FTC wins summary judgment for violations of shipping Rule and Covid Consumer Protection Act

Posted on March 13, 2023 by rtushnet

F.T.C. v. Romero, 2023 WL 2445339, No. 5:21-cv-343-BJD-PRL
(M.D. Fla. Feb. 27, 2023)

The FTC still has some tools in its arsenal. Here,
violations of the Trade Regulation Rule Concerning the Sale of Mail, Internet,
or Telephone Order Merchandise (MITOR) and the COVID-19 Consumer Protection Act
(along with other §5 violations) allow for summary judgment making defendant
responsible for substantial penalties for falsely advertising personal protective
equipment during the pandemic.

Romero operated a drop-shipping business. In March 2020 (I
was going to say mid-March, but I recognize there’s a question about how long
March 2020 actually was), he began marketing facemasks, including masks he
described as “N95” and “Class N95.” Customers were provided “two shipping
options: 1) ‘Fast Shipping (5-15 days)’; and 2) ‘Standard Shipping (3-5
weeks).’ ” However, when the pandemic began, Romero updated the policy: “As [a]
consequence of the unprecedented novel coronavirus (COVID-19), we’re
experiencing an unforeseen and unanticipated spike in the volume of orders
which may affect our standard shipping/delivery times.” This was linked at the
“My Cart” stage of the four-part checkout process, but it was not available
once customers clicked the “CHECK OUT” button.

Over about a year, 104 orders were fulfilled late, 95 of
which received no refunds or charge backs, while 219 facemask and facemask
filter orders were unfulfilled and not refunded in full or charged back. Beginning
in April 2020, customers began complaining about not receiving orders.

From March 19, 2020 through August 20, 2020, Romero sent a
standard email to customers who ordered facemasks using the same language as in
the updated store policy. However, this didn’t provide customers an option or
avenue to either consent to a delay in shipping or to cancel their order for a
prompt refund. This email was sent 9,619 times. If customers complained or
inquired, Romero emailed, “Once orders have been placed, they’re immediately
processed and therefore cannot be canceled. If customers contact us regarding
cancellations after making a purchase, and the item/s purchased have not yet
shipped, we can issue a refund in the form of store credit only.” This email
was sent 868 times.

You will not be shocked to hear that Romero also lacked a
reasonable basis to claim that the masks he was selling were N95s, even though
he posted a “Certification of Registration” with the FDA’s logo on it connected
to some of the facemasks he sold that were purportedly of “N95” quality. He
also sent purported NIOSH certifications to customers.

MITOR prohibits a seller from soliciting any “order for the
sale of merchandise to be ordered by [a] buyer … via the Internet … unless,
at the time of the solicitation, the seller has a reasonable basis to expect
that it will be able to ship any ordered merchandise to the buyer” either
“[w]ithin that time clearly and conspicuously stated in any such solicitation;
or [i]f no time is clearly and conspicuously stated, within thirty (30) days
after receipt of a properly completed order from the buyer.” If “a seller is
unable to ship merchandise within the” aforementioned time, then the seller
must “clearly and conspicuously and without prior demand” allow the buyer to
either “consent to a delay in shipping or to cancel the buyer’s order and
receive a prompt refund.” If a “seller fails to offer th[is] option” to the
buyer, then the seller must “deem [the] order cancelled and … make a prompt
refund to the buyer[.]” In addition, “the failure of a respondent-seller to
have records or other documentary proof establishing its use of systems and
procedures which assure compliance, in the ordinary course of business,” with these
requirements “will create a rebuttable presumption that the seller failed to
comply with said requirement.”

Findings: Romero didn’t have a reasonable basis for his
shipping claims. He received many customer complaints and was aware that the
manufacturers he used were struggling with product demand volume, but still continued
to solicit and accept customer orders. Representations and purported guarantees
from vendors on Aliexpress “do not coincide with or negate what Defendant
actually knew.”

Romero also didn’t offer the refund-or-consent option to all
necessary customers, nor deem orders cancelled and provide prompt refunds after
failing to give the refund-or-consent option.

Thus, the FTC was entitled to Romero’s net revenues for
violating the MITOR: $989,483.69.

The court also found violations of Sections 5 and 12 of the
FTC Act with the shipping claims and N95-related claims (NIOSH/FDA
certification, that the masks were proper N95 masks, and that they “had
filtration efficiencies comparable to N95 respirators,” “had filtration
efficiencies of greater than or equal to 95 percent,” and would “prevent
viruses, including the CoV-2-virus, from passing through”). For shipping times,
Romero lacked a reasonable basis for the representations, and they were
presumptively material because they were express claims. Even without the
presumptions, consumer complaints showed that shipping times were material.

