/2024/07/court-allows-nikes-legal-theories-and.html

Posted in Uncategorized | Tagged , | Leave a comment

Team Blood Donor

Posted on July 15, 2024 by rtushnet

 Spotted in the wild:

Team Blood Donor “cooling towel” with five colored, overlapping blood drop outlines on label


Inova says, “[t]he Olympic-themed gifts add a fun and engaging element to the donation experience, making it more likely for donors to return and continue supporting our lifesaving mission.” Unfair free riding or normal participation in popular culture?

from Blogger http://tushnet.blogspot.com/2024/07/team-blood-donor.html

Posted in Uncategorized | Tagged | Leave a comment

federal preemption for airlines doesn’t extend to Delta’s “carbon neutral” ads

Posted on July 8, 2024 by rtushnet

Berrin v. Delta Air Lines, Inc., 2024 WL 3304815, No.
2:23-cv-04150-MEMF-MRW (D.C. Cal. Mar. 28, 2024)

The court declined to find Berrin’s consumer protection
claims against Delta based on its “carbon neutral” advertising preempted by the
Airline Deregulation Act (ADA, confusingly enough), though that wasn’t the end
of the inquiry.

Since March 2020, Delta has repeatedly touted itself as “the
world’s first carbon-neutral airline.” This claim was based on carbon
offsetting via participation in the voluntary carbon offset market. Berrin
alleged that “foundational issues with the voluntary carbon offset market make
it impossible to make a company carbon-neutral with the purchase of offsets.” Scientists
and government regulators allegedly identified Delta “as one of many companies
who have grossly misstated the actual carbon reduction produced by their carbon
offset portfolio.” Berrin alleged she paid a price premium based on the
deception, asserting the usual
California statutory claims.

The purpose of ADA preemption is to prohibit states from
regulating anything “relating to [air carriers’] rates, routes, or services.” However,
“ ‘some state actions may affect [airline fares] in too tenuous, remote, or
peripheral a manner’ to have pre-emptive effect.” While the Supreme Court has
found state regulation dictating what sort of disclosures airlines must make
when advertising certain prices to be preempted by the ADA, the Court explicitly
stated that it was not addressing “state regulation of the nonprice aspects of
fare advertising …” and that “the connection [there] would obviously be far
more tenuous.” (Likewise, the DOT’s regulation of airline advertising is
limited to matters under the scope of rates, routes, and services, and thus
didn’t have preemptive relevance beyond the ADA in this case.)

American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), involved
claims against an airline’s retrotactive changes in terms and conditions to its
frequent flyer program. The Court found that although both Illinois Consumer
Fraud Act and contract claims had the same underlying facts—which were clearly
related to rates and services—the plaintiffs’ claim was preempted but the
contract claim could proceed. The ADA’s preemption clause does not “shelter
airlines from suits … seeking recovery solely for the airline’s alleged breach
of its own, self-imposed undertakings.” But, Wolens highlighted “the potential
for intrusive regulation of airline business practices inherent in state
consumer protection legislation” (emphasis added). The court here read this as “implying
that there are instances in which such legislation may not be intrusive,” and
found “no binding authority that holds that any attempt to regulate airline
advertising or any application of consumer protection laws on airlines would be
summarily preempted.”

The Ninth Circuit has held that preemption could occur even
if a state law’s effect is only indirect, but that “whether direct or indirect,
‘the state laws whose effect is forbidden under federal law are those with a
significant impact on [ ] rates, routes, or services.’ ” Thus, state wage and
hour laws were not preempted. Concerns for a state “patchwork” of regulations are
only relevant to laws “that are significantly ‘related to’ prices, routes and
services.” Where “a law does not refer directly to rates, routes, or services,”
“the proper inquiry is whether the provision, directly or indirectly, binds the
carrier to a particular price, route, or service and thereby interferes with
the competitive market forces within the industry.” Meal and rest break laws, for
example, “do not set prices, mandate or prohibit certain routes, or tell [ ]
carriers what services they may or may not provide, either directly or
indirectly.” This is true even if the state law has “some impact on costs or
market share,” including laws that “shift[ ] incentives and make[ ] it more
costly for [ ] carriers to choose some routes or services relative to others,
leading the carriers to reallocate resources or make different business
decisions.”

