materiality dispute avoids sj in literal falsity case (also no seller standing against ingredient supplier)

Posted on June 26, 2023 by rtushnet

World Nutrition Inc. v. Advanced Enzymes USA, 2023 WL
4105345, No. CV-19-00265-PHX-GMS (D. Ariz. Jun. 21, 2023)

WNI and defendants AST/Specialty sell enzyme supplement
products. WNI and AST sell directly to consumers, while Specialty is a wholesaler
that sells to other businesses, including AST. Each side alleged false
advertising by the other, primarily that each falsely advertised their products
as containing enteric coating, which protects an enzyme from the stomach’s
acidic environment and preserves its activity until it reaches the small
intestine. WNI had some additional claims of false advertising by AST (that AST
is a manufacturer, that it uses a Bioactive Protein Peptide System, that it
employs a formulator and master enzymologist, and that it conducts in-house
laboratory testing). AST also contended that WNI falsely advertised its
products as containing buffer enteric coated serrapeptase, and falsely
advertised the efficacy of its two liquid products as well as its compliance
with “Good Manufacturing Practices” (GMP), as established by federal law.

Relevant background: more than 20 years ago, WNI purchased
an enzyme blend in bulk from Specialty; it got sued for falsely advertising a
product sourced from as containing enteric coated serrapeptase. “WNI lost at
trial and ceased purchasing products from Specialty.”

Previously, the court dismissed Specialty’s Lanham Act claim
against WNI on standing grounds. Specialty then moved for summary judgment on
WNI’s claims on the grounds that WNI didn’t have Lanham Act standing, since it
was a wholesaler and WNI sells directly to consumers. The court agreed that
Specialty fell outside the relevant zone of interests.

Although vicarious liability may be possible, there was no
evidence that Specialty exercised control over AST or its advertiser. Nor was
there evidence that Specialty induced AST to falsely advertise or knew that AST
was engaging in false advertising of its products. “The mere existence of a
supplier relationship does not give rise to vicarious liability.” Likewise, Arizona’s
unfair competition law requires a plaintiff to “either show that it was engaged
in competitive business with [defendant] or that [defendant’s] actions were
likely to produce public confusion,” so the state law claims also failed.

Unclean hands couldn’t be resolved on summary judgment
because of “genuine disputes of material fact underpinning most aspects of both
party’s claims.” The only undisputedly false statement was WNI’s statement that
its products contained buffer enteric coated serrapeptase. But “even if these
statements constitute inequitable conduct that relates to the subject matter of
the claims” the court couldn’t balance the parties’ wrongdoing while many
disputes remained for trial.

In addition, as to that undisputedly false statement, there
was a genuine dispute over materiality. Although the court gave AST a
presumption of materiality, WNI sufficiently rebutted it for purposes of
avoiding summary judgment: (1) Because the products are digestive enzymes,
which do not require enteric coating at all, the statement was meaningless; (2)
the products at issue were WNI’s digestive products, which didn’t compete with
AST’s products, which are systemic products, which would rebut likely harm.
Sort of weirdly, the court concludes that these put other elements into
dispute, rebutting the presumption of materiality—but it seems like (2) at
least would merely make the presumption of materiality insufficient for
liability.

Whether advertising GMP compliance, including adjacent to
statements about quality control, falsely advertised that the products
themselves are high quality and safe or merely indicated that the products are
manufactured in GMP compliant facilities was for the jury, as was
materiality/harm.

Declining to use ordinary conversational principles, the
court also found that a jury would have to resolve whether AST’s advertising of
a product as containing “enteric coated serrapeptase and nattokinase” when only
the former was enteric-coated. (After it allegedly resumed the enteric coating,
AST changed the advertising to say “enteric-coated serrapeptase and
enteric-coated nattokinase.”) Whether “enteric coated” modified both terms was
a jury issue. AST also did say, during the relevant period, “the serrapeptase
and nattokinase in Serracor NK are enterically coated,” but AST urged that
these statements were “buried in [two] additional informational tabs and a blog
post” which sufficiently challenged deception and materiality. (I’d have gone
for falsity by necessary implication, myself.)

from Blogger http://tushnet.blogspot.com/2023/06/materiality-dispute-avoids-sj-in.html

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Advertising injury policy’s IP exclusion means ROP claims aren’t covered

Posted on June 26, 2023 by rtushnet

Covington Specialty Insurance Company v. Omega Restaurant
& Bar, LLC, — F.Supp.3d —-, 2023 WL 2720805, No. 2:21-cv-247 (E.D. Va.
Mar. 30, 2023)

This is fallout from one of the many right of publicity etc.
lawsuits against clubs for advertising them with images of models without those
models’ consent. Omega was sued in state court by a group of such models;
Covington sought a declaration that it had no duty to defend, which it secured
on summary judgment.

The relevant policy provides coverage for bodily injury,
property injury, and advertising injury, subject to certain conditions and
exclusions. The underlying lawsuit asserted misappropriation of images and
likenesses for advertising purposes under state law; violation of the Virginia
business conspiracy statute; and violations of the Lanham Act for false
advertising and false association.

