5th Circuit holds that inquiries weigh less than lost sales but can still be evidence of actual confusion

Posted on September 11, 2023 by rtushnet

Rex Real Estate I, L.P. v. Rex Real
Estate Exchange, Incorporated, — F.4th —-,  2023 WL 5735552, No. 22-50405 (5th Cir. Sept.
6, 2023)

Doctrinal evolution
is so fascinating! Here, I think we might be starting to see what a post-Abitron,
post-JDI world could look like: courts may begin to reestablish distinctions
between registered trademarks and unregistered matter protected by unfair
competition law, based this time on statutory interpretation rather than
conceptual categories. Because the plaintiff doesn’t own the relevant
registration, its §32 claims fail, but the court allows §43(a) claims to
proceed, partially reversing the district court’s grant of summary judgment—but
read on for more on what that might look like.

Plaintiff Rex Real
Estate sued Rex Real Estate Exchange for trademark infringement.

Plaintiff
is a real estate company founded by Rex and Sherese Glendenning that
“specializes in the acquisition and sale of commercial, investment and
development properties, both large and small, in the North Texas growth
corridor.” Plaintiff only brokers real estate in the state of Texas, but it has
clients throughout the United States and in other countries.

The Glendennings
started in Texas real estate in 1987. Its marks: “REX,” “REX Real Estate,” and
a logo showing a crown alongside the words “REX Real Estate.” In 2015, the
crown mark was registered. Plaintiff mostly works with retail, office,
industrial, and mixed-use properties; it’s brokered some single-family home
sales, but almost all involving individuals related to it or its employees.

Meanwhile, Rex Exchange,
founded in 2015, offers an online platform for homeowners and homebuyers to
transact the sale of single-family homes. It first expanded into Austin in
2018. Rex Exchange purchased a “REX” trademark with a 2002 priority from a
company called Azavea that had registered the mark for the following use:
“computer software for use in search and displaying real estate information on
a global computer network.”

At the close of
plaintiff’s evidence at trial, the court granted a directed verdict.

Only an owner or a
true assignee has statutory standing to bring a claim under §32.
Section 43(a) reaches more broadly; the court here applies Lexmark to
both false advertising and trademark claims.

Section 32 did not
apply because Mr. Glendenning became the original owner of the marks when he
first used them in commerce as a sole proprietor many years before the
plaintiff Rex was formed. Although “an applicant seeking to register a
trademark may benefit from its use by a related company,” “this does not
displace the requirement that only the owner can seek registration.”
Assignments of registered marks must be in writing. Assignments before
registration need not be in writing, but the evidence must be clear.  “[R]equiring strong evidence to establish an
assignment is appropriate both to prevent parties from using self-serving
testimony to gain ownership of trademarks and to give parties incentives to
identify expressly the ownership of the marks they employ.” There was no
evidence at trial that there had been an assignment by Glendenning to
plaintiff. Thus, the §32 claim failed as a matter of law.

However,
§43(a)(1)(A) was available, and a reasonable jury could find that the marks
were inherently distinctive, not merely personal names. The relevant evidence
on plaintiff’s side, which the court thought went to public perception, was that
Mrs. Glendenning testified that she “came up with the crown because Rex means
king and that was that” and the mark is often accompanied by a crown, “reinforcing
the translation of Rex as a king in Latin.” On the other side Mr. Glendenning
testified that the name Rex has become synonymous with him as a person and
founder of the company to consumers in the real estate industry, and plaintiff didn’t
submit any evidence showing that the relevant consuming public associates the
Rex marks with their purported Latin meaning. Still, the court of appeals found
a fact issue because defendant

views
its marks by their Latin translation. While Defendant is not necessarily a
member of the “purchasing public,” the fact that some party outside of
Plaintiff recognizes the Latin translation support its claims that the marks
could be inherently distinctive. While there was strong evidence that the marks
are perceived by the public as primarily a personal name, the record does not
compel that conclusion.

This then meant
that likely confusion was at issue. Although the mark was at most suggestive,
and although many other entities in Texas have “Rex” names, and some of those
businesses might be involved in real estate, there was not enough evidence of “Rex”
in real estate. The jury saw evidence that only the parties appear in the first
page of results in a Google search for “Rex Real Estate Texas.” Plaintiff also pointed
to numerous calls it received from confused consumers as evidence that the
callers assumed that it was the sole source of the advertising. “This is a
plausible inference for a jury to make.”

Despite different
fonts, colors, and design elements, a reasonable jury could find enough
similarity to confuse.

Product/purchaser
similarity: The court framed this as an issue of sponsorship, affiliation, or
connection. “If consumers believe, even though falsely, that the natural
tendency of producers of the type of goods marketed by the prior user is to
expand into the market for the type of goods marketed by the subsequent user,
confusion may be likely.” Although the parties operate in different corners of
the real estate market and cater to different sets of prospective customers,
plaintiff’s lack of actual intent to expand into the single-family sales market
was not particularly probative of what a reasonable jury could find.

No reasonable jury
could find the parties’ advertising to be similar: plaintiff’s was “high touch,”
involving mainly a corporate suite at AT&T stadium and a dove hunt, and no
digital marketing, whereas defendant was focused on digital marketing. Intent
was neutral.

Plaintiff offered
anecdotal instances of confusion. Addressing variation in the case law, the
court found that the older precedent—which didn’t require any consumer purchases
to have been swayed by confusion—had to control. (The other way to read those
cases is that they (1) didn’t reach the issue or (2) were specific to bait-and-switch
theories of initial interest confusion, in which the confusion is still a
but-for cause of a sale.)

