ordinary recalls aren’t commercial advertising or promotion

Posted on September 20, 2021 by rtushnet

Pictsweet Co. v. R.D. Offutt Farms Co., 2021 WL 4034222, No.
3:19-cv-00722 (M.D. Tenn. Sept. 3, 2021)

Defendant RDO has a subsidiary, CRF, which was in the
business of “producing, preparing, processing and selling frozen vegetables to
frozen vegetable producers, processers, repackers, distributors and wholesale and
retail re-sellers, including Pictsweet, for human consumption.” Pictsweet
packages frozen vegetables for various wholesale and resale customers,
including Kroger.

CRF assumed responsibility for
Pictsweet’s previous supplier’s facility and obligations, which Pictsweet
allegedly consented to in reliance on representations that CRF would fully
perform those obligations and that Pictsweet—through CRF— “effectively would be
doing business with RDO Farms, which was well known in the industry.”

However, shortly after CRF took
over, defendants allegedly became aware that products processed at CRF’s
facility had tested positive for Listeria or “exceeded an IEH2 Process Control
Test (‘PCT’) value of 9,” meaning that they knew the products were “adulterated,”
and they affirmatively chose not to notify Pictsweet of the Listeria-positive
test results, despite purchase orders containing express warranties by CRF
regarding the products’ wholesomeness and fitness for human consumption,
language regarding the seller’s obligation to notify Pictsweet of any
“significant issues” relating to the products, and indemnification provisions
requiring CRF to indemnify Pictsweet for any claims against it relating to
injury caused by the products.

In 2016, the CDC and the FDA began investigating reported
instances of illnesses related to Listeria and soon determined that the strains
were “closely related to strains” of Listeria detected in vegetables processed
at CRF’s facility. CRF thereafter issued two voluntary nationwide recalls of
its frozen vegetable products. The second recall “impacted 432 products and
included Pictsweet products.” However, Pictsweet alleged, the “second recall,”
for undisclosed reasons, also included products that were not contaminated. “Because
of CRF’s recall, Pictsweet, as required by law, issued its own recall of
products that either contained or could contain CRF green beans and green peas.
Pictsweet’s customers, including Kroger, were then required to issue their own
recalls.”

As a result of a consumer class action against Kroger, Pictsweet
allegedly obtained an FDA inspection report for CRF’s facility, from which it
learned for the first time that CRF had concealed positive Listeria test
results and PCT scores above 9 and that it had engaged in a protocol pursuant
to which it redirected and shipped product that it knew was contaminated to
Pictsweet and other customers that did not require finished-product pathogen
testing. Pictsweet allegedly also learned through discovery that “CRF’s representations
about [Listeria] contaminated products was [sic] inaccurate, and that a large
portion of the frozen green peas and beans CRF had supplied to Pictsweet were
not contaminated by [Listeria].”

Most of the decision is about alter ego liability, but the
court spends some time on the various business tort claims. Some fraudulent
concealment claims weren’t challenged in the motion to dismiss, but libel
claims failed because the complaint didn’t allege that CRF made any statements
about Pictsweet’s product. CRF allegedly knew that, “once it issued its recall,
Pictsweet would be obligated to issue its own recall, which would communicate
to Pictsweet’s customers that the product Pictsweet had delivered was
contaminated and not merchantable.” But that meant that “it was Pictsweet’s own
recall that communicated to its consumers false and disparaging information
about Pictsweet’s products, not CRF’s recall. CRF’s recall, necessary or not,
was only about its own product.”

Lanham Act claim: The recall was not “commercial advertising
or promotion.”  Innovation Ventures, LLC
v. N.V.E., Inc., 694 F.3d 723 (6th Cir. 2012), was not to the contrary. That
case involved a recall order based on a trademark/trade dress claim. The
plaintiff had sued two different manufacturers of competing energy shots and
gotten a preliminary injunction based on trade dress, but not trademark. It
then sent a “recall notice” to 110,000 convenience stores and truck stops,
without specifying which “6 Hour Shot” was covered or mentioning that there
were multiple such products on the market. There was no dispute in that case
about whether the notice was commercial advertising or promotion.

Here, the plaintiff didn’t sufficiently allege what in the
recall notice was false or misleading. But more important, the recall here “clearly
did not constitute commercial advertising or promotion of CRF’s product but
instead recalled it. Even if the court assumes that the recall was ‘misleading,’
insofar as it allegedly extended to products of its own that CRF actually knew
were not contaminated, this is simply “not the kind of misrepresentation
prohibited by the [Lanham] Act.’”

Tennessee Consumer Protection Act claims based on the same
conduct also failed, though there was other stuff going on (alleged
misrepresentation of the CRF/RDO relationship, and allegedly knowing provision
of contaminated/adulterated products to Pictsweet while representing their
wholesomeness/fitness for human consumption). The economic loss doctrine didn’t
bar recovery under the TCPA.

from Blogger https://ift.tt/3AvnMdh

Posted in Uncategorized | Tagged | Leave a comment

Does the Lanham Act cover a campaign to get a particular job?

Posted on September 20, 2021 by rtushnet

Healthcare Integrity, LLC v. Rehoboth McKinley Christian
Health Care Servs., Inc., 2021 WL 4129248, Civ. No. 20-750 KG/LF (D.N.M. Sept. 9, 2021)

Plaintiffs, a healthcare management company and its
individual owner  alleged that a group of
medical providers at RMCHCS secured their ouster as management company/Chief
Executive Officer of RMCHCS through a campaign of false and misleading
information. Defendant CMO Wangler was allegedly motivated by a desire to
replace the individual plaintiff, Conejo, as CEO and secure a lucrative
management agreement for her own company.