In Virginia, insurance contracts are interpreted according to
general principles of contract law; any ambiguity is construed against the
insurer. “In deciding whether coverage applies, a court may consider only the
underlying complaint and the relevant policy.” A duty to defend is triggered if
there’s any possibility that a judgment against the insured will be covered.

Additionally, “[l]anguage in a policy purporting to exclude
certain events from coverage will be construed most strongly against the
insurer.”

Covered personal/advertising injury included

d. Oral or written publication, in
any manner, of material that slanders or libels a person or organization or
disparages a person’s or organization’s goods, products or services;

e. Oral or written publication, in
any manner, of material that violates a person’s right of privacy;

f. The use of another’s advertising
idea in your “advertisement”; or

g. Infringing upon another’s
copyright, trade dress or slogan in your “advertisement”.

It excluded knowing violation of the rights of another, and
injury “arising out of the infringement of copyright, patent, trademark, trade
secret or other intellectual property rights. … However, this exclusion does
not apply to infringement, in your ‘advertisement,’ of copyright, trade dress
or slogan.”

Covington argued that the ROP claim was an intellectual
property right; although Omega didn’t contest this, it’s not obviously true
(see what’s going on in courts’ characterizations of the ROP for §230 purposes)
and it’s probably past time to add ROP (or name, image and likeness if you prefer)
to that list if insurers really want it excluded. However, given how ROP claims
work, they really should be treated like copyright, trade dress, and
slogan—they’re routinely connected to advertising and the advertising can
regularly be distinguished from the underlying goods/services. Certainly
insureds have at least as much reason to want such insurance, and given the
extension of the right of publicity there is a set of claims that don’t involve
knowing violations of rights.

Anyway, Omega also didn’t contest that the conspiracy
allegation was an excluded “criminal act” and knowing violation of rights of
another, or that the Lanham Act claims aren’t one of the enumerated offenses in
the definition of personal/advertising injury. Instead, it argued that the
underlying lawsuit alleged misappropriation of advertising ideas and
slander/libel/disparagement.

The Virginia ROP “protects both a property interest and a
right to privacy.” But it is generally known as the “right of publicity” as
evolved from the right of privacy. The court concluded that the ROP is an
intellectual property right. Black’s Law Dictionary defines “intellectual
property” as “[a] category of intangible rights” including “trade-secret
rights, publicity rights, moral rights, and rights against unfair competition.”
 

“The distinction between the right of privacy and the right
of publicity is critical to the coverage determination here because the Policy
provides coverage for violation of one (the right of privacy) but excludes coverage
for infringement of the other (as an intellectual property right).” But the
exclusion didn’t swallow the coverage rendering the coverage meaningless,
because other personal/advertising injury offenses were covered.

There was thus no duty to defend as to the ROP, and the
court also found that the policy excluded the conspiracy claim and didn’t cover
Lanham Act claims based on confusion about underlying plaintiffs’ employment at
and/or endorsement of Omega. This was important because false endorsement/false
advertising claims could succeed without the existence of intellectual property
rights.

Omega’s arguments favoring coverage failed because the
underlying complaint didn’t even implicitly allege misappropriation of
advertising ideas, given that there’s no general common law right against
misappropriation in Virginia. Nor did the underlying complaint state a
potential claim for defamation by implication despite the fact that the
underlying plaintiffs alleged that the false suggestion of association with
Omega “would be highly offensive to a reasonable person.”

Courts have divided on whether similar allegations can
actually found a defamation claim. Here, the underlying complaint didn’t
“elaborate” on how such an association or affiliation would subject the underlying
to “scorn, ridicule, or contempt” or render them “infamous, odious, or
ridiculous.” Plus, the underlying complaint alleged that Omega used the images
to promote and draw customers to their business—not to shame or disgrace the
underlying plaintiffs.

from Blogger http://tushnet.blogspot.com/2023/06/advertising-injury-policys-ip-exclusion.html

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ESG statements are commercial speech excluded from California’s anti-SLAPP law

Posted on June 21, 2023 by rtushnet

Hicks v. Grimmway Enters., Inc., 2023 WL 3829689, No. 22-CV-2038
JLS (DDL) (S.D. Cal. Jun. 5, 2023)

Hicks alleged that defendant, a California agricultural
corporation, misrepresented the environmental impact of its farming practices
through its advertising and “Inaugural Report on Environmental, Social and Governance
Actions.” She alleged that its statements about “regenerative farming”; its ESG
commitments; and “preserving natural resources” were “false, deceptive, and
misleading.” She brought the usual
California statutory claims.

Defendant brought a motion to strike under the anti-SLAPP
law. The anti-SLAPP law does not apply to commercial speech when:

(1) the cause of action is against
a person primarily engaged in the business of selling or leasing goods or
services;

(2) the cause of action arises from
a statement or conduct by that person consisting of representations of fact
about that person’s or a business competitor’s business operations, goods, or
services;

(3) the statement or conduct was
made either for the purpose of obtaining approval for, promoting, or securing
sales or leases of, or commercial transactions in, the person’s goods or
services or in the course of delivering the person’s goods or services; and

(4) the intended audience is an
actual or potential buyer or customer, or a person likely to repeat the
statement to, or otherwise influence, an actual or potential buyer or customer.