But the later cases
weren’t irrelevant. Instead, the court reasoned, “very little proof is required
when customer purchases were actually swayed. However, … more is required when
the confusion did not or cannot sway purchases.” In particular:

isolated
instances of confusion about the affiliation of two companies that do not
result in redirected business are not enough to sustain a finding of actual
confusion. Additionally, proof of actual confusion not involving swayed
customer purchases should be weighed against the parties’ total volume of
sales.

Also, courts should
“look to the volume of each company’s advertising” and give actual confusion “more
weight if it is a potential customer considering whether to transact business
with one or the other.” Circuit “precedents give varying weight to evidence of
actual confusion, depending on whether it is short-lived confusion by
individuals casually acquainted with a business or lasting confusion by actual
customers.”

With that
background: Plaintiff identified two people who inadvertently contacted
defendant while seeking plaintiff. Unlike initial interest confusion, “this
confusion did not present the possibility of garnering the Defendant business
before or after it was dissipated.” And there were three phone calls to
plaintiff from people who’d seen or heard defendant’s ads, and one of defendant’s
customers sent a letter to plaintiff complaining about defendant. “[P]roof that
the plaintiff is receiving calls from people who are trying to do business with
the other party can still be relevant even where there is no realistic
possibility that business can be diverted.” Finally, there were two instances
of third parties confusing the companies or their locations. “[T]hose anecdotes
are relevant because proof of actual confusion is not limited to actual or
potential customers.”

Although this wasn’t
much, it was some relevant evidence of actual confusion, and a reasonable jury
could weigh it in plaintiff’s favor. (How does this play into the statement above that isolated instances that don’t result in sales “aren’t enough”?) Question: what does a good instruction
look like in light of this discussion? Another question: Given Lexmark,
which does require a showing of likely harm for §43(a) cases, how should evidence
of nonpurchaser confusion go to show likely harm?

Degree of care: No reasonable jury could weigh this in
plaintiff’s favor.

Nonetheless, because a reasonable jury could conclude that
some of these factors, including the important factor of actual confusion,
weigh in plaintiff’s favor, a reasonable jury could also find a “probability of
confusion.”

from Blogger http://tushnet.blogspot.com/2023/09/5th-circuit-holds-that-inquiries-weigh.html

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Are Burger King menu boards whoppers?

Posted on September 11, 2023 by rtushnet

Coleman v. Burger King Corp., No. 22-cv-20925-ALTMAN (S.D. Fla.
Aug. 25, 2023)

Plaintiffs alleged that Burger King, through its
advertisements and in-store ordering boards, “materially overstates” the size
of (and the amount of beef contained in) many of its burgers and sandwiches. Allegedly,
“[a] side-by-side comparison of Burger King’s former Whopper advertisement to
the current Whopper advertisement shows that the burger increased in size by
approximately 35% and the amount of beef increased by more than 100%. Although
the size of the Whopper and the beef patty increased materially in Burger
King’s advertisements, the amount of beef or ingredients contained in the
actual Whopper that customers receive did not increase.”

Burger King responded that it makes very clear how much beef
the Whopper contains. Its website says: “Our Whopper Sandwich is a ¼ lb* of
savory flame-grilled beef topped with juicy tomatoes, fresh lettuce, creamy
mayonnaise, ketchup, crunchy pickles, and sliced white onions on a soft sesame
seed bun,” with the asterisk after the burger’s weight referring to the
“[w]eight based on a pre-cooked patty.”

The court first refused to consider the consumer protection
laws of 50 different states without a named plaintiff from every state.
Although the named plaintiffs had Article III standing to assert claims
on behalf of absent class members from other states—they had alleged a
redressable injury—they couldn’t assert claims under the laws of states that
did not apply to them because they hadn’t made their purchases in those states.
Plaintiffs were directed to file an amended complaint for only those states in
which they’d purchased products. They could eventually seek certification to assert
materially identical consumer-protection claims on behalf of class members from
other states, and they could even list the states whose consumer-protection
statutes (they believe) are similar enough to justify certification. They could
also try a nationwide FDUTPA claim based on allegations that, from its
headquarters in Florida, Burger King disseminated throughout the whole country
its allegedly deceptive communications.

Side note: “in deciding whether a named plaintiff has
standing to pursue the claims of out-of-state class members, some of our
colleagues have tried to distinguish between state common-law and state
statutory claims.” That doesn’t work because (1) many states have codified the
traditional common-law claims, and it doesn’t make much sense to think of
traditionally common-law claims as distinct from statutory law. And (2)
regardless, the cause of action is still “a creature of state law,” not some 50-state
blanket.  

Breach of contract: Burger King argued that its ads weren’t
binding offers.  Generally, ads are
merely “solicitations to bargain,” not offers, and so here with the TV and
online ads. But in-store “menu ordering boards” were different. An ad can
become an offer if a “reasonable person” would have thought that “the
advertisement or solicitation was intended as an offer.” These in-store
ordering boards—unlike BKC’s TV and online ads—list price information and provide
item descriptions. “Their whole purpose is to present to the potential customer
an offering of the available menu items (and their prices). They’re thus very
different from the advertisements one might see on the Internet or on TV—which
cannot constitute offers precisely because they cannot promise that the item
will still be available when, at some future date and time, the customer
finally elects to walk into the store.” Although it’s not reasonable to believe
that an ad promised that inventory would always be available, the menu boards, “by
definition, are only subject to acceptance by the handful (or so) of customers
who are actually in the store looking to purchase a sandwich.”