N95-related claims were also made without a reasonable
basis.  Romero argued that NIOSH itself
did not know what an “N95” mask was in the beginning of the COVID-19 pandemic, but
“this argument bolsters that Defendant himself could not have properly
represented that the masks he sold on Trend Deploy were approved by NIOSH if,
according to Defendant, such a certification did not exist.” This was deceptive
and material, given the relationship to the pandemic, and customers repeatedly
inquired about the quality.

Nor was the “Buyer Protection Guarantee” offered by
Aliexpress enough for Romero to have reasonably believed his products were of
proper quality. Although he didn’t seek approval from either NIOSH or the FDA,
in response to customer questions, he sent customers copies of a purported
NIOSH certification. Plus, Romero’s e-commerce domain host, Shopify, alerted him
that his claims about the quality of his facemasks were unsubstantiated. Shopify
ultimately prohibited him from using its serivces to process payments because
of his unsubstantiated claims about the facemasks.

After the enactment of the COVID-19 Consumer Protection Act
(CCPA) on Dec. 27, 2020, the FTC can go directly to court for penalties for
Section 4 violations “associated with the treatment, cure, prevention, mitigation,
or diagnosis of COVID-19.” Romero’s conduct violated the CCPA

Civil penalties: Civil penalties are available for any rule
violation “with actual knowledge or knowledge fairly implied on the basis of
objective circumstances that such act is unfair or deceptive and is prohibited
by such rule.” Romero testified that he became aware of the MITOR in November
2020, when the FTC informed him he was under investigation, but kept making
representations about, and selling, his facemasks in violation of MITOR and
Sections 5/12.

Although the maximum civil penalty was $43,280.00 per
violation, the court only imposed $2,565.21, a trebling of the $854.07 he
apparently earned from violative sales after that point; although the court
doesn’t say so, the fact that it awarded substantial consumer redress probably
bears on this.

The court also found that Romero should be enjoined. Romero also
sells clothing through a separate company; during the pandemic, he explained
that his advertising “pages ke[pt] getting banned because they have the same
name,” and he noted that he had the ability “to change [his] domain and start
from zero again … so that [F]acebook [would] not block [Defendant]
anymore[.]” And he was still violating the MITOR by misrepresenting shipping
times and not allowing customers the opportunity the refund-or-consent option
required under the MITOR. The “FTC has proven a ‘cognizable danger’ of a
recurrent violation.” The FTC was directed to file a proposed order; the
defendant “must expect some fencing in” “as long as the relief is reasonably
related to the violations of the FTC Act which occurred, and is not too
indefinite.”

from Blogger http://tushnet.blogspot.com/2023/03/ftc-wins-summary-judgment-for.html

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“TM-compliant” ads not shown to be nominative fair use

Posted on March 10, 2023 by rtushnet

World Axe Throwing League, Inc. v. Cold Steel Inc., 2023 WL
2372059, No. 2:20−cv−11407 JAK (Ex) (C.D. Cal. Feb. 14, 2023)

Plaintiffs sued defendants for state and federal trademark
infringement and related claims. Plaintiff WATL is allegedly the preeminent
governing body and league for the sport of axe throwing and uses the trademark
“WATL” to market and publicize the axe throwing league. Cold Steel allegedly “marketed,
advertised and sold substantial sums of axes which were clearly labeled ‘WATL
Compliant’ or ‘Meets WATL regulations.’ ”

The court found that this was close enough to saying “WATL approved”
that it wouldn’t grant summary judgment on nominative fair use, which is yet
another way that trademark is just much more expansive than false advertising
(compare treatment of “FDA
registered,” for example).

First, nominative fair use permits only the “truthful use of
a mark.” Toyota, 610 F.3d at 1177. Defendants contended that one axe “meet[s]
WATL Regulations” and that another “meets WATL Regulations with a slight
modification that is commonly made.” But WATL argued that wasn’t true, creating
a disputed issue of fact. As to one axe whose compliance was undisputed, the
defense was still disputed.

NFU factors: (1) WATL wasn’t readily identifiable without
use of the mark (the current ad claim “Meets most axe throwing association
requirements for tournament play,” was an insufficient substitute). (2) Defendants
didn’t use any distinctive features of the mark, such as logo or stylized
lettering; although the WATL mark was displayed more prominently than the Cold
Steel mark in some instances, that wasn’t important given the lack of
distinctive font or logo; defendants only used what was reasonably necessary.