The court found that the commercial speech exception applied
to the ESG report. It was undisputed that (1) was satisfied; the ESG report
also contains several representations of fact about the defendant’s business
operations and goods, boasting of “Environmental Stewardship,” “Leadership in
Organics,” low-emission farm equipment, “Responsible Farming Practices,” and
“Quality Assurance and Food Safety,” among other aspects of its business
operations and goods. One section of the ESG Report is “pointedly” titled
“Operations” and describes efforts to “increase productivity, food safety and
quality, and accountability.”

Moreover, the ESG report was created, at least in part, to
promote the defendant’s goods or services. It “repeatedly spotlights the safety
and quality of Defendant’s goods. ‘Consumers can buy our products with
confidence that they meet the industry’s most rigorous safety standards,’ reads
the ESG Report.” Although “significant sections of the ESG Report discuss
topics not strictly tied to Defendant’s goods and services,” such as “Employee Health
and Wellness,” “Diversity, Equity, and Inclusion,” and various philanthropic
initiatives, the “overall message” was that the defendant was an ethically
responsible grower and seller of high-quality food products. “As such, the ESG
Report promotes Defendant’s products and its brand more generally.”

“Finally, the ESG Report’s audience consists of actual and
potential customers, as well as organizations likely to influence potential
customers.” Although the defendant argued that the report was directed to “internal
and external stakeholders like employees, policymakers, and advocacy groups,”  the report itself defined the term
“stakeholders” as including those groups and also “Consumers” and “Customers.” The
ESG Report was distributed to “Chambers of Commerce,” “various trade
associations,” and “the media,” “all of which are likely to influence potential
customers.” It was also published on the defendant’s website, where direct
customers and end-consumers could access it. Although defendant’s VP for External
Affairs & Corporate Responsibility stated that the report was only
published online so that the defendant could be eligible for a global corporate
governance award and “was not put online for any sales-related purpose and was
not directed to end-consumers,” the plaintiff submitted evidence that links to
the ESG Report were widely circulated on the defendant’s social media accounts.
Whatever the initial motivation, “the subsequent promotion of the ESG Report to
Defendant’s social media followers supports the conclusion that the ESG Report
was used to target Defendant’s actual and potential customers.”

It did not matter whether the challenged statements
were made specifically for the purpose of promoting defendant’s sales. The
communication as a whole was the key.

from Blogger http://tushnet.blogspot.com/2023/06/esg-statements-are-commercial-speech.html

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“sweetened with monk fruit” and “sugar free” plausibly suggest food is entirely/predominantly sweetened with monk fruit

Posted on June 20, 2023 by rtushnet

Scott v. Saraya USA, Inc., No. 22-cv-05232-WHO, 2023 WL
3819366 (N.D. Cal. Jun. 5, 2023)

Scott alleged that Saraya’s representations that its granola
and other products are “sweetened with monk fruit” or “monk fruit sweetened” were
false and deceptive because they are not entirely or predominantly sweetened
with monk fruit, bringing the usual
California statutory and common-law claims. The court found that Scott
plausibly alleged that these statements, read alongside the statements “sugar
free,” “no sugar added,” or “zero sugar” also appearing on the products’ front
labels, would mislead a reasonable consumer to believe that they were solely or
predominantly sweetened with monk fruit.

The complaint alleged that monk fruit was “a premium fruit
which consumers value given its nutritional values, lack of impact on blood
sugar, antioxidant levels, and more” and that “[c]onsumers seeking monk fruit
products do so for a specific reason—they want solely, if not predominantly,
monk fruit given its premium nature and understood benefits.” Further, the
complaint alleged that Saraya’s competitors “offer products that are advertised
similarly and are actually solely sweetened with monk fruit” and Saraya itself
sells “Lakanto Monkfruit Extract Drops,” which are also advertised as having
“zero sugar” and contain only monk fruit. Thus, consumers could reasonably
believe that products can actually be sweetened solely with monk fruit.
However, the challenged products are  allegedly“predominantly sweetened with erythritol,”
a sugar alcohol that “can lead to multiple side effects, including digestive
problems, diarrhea, bloating, cramps, gas, nausea, and headaches,” and that has
been linked to an increased risk of heart attack and stroke. Monk fruit is allegedly
less processed and “considered to be a more premium sweetener than erythritol,”
and is “much more expensive.”

An earlier version of the complaint didn’t sufficiently
allege why consumers would believe that

“sweetened with monk fruit” or “monk fruit sweetened,” “on
their own,” meant “entirely, or at the very least predominantly, sweetened with
monk fruit.” The amended complaint fixed this problem by alleging both that “sugar
free,” “no sugar added,” or “zero sugar” on the front, coupled with mention of
only one sweetener, misled consumers, along with the existence of monk
fruit-only sweetened competitors.

