in a Lanham Act (false advertising) case, presumptions cannot substitute for Article III injury

Posted on April 26, 2023 by rtushnet

TocMail, Inc. v. Microsoft Corp., — F.4th —-, 2023 WL
3070085, No. 22-10223 (11th Cir. Apr. 25 2023)

Previous district
court opinion allowing Lanham Act false advertising claims to proceed
against Microsoft; applying the Article III analysis that doesn’t (yet?) get applied to
trademark claims, the court of appeals concludes there’s no standing and thus
no jurisdiction over the appeal.

TocMail “offers a product geared towards a specific type of
threat called Internet Protocol (IP) evasion. TocMail launched its IP-evasion
product, got a patent, and then sued Microsoft for false advertising—all within
two months.” It alleged that Microsoft misled the public into believing that
Microsoft’s product offered protection from IP evasion. But at summary judgment
it failed to show any injury.

Microsoft’s Safe Links, part of its larger product,
evaluated links as users clicked on them; the parties disputed whether it
protected users from IP evasion, which occurs when a link sends visitors to
different websites depending on the visitor’s IP address, thus attempting to send
a security program to one (safe) website and the real user to another
(malicious) website. Microsoft’s ads included statements like:

Sophisticated attackers will plan
to ensure links pass through the first round of security filters. They do this
by making the links benign, only to weaponize them after the message is
delivered, altering the destination of the links to a malicious site. With Safe
Links, we are able to protect users right at the point of click by checking the
link for reputation and triggering detonation if necessary.

As a new market entrant,

TocMail hasn’t done much to market
its product. In bringing its product to market, TocMail has issued two press
releases, sent some emails to potential investors, and spent a few thousand
dollars on digital advertising. That’s essentially it. TocMail hasn’t made any sales.
TocMail admits that, although over 33,000 people have visited its website, it
has not made a single sale and has zero revenue. There’s no evidence that
TocMail has achieved any reputation in the marketplace.

It nonetheless estimated, based on Microsoft’s sales, “more
than $43 billion in lost profits.”

While the harm theory might have survived a motion to
dismiss, TocMail didn’t offer any expert testimony on damages causation,
relying instead on the presumption of injury that some courts have held arises
in a two-player market. According to TocMail, “TocMail and Microsoft are the
only cybersecurity vendors that promote their cloud-based, time-of-click
services as effective protection against IP evasion.” Given Microsoft’s dominance,
TocMail argued, consumers would believe Microsoft over a startup. And TocMail pointed
to evidence that one of Microsoft’s customers, Bosch, raised concerns about IP
evasion and asked Microsoft if it would need to add a third-party solution for
additional protection. Microsoft responded that Bosch “should be covered for
email-based threats” with “the full suite of [Advanced Threat Protection] and
the right best practices.” At the same time, Microsoft said that it “of course
encourage[s] customers to take a multi-tiered approach to security.” And it
noted that it was “exploring new ideas” to prevent IP evasion.

The district court granted summary judgment for Microsoft on
failure to show falsity or misleadingness, but the court of appeals had to do
Article III first.

TocMail failed to show injury in fact. It didn’t offer
testimony from any witness saying that he or she would have purchased TocMail’s
product if not for Microsoft’s advertising, any expert testimony calculating
TocMail’s lost sales from consumers who went with Microsoft (its expert instead
calculated lost profits by assuming that TocMail would have sold to everyone
who paid for Microsoft’s product), or a survey showing that consumers had any
interest in buying TocMail’s product. When it sued, it had done minimal
advertising, and hasn’t made a single sale. Any harm was pure speculation. There
was no evidence that the website visitors who declined to buy the product had
even seen Microsoft’s advertising or bought Microsoft’s product. As to the
customer who asked about IP evasion, TocMail didn’t depose anyone from that
customer or provide other evidence that it would have bought from TocMail. The Supreme
Court has indicated its “reluctance to endorse standing theories that rest on
speculation about the decisions of independent actors.” [Ed. note: Like trademark
claims do?]

TocMail’s claim was too hypothetical and uncertain, given that
it assumed: “(1) that consumers read Microsoft’s advertising, (2) that
consumers understand IP evasion, (3) that consumers are concerned about IP
evasion, (4) that consumers would be willing to buy computer security programs
from a company without any reputation, (5) that consumers would pay the price
TocMail is charging, and so on.”

“All TocMail needed was some evidence that it suffered an
injury: some testimony, some survey, some report. But TocMail has none.” What about
presuming injury from being in a two-player market? Well, that presumption has
been applied to the merits, not standing. “While it may make sense to presume
injury in assessing the merits, presuming an injury in fact for purposes of
standing would raise serious constitutional questions.” [Ed. note: Cf. the TMA’s
presumption of irreparable injury.] “A legal presumption would seem to fall
short of showing (through specific facts) a concrete and actual injury.”

Moreover, a presumption of injury from a two-player market “is
based on an assumption about how third parties will behave. But this
presumption collides head on with the Supreme Court’s ‘reluctance to endorse
standing theories that rest on speculation about the decisions of independent
actors.’ … In short, we can’t presume an injury in fact.”