The court here wasn’t holding that false or deceptive
advertising regulation in general, or California consumer protection statutes
generally, were preempted. Rather, it focused on “carbon neutral” claims, which
did not directly refer to rates, routes, or services. Delta would not be “bound
to particular rates, routes, or services” if its representations on
carbon-neutrality were regulated by state law. The fact that Berrin’s injury
was measured by the extra she alleged she paid didn’t mean that her claim was
about Delta’s rates (though the court suggested that this injury might be
unique to her). More broadly: “Berrin’s claims, if enforced, would not require
that Delta should have to set its rates at any particular amount, or that it
has to make any claims about carbon neutrality with regards to how it would
like to market its flights.” Instead, enforcing the law meant only that “should
Delta want to make a claim that it is carbon-neutral, it must actually be
carbon-neutral. That damages may be ultimately be calculated in the form of a
price premium does not change that the thrust of the claim itself is not an
allegation of a price premium.”

Maybe requiring Delta not to advertise falsely about environmental
impact could impact the prices it could charge, or increase its costs to meet the
standards it claims to follow. But this was insufficient to find the necessary
relation to rates for preemption. “Delta has not identified how, if at all,
regulation on its carbon-neutrality representations would significantly and
necessarily impact the prices they could set.” The court noted that “it is
conceivable that Delta could gain market share if it advertised ‘gambling and
prostitution’ to consumers. But, the precedent set by the Supreme Court clearly
leaves room for states to regulate such advertisement, and suggests it would
not be preempted.”

For similar reasons, Berrin’s claims didn’t sufficiently
relate to Delta’s services for preemption.

 “[R]egulation on
carbon-neutrality would not bind Delta to any particular service.” The complaint
was clear that “carbon-neutrality is not achieved through any difference on
Delta’s actual flights, which presumably exude the same amount of carbon
regardless of how carbon-neutral Delta represents itself to be. … While
airlines surely may compete by choosing to offer different services that would
affect the travel experience, the Court finds that carbon-neutrality does not
qualify as such a ‘service.’” Even if a service were involved, the regulation
at issue wouldn’t bind Delta to providing carbon neutral flights, only to make
accurate representations about its carbon neutrality.

Nonetheless, the FAL and UCL claims were insufficiently
pleaded for lack of standing for equitable relief; the court granted leave to
amend. The CLRA claim for damages was adequately alleged.

 

 

from Blogger http://tushnet.blogspot.com/2024/07/federal-preemption-for-airlines-doesnt.html

Posted in Uncategorized | Tagged , , | Leave a comment

plausible critiques of “clinically proven” suffice to plead false advertising

Posted on July 8, 2024 by rtushnet

Noriega v. Abbott Laboratories, — F.Supp.3d —-, 2024 WL
402925, No. 23 Civ. 4014 (PAE) (S.D.N.Y. Feb. 2, 2024)

Noriega alleged that Abbott’s PediaSure falsely advertised
that it was “[c]linically proven to help kids grow.” The packaging claim also
contains an asterisk directing a consumer to a statement on the labeling that
reads, in smaller font: “Studied in children at risk of malnutrition.” The
label also includes a cartoon giraffe next to, and exceeding the height of, a
cartoon ruler.

example package with “clinically proven” claim circled

On its website, Abbott lists six clinical studies as
“references” supporting the statement in its packaging that the Grow and Gain
drink is “clinically proven to help kids grow.” The complaint cited three
additional studies that, although financed by Abbott and undertaken by
Abbott-affiliated researchers, weren’t listed, which allegedly did not find
evidence that PediaSure led to an increase in children’s height-to-age or
height-to-weight.

Noriega’s own grandson was short for his age; she allegedly
paid a premium for it, but after around a year, she stopped, because her
grandson, despite ingesting two Grow and Gain Drinks per day, remained short
for his age, and had become overweight.

