“One a Day” plausibly misleads when consumers need to take more than one to get full benefit

Posted on January 2, 2024 by rtushnet

Newman v. Bayer Corp., — F.Supp.3d —-, 2023 WL 6318523, No.
22-CV-7087 (KMK) (S.D.N.Y. Sept. 28, 2023)

Another day, another
“One A Day” claim where the bottle instructs users that, you guessed it, a daily
serving is more than one gummy. NY GBL § 349 and § 350 claims survived. (Does
this cause any problems for the One A Day trademark?)

One a Day gummies that aren’t one a day

The court found consumer-oriented conduct and price premium
injury sufficiently alleged. The labels were also plausibly materially
misleading. Defendants relied on two cases rejecting similar theories,
including one that was vacated by the Ninth Circuit in light of California
cases more favorable to plaintiffs (Goldman v. Bayer AG, No. 17-CV-647, 2017 WL
3168525 (N.D. Cal. July 26, 2017), vacated and remanded, 742 F. App’x 325 (9th
Cir. 2018); and Howard v. Bayer Corp., No. 10-CV-1662, 2011 WL 13224118 (E.D.
Ark. July 22, 2011)). But, under Mantikas v. Kellogg Co., 910 F.3d 633 (2d Cir.
2018), it was plausible that “there is little chance that clarification or
context on the reverse of the package will suffice to overcome a deception
claim (especially at the motion-to-dismiss stage).”

The product “communicat[es] by the large, bold-faced claims”
to a reasonable consumer that “One A Day,” or specifically, to a reasonable
consumer purchasing a bottle of supplements, one supplement a day, is needed to
receive its benefits. It was also relevant, though not dispositive, that other
supplements sold under the same brand were, in fact, one per day. “Common sense
would dictate that a reasonable consumer, choosing between supplement brands or
products, may choose a product within a line that provides the ‘full
nutritional value’ in a single gummy, as Defendants indeed market with their
other, non-chewable versions within the same line.” The interpretation “one
serving a day,” by contrast, was “a stretch.” “An apple a day keeps the doctor
away” means one apple, not one serving.

Even though one would need to look at the ingredient label
to know exactly what the nutrients were, the issue was whether a consumer would
believe she’d get the full nutritional benefit—whatever that was—with one gummy
a day.

Breach of warranty claims survived. But scienter was a
problem for fraud. The plaintiff quoted a California state court (linked above)
“discussing One A Day’s 75-year work ‘convincing the public they could be
trusted to divine its vitamin needs.’” “[T]he Court is skeptical of Plaintiff’s
use of another court’s musings upon Defendants’ business model as substantial
allegations of Defendants’ scienter,” and there weren’t supporting allegations
about the market share of the defendants and industry practices.  

from Blogger http://tushnet.blogspot.com/2024/01/one-day-plausibly-misleads-when.html

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identical product labeled “For children” and sold at higher price could be deceptive

Posted on December 28, 2023 by rtushnet

Mendoza v. Procter & Gamble Co., No. CV 23-1382-DMG
(JPRx), 2023 WL 8860900 (C.D. Cal. Dec. 20, 2023)

Mendoza brought the usual
California claims, alleging that Vicks Vapo cough and cold treatment
products marketed as being for children were identical to the adult versions,
only pricier; the court mostly rejected P&G’s motion to dismiss. The
Children’s VapoRub front label states that it is for children two and older;
the Standard Product’s front label includes no age instruction. Id. ¶
Children’s VapoRub costs approximately $1.03 more per ounce than Standard
VapoRub. The Children’s VapoPatch includes a picture of a cartoon child wearing
the patch; the Standard Product contains a more defined image of an adult
wearing the patch, and costs at least $0.70 less. The Children’s VapoCream
includes the language “easy to apply” and illustrations of various objects,
such as an airplane, butterfly, flowers, stars, paper airplanes, and clouds;
the Standard Product does not have such language or illustrations and costs
less.

There was no FDCA preemption of a standard misleadingness claim.
Further, the complaint sufficiently alleged an affirmative misrepresentation
that led reasonable consumers to believe, falsely, that the products were
specially formulated for children—not just a price differential. Negligent
misrepresentation claims failed, however, for want of non-economic damages.

Mendoza had standing to challenge the VapoCream products
because the products and alleged misrepresentations were sufficiently similar
to those of the products she did buy. And she sufficiently alleged that she
“would like to, and would consider, purchasing the Products again … [but]
will be unable to rely on the Products’ advertising or labeling in the future,
and so will not purchase the Products again although she would like to” to have
standing for injunctive relief.

from Blogger http://tushnet.blogspot.com/2023/12/identical-product-labeled-for-children.html

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Cy pres recipient in false advertising case has to be false-advertising-focused group, court rules

Posted on December 22, 2023 by rtushnet

 You might think that class action rules can be a bit like Calvinball, and I’d be hard pressed to disagree. Here’s another hurdle to jump, although it’s certainly jumpable.

Hawes v. Macy’s Inc., 2023 WL 8811499, No. 1:17-cv-754 (S.D.
Ohio Dec. 20, 2023)

The court denies settlement approval in this case alleging
that Macy’s misrepresented the thread count in some of the sheets it sold, because
it doesn’t like the cy pres part of the remedy. The global class action
settlement created a $10.5 million common fund, and the parties jointly moved
the court to approve. As part of the settlement, Macy’s agreed to change the
packaging on its sheets to include the language: “Thread count determined from
a sample of a representative sheet by counting cotton yarns and by separating
and counting adjacent parallel polyester yarns.” The $10.5 million fund would
first satisfy any notice and administrative costs. The remaining balance was to
go towards the class counsel’s attorneys’ fees, incentive payments for the
named plaintiffs, and payouts to the class members who submit eligible claims. Class
members whose purchases Macy’s can verify through its own records would receive
$7.50 per unit of CVC Sheets purchased (and could potentially receive a
secondary distribution), as would class members who had proof of purchase
through receipts. Class members who attest under penalty of perjury that they
purchased CVC sheets would receive $2.50 per household (no matter how many
sheets persons in the household claim to have purchased) and no secondary
distribution.