The court here agreed with Hutchinson v. Pfeil, 211 F.3d 515
(10th Cir. 2000), which held that a presumption of injury alone cannot serve to
prove standing. The cases that use the presumption of injury “merely support
the proposition that when a plaintiff with an otherwise sufficient interest to
have standing shows that its interest has been subjected to patently false
representations, harm sufficient to sustain a claim and justify equitable
relief may be presumed” (also citing Ortho Pharm. Corp. v. Cosprophar, Inc., 32
F.3d 690, 697 (2d Cir. 1994) (“Because consumer behavior is unpredictable, and
because of the general rule in our [c]ircuit against making presumptions of
injury … favorable to the plaintiff, we affirm the district court’s decision
dismissing [the plaintiff’s] Lanham Act claims for lack of standing.”)). “The
presumption cannot be used to show Article III standing.”

Is INTA worried yet? 

from Blogger http://tushnet.blogspot.com/2023/04/in-lanham-act-false-advertising-case.html

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using competitor’s images in comparative advertising is fair use even when appearance isn’t being compared

Posted on April 26, 2023 by rtushnet

 I Dig Texas, LLC v. Creager Servs., LLC, 2023 WL 3066119,
No. 22-CV-0097-CVE-JFJ (N.D. Okla. Apr. 24, 2023)

“This case arises out of alleged misuse of copyrighted
images, eventually leading to a dispute … that resulted in false business
reviews, malicious e-mails, and mutual efforts to interfere with each other’s
business.” The court ends up kicking out all the federal claims and remanding
to state court to resolve novel issues under the Oklahoma Deceptive Trade
Practices Act.

The parties compete in the market for skid steer attachments
and other products. Creager sells Montana post drivers (made in China) that
compete with the Texas post drivers sold by IDT (advertised as made in the USA).

IDT created an ad for its products using two images of
Montana post drivers for which Creager later obtained a copyright registration.
The IDT ad displayed the two images next to the phrase “Made in China” inside a
red circle with a line drawn through the words.

The parties had other disputes, including accusing each
other of posting false reviews of the other. An IDT-related person admitted
that he posted a review about Creager under the name “Karen Sideshow” alleging
that Creager falsely advertised its products as “made in America,” and the post
promotes the Texas post driver sold by IDT, as well as additional reviews about
Creager using other false identities.

Creager also alleged that IDT contacted vendors who sell
Creager’s products and made defamatory statements; the one that seemed to have
an impact was to third party LJD, claiming that Creager was using LJD’s name in
“defamatory advertising against my company,” advising that LJD could be
“tangled up in litigation.” LJD therefore reduced the amount of business it
conducted with Creager until it could determine how the litigation between
Creager and IDT was resolved. Creager sent a letter to third party Semper Fi, an
IDT consignee, stating that the owner “got in bed with a snake” and his recent
bad decisions would “put [his] life in turmoil,” referring to a “tax thing”
that Semper Fi’s owner interpreted as a threat to report him to the IRS for tax
evasion. There’s more, including public disputes on Craigslist.

Creager alleged that IDT falsely advertised that its
products are made in the US, when in fact IDT’s Texas post driver comes in a
premium and economy model, and the economy model is wholly made in China while the
premium model is partially manufactured in the United States, but the power
unit is manufactured in China and the product will not function without the
power unit. At least two IDT ads, though, specifically state that the power
cell of the Texas post driver is manufactured in China, and “attempt to
distinguish IDT’s products from other distributors that sell products wholly
made in China.” [I note the headline is not that nuanced, though the rest of
the post is.]

IDT removed its “Made in USA” advertising in the first 8 months
of 2022, and its on-line sales increased during that time period.

Copyright infringement: This was permissible comparative
advertising, which is fair use:

[I]t is clear that IDT used the
images to compare its own Texas post drivers to the Montana post drivers sold
by Creager, even if IDT’s advertisement does not include a picture or image of
its own product. The comparison being drawn by IDT has less to do with the
quality or features of the products but, instead, IDT is using the copyrighted
images to suggest that customers should purchase IDT’s products based on where
the products were manufactured. Due to the type of comparison being made, the
lack of images of IDT’s products does not detract from the comparative nature
of the advertising, and the Court finds that the purpose of IDT’s use of the
copyrighted images was for a permissible purpose to compare IDT’s and Creager’s
products.

The nature of the work didn’t disfavor fair use, since they
were not particularly “creative or artistic” but were made to sell post
drivers. The ads used the entire images.

The “most important” factor was market effect, and there was
none. “The Supreme Court has expressly rejected the application of a
presumption of market harm in cases when the duplication or use of a
copyrighted work was for a commercial purpose, and the Court will not presume
that IDT’s actions harmed the market for or value of the copyrighted images.” Creager
never attempted to license the images or otherwise value them, other than to testify
that no amount of money would justify licensing to a competitor for this type
of ad. There was no evidence that a marketplace actually exists for the
copyrighted images or that the images have any independent value.

Lanham Act false advertising counterclaim: IDT argued that,
at most, its “Made in USA” statements were ambiguous.