The problem was (3): whether defendants did anything that
would, in conjunction with the mark, suggest sponsorship or endorsement. Use of
the mark with the words “compliant,” “legal,” and “meets … regulations” could
have done so because there was evidence of consumer confusion. An axe-throwing
business owner testified that, in 2019, he and two other league members
believed that WATL worked with Cold Steel to manufacture axes, based on
advertisements on Cold Steel’s website. “Although it is not clear whether the
phrase ‘WATL approved” appeared on Cold Steel’s website, [his] testimony
demonstrates that axe purchasers could reasonably and mistakenly believe that
the Competition Thrower was either approved by or made with WATL, and that this
belief arose due to the use of the WATL mark on Cold Steel’s website.” Another
business owner testified similarly; though his belief “stemmed from assumptions
and inferences,” his testimony supported “the view that Defendants’ use of the
WATL mark on social media and through a sales representative, contributed to
confusion about the relationship between WATL and Cold Steel within the
community of competitive axe throwers.” Thus, a reasonably prudent consumer
could be confused, and another putative defense dies as it is reduced merely to
confusion.

“Further, internal Cold Steel communications support the
inference that Cold Steel intended to use the WATL trademark to increase sales.”
In another case, statements by a manager of a band that recommended the use of
a trademark to “create or enhance marquee value,” was evidence that the band
used the trademark to suggest sponsorship. Cold Steel’s use could have
contributed to the impression that Cold Steel’s Competition Thrower would be
“the next big thing in WATL,” causing throwers to buy it. [None of that depends on confusion. NFU was born because USA Today polled on New Kids on the Block,
not some unknown band, which it did because that would be more profitable than
polling about an unknown, but that’s not the same thing as intending or desiring confusion.
Sigh.]

Contributory infringement: There was a genuine issue as to
whether defendants intentionally caused any other person to infringe on the
WATL mark or continued to supply axes to any person while knowing that the
person was using the axe to engage in trademark infringement, based on the “common
practice for retailers, including Amazon, to copy and paste product
descriptions from the website of the manufacturer.”

from Blogger http://tushnet.blogspot.com/2023/03/tm-compliant-ads-not-shown-to-be.html

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Drop-shipper’s “in stock” and “trust us over others” claims not shown to be deceptive

Posted on March 10, 2023 by rtushnet

Krikor v. Sports Mall, LLC, 2023 WL 2372068, No. CV
22-5600-DMG (MRWx) (C.D. Cal. Jan. 24, 2023)

Previous
decision here—really interesting attack on internet arbitrage; defendant
copied Krikor’s eBay memorabilia photos and listed the memorabilia on its own
site with a markup; anyone who bought from defendant would actually have
defendant buy from Krikor and drop-shipped to the purchaser. Both copyright and
false advertising claims (based on Sports Mall’s disparagement of eBay sellers
as unreliable) survived a motion to dismiss, but the false advertising claim can’t
make it past summary judgment, while Krikor received partial summary judgment
on the copyright claim.

Sports Mall advertises items as “in stock” when either (1)
it has an item available in its own inventory or (2) the item is in the
inventory of a third-party source from which Sports Mall can purchase and
either ship or have the item “drop-shipped” to fill an order. “Sports Mall
claims that whenever it purchases items from other, third-party vendors of
sports memorabilia, it requires certificates of authenticity or has items
authenticated by third party service providers.”

Its website FAQ includes: “Why can I, when searching, find
the same item for a lower price on eBay?” and the answer states:

You might find the same item or one
very similar for various reasons. Most of our leading competitors buy their
collectibles in bulk and resell them on their site. SportsCollectibles.com
deals directly with the athletes at signings along with their agents and our
highly reputable vendors, therefore our products are 100% authentic. We would
never sacrifice the quality or authenticity of your collectible for a lower
price. Anyone can sell their items on eBay, so unless you personally know the
vendor you should be cautious when purchasing.

So too “How do I know that what I am purchasing is
authentic?”:

SC does not purchase autographed
sports memorabilia from private collectors. We do this for your protection. We
do not take a chance in purchasing from individuals that we do not know as we
want to be able to guarantee our products 110%. All our products come direct
from a private session with the athlete in which a reputable company (such as
Steiner, Upper Deck, APE, Real Deal, etc.) was present…. We will not purchase
any of these items as we only deal direct [sic] with the authenticator.

The court grouped the UCL/Lanham Act claims together.

“In Stock”: This wasn’t literally false, but it could be
misleading. The dictionary definitions didn’t show that “in stock” always means
that the goods are in the possession of a retailer, rather than merely
available “for immediate sale” or “available for sale or use.” There was a
genuine dispute of material fact about misleadingness. Even if drop-shipping is
a common industry practice used by retail giants such as Amazon, “that does not
mean that SportsCollectible.com’s use of ‘in stock’ does not tend to mislead
consumers to believe it literally possesses the item, especially given its
assurances regarding its process for ensuring authenticity.”