Saraya argued that the product nowhere said “only monk
fruit.” Although the back of the label “contains a short passage on the
discovery of monk fruit, its perceived benefits, and where Lakanto harvests its
monk fruit,” it also contains an ingredient list that “expressly states that
the product contains ‘Non GMO Lakanto Monkfruit Sweetener (Erythritol and Monk
Fruit Extract).” That wasn’t enough, given the plausible allegations of the
complaint.

With no other sweetener mentioned
on the front label, it is plausible that a reasonable consumer would believe
that monk fruit was the products’ sole or predominant sweetener. That the sugar
and monk fruit representations both appear in large font on the representative
labels, with the sugar statements made above the monk fruit statements, further
support this.

The existence of competitors with all monk fruit sweetening
carried less weight but still helped.

 

from Blogger http://tushnet.blogspot.com/2023/06/sweetened-with-monk-fruit-and-sugar.html

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literally false material comparative ad avoids sj because of dispute about injury

Posted on June 20, 2023 by rtushnet

MacuHealth, LP v. Vision Elements, Inc., 2023 WL 3863341, No.
8:22-cv-199-VMC-JSS (M.D. Fla. Jun. 7, 2023)

MacuHealth sells a nutritional supplement of the same name
that is intended to maintain or improve eye health; Vision Elements is a
competitor that sells Early Defense. Each capsule of MacuHealth’s product
contains three active ingredients, LMZ carotenoids, and Vision Health states
that Early Defense has the same active ingredients in the same amounts. Approximately
1 percent of Early Defense product sales are direct to consumers and 99 percent
are to eyecare physicians.

MacuHealth bottle: note colors

“The LMZ carotenoids used in MacuHealth and Early Defense
are extracted and derived from marigold flower petals using solvents. It is
industry standard to use as solvents hexane or methanol to extract and derive
the LMZ carotenoids. The solvents are largely removed from the LMZ carotenoids
during the production process, but residual amounts remain in the final
product.”

Vision Elements’ challenged ads stated that Early Defense
had “Clean label ingredients: Solvent-free carotenoids derived from non-GMO
marigold flowers through an eco-friendly super critical CO2 extraction process
– No hexane, methanol, or acetone” and the bottle states that Early Defense
“contains none of the following:…Class 2 solvents – hexane, methanol,
acetone[.]” The FDA states that Class 2 solvents “should be limited in pharmaceutical
products because of their inherent toxicity.” These claims were repeated at
trade shows, in personal product pitches, and in emails to potential customers.

Vision Elements’ ads used comparisons based on the
MacuHealth bottle, labeled “Competitor A.”

Vision Elements also used “Competitor Solvent Extraction
Method” at trade shows, a document that includes a cover page of a patent
assigned to MacuHealth’s LMZ carotenoid supplier, and compares that patent’s
use of hexane as an extraction solvent to the use of supercritical CO2
extraction techniques. MacuHealth is the only competitor of Vision Elements
that used that supplier.

Vision Elements comparative ads

Unfortunately for Vision Elements, it turned out that its
own source also used hexane extraction. It didn’t inquire into the ultimate
source or methods of production until the litigation began. Vision Elements initially relied on the
certificates of analysis it received from its supplier to demonstrate that the
supercritical CO2 extraction method was used on the batches it purchased, but
ultimately admitted that the certificates did not provide a basis for
determining whether Class 2 solvents were used. MacuHealth presented evidence of residual solvents in Early Defense capsules.Vision Elements chose not to test for the presence of solvents in Early
Defense.

Vision Elements’ principal testified that the solvent claims
were “highly important” to customers and that it distinguished Early Defense
from competitors like MacuHealth.

An attendee at an industry conference asked, “How is it that
[MacuHealth] doesn’t have a way to do things without solvents?” One substantial
customer and reseller of MacuHealth for many years switched and promoted Early
Defense based in part on Vision Elements’ “clean formulation,” but, along with
another doctor who switched, stated in an affidavit that Vision Elements’
advertisements promoting Early Defense as free from Class 2 solvents did not
affect her decision to purchase Early Defense or recommend it to patients.

Unsurprisingly, there were no genuine disputes on literal
falsity; thus no additional evidence of consumer deception was required. There
were no genuine disputes on materiality either—the court pointed to Vision
Element’s own admission; potential consumers’ questions to MacuHealth; and the
“prevalence” of the solvent claims across Vision Elements’ website, its bottle,
and its oral and email pitches to potential consumers. “Through its own
actions, Vision Elements has demonstrated that its solvent claims are material.”

However, there was a genuine dispute of material fact on
injury. There was evidence that customers switched due to “clean” claims, but
their affidavits indicated that it wasn’t because of the solvents. (Yeah, I
have to wonder if they’re worried about their own liability too.) The court
declined to apply a lesser standard for injunctive relief—demonstrating again
that the TMA’s presumption of irreparable harm only works for trademark claims,
for which harm is not a recognized element of the cause of action; where harm
has to be shown as part of the claim, the presumption doesn’t do any work. FWIW, I would have presumed harm from the evident materiality of the claim
and the direct comparative advertisement, at least for injunctive relief. 