Plaintiffs sought to amend the complaint to add, inter alia,
a Lanham Act false advertising claim, which the court held was not futile.

Footnote: Commercial advertising or promotion isn’t
necessarily straightforward. The court didn’t undertake any analysis of this
element at this stage.

The proposed amended complaint would allege that Wangler “in
connection with a professional service (i.e., managing a hospital system) made
false or misleading statements of fact regarding the hospital management
services Plaintiffs provided that, in fact, caused damage to Plaintiffs.” She
allegedly “embarked on a campaign to disparage the value and quality of the
management services Mr. Conejo and HCI were providing to RMCHCS” because she
“knew that Mr. Conejo was well-liked and respected” and that she would “need to
create a negative impression of Mr. Conejo … if she were to be successful in
ousting Mr. Conejo” and HCI so that she could “secure the CEO position for
herself under a management contract with her LLC[.]” She allegedly
“complain[ed] publicly about how Mr. Conejo had cancelled contracts with agency
nurses and proposed employee pay cuts and insist[ed] that his mismanagement and
desire to turn a profit was endangering patient lives and safety”; made
statements to the media suggesting that the entire RMCHCS medical staff had
voted “no confidence” in Conejo where, in fact, the majority of physicians and
nurses had not signed the No Confidence Declaration; accused Conejo of creating
patient safety risks and engaging in retaliatory suspensions; and made the
foregoing statements despite knowing that they were false or misleading.

Wangler also allegedly (1) disseminated the allegedly false
or misleading statements to the relevant purchaser of the services: the RMCHCS
Board, which had the authority to engage—and/or terminate—the services of a
hospital administrator of its choosing; (2) utilized multiple methods of
communication, including interviews with news media, email, Zoom
videoconferencing, and letters, to disseminate false or misleading statements
about the services Plaintiffs were providing; and (3) “made an express sales
pitch for the CEO contract” in a letter she submitted to the Board in May 2020.
Taking all this as true, the court couldn’t say that amending the complaint
would be futile.

Comment: The key move prefigured here is whether a specific
potential employer is the relevant audience for an individual’s services. Is
this an organized campaign to penetrate the relevant market? We can only know
once we understand the relevant market, and the answer might be different for
an ordinary company that could in theory provide services to many different
hospitals versus a very specific employment situation—or it could simply be
that soliciting a particular employer, no matter how desireable to that
would-be CEO, is not enough to be commercial advertising or promotion, since
the relevant skills are likely transferable in ways that, say, supplies for
Ford engines are not. That is, previous cases recognizing solicitations to a
single buyer as “commercial advertising or promotion” for Lanham Act purposes
have all, as far as I know, been about customized products that can only
realistically be sold to the specific buyer, like Ford or Coca-Cola. However,
it’s notable that the producers in those cases chose to customize their
products—there was a broader market out there; they just wanted to participate
in a very specific market. So at what point in time do we assess the relevant
market, and can the specificity of human factors be part of that?

from Blogger https://ift.tt/3tZk1dQ

Posted in Uncategorized | Tagged | Leave a comment

“recyclable” could be deceptive where local recycling isn’t widespread

Posted on September 17, 2021 by rtushnet

Downing v. Keurig Green Mountain, Inc., 2021 WL 2403811, No.
1:20-cv-11673-IT (D. Mass. Jun. 11, 2021)

Keurig allegedly deceptively advertised its plastic
single-serving pods as recyclable when those pods were not recyclable according
to federal regulations. Keurig allegedly released pods that were manufactured
from #5 plastic (which is recyclable) instead of #7 plastic (which is not) in
order to address backlash to the use of nonrecyclable plastic. The new pods
featured a three-arrow recycling symbol and the catch phrase “Peel, Empty,
Recycle,” although the word “Recycle” was followed by an asterisk that advised
buyers to “Check Locally.” The box also informed customers that they could
“Have your cup and recycle it, too,” although again it stated that customers
should “Check locally to recycle empty cup.”

During the period from the release to the present, however,
many recycling centers could not accept the Pods as a recyclable product. In a
pre-release investigation, Keurig allegedly discovered that even at recycling
centers which will accept the Pods only 30% of the Pods were successfully
recycled, because of their size, their tendency to become crushed by the
recycling machines, and residue from the foil tops, filters or other
contaminants.

Keurig argued that Downing lacked Article III standing
because he didn’t include the specific ad he saw that induced him to buy the
pods, didn’t say whether he was a prior pod purchaser before the change, didn’t
allege whether the pods he bought were recyclable in his community, and didn’t
allege what the difference in value between a recyclable and a non-recyclable
pod would be. That’s not required (and very little of that is about standing).
He attached photos of the ads and stated that the ads had been substantially
and materially the same since the “recyclable” pods were released, which was
sufficient. He further alleged that he relied on the ads and paid more than he
would have paid for the truth.

Keurig then argued that any harm was traceable to the
recycling centers, not to Keurig. Also no. “Keurig’s advertisement may be
understood as making representations regarding the recycling process,” and
causation exists “where the deceptive act or practice ‘could reasonably be
found to have caused a person to act differently from the way he [or she]
otherwise would have acted.’ ”

He also had standing to seek injunctive relief so that he
could rely on future statements from the company. It was plausible that he’d
buy pods from Keurig again if he had confidence that they were recyclable, so
his alleged present inability to rely on the product’s labeling satisfies the
requirement of an “actual and imminent, not conjectural or hypothetical” threat
of future harm sufficient to establish his “ ‘personal stake in the outcome of
the controversy’ as to warrant his invocation of federal-court jurisdiction.”