At the motion to dismiss stage, it was plausible that the “clinically
proven” claim was false or misleading under NYGBL §§ 349 and 350.

Abbott’s central argument was that the clinical studies
cited on its website support that PediaSure has been clinically proven to help
kids grow, and therefore it was implausible to term that claim materially
misleading. But the complaint alleged “strong, evidence-backed reasons to doubt
Abbott’s claim including clinical studies that Noriega suggests may be as or
more sound than those Abbott cites.” The complaint made methodological critiques
of Abbott’s favored studies, which weren’t implausible. Some of them derived from
a published, peer-reviewed paper. And although “identifying flaws in a
scientific study does not necessarily make marketing statements based on such a
study false or misleading,” “at the motion-to-dismiss phase, it is not the
Court’s province to look beneath a facially colorable methodological critique
where doing so would require resolving factual disputes and/or making
scientific assessments.”

In footnotes, the court said it wasn’t relying on the critique
that it was “methodologically improper” to base the “clinically proven” claim on
children suffering from malnutrition in foreign countries. Noriega alleged that
the nutritional experiences of such children materially differ from those of
children in New York State and that “American children … are not ‘at risk of
malnutrition.’ ” “Although Noriega is at liberty to pursue such a theory in
this litigation, the Court, in finding the Complaint’s § 349 and § 350 claims
plausibly pled, puts aside these dubiously sweeping generalizations about the
nutritional experiences of American children.” Relatedly, whether the
asterisked disclaimer sufficed to clarify the claim was not suitable for a motion
to dismiss.

Although “every clinical study could be criticized in some
way,” the complaint here went “well beyond” “nitpicking” to “substantial.”

In addition, the complaint cited published literature disputing
the methodologies of several of the studies on which the Abbott label’s
effectiveness claim relied. And it cited three allegedly contrary Abbott-funded
studies. “[T]he existence of studies contradicting the label’s claim reinforce[s]
the plausibility of the Complaint’s allegation that the label would mislead a
reasonable consumer.” Discovery was the place to evaluate the merits.

Cases like this serve as implicit rebukes to the Fourth Circuit’s unserious GNC decision.

from Blogger http://tushnet.blogspot.com/2024/07/plausible-critiques-of-clinically.html

Posted in Uncategorized | Tagged , | Leave a comment

7th Circuit endorses behavioral approach to reasonable consumer standard

Posted on July 5, 2024 by rtushnet

Kahn v. Walmart Inc., No. 23-1751 (7th Cir. Jul.
3, 2024)

Kahn alleged that Walmart routinely charged more at the checkout
than advertised at the shelf, small amounts individually that add up to hundreds
of millions of dollars a year. The district court found that a reasonable
consumer would not be deceived because the true charge was printed on their
receipt, which they could complain about if they cared. The court of appeals,
in classic Seventh Circuit style modulated by behavioral economics instead of
classical L&E, reverses, saying a lot of things about reasonable consumers
as well as the well-resourced businesses that will fleece them if they can get
away with it.

The complaint alleged that, “in 2012, California assessed a
$2 million fine against Walmart for violating a 2008 ruling requiring it to
resolve pricing errors at checkout. In November 2021, North Carolina fined two
Walmart stores after an investigation found repeated and excessive scanning
errors that caused overcharges on three to seven percent of items purchased
each month. In February 2022, five additional Walmart stores had to pay North
Carolina over $15,000 in fines for overcharging consumers due to price scanning
errors.”

In Kahn’s case, he bought fifteen items, and was allegedly
charged more than listed shelf price on six of them, for ten to fifteen percent
markups. The overcharge was $1.89, nearly seven percent of the pretax total of
his bill. “Small change for Kahn as an individual, no doubt, but keep in mind
the volume of Walmart’s business.” Kahn’s counsel investigated other stores in
Illinois, Florida, Indiana, Maryland, New Jersey, New York, and North Carolina
finding overcharges.