If, after all that, it was “economically feasible” to make a
second distribution, the first two groups of claimants would receive their
pro-rata share of the remaining funds, weighted according to the purchase price
that each claimant paid for his or her sheets, but capped at 50% of that
purchase price. If it wasn’t economically feasible to make a second
distribution, or if funds remain even after a second distribution, the
agreement provides that the remaining funds would go to the Public Interest
Research Group (PIRG), a nonprofit advocacy organization that the parties
chose.

The notice plan already went into effect and was “remarkably
successful at generating claim submissions,” with an estimate of over one
million claims before the close of the claims period; roughly 10% could be
verified either by internal record or proof of purchase.Only 59 class members
opted out and none objected.

First, the court found that the state consumer protection
law claims couldn’t cover the US because it wasn’t enough to allege that “substantially
similar statutes” exist in all other states is insufficient, and they only
cited California and Missouri consumer protection law in the complaint. But fraud
and unjust enrichment, along with UCC breach of warranty, did not create any
conflicts. Thus, the court certified a class.

“The relief provided in the settlement (at least for those
whose purchases are verifiable by Macy’s business records or who can provide
proof of purchase) likely meets or exceeds what any class member could have
procured by an individual lawsuit.” The submitted claims would likely account
for around 40% of the class. “For low-value-claim class actions like this one,
a 40% distribution rate weighs towards a finding of adequate relief.” Nor were
appropriate incentive awards to class representatives a problem.

Although “every circuit to squarely consider the issue” has
found that Rule 23 does not preclude cy pres awards. But when are they ok? The
Eighth Circuit says only when “existing class-member claimants have been fully
compensated and further distribution to remaining class members is not feasible”
and when the recipient is “for the next best use for indirect class benefit.” Accordingly,
the use to which the funds are put must be “consistent with the nature of the
underlying action and with the judicial function.” The recipient must be one
that “relates directly to the injury alleged in [the] lawsuit and settled by
the parties.”

Here, it was proper to use cy pres as a last resort. “While
Category 3 claimants will only receive $2.50, which would fall short of a full
recovery for a fully-proven claim, the claimants in that category would likely
not succeed at trial because they would struggle to prove they actually bought
sheets,” and further distributions to absent class members were also feasible.

So what was the problem?

As far as the Court can tell, …
PIRG does no work addressing false or misleading labeling for bed sheets,
textiles more generally, or even false advertising as a category. … PIRG’s work
appears to primarily focus on company or government policy related to toxins,
waste, or climate change. … [M]ost of PIRG’s consumer-related campaigns relate
to product safety, food safety, and unfair loan practices. True, the bed sheets
here may have had a rougher texture than the customers had been led to believe,
but uncomfortable and unsafe are two different categories, and no one contends
the sheets raised safety issues.

Perhaps even more troubling to the
Court in its assessment of PIRG as a potential cy pres recipient, … PIRG uses
portions of its funds to donate to other organizations—organizations whose
missions are even a further cry from any issues this suit presents. In 2016,
PIRG granted $40,000 to the People’s Action Institute, an organization that
advocates for socialized medicine, pursues “climate justice,” and fights
against “the growing threat of authoritarianism in rural communities.” PIRG
also donated over a million dollars to Environment America, an organization
that seeks to ban plastic. Last, but not least, PIRG donated $60,000 to “Onward
Together,” a PAC that supports progressive candidates in their runs for offices
across the country.  

Whatever one may think of the
merits of such endeavors, it is hard to see how they have much to do with bed
sheets, thread count mislabeling, or even consumer fraud more generally. In
sum, the Court can discern no way in which a potential multi-million-dollar
award to PIRG is the “next best use” for a class fund created to settle
consumer fraud claims stemming from inaccurate bed sheet thread counts. PIRG
does not relate “directly to the injury” suffered by the class members and it
would be an inappropriate exercise of the “judicial function” to divert class
money to an unrelated organization that has nothing to do with the class or the
injury its members suffered.

Worse, the parties didn’t provide argument beyond a “vague,
unsupported statement” that PIRG “has as its purpose the advancement of
consumer protections and rights.” Nor was it enough to provide a declaration
from PIRG’s Director of its Consumer Watchdog Team stating that they will use
any award “to promote accurate and truthful labeling and advertising of
consumer bedding products … [to] educate consumers with a focus on truth in
labeling … [to] serve as a marketplace watchdog … [and to] research and monitor
the marketplace.” This was too vague a promise, and anyway there was no
mechanism to enforce it. Further, money is fungible, so even enforceable
restrictions wouldn’t help. (Does that mean every cy pres recipient has to be
newly created? That seems … unhelpful, and also fungibility could presumably be
overcome with evidence that there’d be no bedding marketing program at all in
the absence of the money.)