Massachusetts Chapter 93A: Massachusetts law is “guided by
the interpretations given by the Federal Trade Commission.” The FTC has
provided such guidance: “When recycling facilities are available to less than a
substantial majority of consumers or communities where the item is sold,
marketers should qualify all recyclable claims.” The guidance also states: “If
any component significantly limits the ability to recycle the item, any
recyclable claim would be deceptive. An item that is made from recyclable material,
but, because of its shape, size, or some other attribute, is not accepted in
recycling programs, should not be marketed as recyclable.”

It offers an example:

[a] paperboard package is marketed nationally and labeled
either ‘Recyclable where facilities exist’ or ‘Recyclable B Check to see if
recycling facilities exist in your area.’ Recycling programs for these packages
are available to some consumers, but not available to a substantial majority of
consumers nationwide. Both claims are deceptive because they do not adequately
disclose the limited availability of recycling programs.

Given the allegations that most recycling centers do not
accept Pods and only 30% of Keurig’s Pods were recyclable at the facilities
that accepted them, Keurig’s statement to “check locally” might not be
sufficient to avoid deceptive marketing under the FTC guidance.

A reasonable consumer could have relied on the claim:
“reasonable customers viewing the Keurig’s claims that the Pods were recyclable
were not expected to do research to see if the Pods were actually recyclable,
either in their own communities or across the United States. The warning ‘check
locally’ did not make those customers unreasonable in assuming the Pods were
recyclable.”

However, Downing could not represent a putative nationwide
class, even if the relevant decisions were made in Massachusetts.

from Blogger https://ift.tt/3kkR8Wi

Posted in Uncategorized | Tagged , , | Leave a comment

Lost profits aren’t restitution for California UCL purposes

Posted on September 17, 2021 by rtushnet

Lee v. Luxottica Retail North
America, Inc., — Cal.Rptr.3d —-, 2021 WL 2451109, A157657 (Ct. App. Jun.
16, 2021)

Lee, on behalf of a
putative class of California optometrists with independent optometry practices,
brought suit against a competing chain of optical retailers, alleging UCL
violations. However, compensation for lost market share isn’t authorized by the
UCL, because that’s not restitution, “the only form of nonpunitive monetary
recovery authorized under the UCL. … Lost profits are damages, not restitution,
and are unavailable in a private action under the UCL.” Absent a legally
enforceable right to a stream of future income, the plaintiff lacks an
ownership interest in it and thus there is nothing to “restore.”

from Blogger https://ift.tt/3zj6Mph

Posted in Uncategorized | Tagged , , | Leave a comment

handful of bad Amazon reviews make Energizer’s false advertising claims plausible

Posted on September 17, 2021 by rtushnet

Energizer, LLC v. MTA Trading, Inc., 2021 WL 2453394, No.
20-CV-1583 (MKB) (E.D.N.Y. Jun. 16, 2021)

Along with breach of contract and tortious interference
claims, Energizer alleged that MTA falsely advertised by selling batteries with
Energizer’s mark and then by fulfilling orders with products different from
those advertised and shipping batteries to consumers that were “used, aged, or
tampered-with.” In seven consumer reviews quoted in the complaint, the
reviewers report that batteries sold by the relevant account did not work or
were not as advertised.

Defendants argued that Energizer failed to state a false
advertising claim because it relied on seven pieces of negative feedback
without explaining whether they were representative, and didn’t allege details
about how the batteries were advertised, such as whether they disclosed
repackaging or advertised an expiration date (two subjects that came up in the
negative reviews). It argued that there are plausible alternative explanations
for the negative reviews, including that Amazon shipped and fulfilled the
products (and might well have sent them from another seller, which does seem to
be a thing with Amazon sales) or that competitors were leaving fake negative
reviews. That’s a fascinating Twiqbal issue, it seems to me: at what point do
Amazon’s problems become part of common sense?

The court found the Lanham Act allegations adequate.
Energizer alleged that defendants advertised their batteries as “new,” and also
advertised the batteries in certain quantities, but instead, the batteries were
not new and were inoperable or had insufficient charge, and the shipments sent
to consumers were short of the quantities they ordered. That was specific
enough.

The additional arguments might work, but not on a motion to
dismiss.

from Blogger https://ift.tt/2YVX3Zp

Posted in Uncategorized | Tagged | Leave a comment

independent contractors as agents in creating fake reviews

Posted on September 17, 2021 by rtushnet

RingCentral, Inc. v. Nextiva, Inc., 2021 WL 2476879, No.
19-cv-02626-NC (N.D. Cal. Jun. 17, 2021)

The parties are cloud-based communications companies.
RingCentral offers voice, virtual private branch exchange, audio and video
conferencing, messaging, contact center collaboration, SMS, online meetings,
contact center, and fax. Nextiva’s offerings inlcude voice, video, and
messaging.

RingCentral sued for tortious interference, defamation,
trade libel, unfair competition, and cybersquatting. Nextiva’s independent
contractor, Baruch Labunski, “fabricated fictitious online personas of
RingCentral personnel, registered domain names using fake contact information,
and created fraudulent websites associated with those domains for the purpose
of redirecting users away from RingCentral, and toward unrelated business
websites.” Nextiva also allegedly posted fake negative reviews of RingCentral
and fake positive reviews of Nextiva.