A key question: is the “reasonable” consumer empirical or
normative? You will not be surprised to hear that the Seventh Circuit embraces
an empirical view: “Reasonable consumer behavior is not a matter of pure
economic theory….  [W]hat matters is ‘how
consumers actually behave—how they perceive advertising and how they make
decisions.’” Consumers are not required to behave like “Adam Smith’s homo economicus,
a perfectly rational being who gathers and evaluates the optimal amount of
information about options in the marketplace to maximize utility preferences.”
This is because “human cognitive abilities are not perfect or infinite. We have
limited time, computational skills, and memories, and we rationally use mental
shortcuts to deal with those limits. The classical economic model often fails
to predict accurately how real humans will behave in real-life marketplaces.”

Furthermore, “[p]redictable tendencies in consumer behavior
mean that retail settings can be engineered to influence consumers in ways they
(meaning we) do not fully anticipate or appreciate.” But what about the free
market, you might ask? “The market itself usually cannot correct for these
problems. Instead, consumer protection regulations are often responses to
inefficiencies enabled by market manipulation.” Thus, courts applying the
reasonable consumer standard must focus on “how real consumers understand the
carefully crafted messages aimed at them.”

Grocery shoppers, in particular, are well-studied, providing
plenty of empirical fodder for remand. Especially on a motion to dismiss,
courts shouldn’t “overlook the realities of attempts to influence consumer
behavior.” Here, the nation’s largest retailer “allegedly stands to profit by
hundreds of millions each year from shelf pricing discrepancies.” It was
reasonable to assume that it was engaging in a lot of careful consumer research.
And “we have often stressed that consumers are likely to exhibit a low degree
of care when purchasing low-priced, everyday items.” Such a low degree of care “does
not make consumers unreasonable—it makes them human, and even economically rational
when search costs and transaction costs are included in the utility calculus.
But it also makes them vulnerable to exploitation by unfair and deceptive
practices.”

There was “nothing implausible” about allegations that
Walmart’s inaccurate shelf prices are likely to deceive a significant portion of
reasonable consumers. “It is neither ‘unreasonable’ nor ‘fanciful’ for
consumers to believe Walmart will sell them its merchandise at the prices
advertised on its shelves.” Indeed, Illinois’s consumer protection statutes assume
that consumers rely on advertised prices by specifically singling out “misleading
statements of fact concerning the … existence of … price reductions” as
deceptive acts. The advertised shelf prices weren’t alleged to have been
accompanied by any statements warning they might not be reliable or saying they
were provisional. “If shelf prices are not accurate, they are likely to mislead
reasonable consumers.” (In a footnote, the court noted that Walmart was wise
not to challenge materiality: “Price is obviously a material term of consumer
transactions.”)

The district court erred when it concluded that providing a
receipt after the transaction dispelled any deception created by Walmart’s
facially misleading shelf prices. It reasoned that “Kahn could, and indeed did,
use this receipt to compare the prices Walmart charged him with the advertised
shelf pricing. This comparison revealed the discrepancy and dispelled any potential
deception.”

But, first, providing information after the
transaction doesn’t show that the shelf prices wouldn’t have deceived a
reasonable consumer. And the district court’s rationale would require
unreasonable efforts by consumers to protect themselves. The receipt alone, of
course, doesn’t dispel deception. Instead, the consumer has to go back and compare
the advertised prices for every item. The court:

Who does that? For obvious reasons,
many reasonable consumers will not undertake such audits. Some consumers lack
smartphones to photograph the shelf prices as they shop, requiring them to
write down or remember dozens of distinct shelf prices. Others lack the time to
retrace their steps through the store, comparing their receipts against all the
shelf prices. Even if shoppers somehow retain records of each shelf price, at
checkout, many are trying to corral young children, others are skimming the
tabloid headlines displayed to entice them, and still others are lending a hand
to the baggers or pulling out their wallets. Shoppers can easily miss the
split-second display of a price or two at checkout. Even if consumers do notice
a price discrepancy on a point-of-sale display or on a receipt, they must then
raise the issue to the store’s attention to resolve it. It is reasonable to
infer that many consumers in that situation would be concerned about holding up
the six shoppers in line behind them, reluctant to trouble a busy store manager
over a few pennies per item, or unable to spare the time to track that manager
down.