This
also controlled the results for FDUTPA and common law unfair competition.

Negligent misrepresentation: “To state a cause of action for
negligent misrepresentation in Florida, a plaintiff must allege: ‘(1) the
defendant made a misrepresentation of material fact that [it] believed to be
true but which was in fact false; (2) the defendant was negligent in making the
statement because [it] should have known the representation was false; (3) the
defendant intended to induce the plaintiff to rely…on the misrepresentation;
and (4) injury resulted to the plaintiff acting in justifiable reliance upon
the misrepresentation.’ ” Here too, there was no genuine dispute on the first
three elements.

from Blogger http://tushnet.blogspot.com/2023/06/literally-false-material-comparative-ad.html

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To every cow her calf: claim against Organic Valley partially survives based on maternal separation

Posted on June 20, 2023 by rtushnet

Takahashi-Mendoza v. Cooperative Regions of Organic Producer
Pools, 2023 WL 3856722, No. 22-cv-05086-JST (N.D. Cal. May 19, 2023)

Plaintiff sued defendant, which does business as Organic Valley,
under the CLRA and UCL, challenging labels on milk that say:

1. “Organic Valley’s commitment to
the highest organic standards and animal care practices helps make all our food
delicious and nutritious”;

2. “Humane Animal Practices[:] Our
organic animal care focuses on holistic health practices, including daily doses
of sunshine, fresh air, and pasture”;

3. “Pasture-Raised Goodness[:]
Organic Valley’s commitment to high standards of animal care go above and
beyond organic standards because we know the best milk comes from happy cows”;

4. “We Hold Ourselves to the
Highest Standards”;

5. “Our cows are social and so are
we!”

6. “We are your neighbors, a
national cooperative of real farmers growing real food the right way”; and

7. “Pasture-Raised with Love.”

Along with the “idyllic imagery” of the labels – some of
which feature images of human mothers and children and at least one of which
includes “an image of what any reasonable consumer would infer to be a mother
and her calf” – these statements allegedly lead a reasonable consumer to infer that
Organic Valley’s milk products meet the highest standards for humane treatment
of dairy cows, which is allegedly false.

 

Instead, Organic Valley’s member farms allegedly separate
cows and calves “shortly after birth,” a practice which may inflict stress upon
the cows and impair their immune responses. Some farms house calves
individually, a practice associated with “poor growth and chronic hunger.” And male
calves are sold to commercial farms to be raised and slaughtered for meat, and,
once their milk production levels drop, female cows are also slaughtered. 

Surveys allegedly show the majority of consumers agree that
cows should not be separated from their calves early after birth or within a
few hours of birth and that participants would pay the same or more for milk
from cows not separated from their calves shortly after birth. Consumers allegedly
pay a premium for Organic Valley products in order to support humane farming
practices, which they believe do not involve separating cows and calves shortly
after birth.

Although plaintiff had standing to seek injunctive relief,
she didn’t sufficiently allege that her claim for money damages under the CLRA
was inadequate, so equitable relief claims were dismissed.

The court rejected reliance on several statements as “unmeasurable,
subjective claims about Defendant’s products on which no reasonable buyer would
rely.” Considered in context, “growing real food the right way,”
“Pasture-Raised with Love,” “the best milk comes from happy cows,” and “[o]ur
cows are social and so are we” were unmeasurable opinions. Dictionary
definitions of “social” didn’t “provide a usable standard for defining a social
cow. Further, no reasonable consumer would interpret the phrase, ‘Our cows are
social and so are we,’ when followed immediately by several logos for social
media networks, to mean that the cows are never alone.”

But the remaining statements, in context, were actionable
statements of fact. “Whether Defendant observes ‘Humane Animal Practices’ in
its milk production does not amount to puffery.” Other statements were also
definite enough in context. By claiming that “Organic Valley’s commitment to
high standards of animal care go above and beyond organic standards,” Organic
Valley was itself claiming to meet or exceed measurable, objective standards. “We
Hold Ourselves to the Highest Standards” was similarly definite, as it was
immediately followed by a list of five standards, including “Humane Animal
Practices[:] Our organic animal care focuses on holistic health practices,
including daily doses of sunshine, fresh air[,] and pasture”; and “The
Pasture-Raised Difference[:] More time on pasture means our cows’ milk
naturally delivers omega-3 and CLA.” However, the court then found that the “We
Hold Ourselves to the Highest Standards” and “Humane Animal Practices” claims
were not plausibly deceptive, because in context they didn’t suggest that
calves would be kept with their mothers but rather focused on other specific
practices.]