The FTC says:

A product that is all or virtually
all made in the United States will ordinarily be one in which all significant
parts and processing that go into the product are of U.S. origin. In other
words, where a product is labeled or otherwise advertised with an unqualified
“Made in the USA” claim, it should contain only a de minimis, or negligible
amount of foreign content.

But not all courts agree that “Made in the USA” statements
are sufficiently clear and unambiguous to constitute a statement of literal
fact for the purpose of a Lanham Act claim. Some of IDT’s claims were clear and
unambiguous: it advertised “100% American Made Skid Steer Attachments,” and it
includes a “Made in USA” logo on its website and certain ads. Its post on
Craigslist.com states that its premium model is manufactured in the United
States, except for the “imported nitrogen power cell,” and IDT clearly stated
that its economy model is “fully Chinese built.” Another ad asks consumers if
they “[w]ant a post driver MADE in USA,” and IDT goes on to explain that its
premium post driver is manufactured “in house,” except for the imported
nitrogen power cell.

The details are repeated and clear, but the intro (“USA made post driver”) is less so

The court didn’t need to resolve whether the FTC’s guidance
should be applied directly, “because the Court is not dealing with vague or
unsubstantiated claims that IDT’s products are wholly manufactured in the
United States.” Instead, the ads made specific claims and “expressly inform[ed]
consumers that part of the product originates from outside the United States.
The FTC standard appears to apply to more general claims that a product is
manufactured in the United States…. “While IDT’s advertising does make general
claims that it sells products ‘Made in USA,’ this representation is supported
by specific disclosures about its products.” Thus, Creager failed to show
falsity or misleadingness.

Because the parties were asserting novel arguments that
social media posts or online advertising can constitute an unfair trade
practice under Oklahoma law, the court remanded the remaining claims to state
court.

from Blogger http://tushnet.blogspot.com/2023/04/using-competitors-images-in-comparative.html

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no disgorgement under state law when false advertising wasn’t shown to result in sales

Posted on April 25, 2023 by rtushnet

Republic Technologies (NA), LLC v. BBK Tobacco & Foods,
LLP, 2023 WL 3004625, No. 16 C 03401 (N.D. Ill. Apr. 19, 2023)

Previous
discussion. A jury found that defendant HBI engaged in unfair competition
and violated the Illinois Uniform Deceptive Trade Practices Act (IUDTPA” in its
packaging and promotional activities for its RAW Organic Hemp branded tobacco
rolling paper products. Here, the court mostly denied a renewed motion for
disgorgement, prejudgment interest, and attorneys’ fees.

Republic alleged that HBI, its competitor in the tobacco
rolling paper industry, engaged in false advertising under the Lanham Act,
unfair competition, and violations of the IUDTPA. HBI counterclaimed that
Republic infringed its copyrights and trade dress. The jury ruled for HBI on
one of its copyright infringement counterclaims and one of its trade dress
claims against Republic and awarded HBI $979,620 in lost profits and $40,000 in
statutory damages. The jury found that HBI did not engage in false advertising
under the Lanham Act, but that HBI had engaged in unfair competition under
Illinois common law and violated the IUDTPA. There was no special verdict form.

Because the jury was instructed not to consider the question
of damages as to the unfair competition and IUDTPA claims (and plaintiffs
cannot seek monetary damages under that statute), Republic was not awarded any
monetary damages. The false advertising claims were based on statements (1)
that HBI’s rolling paper is “made in Alcoy, Spain, the birthplace of rolling
paper;” (2) that HBI’s RAW “Organic Hemp” papers are the “World’s Only” or
“World’s First” organic hemp rolling papers; (3) that HBI contributes its funds
or sales to a charitable entity called the “RAW Foundation;” (4) that HBI’s
rolling papers are made with “natural hemp gum;” (5) that RAW rolling papers
are “100% wind powered;” and (6) that OCB Organic Hemp papers (Republic’s
products) are knock-offs, “RAWnabees,” copies, or fake versions of RAW. The
court granted an injunction focusing on the Alcoy claims, which were false.

Here, the court declined to order disgorgement of “every
cent of profit from HBI’s RAW brand during that time period—over $34 million.” Disgorgement
is unavailable under the IUDTPA, which provides only for injunctive relief, and
if the violation was willful, attorneys’ fees. But IUDTPA remedies are
additional to any other remedies available against the same conduct under the
common law. “And here, the jury also found that HBI committed common law unfair
competition, which may carry with it the right to disgorgement, though the
parties have not cited, and this Court could not find, an example in Illinois
in the last 75 years.”

Assuming that disgorgement was available, the court looked to
the Restatement (Third) of Unfair Competition for guidance. That worthy
document deems disgorgement appropriate only when (1) “the actor engaged in the
conduct with the intention of causing confusion or deception,” and (2) “the
award of profits is not prohibited by statute and is otherwise appropriate” in
light of all of the factors of the case.

The court was primarily guided by the absence of proof that
the false statements were a substantial factor in producing sales. The court’s
previous finding that the falsehoods “are likely to cause consumers to choose
HBI’s products over Republic’s products” were directed at “likely” future harm
to Republic, not actual proof of causation of HBI’s past profits. Republic
could have provided survey data or consumer testimony, but did not.