Reasonable consumer behavior does
not require shoppers to audit their transactions and to overcome those
additional hurdles just to ensure that they receive merchandise at the advertised
shelf prices.

Consumer protection laws “do not expect or require real
consumers to undertake such measures over a few pennies per item. Nor, as
plaintiff plausibly alleges, does Walmart expect them to. That is precisely why
these alleged price discrepancies may be highly profitable on a large scale and
over the long run.” Plaintiffs “are entitled to present evidence on how
consumers actually understand these labels” and respond to Walmart’s
advertising. Walmart could, of course, attempt to prove that its shoppers have
photographic memories and plenty of time to scrutinize receipts.

In addition, Kahn adequately pled that, even where the
consumer discovers the discrepancy before completing a purchase, Walmart was
engaged in deceptive bait-and-switch pricing. These are injuries that consumers
“cannot reasonably avoid,” which come “in the form of higher prices and search
costs.”

For similar reasons, Kahn adequately alleged “unfairness”
under Illinois consumer protection law. This claim wasn’t necessarily based on
fraud, since inaccurate shelf pricing practices could “offend an established
public policy, and are immoral, unethical, oppressive, and unscrupulous,” in
ways “substantially injurious to consumers.” This was plausible because the
sunk costs plausibly leave consumers with little choice but to submit. And a
small harm to lots of people can be a substantial injury. Moreover, the FTC
reasons that the substantial injury to consumers “is not outweighed by benefits
to consumers or competition” because “[t]he practice of advertising prices that
are not the full price does not benefit consumers or competition.”

The district court also held that Kahn failed to allege sufficiently
that Walmart intended for him to rely on its inaccurate shelf prices. First, Illinois
consumer protection law “eliminated the requirement of scienter,” so that
“innocent misrepresentations are actionable as statutory fraud.” Kahn needed
only to allege that Walmart intended that he rely on its shelf prices, not that
it intended to deceive him. He did both. (Under Rule 9(b), scienter can be
alleged generally.)

Kahn alleged that “Walmart is well aware that it is
deceiving its consumers,” in part because Walmart stores have been fined for
this practice in multiple states. “There is nothing implausible about these
allegations that Walmart intends consumers to rely on shelf pricing. The contrary
proposition seems absurd. Walmart uses shelf pricing to inform consumers of its
prices so they can compare items and decide what to buy.” There were no
indications that there were disclaimers, which would in any case merely create
a fact issue of sufficiency.

Plus, affirmative intent to mislead was plausible. The
relevant factors: “Walmart’s size, the hundreds of millions of dollars in
profits allegedly available from the pricing discrepancies, and the company’s
heavy focus on sales from brick-and-mortar stores.” It was reasonable to infer
that Walmart, in particular, had access to consumer research and was “aware of
the obstacles that would deter real consumers from trying to hold it to its
advertised shelf prices.”

Of course, Walmart sells hundreds of thousands of products,
and some errors were inevitable. But error rates can be managed:

We assume that neither courts nor
regulators can insist on perfection in retail pricing. They can, however,
address how a retailer tries to prevent and remedy discrepancies like those
alleged here. Even if some low level of price discrepancies is unavoidable,
Walmart is not alleged to have undertaken any preventive or remedial measures
to mitigate overcharges, such as by implementing systemic controls.

That made deceptive intent plausible. (What if they try and
fail to the tune of hundreds of millions of dollars a year? Who is the cheapest
cost avoider? What is the proper remedy?)