Burger King argued that a sandwich’s appearance isn’t an
essential term of a contract. But the court wouldn’t “lightly suppose that a
proprietor can offer to sell you a certain amount of food at a specified price
only to provide you with less food for the same price.” Although a 1%
exaggeration wouldn’t be a problem, the court wouldn’t impose its own judgment
about whether “a seemingly substantial difference between what was promised and
what was sold was (or was not) enough to alter the purchasing preferences of
reasonable American consumers.”

Negligent misrepresentation survived (for now) because Florida
doesn’t require a special relationship; unjust enrichment survived as an
alternative claim.

from Blogger http://tushnet.blogspot.com/2023/09/are-burger-king-menu-boards-whoppers.html

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claim that Adidas NHL jerseys are not “authentic” versions of on-ice jerseys can proceed

Posted on September 7, 2023 by rtushnet

Smith v. Adidas America, Inc., 2023 WL 5672576, No. 6:22-cv-788
(BKS/ML) (N.D.N.Y. Sept. 1, 2023)

A non-food case litigated by Spencer Sheehan, just
profiled in this New Yorker article. Smith brought claims under NY and
other consumer protection laws as well as warranty and other common-law claims,
based on Adidas’s marketing of its NHL jerseys as “authentic.”

screenshot from complaint

Adidas is the “official manufacturer of the jerseys worn on
the ice by NHL players.” It identifies at least some of the NHL jerseys it
manufactures and sells as “authentic” and allegedly sells them at a “premium”
price. But they were allegedly not “the same as the one[s] … players wear
when the puck drops on the ice.” Specifically, Smith alleged, the quality of
the “fight strap” of the “authentic” jerseys is inferior as compared to the
fight strap of on-ice jerseys; the fabric of the “authentic” jerseys is half
the thickness of the fabric of the on-ice jerseys; the stitching of the
“authentic” jerseys is weaker and less durable than the stitching of the on-ice
jerseys, the neck holes of the “authentic” jerseys are larger than the neck
holes of the on-ice jerseys;the air-flow dimples of the “authentic” jerseys are
smaller and less effective than the air-flow dimples of the on-ice jerseys; the
logos, numbers, stripes, and names on the “authentic” jerseys are applied via
heat pressing while those features of the on-ice jerseys are double-stitched;
and the “authentic” jerseys are manufactured in Indonesia while the on-ice
jerseys are manufactured in Canada.

The complaint cited online complaints about calling NHL jerseys
“authentic” and said they should be called “replica” jerseys—which allegedly
sell for less. Smith argued that these complaints gave Adidas knowledge of the
problem, while Adidas argued that these complaints

Showed that “the physical differences [in jerseys] are …
widely known among hockey enthusiasts,” and that “a reasonable consumer would
not view the retail ‘authentic’ jerseys as identical to the on-ice ‘pro stock’
jerseys, because it is widely known that the two have not been the same for at
least 15 years.”

The court dismissed the MMWA claim for lack of subject
matter jurisdiction, and the warranty claims for failure to provide pre-suit
notice.

But the NY GBL claims survived. It was plausible that “authentic”
was “likely to mislead a reasonable consumer acting reasonably under the
circumstances.”

Adidas argued that Smith’s understanding of “authentic” was
merely subjective, and that, because it’s the official manufacturer of NHL jerseys,
any jersey it manufactures is, by definition, authentic. But a reasonable
consumer would not necessarily believe that “authentic” is synonymous with
“officially licensed.”

In addition, Smith provided relevant context to inform the
reasonable consumer’s understanding: Adidas allegedly describes the jersey as
“the same as the one[s] [NHL] players wear when the puck drops” and alleged
myriad ways in which they materially differed from those worn by NHL players. There
was no “alternative explanation” of “the same as the one[s] [NHL] players wear
when the puck drops” that “render[s] [P]laintiff’s inferences unreasonable.”

screenshot with “this jersey is the same as the one Oilers players wear when the puck drops” highlighted

Adidas argued that the differences were easily discoverable,
but so what? This wasn’t an omission claim, and Adidas isn’t allowed to make
easily disprovable affirmative misrepresentations.

But claims based on the laws of other states were
insufficiently specified, and there was no duty alleged as necessary for a
negligent misrepresentation claim. Also, the where/when wasn’t pleaded with
sufficient particularity for fraud, and unjust enrichment was dismissed for not
really being separate.

from Blogger http://tushnet.blogspot.com/2023/09/claim-that-adidas-nhl-jerseys-are-not.html

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Microsoft’s PR agency got Gannett sued by sending it an ad for its Superbowl Ad Meter

Posted on September 7, 2023 by rtushnet

Campbell v. Gannett Co., No. 4:21-00557-CV-RK (W.D. Mo. Aug.
15, 2023)

This is a copyright suit against Gannett for
advertising-like use of a photo taken by Campbell of NFL coach Katie Sowers;
the photo came from a screenshot of an ad run by Microsoft that played during
the Super Bowl. The Microsoft ad was licensed by Campbell and showed the photo at about the
40-second mark. (Campbell’s lawyers are not serving her well by claiming
that §106A applies to this photo, but that doesn’t turn out to matter here.)

For decades, Gannett has conducted an annual survey of Super
Bowl commercials, called “Ad Meter,” through which anyone over 18 years old can
register to rate commercials submitted to Ad Meter. A PR rep sent an email to
Gannett stating, “I would like to submit Microsoft’s 2020 Super Bowl ad, ‘Be
The One,’ featuring Katie Sowers to the USA Today Ad Meter.” The email included
a YouTube link to the BTO ad and to high-resolution screenshots from the BTO ad,
but the email did not include the Sowers photo (this description is a bit
equivocal about whether the screenshots included the Sowers photo, but
I’ll assume it didn’t). A second request followed, asking, “Can we please be
included as part of the USA Today Ad Meter?”