Likewise, RingCentral allegedly created a customer review
page selectively aggregating only positive reviews from other review sources.

Starting with the counterclaims against RingCentral:  The review page “reflects an overall 4.8-star
rating in the marketplace,” but Nextiva argued that, on the sourced websites
where the reviews originate, it has “at least hundreds of one- and two-star
reviews; rather than the five one- and two-star reviews reflected on
RingCentral’s Reviews Page.” RingCentral blamed a third party contractor,
though I’m not sure why that should matter; the court found there were genuine
issues of material fact, including about whether the third party had discretion
to exclude reviews. (Even if it did, I don’t see why RingCentral wouldn’t be
liable for them.)

RingCentral then argued that Nextiva failed to prove
causation or economic injury. “Here, Nextiva’s experts used regression analyses
to show that traffic to RingCentral’s web pages closely coincided with reduced
Nextiva sales, and that Nextiva would have to spend significant funds to
correct the misimpressions that RingCentral’s pages caused in the market.”
Though RingCentral pointed out that the experts relied on claims that were no
longer being challenged and didn’t apportion the harm, this was for a jury to
resolve.

Nor could RingCentral’s unclean hands argument be resolved
on summary judgment.

So too with Nextiva’s motion for summary judgment, except
for claims based upon allegedly fake positive reviews of Nextiva. Starting with
those, defamation and trade libel don’t cover fake positive reviews of the
defendant.

As mentioned above, Labunski, under the supervision of
Nextiva’s former CMO, “posted over 10,000 fake positive reviews of Nextiva on
downdetector.com and verified-reviews.com,” as well as a smaller number of fake
positive reviews on other sites.  Nextiva
allegedly published at least 85 fake negative reviews of RingCentral’s
services, though RingCentral’s own expert testified that approximately five of
those fake negative reviews were “verified” as false by being tied to domains
known to be registered by Labunski.

Defamation: Fake positive reviews of Nextiva were not “of
and concerning the plaintiff,” and RingCentral didn’t show that third parties
reasonably understood the fake positive reviews to be a part of a “defamatory
scheme” against RingCentral. In fact, the law doesn’t recognize RingCentral’s
theory that the fake positive reviews were part of drawing a contrast between
the parties with a “defamatory scheme.” It had to prove that prospective
customers reasonably understood the challenged statements to be derogatory
against RingCentral under the circumstances. RingCentral did show that that
three prospective customers, who ultimately chose Nextiva, made a comparison
between the two companies after looking at reviews. “But there is no evidence
that those prospective customers interpreted positive reviews about Nextiva to
mean something derogatory about RingCentral…. To agree with RingCentral’s
‘defamatory scheme’ argument would be to say that any statements made in the
course of market competition, whether falsified or factual, would necessarily
result in defamation.”

However, fake negative reviews of RingCentral were
definitely “of and concerning” RingCentral, so the
defamation and trade libel claims based on them could continue.

Trade libel: Trade libel is the intentional disparagement of
another’s property that results in pecuniary damage. A trade libel plaintiff
“must also prove that the statement played ‘a material and substantial part in
inducing others not to deal with [the plaintiff],’ ” along with special damages
in the form of specifically itemized pecuniary harm that was proximately caused
by the libelous statements. Nextiva argued that RingCentral couldn’t prove
causation and damages. The court agreed that, under governing law, a plaintiff
is required to “identify particular customers and transactions of which it was
deprived as a result of the libel.” But there was a genuine dispute of material
fact on causation and loss: RingCentral identified prospective customers who
saw reviews of both companies and chose Nextiva, but it wasn’t clear whether
they saw the allegedly fake reviews, and if so, whether those fake reviews
played a substantial and material role in their decision to choose Nextiva over
RingCentral.

Tortious interference: Same thing.

UCL: Nextiva argued that RingCentral didn’t show it was
entitled to an injunction.  But “[t]hat
Nextiva has since fired the alleged wrongdoers and discontinued its policy does
not mean that a risk of future injury is lacking.” There were disputes of fact
about whether the officers and employees still employed by Nextiva were
complicit or failed to act on the fake review scheme, and whether changes were
implemented company-wide or only by specific teams.

Cybersquatting: Could Nextiva be held liable for the acts of
its independent contractor “falsely register[ing] at least one domain name
strongly suggestive of the RingCentral brand name.”

Masjedi was the CMO who hired Labunski to work on search
engine optimization. He instructed Labunski to impersonate another competitor
to post fake negative reviews. Labunski then re-used that idea to impersonate
RingCentral; he purchased the domain name “ringcetrnal.com” and used fake
identities and funds supplied by Nextiva, he created fake email accounts on the
“ringcetrnal.com” domain to impersonate RingCentral’s CEO and the CEO’s
daughter, and tried to use those false identities to eliminate positive reviews
of RingCentral with the Better Business Bureau and Fit Small Business.

Nextiva argued that there was no evidence that the
impersonation caused harm. RingCentral’s 30(b)(6) witness testified that “the
reputation of RingCentral was diminished…through the fraudulent emails,” but
also lacked knowledge of any changes to RingCentral’s Better Business Bureau membership
or of any RingCentral reviews being removed from Fit Small Business. It was for
the jury to weigh the credibility of this testimony.