“Why can I, when searching, find the same item for a lower
price on eBay?”: This too was misleading in context, because it “implies that
the eBay sellers of ‘the same’ merchandise are inauthentic, when in fact, those
are the very sellers from which Sports Mall sources at least some of its ‘100%
authentic’ products.”

“All our products come direct from a private session with
the athlete in which a reputable company… was present. We will not purchase
any of these items as we only deal direct [sic] with the authenticator”: Not
literally false. The statement didn’t mean that Sports Mall itself is present
at these signings, but rather that it verifies the certificates of authenticity
of its products. And the record was “replete” with evidence that Sports Mall
makes all reasonable efforts to ensure that its products are authenticated in
the manner described in this statement. There was no evidence that the
statements led any consumers to believe that Sports Mall or its agents
personally knows all their vendors and/or has a company representative present
at all sessions with the athletes.

However, in the context of the website, the claim that “we
only deal direct [sic] with the authenticator” could plausibly mislead a
consumer to believe that Sports Mall never sells items obtained by third-party
sellers, which is untrue. Nor was it clear whether Sports Mall was
distinguishing between products it directly purchases and holds in its own
inventory versus products it advertises and sells through other vendors.

Deception: Here’s where the claim failed, because there was
only evidence of a single person—a family friend—who may have been deceived by
Sports Mall’s advertising, and even that one person’s testimony fell short of
supporting that claim. He merely stated that he “couldn’t understand how the
exact same item could be in two different places” and “I did not feel right
about the decision” to buy from SportsCollectibles.com, and that he “just
wasn’t sure of [the item’s] authenticity.” This wasn’t enough to show that a substantial
number of reasonable consumers were deceived.

Unsurprisingly, the copyright claims fared better. The
photos of the items were original: Krikor submitted a declaration describing
his intentional choices behind the lighting, composition, and framing of the
photographs. Nor was the use of the photos fair use. Sports Mall’s use of the
photographs was not “transformative,” but merely “exact copying from
Plaintiff’s store to Defendant’s store.” The photos were created to advertise,
not as artistic expression, and Krikor didn’t lose his right of first
publication, so factor two favored neither party (probably truer to say it
favored defendant but was of essentially no weight). They were used in their
entirety. And the photos “serve little use outside of the marketing” of the
memorabilia. Krikor licensed the photos to co-plaintiff Kevorkian for $100. “The
market for the photos may be small, but Sports Mall is Plaintiffs’ direct
competitor, and its use of the photos helps it make a profit. The photos help
Plaintiffs sell the depicted merchandise and it follows that any potential
buyer might be less likely to buy the jerseys directly from Kevorkian’s eBay
store if the photos were copied everywhere.”

Unclean hands: Sports Mall alleged that the plaintiffs “created
and registered the copyrights in the two photos at issue and put them on
[Kevorkian’s] second eBay store (which was never mentioned to Sports Mall),
intending only to trick Sports Mall into copying the photos in order sue Sports
Mall.” “Though slim, triable questions of fact remain as to whether this
defense bars Krikor’s infringement claim.”

There were also triable issues on willfulness. It was
uncontroverted that Sports Mall uses an algorithmic “crawler” to locate
listings for its site, but it was unclear from the record how that “crawler”
works, and how much Sports Mall monitors its listings and manages its “block
list.”  

The parties even disputed whether Sports Mall took down the
allegedly unlawful photographs referenced in a September 2020 demand letter, and
about whether Sports Mall was aware or should have been aware of Kevorkian’s
additional eBay stores and blocked its “crawler” from those sites as well.

from Blogger http://tushnet.blogspot.com/2023/03/drop-shippers-in-stock-and-trust-us.html

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UCL claim could be based on lost opportunity to register trademark

Posted on March 10, 2023 by rtushnet

Zamfir v. CasperLabs, LLC, 2023 WL 2415262, No. 21-CV-474
TWR (AHG) (S.D. Cal. Mar. 8, 2023)

Previous
ruling. Zamfir, a blockchain researcher, alleged that he was known for his
proof-of-stake (PoS) protocol; he adopted the name “Casper” for the research
and development of this protocol, and is often credited as being the “face of
Casper.” CasperLabs had a failed partnership with him. Zamfir alleged that CasperLab’s
officers and agents told him that they would register the Casper trademark on his
behalf, so he didn’t register the Casper trademark himself. Instead, CasperLab filed
two trademark applications to register the Casper mark in its own name.