A USA Today 2 producer downloaded the BTO ad from YouTube
and then took a high-resolution screengrab from the commercial that comprised
the Sowers photo. He uploaded the high-resolution screengrab of the Sowers
photo and the downloaded video into Presto, Gannett’s content management
system, and added tags including “USA TODAY” and “Ad Meter.”

Gannett derives revenue from the Ad Meter Platform, which
included its own advertisement and sponsorship revenue. Gannett did not use the
screenshot of the Sowers photo on Ad Meter, but instead on webpages promoting
Ad Meter. Each publisher defendant separately determined which content it
accessed on Presto to use for its websites and in its publications; their
webpages that included the screenshot of the Sowers photo would have displayed ads.

Campbell sued for copyright infringement,
contributory/vicarious copyright infringement, and CMI removal.

Gannett doesn’t get summary judgment on having a license
even though the contract with Microsoft granted it “an unlimited (including all
lifts, edits and versions) non-exclusive, worldwide, all channels, irrevocable,
license to use, market, promote, distribute, copy, reproduce, display, record,
re-record, electronically publish, publicly display, transmit, broadcast,
telecast, publicly perform, modify, alter, cache, synchronize with visual
images, create derivative works of, and/or publish the whole or part of the
[Sowers Photo], in any media whatsoever (whether now known or hereinafter
developed).” But this was a license to Microsoft, and Campbell argued that
Microsoft wasn’t allowed to reproduce, distribute, and publish the Sowers photo
as part of others’ advertising model (including news reporting). Instead,
Campbell argued that she intended to prohibit further sublicensing.

The court found that whether Gannett had an implied
sublicense couldn’t be determined on summary judgment. When she became aware of
the use, she promptly sent a C&D. (It feels like Microsoft and its PR
agency caused this problem.)

The court also rejected summary judgment on a fair use
defense. There were no changes in the content of the photo itself. “Even
assuming the purpose of Defendants’ use was to make the BTO ad available for
commentary and criticism, that purpose itself, in the context of this case, is
commercial” (citing Warhol).  And
this is really bad:

Both positive and negative
commentary or criticism for the BTO ad would generate attention for
Defendants’ webpages and the services and products advertised there. The
ultimate goal of making the BTO ad available for commentary and criticism using
the Sowers photo is for the Publication Defendants or Gannett to generate more
revenue for the Ad Meter service and for any other of their services or
products advertised on Defendants’ webpages on which the Sowers photo was
placed. (emphasis added)

Remember, “Publication Defendants” are newspapers.  A reasonable jury could find that this factor
weighed in Campbell’s favor.

Factor two: a reasonable jury could find the photo “mostly
creative.” Given that Sowers made history “by being the first openly gay coach,
the second full-time female coach in the National Football League, and, when
the photo was taken, the first female to coach in the Superbowl,” a jury could
find that Campbell’s artistic choices weren’t mainly functional or
informational. Although I don’t think it matters, part one and part two of
those claims are completely unrelated—in fact, part one appeals only to the
importance of the subject matter and has nothing to do with Campbell’s
artistic choices, which remain entirely undescribed in the opinion.

Amount: the whole photo. The fact that it was used to link
to the whole ad didn’t matter.

Market effect: Gannett argued that (1) it was not a market
substitute because in many cases it was altered to include a play button, (2)
it generated no greater likelihood of non-compensated use by others than
resulted from its use in the BTO ad itself, which was on television and YouTube
without attribution or watermark, (3) it was transformational, and (4) using a
screenshot from within the BTO ad video as the means to view the video promotes
the sharing of art and science, and the image is already contained within the
published video. While this all makes sense, and Campbell appealed basically to
the idea that she must have lost out somehow, a reasonable factfinder could
conclude that the other factors all favored her and thus reject the defense.

CMI removal: Goes better for Gannett. It was undisputed that
the Sowers photo, within the BTO ad, didn’t include any CMI or restrictive
language. Campbell shifted her theory to one that the CMI was false because it
attributed the ad, and thus the screenshot from the ad, to Microsoft. But false
CMI is a different claim, one she didn’t bring. There was no proof that any
defendant removed her CMI or distributed the photo with knowledge of its
removal.

Profit disgorgement: “In a claim for disgorgement, the
copyright owner is first tasked with establishing a causal nexus between the
infringement and the infringer’s gross revenues.” “After that nexus is
established, ‘a rebuttable presumption that the defendant’s revenues are
entirely attributable to the infringement arises, and the burden then shifts to
the defendant to demonstrate what portion of the profits are not traceable to
the infringement.’”

In a previous case, the Eighth Circuit upheld the jury’s
conclusion that the plaintiff had established a nexus between the defendant’s
infringing use of his copyrighted work and its profits from the sales of the car
being advertised. There, (1) the infringement was the centerpiece of an ad that
essentially showed nothing but the car, (2) the defendant enthusiastically
presented the ad to its dealers as an important and integral part of its launch
of the car into the U.S. market, (3) sales of the car during the period that
the ad aired were above the defendant’s projections, (4) the ads received high
ratings on surveys that rated consumer recall, and (5) the defendant paid its
advertising firm a substantial bonus based on their success.

By contrast, a previous Ninth Circuit case cited with
approval in the car case, the evidence of a nexus was too speculative.  “The infringing use of the plaintiff artist’s
work was featured within a collage including other content that was pictured
only on one page of a multipage brochure advertising a concert series, and the
plaintiff’s claim for 1.5 percent of the defendant’s total revenues was based
on the defendant’s goal of generating a response rate of 1.5 percent to its
brochure as a whole.”