“[T]he Court has an obligation to ensure that settlement
proceeds benefit the class. The cy pres doctrine simply allows for a
distribution that achieves those benefits indirectly.” The court singled out the
National Advertising Division of the Better Business Bureau, which “exists
entirely to address false advertising,” though TINA seems like a much better
bet to me. Apparently NAD would satisfy the court’s desire for “narrow[]
tailor[ing]” to the class’s interests, but the parties needed to identify some “organization
that verifiably engages in meaningful work related to deceptive advertising,”
requiring new notice to the class. The court expressed its concern that “the
settlement notice postcard distributed to potential class members included no
mention of the cy pres award, [which should] be included in any future notice
so that class members can raise objections to that distribution if they wish.”

from Blogger http://tushnet.blogspot.com/2023/12/cy-pres-recipient-in-false-advertising.html

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reseller’s unsuccessful challenge to takedown notices leads to more successful infringement counterclaim

Posted on December 20, 2023 by rtushnet

CDC Newburgh Inc. v. STM Bags, LLC, — F.Supp.3d —-, 2023
WL 6066136, 22-cv-1597 (NSR) (S.D.N.Y. Sept. 18, 2023)

CDC sued STM, alleging violations of New York state and
federal law arising from STM’s involvement in the removal of ten of its product
listings from Amazon.com. The court dismissed CDC’s defamation, tortious
interference, and common law unfair competition claims, while allowing most of
STM’s counterclaims to survive (except for dilution and common law unfair
competition).

CDC is a “non-authorized reseller” of consumer products that
it purchases from resellers and distributors, among other sources, in order to
resell these products at a discount. Although it didn’t usually purchase its
inventory directly from the relevant manufacturers, it alleged that its
products are authentic.

CDC alleged that STM knew that, when a trademark owner
submits a report that a seller is listing a counterfeit product on Amazon,
Amazon automatically removes the listing without warning to the seller, and
Amazon’s algorithm considers this history of removal when determining how
frequently the accused seller’s other products appear in consumer’s searches,
reducing the accused seller’s sales of all products that it lists on Amazon.

STM sells cases, bags, sleeves, and other accessories for
electronic devices under the “STM” and “DUX” trademarks. Codefendant Lienau
allegedly assists clients with removing fraudulent products from Amazon’s
website, and reported CDC to Amazon for selling counterfeits.

CDC allegedly knew that the items it sold through these ten
listings were authentic because it obtained them from a reputable, publicly
traded company that purchases these items from STM. It alleged that Lienau
filed the reports for anticompetitive reasons after defendants suspected or
confirmed the products were genuine.

STM’s counterclaims alleged that online marketplaces
threaten a manufacturer’s ability to maintain its brand integrity because
customers cannot easily distinguish between the authorized and unauthorized
sellers of a manufacturer’s products. Thus, it alleged, it conducts all sales directly
or through authorized dealers who are prohibited from selling on third-party
websites. Its warranty is allegedly a “material component” of “genuine” STM
products because consumers factor the existence of this warranty into their
decision to purchase an STM product, and CDC isn’t an authorized dealer. CDC
allegedly sold products as “new” when they were previously sold, and
potentially opened or repackaged. CDC allegedly didn’t comply with STM’s
customer service requirements because it cannot provide the type of instruction
and support (for iPhone cases?) that STM requires authorized dealers
to offer to consumers. Thus, the products sold by CDC allegedly don’t include
the STM warranty (is this actually legal in NY?). This allegedly infringes STM’s
marks and diminishes their value because consumers associate negative
experiences that may result from purchasing them with STM’s brands. (As usual,
a compelling and intuitive theory of harm.)

Defamation: The “counterfeit” statements to Amazon were
opinion. A statement of opinion is one which is either “accompanied by a
recitation of the facts upon which it is based” or “does not imply that it is
based upon undisclosed facts.” Here, the challenged reports said things like

“Please note only CaseMotions and Sportique are authorized
by STM to sell on Amazon. These sellers are not authorized nor are they buying
direct from STM therefore we conclude this product is counterfeit”; and (2)
“Please know STM has authorized only Sportique and CaseMotions to sell on
Amazon.com outside of STM selling direct. STM has double checked their records
and have no data to support this seller acquired STM product through a
legitimate channel therefore we can safely assume they are selling counterfeit
products.” Thus, the allegedly defamatory statements were opinion, not based on
undisclosed facts.

STM, however, could not use NY’s anti-SLAPP law in federal
court.

Tortious interference: Removal of listings on an
e-commerce platform does not constitute harm to the underlying business relationship
with the platform, so it wasn’t sufficiently alleged that STM interfered with CDC’s
business relations with Amazon.

Nor did the alleged acts constitute unfair competition under
NY state common law: there was no palming off or misappropriation.

The court also found it was inappropriate to exercise
jurisdiction over a request for declaratory judgment of noninfringement.

Trademark infringement/unfair competition under
§1125(a)(1)(A) was sufficiently pled and first sale couldn’t be decided on a
motion to dismiss. But the state common law claim for trademark infringement
was dismissed for failure to allege more than conclusorily that CDC acted in
bad faith.

False advertising under § 1125(a)(1)(B) was also
sufficiently pled because STM alleged that CDC made a literally false statement
that the products came with their warranties, which was presumed to be
material.

Dilution: “spare, conclusory allegations” that the STM trademarks
“are widely recognized by the general consuming public of the United States”
and “STM has expended substantial time, effort, money, and resources
advertising and promoted STM Products with the STM trademark” were insufficient.

from Blogger http://tushnet.blogspot.com/2023/12/resellers-unsuccessful-challenge-to.html

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Using dominant competitor’s part names/numbers for comparison isn’t false advertising, TM infringement, or (c) infringement

Posted on December 18, 2023 by rtushnet

There really should be a fee shift when a competitor harasses another competitor for daring to make comparisons of part numbers, but we don’t seem to live in that world. 