Walmart’s best argument was its reliance on Tudor v. Jewel
Food Stores, Inc., 288 Ill. App. 3d 207, 681 N.E.2d 6 (1997). Tudor alleged
that Jewel violated the consumer protection law because the prices scanned at
the cash register differed from the advertised or shelf prices. The state court
of appeals found a lack of deceptiveness/lack of intent on the pleadings, which
alleged that the store’s internal audits showed the scanned prices were
accurate 96% of the time. Also, the complaint pled that Jewel had a “policy
providing ‘[i]f the scanned price on any unmarked item is different from the
price on the shelf, you will get the item free.’” The “combination” of “the
high accuracy rate …, along with the issuance of a receipt and defendant’s
policy of providing a money-back guarantee …, indicates there was no deception
by defendant.” Nor was Jewel’s conduct “unfair,” since the provision of a
receipt and the money-back guarantee meant that “oppressiveness and lack of
meaningful choice necessary to establish unfairness” were lacking. These same
two factors also indicated that the “defendant did not intend that plaintiff
rely on an incorrectly scanned price.”

But Tudor didn’t control where here, the only overlapping
exculpatory allegation was that Walmart provided an accurate receipt. Of note,
the state of Illinois participated as amicus on Kahn’s side, and the court of
appeals predicted that the Illinois Supreme Court, if faced with the
allegations in this case, would also distinguish Tudor.

The complaint here didn’t allege a 96% accuracy rate (to be
clear, with millions of transactions a year, that’s still a lot of inaccurate
charges; it would probably be useful to know how many favored the store). Nor
did it allege a money-back policy that went beyond a mere refund and provided the
mislabeled item for free: “Offering consumers the full value of the item as a
bounty gives them an incentive to look for price discrepancies and shifts the
balance of incentives for the retailer closer to optimal deterrence.”

Kahn didn’t sufficiently plead a likelihood of future injury,
though, so the court’s remand would allow an opportunity to replead if possible
for injunctive relief (the only form available under one of the relevant
Illinois laws). “It may be possible for plaintiff to plead a likelihood of
future harm, particularly in light of the injuries to consumers routinely
caused by bait-and-switch pricing schemes …, such as the time and mental energy
reasonable consumers must expend to protect themselves from the alleged unfair
and deceptive practices.”

from Blogger http://tushnet.blogspot.com/2024/07/7th-circuit-endorses-behavioral.html

Posted in Uncategorized | Tagged , | Leave a comment

Puffery in the wild

Posted on July 3, 2024 by rtushnet

 spotted on the T:

from Blogger http://tushnet.blogspot.com/2024/07/puffery-in-wild.html

Posted in Uncategorized | Tagged | Leave a comment

Slow fashion: checkerboard design plausibly infringes another checkerboard design

Posted on July 3, 2024 by rtushnet

Hian v. Louis Vuitton USA Inc, 2024 WL 3237591, No. 22-3742
(E.D. Pa. Jun. 28, 2024)

The court tosses out most of an independent fashion designer’s
claims against LVMH, while preserving one copyright infringement claim based on
a distorted checkerboard pattern. I can’t say I think that one is likely to survive
summary judgment, but it still puts LVMH at some risk given the accused items,
which include some marketing materials.

 [Hian] sent cold solicitations to a
top executive at the fashion conglomerate with hopes of a collaboration. The
solicitations included original clothing designs, lookbooks, and other
promotional material meant to highlight the designer’s international acclaim in
the fashion industry. Ultimately, the fashion conglomerate did not make time to
meet with the designer or decide to work with her. But several years later, she
saw marketing campaigns and products by the fashion conglomerate that looked
like three of her original designs.

Lanham Act claims failed because she didn’t allege secondary
meaning, and reverse passing off in these circumstances flunks Dastar. Likewise,
state unfair competition/unjust enrichment was preempted by §301, even as related
to a design she hadn’t registered.  

There was no claim for copyright infringement of Green
Raffia because Hian didn’t plead a registered copyright.