Deceptiveness was supported by survey data showing that “76
percent of consumers shopping at conventional grocery stores, and 87 percent of
consumers at premium/natural grocery stores, including consumers of dairy
products, say they are concerned about the welfare of animals raised for food.”
Further survey data suggests “low acceptance of any cow-calf management system
involving early separation” and that consumers consider “that early separation
was a breach of [the] standard of care owed to both cows and calves.” And
survey data allegedly showed that consumers are willing “to pay the same or
more for milk from cows who were not separated from their calves prematurely,”
and that survey participants characterized “premature maternal separation as
‘unnatural,’ ‘unacceptable,’ ‘inhumane,’ and ‘cruel.’ ” This made deception
plausible, not because consumers would be aware of specific third-party
certification standards, but because the statement about “high standards of
animal care” “potentially runs afoul of consumer expectations regarding the
early separation of calves from their mothers.”

from Blogger http://tushnet.blogspot.com/2023/06/to-every-cow-her-calf-claim-against.html

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Once again surveys fail to aid consumer-plaintiffs in greenwashing case

Posted on June 20, 2023 by rtushnet

McGinity v. Procter & Gamble
Company, — F.4th —-, 2023 WL 3911531, No. 22-15080 (9th Cir. Jun. 9, 2023)

The court affirmed
the dismissal of consumer protection claims against P&G products that used “Nature
Fusion” in bold, capitalized text, with an image of an avocado on a green leaf.
A concurrence expressed some discomfort, given the prevalence of
“greenwashing.”

McGinity alleged
that P&G’s packaging “represents that the Products are natural, when, in
fact, they contain non-natural and synthetic ingredients, harsh and potentially
harmful ingredients, and are substantially unnatural.” A survey of more than
400 consumers who saw only the front label indicated that 74.9% of consumers
thought the label conveyed that the shampoo contained more natural than
synthetic/artificial ingredients, and 77.4% of consumers thought the same about
the conditioner. When asked about the phrase “Nature Fusion,” 52.6% of
consumers thought that the phrase “Nature Fusion” meant that the product did
not contain synthetic ingredients; 49.1% of consumers thought that the phrase
“Nature Fusion” meant that the product contained only natural ingredients; and
69.2% of consumers thought that the phrase “Nature Fusion” meant that the
product contained both natural and synthetic ingredients.

The court found
that the front label was ambiguous, but not misleading, as shown by “the nearly
50/50 split in survey responses interpreting whether the phrase means that the
products are all-natural and lack synthetic ingredients.” (I teach that false
advertising is probabilistic: if a representation is likely to deceive a
substantial number of reasonable consumers, it is deceptive, even if not
everyone is misled—but that conclusion is most reliable for
competitor-plaintiffs, as this case shows. The court doesn’t discuss “don’t
know/not sure” answers, but those answers are arguably the only ones perceiving
ambiguity, a concept that is maybe not super helpful as applied to a
population.)

The
court also used the survey’s nearly 70% “both natural and synthetic
ingredients” results to reason that the back label was relevant to what
consumers would reasonably take away. Whether a back label ingredients list
“can ameliorate any tendency of [a] label to mislead” depends on whether the
“back label ingredients list … conflict[s] with” or “confirm[s]” a front
label claim. … However, the front label must be unambiguously deceptive for a
defendant to be precluded from insisting that the back label be considered
together with the front label.

“Unambiguously
deceptive,” based on my reading of the cases, seems to mean that the court
agrees that it would be reasonable for a consumer to conclude that she need
seek no further information based on the front label. But that suggests that
the court is holding that nearly half of consumers who thought that the product
contained only natural ingredients were unreasonable. Why? It is perfectly
workable to have a normative definition of reasonability, but it’s a bit odd to
have it only in consumer protection cases and use an empirical definition in
Lanham Act cases.

Anyway, the front
label here was ambiguous, not misleading. [This distinction also seems a bit
lawyerly to me.]

“Unlike
a label declaring that a product is “100% natural” or “all natural,” the front
“Nature Fusion” label does not promise that the product is wholly natural.
Although the front label represents that something about the product bears a
relationship to nature, the front label does not make any affirmative promise
about what proportion of the ingredients are natural. Instead, as the parties
point out, “Nature Fusion” could mean any of a number of things: that the
products are made with a mixture of natural and synthetic ingredients, that the
products are made with a mixture of different natural ingredients, or something
else entirely….

We
hold that when, as here, a front label is ambiguous, the ambiguity can be
resolved by reference to the back label. In addition to the ingredient lists,
the back labels of the Nature Fusion shampoo and conditioner contain the
phrases “Smoothness Inspired by Nature” and “NatureFusion® Smoothing System
With Avocado Oil.” Upon seeing the back labels, it would be clear to a
reasonable consumer that the avocado oil is the natural ingredient emphasized
in P&G’s labeling and marketing. The ingredients list, which McGinity
alleges includes many ingredients that are synthetic and that a reasonable
consumer would not think are natural, clarifies that the rest of the
ingredients are artificial and that the products thus contain both natural and
synthetic ingredients.