Simpson Strong-Tie Co. v. Mitek Inc., 2023 WL 8697700, No.
20-cv-06957-VKD (N.D. Cal. Dec. 15, 2023)

Simpson sued its competitor MiTek for using Simpson part
numbers for structural connectors/fasteners for use in the construction
industry in its catalogs/other promotional material; the court here, after a
nonjury trial before the magistrate judge, rather comprehensively rejects its
false advertising, trademark, and copyright claims. (It sure would be nice if
we could get a consensus that copyright in parts numbers and names should not be
allowed.)

Structural connectors are used to join, and transfer the
load between, different structural members, including vertical members like
studs and posts, horizontal members like floor joists and roof trusses, and
foundations. The engineer of record must indicate on construction drawings the
specific structural connectors that will be used on a given project, whether a
custom connector designed by the engineer to join and transfer the load between
members or a pre-engineered connector. Typically, the engineer will specify a
connector noting both part name and manufacturer (e.g., Simpson or MiTek),
which the contractor/subcontractor is responsible for purchasing. The
configuration and load capacity are the two most important considerations for
selecting a connector, though aesthetics, treatment, and cost also play roles.

Simpson’s structural connectors are specified on most construction
drawings in the US; its market share is over 75%. A contractor may request that a different connector be used, but
may not use a different connector or otherwise deviate from the construction
documents without the engineer’s approval. 

For decades, companies selling structural connectors have
used descriptive product names, and names that consist of an acronym formed
from the initial letters of the words of the product name followed by a model
number or stock number. The product names are formed from words that are common
in the construction industry, including: hanger, anchor, clip, concrete,
masonry, brick, post, column, cap, tie, strap, beam, base, girder, rafter,
roof, truss, hold down, plate, and retrofit. Simpson and MiTek part names
generally consist of an acronym formed from the initial letters of the words
that describe the connector in the product name, followed by a model number or
stock number that corresponds to information about the particular connector,
such as load capacity or size. Although Simpson’s naming process uses
descriptive words, it’s “not dictated by a rule or system,” though it is limited
by the number of characters that can be used—a maximum of 16. 

MiTek’s product and part names are also descriptive, but MiTek
often begins by assigning a MiTek connector in development the same name as the
Simpson connector with which MiTek intends to compete. Sometimes it keeps that
name for sale. For 51 of MiTek’s structural connectors, MiTek’s part name is
identical to the part name for the Simpson connector for the same application,
and for 32, its part name differs from the part name for the Simpson connector
for the same application by one letter.

Engineers rely on the information in the parties’ catalogs
in evaluating whether a connector can be used in a particular application, and
contractors may also do so. Simpson’s catalog includes a two-page “alphabetical
product index” or “API,” an alphabetical list of the part names for the
connectors included in the catalog with the page number where information about
the connector can be found. New parts in recent catalogs are marked as new;
Simpson registered copyrights in two of its recent catalogs. All Simpson’s connectors, catalogs, marketing literature,
and retail display materials, are clearly labeled with the “Simpson Strong-Tie”
name.

MiTek’s 60th product catalog also contains a reference
number index, which includes most of the part names listed in the API in
Simpson’s 2019-2020 Wood Construction Connectors catalog; the same was true of
the most recent product catalog. All MiTek’s connectors, catalogs, marketing
literature, and retail display materials, are clearly labeled with the “MiTek”
name.

For decades, companies selling structural connectors have
used “reference numbers” to cross-reference their competitors’ products,
including charts listing [X] part names next to competitors’ part names,
including Simpson’s. When MiTek uses reference numbers in its marketing
materials, it does not affirmatively identify the reference numbers as Simpson
part names. The MiTek catalogs’ reference number index lists Simpson part names
in alphabetical order, without attribution to Simpson, and the page number
where a MiTek connector product may be found, and are introduced with the text:

Reference numbers shown through the
charts in this catalog are part numbers which may be more familiar to customers
in various regions of the United States. These are included for the convenience
of our new customers who have recently switched from a competitor’s product
line to [MiTek/USP].

The reference numbers in this
catalog are for general application comparison only and should not be used as a
substitution tool. The user is responsible to compare specific load values,
fastener schedules, material specifications, and other factors to determine
suitability of use for any particular product.

MiTek’s catalogs also use Simpson part names as reference
numbers, without attribution to Simpson, in the tables that summarize the
technical information for the MiTek connector offered (see second column, Ref.
No.):

MiTek’s Reference Number Conversion Guide likewise lists
Simpson part names in alphabetical order, without attribution to Simpson, next
to MiTek part names, and this use of reference numbers is repeated in its
website/software/mobile app and point of sale materials.

example of point of sale display with “ref. #” in upper right under MiTek part number

Most MiTek connectors have at least one attribute that
differs from the referenced Simpson connector. Nonetheless, MiTek’s use of
reference numbers “is consistent with how reference numbers have been used in
the construction industry for decades, and in particular with how reference
numbers have been used by providers of structural connectors.”

Simpson offered no admissible evidence of actual confusion,
and no evidence that anyone chose to specify or purchase a MiTek connector
based on MiTek’s use of a Simpson part number as a reference number because the
engineer believed the reference number meant that the MiTek connector was
equivalent to or substitutable for a Simpson connector. MiTek received
inquiries about whether its connectors could be used in particular
applications, including in place of Simpson’s, but there was no evidence that any
inquiry arose from confusion or misunderstanding associated with MiTek’s use of
Simpson part names as reference numbers or MiTek’s use of part names similar or
identical to Simpson part names. Although a customer (reportedly) expressed
concern that a MiTek product wasn’t a good substitute for the referenced
Simpson product, there was no admissible evidence that the consumer was
confused or misled.

Simpson offered a survey purporting to show confusion as to
(1) source/affiliation/authorization and (2) equivalence.