Republic mainly pointed to the testimony of HBI’s own
witnesses that the purpose and effect of the “RAW Foundation” promotion and
charitable giving campaigns was to drive more sales, increase brand awareness,
and enhance brand loyalty. “But though there was no official ‘Raw Foundation’
entity, HBI did indeed donate moneys to charities and conduct charitable
events.” Also, a company’s belief that its advertising is important and profitable
“is not evidence that the advertising actually had that effect.” (Once again,
courts in false advertising cases refuse to make the plaintiff-favorable
inferences that are standard in TM cases, here about intent.)

As for the parties’ competing damages experts, HBI’s expert
admitted that he did not review any consumer data or have any background in
understanding consumer behavior, while Republic’s expert also admitted that he
did not know “how much of HBI’s profits are attributable to the challenged
statements;” did not “have any basis for adjusting [his] profit opinion to account
for the fact that the jury might accept some of the statements, but not all of
them, as false advertising;” and did not “have any basis for an opinion that
any of the challenged advertisements actually increased HBI’s profits.”  This lack of evidence that the wrongful
conduct was a “substantial factor” in producing sales was “fatal” to an award
of disgorgement.

The other factors listed by the Restatement didn’t change
anything (the adequacy of other remedies; the public interest in
deterrence/disgorgement; degree of fault; any delay in suing; any related
plaintiff misconduct).  The court
specifically noted the risk of a windfall to Republic, given that there are 22
hemp-based competitor rolling paper products, “all of whom may have suffered
sales losses because of HBI’s misleading statements.” Deterrence was
sufficiently served because it cost HBI money to bring itself into compliance
with the injunction by removing numerous marketing statements from all
packaging, marketing, and promotional materials for upwards of 600 items. Nor
was Republic a completely innocent party in the matter, given that the jury
found that it willfully infringed HBI’s trade dress and copyright.

However, the court did award some attorneys’ fees under
IUDTPA, which are available “if the court finds that [defendant] has willfully
engaged in a deceptive trade practice.” Willful conduct is defined as conduct
that is “voluntary and intentional, but not necessarily malicious.” HBI acted
with willfulness as to the Alcoy statements. “[W]hen HBI—a full year after
trial—claimed that any problems with its Alcoy statements could be solved by
essentially rearranging the punctuation of its previous statements, this Court
found that it was ‘an attempt to mislead.’” Thus, Republic’s reasonable
attorneys’ fees as to that issue would be awarded.

from Blogger http://tushnet.blogspot.com/2023/04/no-disgorgement-under-state-law-when.html

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“Margarita Hard Seller” with no tequila isn’t deceptive

Posted on April 25, 2023 by rtushnet

Warren v. Coca-Cola Co., 2023 WL 3055196, No. 22-CV-6907
(CS) (S.D.N.Y. Apr. 21, 2023)

Defendant makes Topo Chico “Margarita Hard Seltzer.” It
doesn’t have any tequila in it, though it is made with agave sugars. The front
label contains the brand name “Topo Chico,” the word “Margarita,” and the
phrase “Hard Seltzer.” These words appear on a yellow background containing
faint images of agave plants. The label further indicates that the Product is
4.5% alcohol by volume.

defendant’s package

Warren alleged that “[c]onsumers expect to receive a
cocktail containing tequila when they order a margarita as this ingredient
defines what a margarita is,” “[c]onsumers will expect the Product to contain
tequila.” The use of “Hard Seltzer” allegedly reinforced that expectation, as
“the term ‘hard’ in the context of alcohol refers to distilled spirits, i.e.,
‘hard liquor’ ” like tequila. Nor does the product contain sparkling mineral
water sourced in Monterrey, Mexico, which Plaintiff claims “is an essential
part of Topo Chico beverages.”

She alleged NY GBL and other related claims. The court
rejected them without leave to amend.

This is a question, at heart, of whether producers can push
the definitions of products in new directions, not different in kind from
whether “chik’n” can be made with all-vegan ingredients; consumers may need to
learn new information, such as that alcoholic “margaritas” may not be made with
tequila, if the definition is not frozen (no pun intended) by regulators.

Tequila: Plaintiff’s allegations were inconsistent with the
label and with common sense. The product didn’t use the word “Margarita” in a
vacuum, and instead states that the Product is a “Margarita Hard Seltzer.” “The
context provided by the term ‘Hard Seltzer’ is critical and fatal to
Plaintiff’s claim.” I didn’t know one couldn’t add tequila to seltzer!

The court: “Hard seltzer is a category of ‘alcoholic
beverages that contain carbonated water, alcohol, and – in most cases fruit
flavors, that have enjoyed skyrocketing popularity in the United States,’ which
reasonable consumers would recognize as a product distinct from cocktails like
margaritas.” How do we know? While plaintiff alleged that “hard” predominantly
refers to distilled spirits, that’s only true for “hard liquor,” not for “hard
cider” or “hard lemonade,” “and a reasonable consumer would understand the same
in the phrase ‘hard seltzer.’” The reasonable meaning here is that, unlike
regular seltzer, this one contains alcohol.