Over Zamfir’s objections, CasperLabs released a series of
new blockchain products using the Casper name, including a Casper public
network, Casper token, and Casper highway protocol. The highway protocol
allegedly suffered from performance issues and never met the design
requirements that Zamfir had previously advertised when working with CasperLabs
on the product, thus allegedly harming his reputation. The continued use of the
Casper name allegedly made it more difficult for Zamfir to secure independent
research funding and product promotion.

CasperLabs moved to dismiss two of Zamfir’s remaining
claims: fraud by intentional misrepresentation and unfair business practices.

Fraud: This requires “actual monetary loss” or “pecuniary
damage or injury by reason of having been put in a position worse than he would
have occupied had there been no fraud.” The court previously dismissed the
claim for failure to sufficiently plead commercial injury. He now alleged that he
was deprived “of his exclusive property and presumed nationwide rights in the
CASPER Mark,” the benefits and advantages of federal registration, and the
value of his unregistered mark.

A trademark is a “limited property right,” and, by alleging
a depreciation in the value of his unprotected Casper mark and a deprivation of
the Casper trademark, Zamfir sufficiently stated a claim for monetary loss.
Although the PTO hasn’t finally resolved the ownership issues, Zamfir allegedly
“forfeited a viable opportunity to establish a valuable property right when he
gave up the ability to apply for a trademark registration. The viability of
such an opportunity is underscored by Defendant’s own successful registration
of the trademark, which demonstrates that Plaintiff likely would have secured
at least one trademark had he retained the ability to apply.”

UCL:  “With respect to
the UCL specifically, section 17200 does not support claims by non-California
residents where none of the alleged misconduct or injuries occurred in
California.” The complaint alleged that, “[o]n information and belief,
CasperLabs’ conduct and false statements … occurred in California, and
CasperLabs’ officers and agents residing within California ratified and
participated in CasperLabs’ conduct ….” It was thus plausible that the
alleged fraudulent misrepresentation occurred, at least in part, in California.
But the UCL claim didn’t allege fraudulent misrepresentation; it alleged Lanham
Act unfair competition. Zamfir needed to allege that the acts constituting
federal trademark infringement occurred at least in part in California, and he
didn’t.

In addition, a UCL claim requires that a plaintiff must have
“suffered injury in fact and ha[ve] lost money or property as a result of the
unfair competition.” “This injury requirement is more restrictive than the
federal injury in fact requirement because it encompasses fewer types of
injuries, but it is not intended to be quantitatively more difficult to
satisfy.” In prior versions of the complaint, the general allegation that his
name, reputation, and goodwill were harmed did not, without more, support the
assumption that Zamfir lost money or property. But what about the new
allegations that he was deprived of the benefit of a registered trademark/his
unregistered trademark’s value was harmed? Those injuries didn’t come from the
alleged infringement. However, if the claim had been premised on fraudulent misrepresentation,
that would have been enough to plead economic injury. As Kwikset held,

There are innumerable ways in which
economic injury from unfair competition may be shown. A plaintiff may (1)
surrender in a transaction more, or acquire in a transaction less, than he or
she otherwise would have; (2) have a present or future property interest
diminished; (3) be deprived of money or property to which he or she has a
cognizable claim; or (4) be required to enter into a transaction, costing money
or property, that would otherwise have been unnecessary.

from Blogger http://tushnet.blogspot.com/2023/03/ucl-claim-could-be-based-on-lost.html

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Reminder: teaching first-generation students, free HLS webinar at 12 noon EST

Posted on March 10, 2023 by rtushnet

Teaching First-Generation Law Students

https://ift.tt/g3lKCtU

First-generation students face unique challenges. Anthony
Abraham Jack’s The Privileged Poor recently highlighted many of the
invisible-to-professors barriers such students, especially first-generation
students of color, face in college. What about when those students go to law
school? Dean John Manning will introduce the panel. Three professors—Angela Littwin, Etienne Toussaint, and Rory Van Loo—will
share invaluable insights and recommendations to make “the invisible
curriculum” both explicit and navigable to all students.

Panelist bios:

Angela Littwin, Ronald D. Krist Professor in Law at the
University of Texas at Austin School of Law, is a leading scholar of economic
justice issues facing individual consumers. She studies bankruptcy, consumer,
and commercial law from an empirical perspective. Her current research includes
studying the attitudes towards bankruptcy among consumers being sued by debt
collectors, bankruptcy local legal culture, as well as the relationship between
consumer credit and domestic violence (DV). She has published in journals such
as the Texas Law Review, University of Pennsylvania Law Review, California Law
Review, and American Bankruptcy Law Journal. She has recently published
articles about racial disparities in bankruptcy chapter use, the Consumer
Financial Protection Bureau’s complaints process and supervision program as
well as on how consumer bankruptcy attorneys adapted to the Bankruptcy Abuse
Prevention and Consumer Protection Act. Professor Littwin has been a principal
investigator for a number of empirical projects.