Plaintiff’s expert identified defendants’ revenue from ads
on websites containing the photograph and subscriber revenue related to the
Subscribe Now feature on their websites. The websites also displayed many other
photographs, news articles, videos, screenshots from other Super Bowl
commercials, and other content during the time they displayed the Sowers photo.
There is no way to track revenue from a single item of content, but each site that displayed the Sowers photo displayed it
along with ads that paid based on the number of impressions. Plaintiff’s expert
limited calculation of ad revenue for whole newspaper websites to their time displaying the
photo, but didn’t attempt any further attribution. Using numbers for the
websites as a whole was too speculative to establish a nexus. No rebuttable
presumption arose, and defendants got summary judgment.

In addition, Campbell was limited to one statutory damages
award. Even though each of the newspaper defendants were independent legal
entities that made their own decisions about what to put on their websites,
it’s the number of works infringed that counts. Where there’s a prime
tortfeasor that is jointly and severally liable with every other defendant,
that means one award. Gannett and the other defendants had a substantial and
continuing connection. The newspaper defendants each use and choose content
from Gannett’s content management system, and they were all its subsidiaries.  

But! There was a triable issue on willfulness, even though
the PR agency submitted the ad, and even though the Sowers photo had no
separate attribution or other information and thus there was no reason to
believe it had to be treated separately. Campbell argued that the USA Today
producer violated Gannett’s own copyright policy by downloading the ad from
YouTube and taking a high-res screengrab. I don’t see how this constituted
reckless disregard or knowledge of Campbell’s rights, but the court
thinks maybe: “It is undisputed that Defendants are affiliates in a large,
sophisticated media conglomerate that has written policies regarding
copyrights, copyright infringement, and avoiding such infringement.” Thus,
there was a jury question on willfulness. This seems wrongheaded to me;
now everyone will have to go through an extra step of confirming that they have
the rights including the rights to every individual element of an ad.

from Blogger http://tushnet.blogspot.com/2023/09/microsofts-pr-agency-got-gannett-sued.html

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SlimFast products aren’t “clinically proven,” even if the SlimFast plan is, allowing false advertising claim to survive

Posted on September 7, 2023 by rtushnet

McCracken v. KSF Acquisition Corp., 2023 WL 5667869, No.
5:22-cv-01666-SB-SHK (C.D. Cal. Apr. 4, 2023)

McCracken alleged that SlimFast food products were falsely
advertised as “CLINICALLY PROVEN [ – ] LOSE WEIGHT & KEEP IT OFF” on the
front of their packaging. It was undisputed that none of the products she purchased
has been clinically tested or proven to cause consumers to lose weight or
maintain weight loss, though KSF pointed to additional disclaimers on the back
clarifying that the statements referred to KSF’s low-calorie “SlimFast Plan”
rather than to the products themselves. The products say on the back: “For over
40 years, millions of Americans have lost weight and kept it off using SlimFast
Original Meal Shakes, as part of the clinically proven SlimFast Plan. Clinical
studies prove the SlimFast Plan helps you effectively lose weight, and you can
see results in just one week!”

example of front package with “Clinically Proven: Lose weight and keep it off” claim
example of back with “Clinically Proven to Lose Weight Fast” caption with reference to SlimFast plan

: For over 40 years, millions of Americans have lost weight and kept it off using SlimFast Original Meal Shakes, as part of the clinically proven SlimFast Plan. 50 Clinical studies prove the SlimFast Plan helps you effectively lose weight …”

Although the court dismissed claims for equitable restitution and disgorgement because McCracken didn’t show that adequate legal remedies were unavailable, the remaining usual California statutory claims survived.  (The case was later dismissed after an individual settlement.)

McCracken incorporated NAD and NARB decisions into the complaint. In 2021, NAD found, among other things, that “a reasonable consumer could take away the message that [Defendant’s] clinically proven claim refers to any product upon which it appears” and that “ ‘Clinically Proven to Lose Weight & Keep It Off’ conveys a clinically proven weight-loss and maintenance message about each individual SlimFast product.” Since this claim hadn’t been substantiated for the food products, but still “expressly and by implication conveys the message that the current products themselves have been clinically proven to allow consumers to lose weight and keep it off,” NAD recommended changing the ad. KSF appealed, and NARB affirmed in relevant part.

First, this wasn’t an impermissible private claim merely alleging lack of substantiation. Instead, plaintiff plausibly pled that the “clinically tested” claim was an affirmative misrepresentation as to the food products. “[A] reasonable consumer viewing the front of Defendant’s SlimFast products might assume that the claim ‘CLINICALLY PROVEN [ – ] LOSE WEIGHT & KEEP IT OFF’ refers to the product on which the claim is made rather than to a weight loss plan that is not mentioned on the front of the packaging and that does not in any way depend on consumption of the product being sold.” Even knowing the SlimFast plan existed wouldn’t inherently preclude a belief that defendant actually tested its own products as part of the plant. NAD/NARB’s agreement on this bolstered its plausibility. Indeed, even the fine print didn’t “necessarily dispel the impression created by the front label that the product itself has been tested; consumers might assume that Defendant’s tests of the SlimFast Plan involved the products being sold (as they apparently did for earlier products).”