False advertising: The use of a Simpson part as a reference
number was not a necessary implication that the MiTek parts were equivalent and
substitutable in all respects; one reasonable interpretation was that the
products were generally suited to the same application or function and should
be compared. Nor, for similar reasons, was the use intentionally misleading.

Because Simpson’s structural
connectors are specified in the first instance on most construction drawings in
the United States, the reference number serves as a starting point for
identifying the relevant MiTek connector for further investigation for a possible
substitution of the MiTek connector for the Simpson connector. Even where
Simpson structural connectors are not already specified on the construction
drawings, because Simpson is by far the dominant provider of structural
connectors throughout the United States and therefore familiar to designers and
engineers, the reference number serves a similar purpose as a starting point
for identifying the relevant MiTek connector for evaluation to be specified
instead of or in addition to (as in the case of dual specification) the
referenced Simpson connector.

Simpson’s survey was unpersuasive because it was suggestive.
For example, instead of using an open-ended question asking respondents what
“Ref #: DTT1Z” means on the MiTek product label, the survey used a close-ended
question (i.e. “do you believe that …”), suggesting to respondents (a) that
DTT1Z refers to a product that belongs to a company other than MiTek and (b)
that using “DTT1Z” as a reference means that MiTek is communicating its product
is equivalent to the product of another company. This meant the survey offered “no
meaningful evidence” of confusion. Also, the control group respondents were
exposed to the same MiTek stimuli, but the reference numbers were removed; the
questions didn’t make sense in that context. For example, the control
respondents were asked whether “based on this label, do you believe that MiTek
sells [a product number not included in the label.]” MiTek’s expert testified
that “there’s no way that [the respondents] could intelligently say yes. How
could they say yes when don’t know what’s being compared?” Even so, the results
of the primary and control surveys were very similar, “suggesting that the
primary survey results are not reliable indicators of how the relevant audience
understands MiTek’s use of reference numbers.”

Nor was the expert’s conclusion that the responses showed
recognition of the numbers as Simpson part numbers reliable. The survey tested
only six part names for “distinctiveness” or “secondary meaning,” and the
results didn’t indicate that respondents identify these particular part names
with Simpson.

Materiality was also a problem. With few exceptions, the
engineer of record is in charge of choosing the structural connectors, and
Simpson didn’t show that they were influenced “to any degree” by MiTek’s use of
Simpson part numbers as reference numbers. They consider geometry, load
capacity or strength, and, to a lesser extent, aesthetics, treatment, and cost.

Nor did Simpson show injury.

Passing off/§43(a)(1)(A): The part names were descriptive
or, in some cases, generic. The court did not find secondary meaning. “[T]he
relevant audience typically does not encounter Simpson’s part names alone,” but
rather with Simpson and/or Strong-Tie. The evidence showed that engineers
specify connectors by manufacturer (i.e. Simpson or MiTek or both) in addition
to including specific part names on construction drawing.

And even if Simpson had shown secondary meaning, it couldn’t
show likely confusion. Although similarity of “marks” and direct
competition/overlapping marketing channels favored Simpson, strength, actual
confusion, and consumer sophistication didn’t. As for intent, while MiTek did
use some names identical to those first used by Simpson, “the Court is not
persuaded that MiTek did so with the intent to confuse the relevant audience,
but rather because the names described well the connector at issue.”

California UCL: same.

Copyright infringement of the API: I’m not sure there was
any copying in fact of the index, unless MiTek replicated names of parts
it didn’t stock! But it doesn’t matter. Merger/thin copyright, including the
lack of protectability of product names/abbreviations that are standard or prevalent
in an industry, prevented any finding of infringement. Alphabetical order, of
course, is not protected, but Simpson argued that its product names for the
connectors and their corresponding part names reflected at least a minimal
degree of creativity and were protectable elements of the API. “Some of
Simpson’s part names appear to lack even minimal creativity, see, e.g., (‘H’
for ‘Hurricane Ties’), but most of the others have the minimal level of
creativity required for copyright protection, see, e.g., (‘HSLQ’ for ‘Heavy
Shear Transfer Angle’).” Ugh. “[W]ith some exceptions, MiTek has not shown that
there are so few ways of naming the connectors at issue that the part name
merges with the idea of the connector itself or is otherwise unprotectable,
particularly where the part name has four or five letters.” Ugh again.

Nonetheless, even assuming that all the product names in the
APIs qualified for copyright protection, the copying was de minimis. The
catalogs were concededly not substantially similar—the alleged copying was
limited to the new material, no more than 20 new part names, in each API, of
which MiTek copied at most 12 out of about 400 names (in a 300+ page catalog).
Both in quantity and quality, this was de minimis. This would be true even if
the court considered the API as a whole as a protected work.

Plus, even if there had been substantial similarity, the use
was fair. (Applause to the court for separately considering protectability and substantial
similarity instead of just considering them in factors two and three of the
fair use analysis, which courts often unfortunately do.) Though MiTek’s use was
commercial, so was Simpson’s, and there was more scope for fair use of its
highly factual work. The amount used was tiny, and there was no effect on the
actual or potential market for the works, “as there is no such market
for Simpson’s catalogs, but only for the connectors the catalogs describe.” But
asserting a copyright claim didn’t constitute misuse because there were itty-bitty
copyrightable bits.

MiTek also didn’t show laches, even though Simpson knew of
this type of use since at least 2013, and Simpson knew of similar uses of
Simpson part names by other competitors, including MiTek’s predecessor
companies, since at least 1988. At least by 2015, Simpson knew that MiTek
planned to continue ignoring its legal threats; this was unreasonable delay. But,
because Simpson was seeking only prospective injunctive relief, that wasn’t
enough.