Etienne Toussaint is an Assistant Professor of Law at the
University of South Carolina School of Law where he teaches Contracts, Business
Associations, Secured Transactions, and related seminar courses. His
scholarship sits at the intersection of law, history, political economy, and
critical theory, with a focus on the socioeconomic challenges facing
historically marginalized urban communities across the United States. He has
been nationally recognized for his teaching, scholarship, and service. For
example, in 2022, he was awarded the Junior Great Teacher Award by the Society
of American Law Teachers. Professor Toussaint began his legal career as a project
finance associate with Norton Rose Fulbright US LLP. Then, he served as a Law
& Policy Fellow with the Poverty & Race Research Action Council in
Washington, D.C. before transitioning into law teaching. As a student at
Harvard Law School, Toussaint served as Vice-President of the Board of Student
Advisers. Born and raised in the South Bronx, New York, Professor Toussaint is
the son of immigrants from the island of Dominica in the West Indies, the proud
husband of Ebony A. Toussaint, Ph.D., and the father of their three amazing
sons.

Rory Van Loo teaches Contracts, Business Organization,
Consumer Law, and Financial Regulation at Boston University, where he is
involved with the First-Generation Professionals student group. He is a
graduate of Harvard Law School, and as a student he served as a Teaching
Assistant in the Negotiation Workshop. He later returned to Harvard Law School
as a Lecturer to teach Dispute Systems Design and Advanced Negotiation:
Multiparty Negotiation, Group Decision Making, and Special Dispute Management
Processes. After law school, he worked as a management consultant at McKinsey
& Co. and was on the team that helped set up the Consumer Financial
Protection Bureau.

from Blogger http://tushnet.blogspot.com/2023/03/reminder-teaching-first-generation.html

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“maximum strength” OTC claim plausibly misleading where prescription strength was stronger

Posted on March 6, 2023 by rtushnet

Acosta-Aguayo v. Walgreen Co., No. 22-cv-00177, 2023 WL
2333300 (N.D. Ill. Mar. 2, 2023)

Plaintiffs alleged that three of Walgreens’ pain-relieving
products mislead consumers because the products’ front labels state that they
are “Maximum Strength” lidocaine products, but stronger prescription products
are available. This was plausible on a motion to dismiss.

Plaintiffs alleged that consumers consider dose strength an
important factor when purchasing pain-relieving products. But competitors allegedly
offer similar prescription patches that contain 5% lidocaine and an
over-the-counter cream product that contains 5% lidocaine.

The court also found that the plaintiffs could represent
purchasers of a different patch product, which was substantially similar “in
the colors of the packages and text, the images displayed, the text style and
text descriptions in the bullet points, and the shape and size of the
packaging.” But the challenged cream wasn’t substantially similar.

Walgreens argued that “[n]o reasonable consumer purchasing
one of the Products would read ‘Maximum Strength’ on the labels to literally
mean that the Products contain the maximum amount of lidocaine that a person
could ever obtain anywhere.” But, “[w]hile a reasonable consumer likely
understands the difference between over the counter and prescription drugs, a
reasonable consumer would not necessarily understand the ‘Maximum Strength’ on
the Product’s label to exclude comparable prescription medication…. Reading the
phrase ‘Maximum Strength’ to mean the maximum strength of lidocaine available
generally is not an “unreasonable or fanciful interpretation[ ]’ of the
Product’s label.”

Walgreens argued that the claim was implausible because 4%
is the maximum concentration permitted by the FDA in non-prescription external
analgesics. But it didn’t argue that a reasonable consumer would know this, and
the label could still be misleading. A similar case,  Scilex Pharms. Inc. v. Sanofi-Aventis U.S.
LLC, 552 F. Supp. 3d 901 (N.D. Cal. 2021), concluded that the plaintiff stated
a claim under the UCL or FAL by alleging that defendants’ advertising and
marketing is likely to deceive a reasonable consumer to believe, among other
things, that Defendants’ patches offer ‘the maximum amount of lidocaine
available in patch form.’ ” Factual development was required.

Claims for beach of express and implied warranties ere
dismissed for failure to give pre-suit notice, as was common-law fraud for
conclusory allegations about knowledge and intent; defendants didn’t have a
fiduciary duty to disclose. Unjust enrichment did survive at this stage, as did
claims on behalf of a multi-state class.