Finally, McCracken did have standing to seek injunctive relief because she was still interested in buying.

from Blogger http://tushnet.blogspot.com/2023/09/slimfast-products-arent-clinically.html

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plaintiff has standing to seek injunctive relief against allegedly falsely advertised penile implant

Posted on September 6, 2023 by rtushnet

Peña v. International Medical Devices, Inc., No.
2:22-cv-03391-SSS-PLAx, 2023 WL 5667568 (C.D. Cal. Apr. 17, 2023)

Plaintiff brought the usual
California statutory claims against Penuma, a penile implant/procedure, for
alleged misstatements about Penuma’s safety and efficacy. Here, we deal only with
the claims for injunctive relief. The Ninth Circuit has held: “[i]n some cases,
the threat of future harm may be the consumer’s plausible allegations that she
will be unable to rely on the product’s advertising or labeling in the future,
and so will not purchase the product although she would like to.” Also, in
“other cases, the threat of future harm may be the consumer’s plausible
allegations that she might purchase the product in the future, despite the fact
it was once marred by false advertising or labeling, as she may reasonably, but
incorrectly, assume the product was improved.”  

Peña argued that he has standing to pursue injunctive relief
to prevent future harm because “Plaintiff continues to desire a safe, effective
penile implant. If the Penuma device and procedure were redesigned to be safe
and effective for cosmetic penile enlargement, FDA-cleared for this use, and
truthfully marketed, Plaintiff would purchase a Penuma device and procedure in
the future.” He also argued that he wouldn’t be able to rely on the ads in the
future without injunctive relief. This was sufficient. (Humans really want to
believe certain things; I guess I do think there are people who would try
again.)

Were legal remedies inadequate? Peña and class members
alleged they “suffered irreparable injury” from the alleged misrepresentations
and “[t]heir bodily integrity has been violated, creating a substantial risk of
permanent injury.”  Coupled with the
allegations about the likelihood of future injury absent an injunction, that
sufficiently pled an inadequate remedy at law.

from Blogger http://tushnet.blogspot.com/2023/09/plaintiff-has-standing-to-seek.html

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gray marketer’s counterclaims against Toyota survive, but it still must defend itself

Posted on September 6, 2023 by rtushnet

One case, two opinions.

Toyota Motor Sales, U.S.A., Inc. v. Allen Interchange LLC, 2023
WL 5206884, No. 22-cv-1681 (KMM/JFD) (D. Minn. Aug. 14, 2023)

This opinion deals only with Allen’s counterclaims. Allen
distributes Toyota replacement parts, manufactured by authorized suppliers
around the world.  According to Allen,
Toyota USA “sells Toyota Parts in the United States at prices substantially
higher than those charged by Toyota in other places.” The Toyota parts sold by
Allen Interchange and Toyota bear the same part number, and according to Allen
Interchange, are identical in design, function, and quality. Toyota USA sued
Allen for grey marketing in violation of the Lanham Act and related claims,
asserting that material differences included the existence of a
manufacturer-backed warranty, the shipping and packaging of the parts, and the
appearance and condition of the parts.

Allen counterclaimed for antitrust and related unfair
competition/tortious interference claims. The court declined to dismiss the
counterclaims.

Lanham Act false advertising: Allen alleged that Toyota’s
statements that “[t]he purchase … of unauthorized, gray market parts within [Toyota
USA’s] PMA [Primary Market Area], or anywhere, is … a breach of your dealer
agreement” constituted false advertising because the agreement in fact allows
for purchases of Toyota parts from other sources, including for non-warranty repairs.
The counterclaim also alleged false/misleading use of the term “Genuine Toyota
Parts”; statements about safety of “gray market parts” even though they are
made by Toyota entities; and misleading assertions about Allen Interchange’s
products in flyers depicting a pallet with Toyota parts recognizable as an
Allen Interchange shipment.

Toyota argued that its statements were literally true, but
literally true claims can mislead—a classic question of fact. Plus, statements
about commercial activities are actionable and Allen adequately alleged
falsity. 

Toyota Motor Sales, U.S.A., Inc. v. Allen Interchange LLC,
2023 WL 5207389, No. 22-cv-1681 (KMM/JFD) (D. Minn. Aug. 14, 2023)

This is the trademark side of the case. The court denied
Allen’s motion for joinder of Toyota Japan and allowed key claims to proceed.

This case is one of several that makes me think that a
coherent version of trademark could emerge from cases like Abitron and Lexmark:
registered trademarks get special treatment, even including (though I think
it’s a bad idea) not having a harm requirement as an element of the cause of
action, whereas unregistered/§43(a) claims need to show harm. This isn’t
directly implicated by the case, but the reasons we might have different
treatment are.

In particular, Toyota USA doesn’t own the Toyota marks; it
is a licensee. This was a matter of statutory standing, not Article III
standing.

First, the dilution claims require an “owner” of a famous
mark to bring suit. Thus, they were dismissed. While some cases have allowed an
exclusive licensee to do bring a dilution claim, Toyota USA didn’t plead that it was the exclusive
licensee and acknowledged in its briefing that it wasn’t. Being an exclusive
authorized importer and distributor was not enough, because an “exclusive
licensee” is the sole entity with an interest in a trademark, while an
“exclusive importer and distributor” could be one of multiple entities with
such an interest.

Anyway, even if Toyota USA could be considered an exclusive
licensee, the relevant cases covered only §43(a)(1)(A), not §43(c), which explicitly
uses the term “owner” when identifying who may bring suit, whereas § 43(a) uses
the broader language of “any person.” Minnesota’s trademark statute also said that
“[t]he owner of a mark that is famous in this state may” seek an injunction in
the event of trademark dilution. Likewise, “[o]nly the owner of the trademark
has standing to seek relief for common law trademark infringement.”