Was Nextiva liable for its independent contractor’s domain
name registration? The Restatement (ThirdO of Agency says: “An agency
relationship arises “when one person (a ‘principal’) manifests assent to
another person (an ‘agent’) that the agent shall act on the principal’s behalf
and subject to the principal’s control, and the agent manifests assent or
otherwise consents so to act.” “An agent acts with actual authority when, at
the time of taking action that has legal consequences for the principal, the
agent reasonably believes, in accordance with the principal’s manifestations to
the agent, that the principal wishes the agent so to act.” There was sufficient
evidence for a jury to find that Labunski was an agent of Nextiva for purposes
of cybersquatting liability by finding that Labunkski’s wrongful conduct was
within his authority, or that Labunski was negligently supervised by Nextiva.
The fact that Labunski’s consulting agreement disclaimed an agency relationship
was insufficient.

from Blogger https://ift.tt/3nHCBG1

Posted in Uncategorized | Tagged , , | Leave a comment

TM infringement and false advertising claims related to putative open source software “fork” succeed

Posted on September 16, 2021 by rtushnet

Neo4j, Inc. v. PureThink, LLC, 2021 WL 2483778, No.
5:18-cv-07182-EJD (N.D. Cal. May 18, 2021)

Neo4j specializes in graph database management systems.
“Neo4j USA’s platform helps organizations make sense of their data by revealing
how people, processes and digital systems are interrelated.” [I still don’t
know what that means, but ok.] It has more than 400 commercial customers,
including global enterprises such as Walmart, Comcast, Cisco, and eBay, and
also does substantial business with government agencies, including US agencies.
It has trademark registrations for the word mark “NEO4J.”

Neo4j originally offered a free and open source version of
the Neo4j platform known as the Neo4j Community Edition, with limited features
and no technical or administrative support. Neo4j Enterprise Edition was
originally offered under both a paid-for commercial license and the free GNU
Affero General Public License, version 3, but Neo4j then replaced that AGPL
with a stricter license (the Sweden license), which prohibited the non-paying
public from engaging in commercial resale and certain commercial support services.
Eventually, they released Neo4j EE version 3.5 under a commercial license only.

PureThink is a software and information technology
consulting company that specializes in supporting agencies within the U.S.
Government. The parties previously partnered nonexclusively so that PureThink
would sell and support the commercial version of Neo4j; upon termination,
PureThink expressly agreed to “cease using any trademarks, service marks and
other designations of Plaintiffs.”

Neo4j ultimately considered PureThink’s Neo4j Government
Edition to be a problem. PureThink’s principal created a new entity, iGov,
which stated:

The principal behind PureThink and
the Government Package has created a new corporate entity called iGov Inc,
which is not a Neo4j Solution Partner. …

* * *

iGov Inc’s new Government Package
for Neo4j can be added to any Neo4j instance making it a “Government Edition”.
By default, all Government Packages for Neo4j now comes with Neo4j Enterprise
included under its open source license!

Many details omitted, but eventually defendants’ principal
helped found an organization that began promoting a software called “ONgDB.”
This used Neo4j EE version 3.4 as a base, but replaced the Neo4j Sweden
Software License with the AGPL. “Defendants continued to promote ONgDB as ‘free
and open source’ by replacing the Neo4j Sweden Software License with the AGPL
in certain LICENSE.txt files alongside the source code. Doing so removed
certain legal notices identifying Neo4j Sweden as the copyright holder and
licensor, and removed the Commons Clause, effectively allowing Defendants to
commercially use and support ONgDB.”

On GitHub, the landing page was called “ONgDB – Neo4j
Enterprise Fork: Graphs for Everyone,” contained numerous references to Neo4j
throughout, and was very similar to that of Neo4j EE. Defendants characterized
it as a “drop in replacement” for Neo4j CE and EE. On their sites, various
links including the sequence “neo4j” remained active for a couple of years,
despite going to OngDB pages; conversely, some hyperlinks on their sites
redirected to operations and developer manuals on Neo4j’s website. They also
regularly used the Neo4j Mark as a hashtag on Twitter.

After nearly two years, the ONgDB software had been
downloaded over 14,000 times, “signaling its widespread success.” At the same
time, some consumers who encountered compatibility issues, technical problems
or glitches with ONgDB sought assistance from Neo4j. And some have “expressed
uncertainty about the propriety of Defendants’ modification to the Neo4j Sweden
Software License. This has caused some confusion about whether and when a
commercial license from Neo4j USA is necessary to use, modify or redistribute
the software in a commercial setting.”

Trademark claims: As to nominative fair use, Neo4j argued
that it didn’t apply because defendants had used the mark to identify their own
product, “Neo4j Enterprise”/“Government Package for Neo4j,” before rebranding
that as ONgDB. But that wasn’t a Neo4j product; it was made of the last public
Neo4j EE code, the Neo4j CE code, and “glue code” authored by others, even
though defendants assured potential customers that it was the “same official
Neo4j Github Repositories as Neo4j Inc uses for their paid commercial licensed
builds” except distributed under an open source license.

Thus, this was not nominative fair use, but rather a use
that created the misleading perception that defendants’ products were Neo4j
products.  “Any reasonable consumer
reading about ‘Neo4j Enterprise’ would conclude that they are getting official
Neo4j EE, or in the case of the ‘Government Package for Neo4j,’ consumers would
conclude they are getting Neo4j EE in a specialized government package.” So too
with defendant’s iGov’s use of the Neo4j Mark in its email address and URL.

By contrast, to the extent Defendants offer “support
services” targeted at software that Neo4j Sweden or Neo4j USA provide on an
open source basis, “use of the Neo4j Mark to explain those services could
potentially benefit from a fair-use defense because such uses reference
Plaintiffs’ products, not Defendants’.” They were also permitted by NFU to
describe their product as an unaffiliated or independent “fork” of Neo4j source
code “because that phrasing makes clear that the product is not itself a Neo4j
product.” Perplexingly, the court also suggested that in comparative
advertising defendants would be bound by Neo4j’s trademark guidelines, which
does not seem exactly right unless those guidelines happen to reproduce the law
(perhaps they do).