The court also took judicial notice that the product’s labeling
as a “Margarita Hard Seltzer” contrasts sharply with the labels of the BuzzBox
and Dulce Vida “[r]eady to drink … margarita beverages” identified as
competing alternatives in the complaint:

Those canned beverages are called
“Perfect Margarita” and “Sparkling Margarita” with no additional qualifiers,
and come in packages that describe the contents as “premium cocktails” and
specify that they contain tequila. In contrast, the Product’s labeling does not
refer to it as a cocktail or state that it contains tequila, nor does it
describe the drink solely as any kind of Margarita – perfect, sparkling, or
otherwise. Rather, the Product’s label uses “Margarita” as a modifier of the
term “hard seltzer,” without any reference to cocktails or tequila.

Thus, “margarita” was a reference to taste, as confirmed by
its proximity to flavor varieties on the package. Thus, “a reasonable consumer
viewing the Product’s label as a whole would understand that they were
purchasing a hard seltzer made to taste like a margarita and not a
ready-to-drink margarita cocktail.”  

The use of agave images didn’t change anything, since the
product uses an agave-based sweetener.

The court also pointed to the broader “circumstances” of
purchase.

Had [Warren] lived in New York for
any length of time, she would know that cocktails containing hard liquor are
not and cannot be sold in grocery stores. But even assuming that she moved to
New York right before buying the Product, she plainly was familiar with a
margarita cocktail, and surely knew that nobody sells a margarita for $1.50. Further,
cursory observation of the other items on sale in the beverage section of the
ShopRite supermarket where she purchased the Product would have revealed soft
drinks, beer, and hard ciders/lemonades/seltzers, but no hard liquor,
cocktails, or wine.

[Would it be deceptive to sell these cans for $8 in a
theater?]

Even if there was ambiguity created by the front (which the
court thought there wasn’t) the ingredients label on the back, with its lack of
reference to tequila, cured that ambiguity. I’m not sure why continued silence
can cure ambiguity—the ingredient list doesn’t specify the type of alcohol—but the
court thought that here, with “hard seltzer,” that continued silence confirmed
the absence of tequila.

Likewise, Warren’s claim that the use of the Topo Chico
brand name would lead reasonable consumers to believe that it contains
sparkling mineral water sourced from Monterrey, Mexico was not plausible. The
label made no claims that it was manufactured in Mexico or is otherwise
connected to Mexico in any way, or that it contains sparkling mineral water of
any kind; that was just Warren’s belief about the brand. “[A]ny such ambiguity
is quickly resolved after reading the information on the Product’s back label,
which explicitly states that it contains filtered carbonated water that is ‘not
from source’ and certain ‘minerals for taste,’ and that it is produced and
bottled in Milwaukee, Wisconsin.”

from Blogger http://tushnet.blogspot.com/2023/04/margarita-hard-seller-with-no-tequila.html

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hashtags are plausibly infringing; sales claims plausibly false based on P’s own history of sales

Posted on April 25, 2023 by rtushnet

Automated Pet Care Prods., LLC v. Purlife Brands, Inc., 2023
WL 3046592, No. 22-cv-04261-VC (N.D. Cal. Apr. 21, 2023)

In two opinions on the same day, the court dealt with various
IP/false advertising claims brought by one litter box seller against another.
The first considered various trademark claims, including claims based on use of
a hashtag on social media, where we are apparently going through everything we
went through with domain names and search terms/metatags, yay.

Plaintiff (dba Whisker) sued defendant (dba Smarty Pear),
its competitor in the market for automated, self-cleaning litter boxes. “Whisker
is the pioneer of this technology while Smarty Pear is the newcomer.”

Whisker’s flagship Litter-Robot consists of a rotating
chamber that automatically sifts cat waste after each use into a waste drawer
beneath the chamber, thus keeping the litter box perpetually clean and
eliminating the need for manual scooping. It has registrations for the word
marks “Litter-Robot,” “Litter-Robot 3,” “Litter-Robot 3 Connect,” and
“Litter-Robot Pinch Detect.” Smarty Pear allegedly used confidential information
to inject the market with a new—and virtually identical—automated litter box:
the Leo’s Loo. Its social media posts featured photos of the Leo’s Loo
products, but those posts were tagged, at least in part, with #litterrobot,
#LitterRobot, and #litterrobot3.

Using the old “Internet troika,” the three most important
factors were (1) the similarity of the marks, (2) the relatedness of the goods
or services, and (3) the simultaneous use of the Web as a marketing channel,
all of which weighed heavily in plaintiff’s favor.

Defendant claimed that plaintiff lacked valid rights over the
phrase “Litter Robot” (that is, with a space instead of a hyphen) and the
hashtag “#litterrobot,” given the previous refusal of registration for “Litter
Robot” as merely descriptive; in subsequent applications, Whisker “disclaimed”
exclusive rights to the “Litter Robot” word mark, “meaning it acknowledged that
it lacks a valid trademark over those words.” The PTO also declined to register
“#litterrobot” on the Principal Register, because adding a hashtag to an
otherwise descriptive mark did not alone make the mark suggestive.