Allen is definitely not out of the woods, because
§43(a)(1)(A) is still available, but that should matter to the burden Toyota
USA faces, including the Court’s language in Lexmark about proof of
harm, which is not limited to false advertising.

from Blogger http://tushnet.blogspot.com/2023/09/gray-marketers-counterclaims-against.html

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“major flaw”/”tendency to shear” false advertising claims fail

Posted on September 6, 2023 by rtushnet

Shepard & Assoc., Inc. v. Lokring Tech., LLC, 2023 WL
5229803, No. 1:20-cv-02488 (N.D. Ohio Aug. 15, 2023)

Lokring sells fittings for pipes and other transfer systems
for fluids and gases, as well as tools used to install them. Its distributors
have exclusive territories. Shepard was an exclusive distributor, but the
relationship broke down. This opinion addresses third-party trade secret and
unfair competition claims against Tube-Mac; I won’t cover the trade secret
claim (which is what linked Tube-Mac to Shepard).

The emails at issue all had the same basic outlines: They
said the sender previously worked for Shepard and touted Tube-Mac products. It also criticized Lokring
products and toolings and stated that “The major flaw in the Lokring design is
the thin cross section in the middle of the fitting where the two pipes meet….
Over time there is a tendency for the Lokring fittings to shear at that thin cross
section as shown in the attached picture.”

The “major flaw” statement was false, Lokring argued,
because the basis that the writer gave in deposition was merely testimony that
there had been customer feedback that they didn’t like the thin cross section.
Its head of product development testified that the thin cross section had, as
designed, worked acceptably for over 25 years. But this testimony showed that
the Lokring products did in fact have a thin cross section in some cases.
Characterizing this as a “major flaw” was not actionable. Something can be
designed, and still be flawed. “It is not inherently false to say that a
thinner pipe connector may be more susceptible to corrosion or breakage than it
otherwise would be if it were made thicker.” At least, this wasn’t literally
false.

Tendency to shear: This was more susceptible to empirical
testing and truth. Lokring argued that there was no data to support the claim,
and that the fitting in the photo sheared because of installation error. But
the burden was on Lokring to show falsity, and it didn’t submit expert or other
technical evidence to show literal falsity. And its witness’s testimony was
inconsistent about whether the picture showed shearing in a pipe that had been
installed correctly. Thus, it didn’t show literal falsity. Lokring also didn’t
submit evidence of how many consumers were deceived. It offered an email from
Dow Chemical as evidence of confusion:

I am going to respectfully ask that
you please stop contacting my peers in Deer Park I Houston Hub and
misrepresenting the Pyplok fitting as a “LOKRING equivalent”. The Pyplok
fitting has not been evaluated by our Dow piping discipline team and is not
approved for use at Dow.

As you can see, this email didn’t indicate any deception
about quality/design flaws in Lokring products.

Tube-Mac thus prevailed on summary judgment.

from Blogger http://tushnet.blogspot.com/2023/09/major-flawtendency-to-shear-false.html

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Zillow’s “agent” and “other” tabs were literally false where some agents ended up in “other” purgatory

Posted on September 6, 2023 by rtushnet

REX – Real Estate Exchange, Inc. v. Zillow, Inc., 2023 WL
5334389, No. C21-0312 TSZ (W.D. Wash. Aug. 18, 2023)

Zillow aggregates listings of real properties that are for
sale or for rent. Before January 2021, Zillow’s websites displayed on one page
(or in one tab) all homes for sale in a certain region regardless of how they
were listed, i.e., by a real estate agent, a real estate broker, a realtor, or
an unrepresented owner. Then Zillow unveiled a two-tab design, which segregated
content between tabs (or webpages) labeled as “Agent listings” and “Other
listings.”

According to Zillow, the two-tab display resulted from
Zillow’s efforts to comply with the National Association of Realtors model
“no-commingling” (or segregation) rule, which had been adopted by roughly
two-thirds of the multiple-listing services (MLSs) that had agreed to provide
Zillow with data feeds. This rule requires segregating listings obtained
through such data feeds from listings obtained from other sources.

REX’s listings come from licensed brokers and agents; they
qualified as agent listings, as opposed to for-sale-by-owner (“FSBO”) or
non-agent listings. Nevertheless, REX’s for-sale listings were relegated, along
with FSBO and non-MLS listings, to the “Other listings” page because REX’s
brokers and agents were not members of the MLSs from which Zillow was receiving
data feeds.

Before Zillow launched the two-tab system, it evaluated the
associated risks. A 2019 investigation of tabs labeled “Agent listings” and
“Other listings” revealed “critical comprehension concerns warranting further
iteration.” In November 2020, Zillow’s research indicated that eight of the
twelve participants in a study (described as “buyers,” meaning individuals
trying to purchase a home who had previously used one of Zillow’s platforms)
“assumed” that “other” meant “non-agent” listings, while the other four buyers
thought “other” meant non-Zillow-agent or agent “not approved by Zillow.”

Zillow’s FAQ said:

“Agent Listings” are properties
listed by real estate agents in the MLS. “Agent Listings” do not include homes
for sale by owner, non-MLS auctions or foreclosures. “Other Listings” are for
sale by owner, non-MLS auctions, foreclosures and other properties. “Other
Listings” do not include properties listed by agents in the MLS.

…

If an agent lists your home on the
MLS (even through a limited-service brokerage), it will appear under “Agent
Listings.” If you advertise your home on Zillow as for sale by owner, it will
appear under “Other Listings.”

The FAQ did not indicate that the “Other listings” tab might
include homes for sale by agents or brokers who were not MLS members. It also
failed to define MLS or to clarify that some licensed real estate agents and
brokers do not belong to an MLS.