As Judge Kozinski once did, the court seemed to treat
non-nominative uses as confusing by definition without further analysis (even
citing the old terrible “metatags” cases for this result), so the bad conduct
was a mix of stuff that probably was confusing and stuff that is more
questionable: (1) extensively
using “Neo4j’ and “Neo4j Enterprise” on iGov and PureThink websites without
proper trademark notices; (2) using embedded “Neo4j” links to Neo4j USA’s
website and GitHub repository on their websites; (3) hyperlinking to Plaintiffs’
build instructions, support documentation and change logs containing the Neo4j
Mark rather than creating and hosting their own with the ONgDB name; and (4)
using “Neo4j Enterprise” and “ONgDB” interchangeably to promote ONgDB on their
websites.

Embedded links to Neo4j’s sites and documentation, along
with the repeated references to “Neo4j,” “including in the title of the
products themselves, create the misleading perception that Defendants and
Plaintiffs are affiliated.” Plaintiffs’ motion for summary judgment on the
trademark claims was granted.

False advertising under the Lanham Act/UCL: Neo4j alleged
two basic categories of falsehoods: (1) statements that ONgDB and Neo4j
Enterprise are “free and open source” versions of or alternatives to commercially
licensed Neo4j EE; and (2) statements that ONgDB is a “drop-in replacement for
an existing commercial licensed distribution of the same version number” of
Neo4j EE.

For (1), Neo4j argued that “the Neo4j Sweden Software
License did not permit Defendants to remove the commercial restrictions imposed
by the Commons Clause,” so ONgDB is not “free and open source.” The court found
that there is no reasonable interpretation of the Neo4j Sweden Software License
that permits licensees such as defendants to remove the Commons Clause and
redistribute the software under the standardized AGPL license. Thus, these
statements were false.

For (2), Neo4j argued that ONgDB is not a true drop-in
replacement because ONgDB contains source code filed that were wrongly licensed
under the AGPL in violation of Neo4j Sweden’s copyright and because the
software was not of the same quality and did not contain all of the features of
Neo4j EE. Defendants argued that “drop-in replacement” didn’t mean that all the
features were the same, but rather that users could move their data from a
Neo4j instance and place into an ONgDB instance of the same version and have it
function.

Neo4j rejoined that, even if “drop-in replacement” merely
indicates compatibility, iGov’s representations related to ONgDB versions 3.5
and later are still false. After Neo4j EE 3.5 was released entirely closed
source, GFI “no longer could … reliably guarantee that [ONgDB] was a drop-in
replacement”; it was “too hard to demonstrate” with the Neo4j EE code becoming
more divergent. Yet iGov continued to make drop-in replacement claims for later
versions. Thus, representations that the equivalent versions of ONgDB were
“drop-in replacements” could not be verified and were therefore false or
misleading. [Is this a lack of substantiation holding?]

As for earlier versions, were the statements misleading?
Even though the phrase didn’t necessarily indicate identicality on its own, the
full context of the statements implied it. [Not clear if the court is doing a
necessary implication analysis; it is focusing on what defendants said, not on
consumer reaction evidence.] E.g., the website said that “commercial packages
available from Neo4j Inc and their partners are essentially support offerings
… [i]f you do not need support for your ONgDB Enterprise or Neo4j Enterprise
open source licensed distribution, then simply download ONgDB Enterprise as a
drop in replacement for an existing commercial licensed distribution of the
same version number.” It further provided a chart comparing Neo4j EE and “Neo4j
Enterprise open source license,” which is captioned: “There are no physical
differences between Neo4j Enterprise commercial and AGPL open source licenses!”
“No reasonable consumer would understand these statements to indicate mere
compatibility with Neo4j EE.”

Further evidence of misleadingness was that consumers who
chose ONgDB and encountered technical issues reached out to Neo4j USA for help,
“indicating that those consumers thought they were operating genuine Neo4j EE.”

Materiality: “Because Defendants misrepresented ONgDB as a
free version of Neo4j EE licensed under the APGL, there is no doubt that this
price differential (free versus paid) was likely to influence customers
purchasing decisions.” So statements about a free replacement were material.The
court also found nothing to rebut Neo4j’s evidence that customers chose ONgDB
based on misrepresentations to Neo4j’s commercial detriment. Summary judgment
granted on state and federal false advertising claims.

False designation of origin: Yep.

Relief: Given the First Amendment interests involved, the
Court “may not enjoin nominative use of the mark altogether.” Though it could
be tweaked later, the court enjoined the specific things it had found to be
false/misleading, including “free and open source drop-in replacement.” (I’m
actually not sure how targeted the injunction was, since it also barred
“infringing” on the marks or causing false association with Neo4j, so it isn’t
all that clear what defendants can do.)

from Blogger https://ift.tt/3Ck0M1u

Posted in Uncategorized | Tagged , | Leave a comment

individualized smear campaign wasn’t plausibly commercial advertising or promotion

Posted on September 16, 2021 by rtushnet

Meredith Lodging LLC v. Vacasa LLC, No. 6:21-cv-326-MC, 2021
WL 2546273 (D. Or. Jun. 21, 2021)

The parties compete to manage vacation rental properties
located in Oregon. Meredith alleged that Vacasa “has embarked on a smear
campaign surgically targeted at [Plaintiff’s] homeowner customers, designed to
unfairly snuff out that competition.” The court found that the alleged
statements weren’t “commercial advertising” covered by the Lanham Act.