If Whisker were pursuing claims
based on [“Litter Robot” and “#litterrobot”]—say, if it were arguing that those
marks have attained secondary meaning since the time they were rejected—then
Smarty Pear’s disclaimer arguments would have merit. Whisker’s recent
disclaimers would constitute admissions that the marks are not yet protectable.

But Whisker is not advancing
trademark infringement claims based on those disclaimed marks. It neither
disputes that it has disclaimed them nor argues that they’ve attained secondary
meaning. … The key question here is whether Smarty Pear’s hashtags are
confusingly similar to the marks over which Whisker has rights; focusing on
whether they are also similar to marks over which Whisker does not have rights
is not helpful.

This is the classic problem of scope v. validity, which modern
trademark doctrine generally resolves by promising to appropriately limit scope
in the infringement analysis, though that promise is often unrealized. The
court commented:

To be sure, there is something
unintuitive about the idea that Smarty Pear could be held liable for using
marks that are nearly identical to marks the Trademark Office has determined
are not protected. … But there is a place in the analysis to account for this
peculiarity: the first of the Sleekcraft factors, the “strength of the mark.” …
The resemblance between the marks that the Trademark Office has determined are
merely descriptive and those it has agreed to register suggests that Whisker’s marks—while
valid—are weak.

But plaintiff also alleged “significant marketing efforts
over the course of 22 years, widespread publicity and write-ups, and rave
customer reviews ranging in the tens of thousands. These allegations suggest
the marks have been strengthened over time.” Anyway, “weak mark[s] entitled to
a restricted range of protection,” infringement may still be found where, as
here, “the marks are quite similar, and the goods closely related.”

The real issue here isn’t validity or strength, but whether
the hashtags functioned as comparative advertising, and here the court tilts
heavily against defendant: “For one, Smarty Pear’s intent is transparent: Not
only are the products themselves virtually identical, but the strategic use of
the number three and the upper-case letters in its hashtags evinces an intent
to capitalize on Whisker’s goodwill.” The court didn’t discuss whether the rest
of the post contained anything equivalent to the labeling that the 9th Circuit
has considered relevant for sponsored ads.

Likely expansion also favored plaintiff. And plaintiff alleged
actual confusion: “when Smarty Pear offered consumers free accessories to
incentivize reviews of the Leo’s Loo, several consumers emailed Whisker’s
customer support to claim their accessories, such that Whisker’s product
specialists had to explain that the Leo’s Loo was not Whisker’s product.” And purchaser
care was hard to assess: “These automated litter boxes aren’t exactly cars
costing tens of thousands of dollars, but they’re not insubstantial purchases
either. They sell for nearly $500 each. Most consumers would pause to reflect
before spending that much on a product.”

Motion to dismiss denied as to trademark infringement, false
designation of origin, and unfair competition claims based on the use of Smarty
Pear’s hashtags.

Automated Pet Care Prods., LLC v. Purlife Brands, Inc., 2023
WL 3049106, No. 22-cv-04261-VC (N.D. Cal. Apr. 21, 2023)

After dismissing patent claims because infringement wasn’t
plausibly pled, the court declined to dismiss some false advertising
claims.  Statements like “[w]e’ve packed
the Leo’s Loo with features that make it one of the most convenient
self-cleaning litter boxes available” and “[w]e designed Leo’s Loo with kitty
safety in mind … so our feline friends are always safe when they step inside”
were classic, non-actionable puffery. The allegation that these statements were
likely to mislead consumers into believing that the product is made in
California when it is allegedly manufactured in China was “strained and
unconvincing.”

It was also puffery to label the Leo’s Loo Too as “the
smartest self-cleaning litter box.” Standing alone, that descriptor is classic puffery.
Plaintiff argued that, in context, the statement is actionable because the
video then goes on to identify several specific features, falsely implying that
competitor products lack those features.

If anything, the context here reinforces the conclusion that
the statement is not actionable. Immediately below the video is a bold header
that reads “Features You’ll Love,” followed by a second line of text which—in
reference to the features listed immediately below it—describes the Leo’s Loo
Too as “one of the most advanced … self-cleaning litter boxes available.” And
of the four features highlighted ever so briefly in the video itself, two are
the most basic functions of any automated litter box: the Leo’s Loo Too
“detects when kitties visit” and “cleans after they leave.” Under these
circumstances, no reasonable consumer could believe the video implies that no
other automated litter box can boast the identified features.

However, plaintiff adequately alleged false advertising
based on defendant’s claim that the Leo’s Loo Too is the “First-Ever
App-Connected Self-Cleaning Litter Box with Alexa and Google Voice Controls.”
Plaintiff alleged that its own product, released years earlier, had its own
smart app and can support Alexa and Google Voice, and that another Chinese
product that defendant allegedly knocked off featured this built-in
functionality long before the Leo’s Loo Too did.

Likewise, plaintiff plausibly alleged false advertising that
“[o]ver half a million cats and their owners have made the transition to a
litter-free life with Pear Family.” “This statement—conveying to consumers that
Smarty Pear has sold over 500,000 of its Leo’s Loo and/or Leo’s Loo Too
products—is a quantifiable claim capable of being proven false.”