Zillow recorded a 32% increase in complaints during the
weeks after the transition. Comments included: “Why prop up agents when the
whole point of your app is to circumvent the need for a high commission agent?”
and the like. A user test comment: “Oh…oh no…I wouldn’t even think to click
on a separate list. I just assumed all the homes would be in this list.” The
Other tab was clicked during only 4–7% of sessions, and 80% of the FSBO page
views were lost.

Meanwhile, Zillow perceived REX to be “an industry
disruptor” that had not been well received by other agents and brokers because
it did not share its listings with MLSs (in other words, it did not
“syndicate”), and it did not “pay a buy side commission.” The National
Association of Realtors requires that MLS participants, when listing homes for
sale, make “blanket unilateral offers of compensation” to other MLS members serving
as buyers’ agents. Zillow internally acknowledged that REX was “poised to be a
casualty” of the change, and in fact it was.

Falsity/misleadingness: Misleadingness was a fact issue that
couldn’t be resolved on summary judgment; Zillow’s own internal records might
suffice as extrinsic evidence for that.

Literal falsity: The Third Circuit has held that, although a
plaintiff has the burden to prove falsity, a court may find that “a completely
unsubstantiated advertising claim by the defendant is per se false without
additional evidence from the plaintiff to that effect.” And an assertion of
fact may be literally false by necessary implication “when, considering the
advertisement in its entirety, the audience would recognize the claim as
readily as if it had been explicitly stated.” Under these standards, “Agent
listings” and “Other listings,” considered together and in context, were
literally false by necessary implication. “When the labels are viewed
side-by-side, the unambiguous assertion is that one tab includes homes listed
for sale by agents and the second tab contains all other listings, i.e., homes
for sale by their owners or by non-agents.”

It was undisputed that REX was a broker and/or agent. Thus,
“[b]y relegating REX’s listings to the ‘Other listings’ tab, Zillow falsely
stated by necessary implication that REX was not (or did not employ) an agent.”
Zillow’s own study showed that no participant construed the tab labels in the
way that Zillow proposed to the court (i.e., agent listings and additional
agent listings). (Unsurprisingly, because that’s a Borgean category: what could
distinguish “agent listings” from “additional agent listings”?) The FAQ didn’t
fix the deceptiveness because it didn’t define “MLS” or indicate that agents
didn’t have to belong to an MLS.  Summary
judgment on falsity to REX.

from Blogger http://tushnet.blogspot.com/2023/09/zillows-agent-and-other-tabs-were.html

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claims about legality of insurance service are falsifable

Posted on September 6, 2023 by rtushnet

Route App, Inc. v. Heuberger, 2023 WL 5334192, No.
2:22-cv-00291-TS-JCB (D. Utah Aug. 18, 2023) (magistrate)

Route is a package tracking company that provides shipping
insurance to e-commerce merchants. Heuberger was a Route customer who then
launched a competitor, Navidium. Route sued for breach of contract, commercial
disparagement and defamation per se, intentional tortious interference with
contractual relations, false advertising, and contributory trademark
infringement.

The breach of contract claim survived.

Commercial disparagement/trade libel/injurious
falsehood/defamation per se: The challenged statements were opinion. Even
potentially verifiable facts—such as whether claims are “more often than not
denied,” whether Route requires a police report to be filed for a lost package,
or whether Route commits a “serious breach of customer data”—“when read in the
statement’s full context, would be understood as hyperbolic or figurative and
clearly representing an opinion.”

Route also alleged that Heuberger tortiously interfered with
valid contracts between Route and third-party merchant partners by: using
confidential information to develop Navidium; engaging in commercial
disparagement; making fraudulent misrepresentations about Route and Navidium;
inducing Route’s merchant partners to use Navidium; and engaging in unlawful
activity, including collecting a fee without proper insurance licenses or
permits. Route alleged that Heuberger stated in online posts and messages that
he “created Navidium to ‘screw with’ and ‘tak[e] down’ Route, because he
‘hate[s] Route.’ ” Route argued that Heuberger misled Route’s then-clients by
portraying Navidium as a “technology that facilitates the lawful sale [of]
shipping insurance” despite such services being “illegal.” The court wasn’t
sure whether Route could show causation, though Route alleged that an
increasing number of merchants who discontinue Route’s services appear to cite
“the false statements made in Heuberger and Navidium’s solicitations.” Whether
these acts were justified was fact-intensive and couldn’t yet be resolved.

False advertising: 
The comments about Route were opinion and not actionable under the
Lanham Act. But Route’s allegations that Navidium misrepresented or implied
that merchants can lawfully offer shipping insurance or shipping protection
without obtaining insurance licenses or permits and that Navidium is a shipping
insurance company or technology “are straightforwardly factual assertions the
veracity of which may be determined” by a review of the applicable law and an
investigation of Heuberger’s marketing of Navidium. Other cases say that legality claims are usually opinion unless offered by someone with legal expertise, but the court doesn’t discuss the issue.

Contributory trademark infringement: Defendants allegedly knowingly
facilitated infringement of Route’s trademarks by installing versions of the
Navidium widget under the names “Route Plus” and “Route Pro,” infringing its
registered “Route” mark for shipping protection/e-commerce tracking. Defendants
responded that Navidium is fully merchant-run after installation, and that
Heuberger did not know and had no reason to know that merchants were replacing
the Navidium name. Route counters that “[b]ecause Navidium has no product
offerings that do not include expert installation, Heuberger or another
Navidium representative modifies the Navidium widget code to include the name
and/or text chosen by the merchant every time the white-labeled Navidium widget
is installed.” This was sufficiently pled. Not clear to me: does anyone but the merchant internally see the widget? If not, what confusion could there be?

 

from Blogger http://tushnet.blogspot.com/2023/09/claims-about-legality-of-insurance.html

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