Was there evidentiary prejudice? MiTek argued that relevant
documents and witnesses with information regarding early uses of product names
and part names by companies other Simpson were no longer available by the time
Simpson filed this action. But none of the non-copyright claims depended on the
idea that Simpson created the part names or was the first user.  “Nor does the question of whether Simpson’s
part names serve a source-identifying function now depend on another company’s
use of the same part name at some point in the past.” (Genericity can, or at
least could; maybe not post-Booking.com.) And MiTek already made a
persuasive showing on industry practice, so it didn’t need better or different
evidence.

Nor was there expectations-based prejudice because MiTek
didn’t show that it would have avoided investments or changed its advertising
had Simpson sued earlier.

from Blogger http://tushnet.blogspot.com/2023/12/using-dominant-competitors-part.html

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Reasonable consumers may not be required to peel back labels in store to read drug facts

Posted on December 15, 2023 by rtushnet

Zimmerman v. L’Oreal USA, Inc., 2023 WL 8587620, No.
22-cv-07609-HSG (N.D. Cal. Dec. 8, 2023)

This putative class action bringing the usual
California statutory claims alleges that L’Oréal misleadingly advertises
the sunscreen benefits of some of its cosmetic products, such as L’Oréal
Infallible Fresh Wear 24HR Foundation. The front label statements claiming it
provides “Up to 24HR Breathable Texture,” “Up to 24H Fresh Wear,” and
“Sunscreen Broad Spectrum SPF 25” allegedly led Zimmerman to believe that the
foundation provided 24 hours of sunscreen protection. But this protection lasts
only two hours. The drug facts panel, located underneath a peel-back sticker on
the back label, directs users to “reapply at least every 2 hours” for sunscreen
use.

Similarly, plaintiff Heuchan alleged that she purchased
L’Oréal Infallible Pro-Glow Foundation, whose front label claims that it
provides “Up to 24HR Foundation,” “OCTINOXATE Sunscreen,” and “Broad Spectrum
SPF 15.” It also has a drug facts panel located underneath a peel-back sticker
on the back label, directing users to “reapply at least every 2 hours” for
sunscreen use. Plaintiff Giordano made similar allegations about “Lancome Teint
Idole Ultra 24H Long Wear Matte Foundation,” with a front label claiming
“Octinoxate Sunscreen” “Broad Spectrum SPF 15,” and “Up To 24H Color Wear &
Comfort.” However, the complaint didn’t allege that the Teint foundation’s drug
panel facts are located underneath a peel-back sticker on the back.

L’Oréal argued that it wasn’t plausible that a reasonable
consumer would be deceived because the 24-hour statements clearly referred only
to cosmetic benefits, and that a reasonable consumer would refer to the back
panel. The court agreed with L’Oréal as to Giordano only.

The “Up to 24H Foundation” statement was ambiguous, but it
was not clear that this ambiguity “can be resolved by reference to the back
label.” “The Court cannot conclude as a matter of law that a reasonable
consumer would peel back the label in the store, before purchasing the product,
to find and read these instructions.” So too with the Teint foundation, but the
back label resolved any ambiguity. (As a consumer, I’d worry about being forced to buy anything I’d done that to!)

from Blogger http://tushnet.blogspot.com/2023/12/reasonable-consumers-may-not-be.html

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alleged misrepresentation of partnership/approval suffices for false advertising claim

Posted on December 15, 2023 by rtushnet

Faire Wholesale, Inc. v. Tundra, Inc., 2023 WL 8586681, No.
23-cv-02538-JSC (N.D. Cal. Dec. 8, 2023)

When does TM logic creep into false advertising cases? Faire operates an online marketplace connecting wholesalers
with retailers. Faire sued Tundra, which makes a comparison tool. Faire sued, challenging
Tundra’s unauthorized use of Faire’s users’ login credentials to gain access to
Faire’s non-public information. The court denied Tundra’s motion to compel
arbitration; the remaining statutory claims weren’t intricately intertwined
with, nor dependent on, Faire’s service terms. Tundra—a nonsignatory to the
service terms, and thus the arbitration agreement—couuldn’t force Faire to
arbitrate those claims.

Tundra’s motion to dismiss was granted with leave to amend
on the CFAA and California Comprehensive Computer Data Access and Fraud Act
claims, and the California UCL claim to the extent it relies on the two former
claims. The rest of the UCL claim and the Lanham Act claim survived because
Faire plausibly pled that Tundra made misrepresentations likely to deceive the
public into believing Tundra had partnered with Faire and was permitted to
access Faire’s computers.

To list a product or search the catalog of products for sale
on Faire’s platform, users must create an account with a username and password.
Only users who have logged into password-protected accounts may access
inventory, pricing, and contact information related to the goods available for
sale on Faire’s platform. Faire’s service terms prohibit users from disclosing
their passwords to third parties. Faire makes a commission on successful
transactions on its platform, but Faire also provides wholesalers with a
personalized link they can use to invite retailers to order directly from their
shop on Faire’s platform; using that link results in 0% commission to Faire. Tundra’s
comparison tool encourages its users to disclose their Faire login credentials
and offers to pay the retailers up to 10% “cash back” on every purchase they
make from a Faire wholesaler. Tundra solicits sellers on Faire’s platform to
provide their Faire Direct links to retailers registered with Tundra by
“promising to promote their brands to new retailers and give them greater
exposure” to Tundra retailers. Tundra charges sellers who participate in the
Faire Direct program a fee of 15% “that replaces the marketplace commission for
new retailers to a marketplace and their reorders.” It then pays a percentage
of this fee as “cash back” to the retailers and pockets the rest. This
allegedly diverts commissions properly owed to Faire to Tundra. Tundra allegedly
uses the information it scrapes from Faire’s platform, including contact information,
to market its product.