Plaintiff’s Green Raffia design and LVMH’s accused design

For the two registered designs, Hian successfully pled
access: Hian’s representative emailed the Ombre design to a top executive
within the LVMH conglomerate who had “access to all divisions, groups, owned
companies, brands, and/or teams within LVMH and including … any and all
designers and stylists.” His assistant also physically printed the email and
its attachments, including the Ombre design, and placed it on his desk. The
second design, Plaque D’egout, wasn’t included in the email, but it was
plausibly alleged that someone at LVMH looked up plaintiffs on the internet
after plaintiffs’ work was brought to LVMH’s attention, found their Plaque
D’egout design, and copied it. “We needn’t check our common sense at the door
when evaluating a complaint.” Given what happened to Ombre and other
promotional materials, it followed that LMVH designers had a “reasonable
opportunity” to investigate plaintiffs and their work further. In addition, Hian
pled that she and LMVH use the same textile manufacturers in France, and that it
is common for French textile manufacturers to show off designers’ works to
other designers.

Substantial similarity: plausible for Plaque D’egout, not for Ombre.

possibly the only accused LVMH clothes above; the rest seems to be marketing

accused design J is bottom right: wavy/distorted LV bag in classic LV colors

accused design M is top right: blue checkerboard top

Plaque D’egout “looks like what one might describe as an irregularly warped black-and-white checkerboard pattern.” A lay observer “might not readily find aesthetic differences between Plaque D’egout and some of the accused LVMH designs,” which shared “a number of aesthetic details in common with Plaque D’egout, including a warped black and white checkerboard pattern with similarly sized boxes.” LVMH argued that the distortions on their checkerboard designs were very different based on the shape and size of the squares in each. “Those may be significant contrasts, but we don’t think that this is necessarily the kind of thing that a lay observer who has not set out to scour the images for differences would notice.” [This is where the “prior art” inquiry/expert testimony would likely focus on summary judgment, if it gets that far.] “And the overall aesthetic feel and total concept of the designs is rather similar.” The fact that the checkerboard design is commonplace might matter, but not at the pleadings stage.

But two accused designs, J and M, weren’t substantially similar as a matter of law because of the “stark differences” between the designs “that would be obvious to even a lay observer who has not set out to look for disparities. Accused design J looks nothing like Plaque D’egout in size, shape, color, or overall aesthetic feel. And accused design M does feature a warped checkerboard design but has an overall aesthetic feel different from Plaque D’egout owing to its different color scheme.”

Note: “Ombre” is apparently a collection of Hian’s, so there are two designs shown at the top of this image that she alleged were infringed.

Ombre: “We are sensitive to the factual nature of
substantial similarity, but this is not even close. Ombre features horizontal
transitions of color broken up by jagged lines with clearly defined edges. In
contrast, the accused designs feature softly blended color transitions in
various directions. And accused design D has no color transition at all.” Though
some designs had similar color schemes, “random similarities are insufficient
to establish substantial similarity.”

One thing that the court didn’t address is: what exactly does Hian own a copyright to? The design of the original outfit?  The checkerboard fabric? The answer may affect the scope of Hian’s rights. If part of the creativity of the design is how the checkerboard is placed on the human body, it seems like the marketing claims are unlikely to be valid, since they aren’t replicating anything sculptural in the design. Ah, Star Athletica, screwing things up even when you aren’t mentioned.

from Blogger http://tushnet.blogspot.com/2024/07/slow-fashion-checkerboard-design.html

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

NetChoice and Calvinball: Initial thoughts

Posted on July 2, 2024 by rtushnet

I understand if you don’t think that the First Amendment is
an area where SCOTUS is really doing “law” as we were taught it, but as a
distraction for myself I have been thinking about (1) the idea that facial
challenges are strongly disfavored and (2) the idea that content-based speech
restrictions are presumptively unconstitutional. (2) might well be on its way
out anyway, and I think (1) will speed its demise, or at least make (2)
(hereinafter Reed) something of a dead letter.

Reed is probably still good law as to sign restrictions
like those in Reed, which were content-based on their face and applied
only to content. But I will note that the rule in Reed prohibited the
display of outdoor signs without a permit, but exempted 23 categories of signs
from that requirement. It seems like (with severability) the exemptions are
content-based, but the permit requirement itself isn’t.