Allegations: With the goal of increasing its market share,
Vacasa “sent out promotional mailers to homeowners with properties located in
the same geographic areas where [Plaintiff] manages vacation rental
properties.” It “began a campaign to systematically contact and try to poach
business from Homeowners under exclusive contract with [Plaintiff]. In many
instances, [Defendant’s] representatives have made false or misleading
statements about [Plaintiff] to these Homeowners.”

The question was whether the alleged misrepresentations were
“sufficiently disseminated.” Ordinarily, “the actions must be ‘part of an
organized campaign to penetrate the relevant market,’ which typically involves
‘widespread dissemination within the relevant industry.’ ”

Each alleged falsehood came in the form of a phone call from
an employee or representative of Vacasa to an individual under contract with
Meredith to manage their vacation rental property. The purpose of each call was
to convince the individual to switch companies. There were five alleged
examples of false statements in calls to owners: (1) rep stated there were
“reviews on VRBO for [Plaintiff] stating that there is a lack of cleanliness,”
that Plaintiff “had no manager for negative reviews,” and claimed Defendant
“could manage the property better”; (2) rep stated that Vacasa “had heard a lot
of complaints about [Plaintiff] and its housekeeping teams”; (3) rep said that
homeowners had switched over a “lack of cleanliness,” but rep couldn’t corrpoborate
this; (4) rep said that Vacasa “had been talking to a lot of unhappy
[Plaintiff] customers”; (5) rep led owner to believe “during the first minutes
of the call that he was associated with [Plaintiff] (even though he was not)
before trying to persuade her to leave [Plaintiff] and switch management of
the” home to Vacasa.

Putting aside whether all these statements were falsifiable,
five calls to potential customers, even coming during a short period of time,
wouldn’t typically qualify as the “widespread dissemination within the relevant
industry” seen in false advertising claims. Although Vacasa allegedly had an
actual widespread promotional campaign in the relevant market, Meredith didn’t
allege that those advertisements contained any false or deceptive
representations.

True, “depending on the relative market at issue,
communications made to only one prospective customer may qualify as sufficient
dissemination under the right circumstances.” But the complaint didn’t allege
that the market for managing vacation rental properties was so limited that
communications reaching just five consumers was sufficient. It alleged only
that “there are a finite and relatively low number of homes suitable for short
term vacation rental management in the relevant geographic areas.”  This wasn’t specific and factual enough. The
market for hamburgers is also “finite,” but “a handful of phone calls from
Ronald McDonald himself to potential burger buyers falsely touting the health
benefits of Big Macs would not support a claim for false advertising under the
Lanham Act.” And the complaint also alleged that the relevant market was big
enough to justify both an Oregon Coast headquarters and a Central Oregon
headquarters, as well as “local offices and locally-based staff and support
teams in Bella Beach, Waldport, Depoe Bay, Neskowin, Pacific City, Manzanita,
Seaside, and Sunriver.” Further, the complaint alleged that the market is large
enough that Meredith has “multiple managers to manage negative reviews.” “That
Plaintiff requires multiple managers to respond to negative reviews in a market
with a ‘relatively low number of homes’ appears to confirm that either (1) the
market is larger than argued by Plaintiff or (2) Plaintiff has bigger problems
than Defendant’s allegedly misleading phone calls.” [Yikes.]

If Meredith did replead, the court would consider expedited,
targeted discovery about falsity, but signalled further skepticism by
commenting that “even the Ritz Carlton has guests unhappy with the
accommodations” while suggesting that it would be willing to find falsity if,
when Vacasa made the statements, it lacked knowledge that some of Meredith’s
customers switched to Vacasa over housekeeping concerns. Footnote: The court
also questioned whether it could take judicial notice “of the fact that there
are dozens of reviews online predating the allegedly false statements that take
issue with the cleanliness of properties managed by Plaintiff.” How would you
do that without considering their truth? The court seems to think that went to
reputation for cleanliness: “This is not to say Plaintiff necessarily has a
reputation for uncleanliness. Only that in the vacation rental industry, a
company essentially arguing that it had no reports of uncleanliness appears to
be patently unreasonable. This is akin to a restaurant, no matter how esteemed,
arguing it had never served one customer who walked away unsatisfied.”

from Blogger https://ift.tt/3kg8TGc

Posted in Uncategorized | Tagged | Leave a comment

AAA’s expansion to home security derailed by trademark

Posted on September 16, 2021 by rtushnet

AAA Alarm & Security Inc. v. A3 Smart Home LP, 2021 WL 3857417,
No. CV-21-00321-PHX-GMS (D. Ariz. Aug. 30, 2021)

Another expansion case, like the ones Uber has had. AAA
Alarm began in 1985, serving over 8000 customers across Arizona and spending
nearly $200,000 since 2014. In late 2019, AAA Alarm began receiving
“communications from people who believed they were AAA Alarm & Security
customers, but who were actually customers of Defendant.” AAA Alarm documented
over 200 instances, as well as mailed documents and emails directed to A3,
including “three unemployment insurance notices from the Arizona Department of
Economic Security, a request from a fiduciary to modify the terms of her ward’s
service, checks and cancellation notices addressed to Defendant from its
customers, and alarm permits from the City of Phoenix,” as well as false alarm
notices from government entities. 