The survey didn’t
help because it didn’t provide access to the back label. The court says that
the results confirmed the ambiguity of the term, because, “[h]ad the survey
participants had access to the products’ back labels, they would have had an
immediate answer to this question—they could see that the products contain
avocado oil, a natural ingredient, as well as many synthetic ingredients.” But
that’s not a satisfactory rebuttal to the survey because the survey suggests
that nearly half the respondents didn’t think there was a question to be
answered, and thus would have had no particular reason to consult the back.
Now, it’s quite possible that the survey was bad—that a “don’t know/not
sure/need more information” option would have received substantial
endorsement—but that’s a different objection. According to the survey, most
consumers didn’t find the label ambiguous, they just didn’t agree on what
message was delivered, which is not the same thing as having questions about
it.

Basically, courts
want the flexibility to find deceptiveness when the back and the front are, in
the court’s view, too distinct:

Although
a back label cannot contradict deceptive statements made on the front label,
the back label can be used to interpret what is conveyed by the labeling when
the front label is ambiguous, as here. With the entire product in hand, we
conclude, no reasonable consumer would think that the products are either
completely or substantially natural. The survey results do not make plausible
the allegation that the phrase “Nature Fusion” is misleading.

The court also
cautioned: “it is important that potential or current litigants draft questions
for consumer surveys with utmost care. Although the particular survey proved
noninformative in the context of this case and the results of the survey,
consumer surveys may well be relevant and helpful in other cases.” That is, as
McCarthy says in the Lanham Act context, the survey will help when it
reinforces the conclusion the judge has already drawn, and not otherwise.

Judge Gould, joined
by Judge Berzon (odd, but ok): Concurred to express concern that P&G was
treading close to “greenwashing,” “a set of deceptive marketing practices in
which an entity publicly misrepresents or exaggerates the positive
environmental impact or attributes of a product[.]”  The concurrence pointed to the FTC’s Green
Guides, which “give general principles that all marketers can use to avoid
deceiving consumers unintentionally or from mere negligence.”

Here,
although there is only one natural ingredient in the products, the word
“Nature” is in bold, capitalized text on the front labels and is one of the
largest words on the bottles, second only to the brand name, “Pantene.” As a
consumer hoping to purchase natural personal care products, McGinity was drawn
to the emphasis on “Nature” and thought that the labeling meant that the
products were “of, by, and from ‘Nature.’ ” … The phrase “Nature Fusion” may be
more ambiguous and less deceptive than “green” or “eco-friendly,” but I still
note how the use of such a phrase sounds alarm bells similar to those sounded
in the Green Guides.

from Blogger http://tushnet.blogspot.com/2023/06/once-again-surveys-fail-to-aid-consumer.html

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Even counterfeiters can make nonconfusing uses where use clearly indicates compatibility rather than source

Posted on June 19, 2023 by rtushnet

JUUL Labs, Inc. v. Chou, — F.Supp.3d —-, No. CV 21-3056
DSF (PDx), 2023 WL 3886046 (C.D. Cal. Jun. 8, 2023)

Juul, which makes vaping products including charging
docks/cases and cables for the main devices, sued defendants for trademark
infringement and counterfeiting. After a bench trial, the court found
defendants liable for some counterfeiting/infringement, but also rejected claims to the
extent that they were based on product listings that merely suggested compatibility
with Juul products—a careful result. I’ll skip most of this to focus on the
interesting bit.

At one point, the relevant website listed a “JUUL Portable
Charger,” showing a picture of an OVNS-branded charger. 

OVNS branded charger

It also listed a “Universal Magnetic JUUL Charging Cable” with
no trademark visible on the product in the available picture.

charging cable

The court found likely confusion with regard to a “JUUL
Mobile Phone Case,” but not as to the magnetic charging cables or portable
chargers. As to the charging cables, “[t]he use of the word universal implies
compatibility with JUUL and not that it is a JUUL product. There is nothing
else in the product description or on the picture of it that indicates it is a
JUUL product.” Similarly, the OVNS branding and the supplementary nature of the
charger meant that the use indicated compatibility, not source. “Here the label
and branding of another logo eliminates any likelihood of confusion.”

However, where there was infringement, it was willful, so
this wasn’t a case of a court bending over backwards to avoid liability, but
rather avoiding precedent that would sweep in legitimate sellers of compatible
goods. The court awarded $2 million in statutory damages.

from Blogger http://tushnet.blogspot.com/2023/06/even-counterfeiters-can-make.html

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Nominative fair use of a logo on a motion to dismiss: common sense has its day

Posted on June 19, 2023 by rtushnet

Xfinity Mobile v. Globalgurutech LLC, 2023 WL 3998459, No.
CV-22-01950-PHX-SMB (D. Ariz. Jun. 14, 2023)

I’ve been thinking a lot after Jack Daniel’s about
the role of common sense in trademark. Judge Leval in scholarship, Trademark:
Champion of Free Speech, 27 Colum. J. L. & Arts 187 (2004), and the
Seventh Circuit in practice, are all about using common sense rather than
doctrine to limit the scope of trademark rights. This works if we generally
share common sense and a consensus about what kind of “confusion” is
actionable; it fails if some judges think that free riding is unfair and
therefore confusing about something. 
Here, common sense works to protect activity related to resale of
legitimately produced goods from trademark liability, but note that it also
requires theories of implicit sponsorship/affiliation to be rejected. Those
theories are probably wrong! (As Justice Sotomayor’s concurrence noted,
consumers generally don’t think about these supposedly implicit claims at all,
and thus aren’t confused about them, as opposed to when they see explicit
claims of affiliation/sponsorship like “official partner” or “FENTY x PUMA.”)