Injunctive relief claims were dismissed for want of
standing, which also got rid of the state UDTPA claims, and because plaintiffs failed
to allege that they lacked an adequate remedy at law, the court dismissed their
claims for restitution and disgorgement.

 

from Blogger http://tushnet.blogspot.com/2023/03/maximum-strength-otc-claim-plausibly.html

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materiality/damages requirements continue to make false advertising harder to win than TM cases

Posted on March 3, 2023 by rtushnet

TRUSTID, Inc. v. Next Caller, Inc., 2023 WL 2298748, 2022-1433
(Fed. Cir. Mar. 1, 2023)

Discussion
of some district court proceedings here. TRUSTID lost both patent
infringement and Lanham Act false advertising claims. I’ll only discuss the
latter. 

TRUSTID developed a caller identification product known as
the Authenticator. Next Caller competed with its VeriCall. “Both products
detect fraudulent or ‘spoofed’ calls while authenticating those from a
business’s genuine callers…. TRUSTID advertised that use of the Authenticator
could lead to a 5–10 percent improvement in IVR containment rates, a measure of
callers who can have their issues resolved by the automated system without
having to speak to a live agent.”

Next Caller’s Head of Sales instructed his team to “jack
that stat or make up a number like 8%” for Next Caller’s product, so Next
Caller advertised VeriCall as providing a 10 percent increase in IVR
containment rates.

The jury found Next Caller’s 10 percent IVR containment
statements to be literally, and willfully, false, awarding $1.44 million in
damages, plus an additional $1.44 million in punitive damages, but the trial
court granted JMOL for want of evidence of deception, materiality, or damages.

Although TRUSTID argued that actual reliance wasn’t
required, only that a false statement be “likely to influence the purchasing
decision,” the Third Circuit requires that, for monetary damages, “there must
be a showing of some customer reliance on the false advertisement.” Either way,
there was insufficient evidence to support a finding of materiality because
“the only evidence for [ ] customers that addressed IVR containment suggested
that IVR containment was not important or relevant to their purchasing
decisions.” One customer purchased before the false statements; others
conducted their own tests or relied on referrals. Even if only likely impact
was required, there wasn’t evidence that customers were likely to be influenced
by the false statements after having performed their own independent testing of
the product or in deciding to purchase the product for implementation outside
of the IVR context. Although TRUSTID’s CEO testified that IVR containment is
“the single key metric for companies that use it,” there was no testimony from
a Next Caller customer that did use or consider using VeriCall for that
purpose.

TRUSTID argued that it could get profit disgorgement anyway,
but that’s only for trademark infringement, because infringement constitutes “an
actual finding of injury.” [Narrator: it does not; neither materiality nor
injury are elements of the current infringement test, though the Federal
Circuit cited a 1957 case to support its conclusion, and that case was much
closer in time to the classic, limited concept of trademark infringement.]

from Blogger http://tushnet.blogspot.com/2023/03/materialitydamages-requirements.html

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Two teaching events: teaching first-generation students and developing professionalism in students

Posted on March 1, 2023 by rtushnet

Please circulate widely! Anyone with an interest in teaching is invited to this free Harvard Law School webinar in which expert teachers share their insights.

Teaching First-Generation Students 

March 10, Noon EST– register here.

First-generation students face unique challenges. Anthony
Abraham Jack’s The Privileged Poor recently highlighted many of the
invisible-to-professors barriers such students, especially first-generation
students of color, face in college. What about when those students go to law
school? Three professors will share invaluable insights and recommendations to
make “the invisible curriculum” both explicit and navigable to all students.

Panelists: Angie Littwin, Etienne Toussaint, and Rory Van Loo

Developing Professionalism in Students

March 21, Noon EST — register here.

What is professionalism for a lawyer? How can we as teachers
help students develop professional identities in ways that honor their
diversity and commitments? Norms of professionalism can be exclusionary, even
when our students adapt consciously and strategically to them. But the ideal of
serving clients with specialized legal knowledge has value and meaning. Our
panelists will discuss their strategies for working with developing lawyers to
find professional identities that honor both themselves and the legal
profession.