The American Automobile Association of Northern California,
Nevada, and Utah (that is, the best known AAA) acquired an Arizona security
business, SAFE Security, in late 2018 and changed its name to A3 Smart Home LP.
It began operating under the brands “AAA Smart Home” and “AAA Smart Business.”
A3 Smart Home has approximately 20,000 customers in Arizona.

Who owned AAA for security services? The court found that
AAA Alarm had priority, mostly skipping over secondary meaning. A3’s claim that
security services were within AAA’s natural zone of expansion was too broad:

Defendant’s assertion that it holds
seniority over any service related to security, safety, and the home, stretches
this confusion analysis to breaking point. Indeed, if the American Automobile
Association were permitted to claim seniority in the AAA mark over any product
or service in such broad categories of business, it could protect the AAA mark
in potentially unlimited markets. Defendant entered the Arizona alarm and
security market over 30 years after Plaintiff by purchasing a customer base in
an industry it had not previously occupied.

AAA Alarm made sufficient use over this period, with over
3000 current customers. “This use is sufficiently public so as to identify the
mark in an appropriate segment of the public mind.”

With that out of the way, the multifactor confusion test
clearly favored AAA Alarm, despite the expense of the services. Surprisingly to
me, the court found “AAA” arbitrary “because there is no fundamental connection
between the letters and security services, and the letters offer no description
of the products they are associated with.” I would have thought that the
standard meaning “first” (or at least “first in the phone book”) made AAA
descriptive. But once conceptual strength was set, the court pointed to the
history of AAA Alarm’s advertising and present expenses of over $5000 a year on
search engine optimization. “These advertising expenditures and the arbitrary
nature of the mark support a finding that the mark is strong enough to be
protectable.” In a reverse confusion case, “[t]he relative obscurity of
Plaintiff as a small business does not undermine this conclusion.”

Along with the actual confusion evidence noted above, AAA
Alarm showed “at least one critical customer evaluation posted on the web
concerning Plaintiff that was actually intended for Defendants.” Although a few
misdirected letters may not be relevant confusion that affects consumers’
purchasing decisions, “confusion is not limited to evidence of diverted
customers.” “And Plaintiff demonstrated at the hearing that the first result
for a search for ‘AAA Alarm & Security,’ Plaintiff’s name, is an
advertisement for Defendant’s services.”

Irreparable harm was also shown. “Defendant’s use of the AAA
mark could continue to confuse consumers and diminish the distinctiveness of
Plaintiff’s brand, thereby preventing Plaintiff from controlling its
reputation. Plaintiff presented evidence that personal referrals are a
significant portion of its business.” The likelihood of confusion was itself
irreparable harm, even without considering the TMA’s statutory presumption.
(Comment: In the 9th Circuit, that’s clearly wrong about pre-TMA
law, but it hardly matters except to suggest that many courts were already
desirous of collapsing confusion and harm as inquiries.)

Given that “Defendant entered a market with an existing
smaller business using their desired mark, and either declined to investigate
or chose to ignore Plaintiff’s presence,” the court set a $20,000 bond for the
preliminary injunction.

from Blogger https://ift.tt/3lx5LFi

Posted in Uncategorized | Tagged | Leave a comment

9th Circuit: desire to purchase properly labeled product is too abstract for injunctive relief standing

Posted on September 16, 2021 by rtushnet

In re Coca-Cola Products Marketing & Sales Practices
Litig. (No. II), 2021 WL 3878654, No. 20-15742 (9th Cir. Aug. 31,
2021)

The Ninth Circuit limits its injunctive relief standing
jurisprudence in light of TransUnion.

The district court certified a class in a multidistrict
consumer action alleging mislabeling of Coke as having “no artificial flavors.
no preservatives added. since 1886” even though Coke contains phosphoric acid,
and allowed it to pursue injunctive relief.

Under previous circuit precedent, “a previously deceived
consumer may have standing to seek an injunction against false advertising or
labeling, even though the consumer now knows or suspects that the advertising
was false at the time of the original purchase, because the consumer may suffer
an ‘actual and imminent, not conjectural or hypothetical’ threat of future
harm.” The two examples: (1) “she will be unable to rely on the product’s
advertising or labeling in the future, and so will not purchase the product
although she would like to” and (2) “she might purchase the product in the
future, despite the fact it was once marred by false advertising or labeling,
as she may reasonably, but incorrectly, assume the product was improved.”

Here, however, none of the plaintiffs alleged a desire to
“purchase Coke as advertised, that is, free from what they believe to be
artificial flavors or preservatives.” Instead, they alleged that “if Coke were
properly labeled, they would consider purchasing it.” But “such an abstract
interest in compliance with labeling requirements is insufficient, standing
alone, to establish Article III standing,” and merely considering a purchase
isn’t an imminent injury.

Two named plaintiffs specifically “explained that they were
not concerned with phosphoric acid, but rather with whether Coca-Cola was
telling the truth on its product’s labels. Both asserted that they would be
interested in purchasing Coke again if its labels were accurate, regardless of
whether it contained chemical preservatives or artificial flavors.” But that
was no more than alleging “a bare procedural violation,” which isn’t enough for
standing.  As a case quoted by TransUnion
said, “[a]n ‘asserted informational injury that causes no adverse effects
cannot satisfy Article III.’ ” Thus, plaintiffs’ “desire for Coca-Cola to
truthfully label its products, without more, is insufficient to demonstrate
that they have suffered any particularized adverse effects.”

from Blogger https://ift.tt/39a31aT

Posted in Uncategorized | Tagged , , , | Leave a comment