UCL fraudulent claims: These were predicated on 1) Tundra’s
misrepresentations it was an authorized user when logging into Faire’s platform
and 2) Tundra’s misrepresentations Faire was aware of and approved Tundra’s
practices. Reliance was required; Faire adequately alleged its own reliance on
1), and that its customers relied on 2), which was enough given that the parties
competed.

Screenshot: "you're eligible for cash back on 11 marketplaces," with specific solicitation for Faire login credentials

The screen seeking a consumer’s login credentials plausibly supported
an inference the public would falsely believe Tundra was partnering with Faire
and had Faire’s permission to obtain the consumer’s Faire login credentials.
(Would a clear disclaimer have solved the problem? Does it matter that there seem to be 10 other marketplaces involved?)

The Lanham Act claim also survived, for similar reasons. The
screenshot was “commercial advertising or promotion.” And Faire alleged that
Tundra repeatedly falsely advertised via phone and email solicitations that
Faire was aware of and approved Tundra’s scheme: on December 15, 2022, Tundra’s
employee allegedly told Brand A Faire approved of Tundra’s scheme and “it was
above board.” The allegation that hundreds of brands have been targeted by
Tundra’s false advertising “supports an inference Tundra’s misrepresentations
have the tendency to deceive a substantial segment of Faire’s audience.”

On materiality, it sufficed to allege that brands pay for
its services and Tundra’s false advertising influences brands to purchase
Tundra’s services instead of Faire’s services. “Again, the screenshot of
Tundra’s website is alone sufficient.” This seems wrong; in other cases,
including one I just blogged, courts require a link between the falsity
and the purchase decision. It wasn’t false that Tundra offered this service
related to Faire; what was the allegation that Faire’s approval of the
scheme mattered?

from Blogger http://tushnet.blogspot.com/2023/12/alleged-misrepresentation-of.html

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false advertising is harder to prove than TM infringement because of the injury requirement (not to mention materiality)

Posted on December 15, 2023 by rtushnet

ImprimisRx, LLC v. OSRX, INC., 2023 WL 8604148, No.
21-cv-01305-BAS-DDL (S.D. Cal. Dec. 12, 2023)

The parties are compounding pharmacies that focus on
medications used in optometry and ophthalmology. Section 503A compounding pharmacies
fill prescriptions for individual patients. Section 503B compounding pharmacies
produce compounded products in large quantities that are not necessarily tied
to a specific patient, sold to practitioners and hospitals as “office stock” to
be available for use on an as-needed basis. Plaintiff ImprimisRx operates both
a Section 503A pharmacy and a Section 503B pharmacy, while defendants operate
only a Section 503A pharmacy.

Section 503A allows for drugs compounded “for an identified
individual patient … [that are] necessary for the identified patient” to be
exempted from the typical FDCA drug-approval requirements if certain conditions
are met, including: (1) the drug compounding occurs after the receipt of a
valid, individual prescription; or (2) the drug compounding occurs before the
receipt of a valid, individual prescription “based on a history of …
receiving valid prescription orders for the compounding of the drug product”
within an “established relationship” between the compounding pharmacy and the
prescriber. There are other requirements, including for sterile manufacturing.

The court addressed motions for partial summary judgment on whether
the statement that “OSRX operates in full compliance with Section 503A
regarding compounded drugs as defined in the [FDCA]” violated the Lanham Act. Imprimis
had two theories of falsity: (1) Defendants instruct prescribers to place bulk
product orders, rather than for particular patients, and provide “office stock”
for use by unspecified future patients; and (2) defendants fail to compound
drugs in a sterile manner. The truth/falsity of these theories was subject to
material dispute.

On materiality, literal falsity wasn’t enough to presume
materiality. Defendants argued that their claims were in tiny print on the
website and thus could not be observed by consumers. “While the statements may
be presented in a small font, possible purchasers could still see them on
Defendants’ website and order forms.” Imprimis also provided declarations by
four ImprimisRx customers that claim Section 503A compliance was an important
factor in their purchasing decisions and survey evidence that 54.1% of surveyed
prescribers indicate that whether a compounding pharmacy “operates in full
compliance with Section 503A” is an important factor in selecting a compounding
pharmacy. But defendants’ own expert and survey evidence created a material
issue of fact. (Even on sterile manufacturing?!?)

Injury: Injury too could not be presumed despite the fact
that the parties were direct competitors; this wasn’t false comparative
advertising. “Instead, Plaintiff must provide some proof of past injury or risk
of future injury caused by Defendants’ false statements” to get money.  

Email correspondence where defendants attempted to poach Imprimis’s
customers and other evidence of direct competition wasn’t sufficient to presume
injury. This wasn’t mostly a two-player market, and the allegedly false
statements did not harm the entire market. Although the parties were two of the
largest compounding pharmacies within the post-operative ophthalmological
market, Allergan, Novartis, and Bio Tissue manufacture competing products. “Because
prescribers have many options in selecting post-operation ophthalmological
drugs, the Court cannot assume Plaintiff’s sales were necessarily reduced by
any increases to Defendants’ sales due to the false statements.”

And Imprimis provided evidence of materiality, but not of
injury.  The evidence of poaching didn’t
show that these customers were poached as a result of the alleged false
statements. Although a precise calculation of damages is not required under the
Lanham Act, a showing of some injury is required. Thus, defendants received
summary judgment on Imprimis’s monetary damages and unjust enrichment claims.

In addition, Imprimis didn’t show irreparable injury, which
would be required for a permanent injunction.