Here’s the interesting bit: falsity was plausible because
plaintiff, which has been in business for over 22 years, has had 700,000 sales
in that time. “It thus seems implausible that Smarty Pear could have sold over
500,000 of its products in the one to two years it has been in the market.
Moreover, such a representation is material to consumers and likely to induce
reliance because it inspires confidence in the product.”

And the statement that defendant’s product’s UV rays are
99.9% effective at eliminating viruses and bacteria was also plausibly false
advertising. Plaintiff alleged the existence of FDA guidance advising that UV
rays are not effective at eliminating viruses or bacteria when they are
“covered by dust or soil, embedded in porous surface or on the underside of a surface.”
“Because bacteria or viruses within the Leo’s Loo Too are likely to be buried
in litter, Whisker has adequately alleged that Smarty Pear’s boast of 99.9%
effectiveness is false. And the complaint adequately alleges that such a
representation is material and likely to induce consumer reliance given the
premium placed on odor reduction in the market for litter boxes.”

from Blogger http://tushnet.blogspot.com/2023/04/hashtags-are-plausibly-infringing-sales.html

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fake meat law reinstated on appeal: intentionally misleading commercial speech gets no protection

Posted on April 25, 2023 by rtushnet

Turtle Island Foods, S.P.C. v. Strain, No. 22-30236 (5th
Cir. Apr. 12, 2023)

Reversing the district
court, the court of appeals found that Tofurkey’s facial challenge to a
Louisiana anti-fake meat law failed because the law plausibly could be read
only to cover intentional deception.

Louisiana’s 2019 Truth in Labeling of Food Products Act bars,
among other things, the intentional “misbrand[ing] or misrepresent[ing of] any
food product as an agricultural product” through several different labeling
practices. Those practices include “[r]epresenting a food product as meat or a
meat product when the food product is not derived” from various animals.

Tofurkey’s products include plant-based “chick’n,” deli
slices, burgers, sausages, tempeh, and roasts. Each of its labels, while
employing meat-esque words like “sausage” or “burger,” prominently indicates
that the product is “plant-based.”

Tofurkey had Article III standing: it intended to engage in
conduct arguably affected by a constitutional interest. “Tofurky’s labels and
marketing— which no one contends are misleading or involve illegal activity—are
just the kind of commercial activity the First Amendment protects.” And its
intended actions were arguably proscribed by the law given its dictate that
“[n]o person shall intentionally misbrand or misrepresent any food product as
an agricultural product through any activity including:

[ . . . ]

(2) Selling a food product under
the name of an agricultural product.

[ . . . ]

(4) Representing a food product as
meat or a meat product when the food product is not derived from a harvested
beef, pork, poultry, alligator, farm-raised deer, turtle, domestic rabbit,
crawfish, or shrimp carcass. [similar for beef, pork, and poultry]

[ . . . ]

(9)       Utilizing
a term that is the same as or deceptively similar to a term that has been used
or defined historically in reference to a specific agricultural product.

The statute defines “misbrand” as “intentionally
identify[ing] or label[ing] a food product in a false or misleading way.” To
“misrepresent” also requires intention.

Louisiana argued that Tofurkey lacked standing because it
didn’t intend to mislead or to break the law. But “intent” can mean different
things, including intentionally making a statement that turns out to be
misleading. Thus, the law was arguably broad enough to cover Tofurkey’s conduct.
There was no explicit safe harbor for “meat-like, plant-based products as found
in similar statutes in other states. See, e.g., Okla. Stat. tit. 2 § 5-107 (‘[P]roduct
packaging for plant-based items shall not be considered in violation of [this
statute] so long as the packaging displays that the product is derived from
plant-based sources.’).”

And Tofurky faced a substantial (or credible) threat of
enforcement. In a pre-enforcement challenge “to recently enacted (or, at least,
non-moribund) statutes that facially restrict expressive activity by the class
to which the plaintiff belongs, [we] will assume a credible threat of
prosecution in the absence of compelling contrary evidence.” While Louisiana
conceded that Tofurky’s nine demonstrative labels do not violate the Act, it declined
to make any “representations as to whether any other label of Tofurky would be
violative of the provisions of the Act.” And nothing bound the state from
changing its mind and deciding Tofurky’s labels do violate the statute.

Merits: This was a facial challenge, which is a big deal. In
the commercial speech context, “[t]o succeed in a typical facial attack,
[Tofurky] would have to establish ‘that no set of circumstances exists under
which [the Act] would be valid,’ or that the statute lacks any ‘plainly
legitimate sweep.’”

Here, the law covered only speech that was completely
unprotected: actually misleading commercial speech. Courts are required “to accept a narrowing construction of a state law in order
to preserve its constitutionality.” The state’s preferred interpretation was
that the law prohibits a company from intentionally misleading a consumer by
claiming a product is made from beef, pork, poultry, crawfish, shrimp, meat,
sugar, or rice when it is not. These would be “actually misleading
representations” and thus not within the coverage of the First Amendment. The district
court erred by applying Central Hudson to its reading of the statute,
when it should have accepted this narrowing construction.