Panelists: Kendra Albert (Harvard), Jack Lerner (UCI), Kimberly Thomas (Michigan)

from Blogger http://tushnet.blogspot.com/2023/03/two-teaching-events-teaching-first.html

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Trademark question of the day, Harvard edition

Posted on February 28, 2023 by rtushnet

 When I was younger, I had a shirt that had VE RI OLD in the traditional Harvard shield configuration. The local burrito place just rolled these out, and I love them:

from Blogger http://tushnet.blogspot.com/2023/02/trademark-question-of-day-harvard.html

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COVID-related communications are ads where they tout D’s services

Posted on February 28, 2023 by rtushnet

Steven A. Conner DPM, P.C. v. Fox Rehabilitation Servs.,
P.C., 2023 WL 2226781, No. 2:21-cv-1580-MMB (E.D. Pa. Feb. 24, 2023)

Conner is a podiatrist who uses a fax machine at his
practice for treating patients, primarily as a communication destination for
incoming lab results. Fox offers a variety of physical, occupational and speech
therapy services in the form of house-calls to patients; it receives patients through,
among other things, referrals from doctors.

The question was whether eight faxes that Dr. Conner’s
practice received from Fox during the early days of the COVID-19 pandemic were
illegal junk faxes (“unsolicited advertisements”) under the federal
Telecommunications and Consumer Protection Act of 1991.

Each fax contained the headline “Helping Flatten The Curve
With House Calls.” Fox’s defense was that, with the healthcare system in
disarray, Fox wanted to reassure its partners and providers that Fox was open
for business and its services could be counted on. There was testimony that, in
the early days of the pandemic, many of Fox’s referral sources had reached out
to Fox asking for information, and that Fox was primarily seeking to inform
providers that Fox was adhering to existing COVID guidelines. The costs of the
fax campaign ultimately came out of Fox’s informational technology budget
because of its internal status as an information communication.

Out of the roughly 20,000 recipients, less than thirty
requested Fox to stop sending such faxes. Two healthcare office managers
testified that they had received Fox’s faxes and found them to be very helpful
in assuring their own practices that Fox remained open for business, was
comporting with COVID protocols and was “taking steps to bring additional
services to my attention.” They also testified that they did not see the faxes
as advertisements because the faxes “weren’t trying to sell me something” and
they “state things helpful to my practice.”

The TCPA defines an “unsolicited advertisement” as being
“any material advertising the commercial availability or quality of any
property, goods, or services which is transmitted to any person without that
person’s prior express invitation or permission, in writing or otherwise.” Dr.
Conner credibly testified that he did not give permission to Fox to send the
faxes. “Liability must be based on an objective standard—neither the intentions
of the sender nor the opinions of the recipient factor into the equation.” The
Third Circuit has also stated that courts can spot illegal junk faxes by considering
if the advertisement has “profit as an aim,” if it promotes a discount or
price, if it comes with a sales contact, or if it contains “testimonials,
product images, or coupons.” The FCC has also defined non-offensive fax
messages that contain only “information” as opposed to commercial promotion: “[F]acsimile
communications that contain only information, such as industry news articles,
legislative updates, or employee benefit information, would not be prohibited
by the TCPA rules.”

The court held that the larger context of the pandemic wasn’t
part of the objective test for what was an ad; the “reasonable recipient”
standard “considers only that material contained within the four-corners of the
fax.”

The court held that it was clear

that all eight faxes are promoting
Fox’s services in a way that suggests … Fox is trying to secure referrals from
providers. The faxes tout a specific “model” of care used by Fox and which Fox
describes as high quality and unique. While the faxes certainly describe
capabilities of Fox’s services as they pertain to dealing with the challenges
of COVID, that is still a promotion of quality and not solely and informational
exercise.

Even the first fax, which posed the closest question, was
not just informational:

[W]hile the majority of the fax
message appears to be on the informational side, it still promotes qualities of
Fox’s proprietary “house call” model, trademarked and therefore presumably
proprietary of Fox. The bullet points describe the quality of Fox’s
services—even though these descriptions are within the context of dealing with
the challenges of the pandemic, they are still promoting the commercial quality
of the services offered. Here—and with the other seven faxes—there is an
embedded profit motive to gain referrals from past providers, because the more
referrals Fox receives the more revenue they are hoping to receive from the
patients’ insurance.

Subsequent faxes went further, promoting the proprietary
“Fox Model” for treatment of patients and going beyond just informing the
recipient that was open for business or even that Fox was adhering to
COVID-preventive protocols. Having a middle informational segment that would be
fine on its own didn’t change the advertising nature of the whole fax.
Promoting new capabilities wasn’t just “informational,” even if they were health-related.

The court also rejected a First Amendment challenge to the
TCPA.

But the court didn’t find willfulness entitling Conner to enhanced
damages; “Fox’s witnesses were credible when they testified that their intent
was to inform their past referral providers of their additional COVID capabilities,
not to gain referrals in spite of TCPA restrictions.”

 

from Blogger http://tushnet.blogspot.com/2023/02/covid-related-communications-are-ads.html

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