Counterclaims: Defendants alleged that Imprimis falsely
advertises that it “compl[ies] with all cGMP requirements which are the most
stringent standards in the nation.” All four challenged claims were publicly
available three years before defendants lodged their counterclaims (three years
being the California fraud statute of limitations, which the parties agreed was
the most analogous). Defendants had the burden of showing why they lacked the
means to discover the statements to invoke the discovery rule. They didn’t. “Indeed,
because Plaintiff is a main competitor for Defendants, one assumes Defendants
would be aware of the content hosted on Plaintiff’s website or the claims
Plaintiff makes regarding its products.” So there was a presumption of laches.
But there was no evidence of prejudice, so summary judgment on the laches
defense was denied.

Once again, there were disputed fact issues on falsity and
materiality. Once again, the counterclaimant couldn’t show any lost customers
or any other actual harm, thus no irreparable harm, so there was summary
judgment on monetary damages and injunctive relief.

(I guess what’s left is disgorgement?)

from Blogger http://tushnet.blogspot.com/2023/12/false-advertising-is-harder-to-prove.html

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Dastar bars false advertising claim against “first of its kind” ads

Posted on December 15, 2023 by rtushnet

 Vericool World LLC v. Igloo Prods. Corp., 2023 WL 8634803, No.
22-cv-02440-HSG (N.D. Cal. Dec. 13, 2023)

Vericool alleged that Igloo falsely claimed that its
“Recool” biodegradable cooler was the first of its kind. The court found this Dastar-barred,
since the alleged misstatements do not go to the “nature, characteristics, or
qualities” of the cooler as required under the Lanham Act. The court rejected
arguments that the materiality of the claim distinguished it from Dastar-barred
claims, and that “first of its kind” doesn’t necessarily imply anything about
patent/IP status.

Dastar explicitly stated that the Lanham Act “does
not exist to reward manufacturers for their innovation in creating a particular
device” and that the Act’s “common law foundations … were not designed to
protect originality or creativity.” “Yet that is precisely what Plaintiff seeks
to protect in this case: the originality and novelty of its own cooler design.”
There was no meaningful distinction between claims of being the “first” and
claims of inventorship. “Plaintiff may not directly challenge the Recool as
infringing its patents, but just as in Dastar and Sybersound, it
is trying to protect its intellectual property rights through the Lanham Act.”

Vericool didn’t help its claim by stating in its papers that
“[t]o vigorously defend its patent, Vericool World had to bring this claim.” But
“[t]he rights of a patentee or copyright holder are part of a ‘carefully
crafted bargain,’ ” and for whatever reason, it didn’t bring a patent
infringement claim.

Zobmondo Ent. LLC v. Imagination Int’l Corp., No. CV
09-02235 ABC PLAX, 2009 WL 8714439, at *1 (C.D. Cal. June 23, 2009), found that
the use of “original” to describe a board game was actionable because it was
about first physical manufacture, not creation of the idea. The court here
disagreed. The ad at issue wasn’t about physical manufacture, just used the
word “original.” “Yet the Supreme Court has stated that patent law, and not the
Lanham Act, offers protections for a manufacturer’s ‘originality’ and ‘creativity.’”
Plus, Zobmondo didn’t explain why date of manufacture was a quality or
characteristic of the game itself. “Although when a product was manufactured
may have implications for patentability, such as whether it is considered novel
or non-obvious, in the Court’s view it does not alter the nature of the product
or a user’s experience with it.” In Sybersound, the Ninth Circuit
explained that the “nature, characteristics, and qualities” of the karaoke
recording referred to things like the “quality of its audio and visual
effects.” “Such attributes would affect the consumer’s experience rather than
the rights of third parties.” (Comment: “First printing” might therefore be
different.)

Blue Spike, LLC v. Texas Instruments, Inc., No. 6:12-CV-499,
2014 WL 11848751, (E.D. Tex. July 25, 2014), report and recommendation adopted,
No. 6:12-CV-499, 2014 WL 11829325 (E.D. Tex. Aug. 15, 2014), involved
allegations that the defendants falsely claimed on their websites that they
were the “first to create content fingerprinting technology,” and that
competitors are using “borrowed” technology. Here too, the decision didn’t
explain how being the first to use a specific kind of technology goes to the
“nature, characteristics, and qualities” of the good itself as opposed to the
innovation of the technology at issue.

This reasoning also
disposed of the UCL claim.

from Blogger http://tushnet.blogspot.com/2023/12/dastar-bars-false-advertising-claim.html

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Of Bass Notes and Base Rates: Avoiding Mistaken Inferences about Copying

Posted on December 14, 2023 by rtushnet

 New article with Chris Buccafusco:

Houston Law Review, Vol. 61, 2023

Abstract

To prove copyright infringement, a plaintiff must convince a jury that the defendant copied from the plaintiff’s work rather than independently creating it. To prove copying, especially cases involving music, it’s common for plaintiffs and their experts to argue that the similarities between the parties’ creative works are so great that it is simply implausible that the defendant’s work was created without copying from the plaintiff’s work. Unfortunately, in its present form, the argument is mathematically illiterate: It assumes, without any underlying evidence, that the experts know or could reasonably estimate how likely it is that a song with similarity level x to another, earlier song was created without copying from the earlier song. Until the state of the underlying art changes, it is reasonable for experts to testify about the existence of similarities between works, but it is unsupported and unreasonable for them to testify about the likelihood that those similarities came about from copying. We don’t know that likelihood in the absence of evidence about base rates: how common is it for a song to have similarity level x with some other song in the corpus of existing songs, and how common it is for that similarity to come from copying or from independent creation (or from both copying a shared antecedent). Until that knowledge is available, testimony about the probability of copying should be deemed inadmissible under Federal Rule of Evidence 702.

from Blogger http://tushnet.blogspot.com/2023/12/of-bass-notes-and-base-rates-avoiding.html

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