 

from Blogger http://tushnet.blogspot.com/2023/04/fake-meat-law-reinstated-on-appeal.html

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May the Fourth promotion seen in the wild

Posted on April 21, 2023 by rtushnet

Not sure I’d want to describe my own food as Bantha meat, but ok.

from Blogger http://tushnet.blogspot.com/2023/04/may-fourth-promotion-seen-in-wild.html

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consumer class settlement can’t include injunctive relief unless there’s Art. III standing to seek injunctive relief

Posted on April 20, 2023 by rtushnet

Williams v. Reckitt Benckiser LLC, — F.4th —-, 2023 WL
2906311, No. 22-11232 (11th Cir. Apr. 12, 2023)

The court of appeals reversed approval of a settlement that
would have provided injunctive relief and up to $8 million in monetary relief
to a class of individuals who purchased one or more “brain performance
supplements” manufactured and sold by defendants. Given that the named
plaintiffs alleged that the products were worthless, there was no reasonable
probability that they’d want to buy them again, so they lacked standing to seek
injunctive relief—and apparently even to agree to it as a settlement offer,
which seems different.

I’m not a standing expert, but I don’t understand why, even
if claims for injunctive relief couldn’t be maintained, one couldn’t settle
claims for monetary relief with non-monetary remedies. The case the court of
appeals discussed, Local No. 93, International Association of Firefighters v.
City of Cleveland, 478 U.S. 501 (1986), seems very different (it’s about a
consent decree that arguably violated a rule against issuing race-conscious
court orders, and says “a consent decree must spring from and serve to resolve
a dispute within the court’s subject-matter jurisdiction”). Here, the money damages
provide the jurisdiction for the damages class, so why can’t the damages class
agree to accept injunctive relief?

I assume that next on the chopping block is cy pres remedies
for nonexhausted settlement funds, since plaintiffs can’t seek that as a remedy
to be awarded either.

FWIW this was not a great settlement in terms of injunctive
relief—it didn’t require anything meaningful—but this ground of reversal might
be worse for consumers overall if such settlements do provide meaningful relief.

from Blogger http://tushnet.blogspot.com/2023/04/consumer-class-settlement-cant-include.html

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paying a referral fee is a consumer injury, not a competitor injury, for Lanham Act standing purposes

Posted on April 20, 2023 by rtushnet

Lewis v. Acuity Real Estate Services, LLC, 63 F.4th 1114 (6th
Cir. 2023)

Acuity operates a website that connects people looking to
buy or sell homes with a local real-estate agent in their area. Acuity offers
its services for free to home buyers and sellers but requires realtors to pay a
fee for referrals. Lewis’s employer required him to pay Acuity’s fee out of his
commissions from home sales. Lewis sued under the Lanham Act, alleging false
statements to home buyers and sellers.

Lewis lacked a “commercial injury” because he was suing as a
customer—he alleged that the “product” he bought was defective and sought to
recover the referral fee. (The facts do sound frustrating: Lewis paid a
referral fee to a different site, which he considered the one that brought him
the client, but because Acuity was also involved, it successfully sued him and
also collected.)

The court held that “no reasonable person would describe
Lewis’s payment of this referral fee as a commercial injury to his ‘reputation
or sales.’” Rejecting Lewis’s specific factual situation as relevant, the court
reasoned, “whenever this injury arose (that is, whenever Acuity requested its
fee), Lewis will have gained, not lost, a sale.” (This arguably makes sense
because the falsity alleged is misrepresentations that lead consumers to use
Acuity’s site rather than continuing to search for agents on their own.) Lewis
didn’t allege that his payment of this referral fee injured his status in the
realtor market in any way. Nor did he allege any reputational harm from, say,
Acuity’s online description of the realtors in its network (including Lewis) as
“top talent.”

The court commented that other realtors could have standing:

To be sure, it is not difficult to
imagine a potential commercial injury to realtors arising from Acuity’s
allegedly false advertising. Instead of identifying the referral fee as the
injury, suppose that a different group of realtors refused to join Acuity’s
network. Suppose further that these realtors alleged that they lost business
because Acuity’s purportedly false advertising caused home buyers and sellers
to use Acuity’s referral services and the competing realtors in Acuity’s
network. Even though this different group of realtors would not directly
compete with Acuity (as compared to its network of realtors), this purported
lost business may well qualify as “an injury to a commercial interest in …
sales” that falls within the Act’s zone of interests.

But that wasn’t the case presented.

from Blogger http://tushnet.blogspot.com/2023/04/paying-referral-fee-is-consumer-injury.html

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Adequate price disclosure?

Posted on April 19, 2023 by rtushnet

Seen in the wild:

Sign on door: “Due to inflation, prices for some food are increasing without notice. Guests can ask the staff at any time for the updated prices. Sorry for the inconvenience!”

My suspicion is that this is not really adequate, but these days, who knows.

from Blogger http://tushnet.blogspot.com/2023/04/adequate-price-disclosure.html

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