Beyond Reed, what remains? Consider a law that bars speech
that creates a public disturbance. Presumably this is not facially
content-based, because a public disturbance can come from volume alone,
regardless of content. However, if applied to speech that creates a public
disturbance because of its content, I would guess that the application has to
survive strict scrutiny. And doctrines of vagueness and overbreadth, and their
concern with chilling protected speech—if we still care about that and not just
about chilling vigorous presidential action—might also bear on the validity of
the law, which could therefore still face a facial challenge.

The narrow tailoring inquiry of strict scrutiny (or the
reasonable tailoring inquiry of intermediate scrutiny) therefore might come at
a different point: when we’re comparing the permissible applications of the law
(overly loud noise) to the impermissible ones (speech that creates a public
disturbance because of its content). According to NetChoice, we are now
supposed to figure out if there are too many impermissible instances compared
to permissible ones. How? Tailoring suggests itself as an answer.

But it’s not the only answer. Consider the following hypothetical:
Free Speech Junction provides evidence that, under its public disturbance
ordinance, it has issued 50 tickets for noise-based violations and 1 ticket for
content-based violations. Does that mean that the impermissible applications
are substantially outweighed by the permissible applications, such that this is
a facially valid ordinance? Its neighboring polity, Nosy Neighborhood, issued
100 tickets for content-based violations and 20 tickets for noise-based
violations during the same period. Is its identical ordinance facially invalid?
Or should we look at the state-level or national data to figure out how to “count”
permissible applications?

Some of the Court’s discussion in NetChoice seems to suggest
that we should count services, or even subservices—if the law as applied to
Uber or Gmail isn’t content-based, that is a strike against facial invalidity. One
of the reasons this suggestion seems strange on its face is that it’s obvious
that Texas and Florida didn’t have any interest in covering Uber—such an
approach seems to reward overexpansive laws. Maybe here we should give extra
weight to what the legislature thought it was doing, since we know that
its key aim was impermissible per the Court majority.

Instead of counting services, which seems a lot like
counting number of citations, perhaps we could count functions. The Court notes
several differences among (probably) covered platforms. But even there we face
some problems: do Uber and Etsy perform the same function (selling off-site goods
or services) or different functions (selling rides and selling tangible and intangible
goods)? Is Discord providing a chat service, a UGC feed, or something else? Do
Discord and Reddit do the same things for First Amendment purposes? (Disclosure—I
submitted an amicus for Discord—cited by one of the bad concurrences, yay.)

Maybe we could do the same conceptual cut as I did for the
public disturbance law: content moderation done for expressive purposes versus
content moderation done for nonexpressive purposes. Stated that way—or, even
worse, stated the way the legislatures did, “censorship” done for expressive
purposes versus “censorship” done for nonexpressive purposes—it’s hard to
imagine how the latter might dominate enough to save the law. Perhaps Uber and
Etsy do remove a bunch of content for nonexpressive reasons, but even their
removals are often going to be because of pure content (Uber drivers or riders
who engage in racial slurs, for example, or Etsy merchandise that promotes Holocaust
denial).

I’m not optimistic that courts will have a good grasp on
this. As I said on Bluesky, people who can imagine that there exist “feeds
whose algorithms respond solely to how users act online—giving them the content
they appear to want, without any regard to independent content standards” (n.
5) probably shouldn’t be making internet policy. Even AO3 and Wikipedia remove
stuff! And they do so in the service of ideologies that are far more centrally
held than any commercial service’s. They just don’t then apply a weighting
algorithm for displaying what they guess will keep the user happier/more
engaged.

Anyway, given the conceptual counting difficulties,
tailoring might seem like a good source for comparisons: the law is facially
invalid if a substantial number of its applications are content-based and don’t
survive strict scrutiny, and a more narrowly tailored law would get rid of most
of those invalid applications. But the majority doesn’t mention tailoring, only
comparison of valid to invalid applications, which gives courts maximum
flexibility to do what they will. And that, of course, is the true lesson of
this Term.

from Blogger http://tushnet.blogspot.com/2024/07/netchoice-and-calvinball-initial.html

Posted in Uncategorized | Tagged , | Leave a comment