Xfinity accuses GGT of unlawfully
obtaining cell phones to be lucratively resold. Xfinity sells cell phones to
customers that buy its high-speed internet service. Customers are offered
financial incentives to purchase the phones, and Xfinity recoups its investment
by servicing customer accounts on its mobile wireless network.

Xfinity sued for various business torts, “trafficking in
computer passwords,” “unauthorized access,” and trademark/contributory
trademark infringement. “Xfinity alleges GGT is using fake or stolen identities
to obtain Xfinity phones, and that GGT ‘unlocks’ those phones before reselling
them abroad for a profit.”

Notably, the other business torts/CFAA claims survived, so
GGT is not off the hook, so to speak.

However, GGT’s website use of Xfinity’s logo was nominative
fair use as a matter of law. The complaint’s only alleged use of the Xfinity
mark was to identify one of the carriers from which it would buy customers’
phones. The court agreed that using Xfinity’s logo along with the logos of
other carriers doesn’t suggest endorsement, rejecting the argument that GGT
“falsely suggested that they were sponsored or endorsed by [Xfinity].” The
website image allegedly “allow[s] co-conspirators to sell brand new
carrier-locked phones by clicking on their respective logos.”

logos from D’s website

This was nominative fair use:

Given the large number of mobile
service providers, the mark’s use in the Complaint was to differentiate the
carrier of origin for the iPhones GGT would buy. Without use of the mark, it
would not be apparent to GGT which carrier an iPhone was associated with, if
any. Similarly, Xfinity’s logo was used for the limited purpose of this
identification and differentiation. Finally, nothing in the Complaint suggests
a use by GGT that suggests sponsorship or endorsement by Xfinity. The website
provides an instruction to “select carrier” and allows users to choose between
Xfinity and many other carriers. At most, the Complaint alleges that GGT used
Xfinity’s mark to advertise its willingness to purchase carrier-locked iPhones
registered on Xfinity’s network.

Xfinity also argued that the phones were materially
different and thus infringing. But the complaint only alleged that GGT used the
logo to categorize the phones that it would purchase, before any alleged
modification; the complaint further alleged that the iPhones GGT sold are “new”
and “factory-sealed.”

from Blogger http://tushnet.blogspot.com/2023/06/nominative-fair-use-of-logo-on-motion.html

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“for children” plausibly misleading where adult version is the same

Posted on June 19, 2023 by rtushnet

 Goodwin v. Walgreens, Co., No. CV 23-147-DMG (PDx), 2023 WL
4037175 (C.D. Cal. Jun. 14, 2023)

This case is part of a wave of “false differentiation” cases
that has been achieving at least some success in avoiding dismissal. Goodwin
alleged the usual
California statutory and common law claims against Walgreens for its sale
of “Cough DM” products that differentiate between adults and children on the
label. The children’s product is allegedly more expensive but otherwise no
different; the court agreed that reasonable consumers could be deceived into
thinking that the product was specially formulated for children. (Notably,
Walgreens is merely following the lead of Delsym, the comparator used on the
label: “Compare to Children’s Delsym® active ingredient”/“Compare to Delsym® active
ingredient.”). The children’s product costs a dollar more per ounce and has an
image of a cartoon child on the label.

Walgreens argued that she didn’t identify any falsity. But “district
courts have often concluded that the same types of representations at issue in
this case—specifically, the labeling of a product as ‘for children’—could be
misleading to reasonable consumers.” The repeated use of the word “children”
and the cartoon child, without express disclosure that the medicine was the
same concentration as the adult version, “could mislead a reasonable consumer
into believing that the children’s product is specially formulated for
children.”

Walgreens argued that the label also said it was suitable
for adults by using the phrases “for children & adults” and “ages 4 and
older,” but that didn’t directly contradict the alleged reasonable belief that
the product was formulated for children, “a distinct point from whether it
could be safely taken by adults. Even if Goodwin had consulted the dosage instructions
on the back label to seek context for the representations on the front label,
she would not be able to discern that the product was not formulated for
children.” This also meant that claims based on partial omissions also
survived.

And there was standing to seek injunctive relief. “Goodwin
could certainly compare the active and inactive ingredients on the labels for
both products in the future, but there is no way she could be on notice of any
changes in the formulation of the Children’s Product, and whether those changes
were specifically devised ‘for children.’ If the changes were made to the
relative proportions of inactive ingredients, a comparison of the labels might
not reflect any difference at all.”

from Blogger http://tushnet.blogspot.com/2023/06/for-children-plausibly-misleading-where.html

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