“all IP” puts C&D recipient on notice of TM (R), and a bit on the meaning of blue check marks

Posted on August 14, 2020 by rtushnet

Commodores Entertainment Corp. v. McClary, Nos. 19-10791,
19-12819, — Fed.Appx. —-, 2020 WL 4218236 (11th Cir. Jul. 23, 2020)

As quickly summarized by the court:

The prolonged dispute concerns the
ownership of the mark “The Commodores,” the name of a famous Grammy
Award-winning rhythm and blues, funk and soul music band. McClary was an
original member of The Commodores but left the band in 1984. He later formed a musical
group that performed as “The 2014 Commodores” and “The Commodores featuring
Thomas McClary.” In 2014, [plaintiff] CEC filed this lawsuit against McClary,
claiming trademark infringement, trademark dilution, passing off, false
advertising, and unfair competition….

At the outset of the case, the
district court granted CEC’s motion for a preliminary injunction. After the
injunction was entered, CEC learned that McClary and his band were marketing
upcoming performances in Europe. Upon CEC’s motion for clarification, the
district court held that the injunction had extraterritorial application
because use of the marks overseas would have a substantial and negative impact
on CEC, an American corporation.…

The district court then determined that CEC owned trademark
rights, and ultimately found that McClary infringed. A jury found that McClary
had actual notice of CEC’s trademark registrations as of June 2009 and that CEC
was entitled to damages from McClary’s profits resulting from musical
performances at West Hampton Beach Performing Arts Center (WHBPAC) and six
non-US locations.  The jury also found
that CEC had not shown it had suffered damages under the FDUTPA. McClary moved
to modify the permanent injunction, arguing that he had acquired licenses to
use the trademark “The Commodores” in Mexico, New Zealand, and Switzerland. The
district court denied the motion as untimely/insufficiently justified. The
court of appeals affirmed everything. 

The most notable thing to me here was the court of appeals’
reasoning that McClary had actual notice of the trademark registration (which
affects eligibility for profits/damages under 15 U.S.C. § 1111) because of a
letter that claimed only “all intellectual property rights” and didn’t mention
registrations. The court of appeals reasoned that the jury reasonably could
have concluded that “all intellectual property rights” included registered
trademarks. “The statement that CEC would treat ‘any future unauthorized use of
the Commodores trade name or logo’ as misconduct further put McClary on actual
notice of CEC’s trademark registrations.” This seems quite misguided to me,
given the existence of non-registered trademark rights, but there you have it. 

As for the motion to modify the permanent injunction, it was
filed “more than five years after the court entered the preliminary injunction,
three years after it issued the clarification order confirming its
extraterritorial reach, two-and-a-half years after it entered the permanent
injunction, and over a year after our Court affirmed the scope of the permanent
injunction.” And McClary obtained the licenses he sought to effectuate from
April 2017-August 2018. “He did not move for two years after his first
acquisition, and about nine months after his last. The district court was well
within its discretion to find this time frame unreasonable, especially in light
of the extensive litigation over the injunction and McClary’s failure to
explain the delay.”

As for McClary’s counterclaim for commercial
misappropriation of his likeness and identity under Fla. Stat. § 540.08, it was
based on screenshots of a Facebook page run by “The Commodores,” which had a
blue checkmark next to the name “The Commodores,” and used his picture on the
page. CEC introduced an unsworn declaration from William King, current member of
The Commodores and CEC’s president, averring that CEC does not maintain a
Facebook page. McClary failed to present any rebuttal evidence, including any authority
about the blue checkmark’s meaning or how Facebook confirms the identity of a
verified account. Without that, he couldn’t avoid summary judgment.

McClary’s defamation/business disparagement counterclaims:
They were based on allegedly false e-mail communications CEC’s former manager made
to non-parties, representing that McClary was enjoined from any use of CEC’s
marks. But the district court had already ruled that McClary’s use of CEC’s
marks, including “The Commodores featuring Thomas McClary,” created a
likelihood of confusion and actual confusion, the emails were true when McClary
continued to market himself as “The Commodores featuring Thomas McClary” in the
EU, and the former manager eliminated any ambiguity by attaching the
preliminary injunction to his e-mail.

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safe harbors under consumer protection law are mostly limited to very specific approvals

Posted on August 14, 2020 by rtushnet

Patane v. Nestlé Waters North America, Inc., No.
3:17-cv-01381 (JAM), 2020 WL 4677636, — F. Supp. 3d – (D. Conn. Aug. 12, 2020) 

This case offers a nice overview of the safe harbor provisions
in several consumer protection laws. Short version: defendants want them to work
like field preemption, but they are usually (not always) better described as working like
conflict preemption. Here, where it was not clear that Nestlé’s state licenses
to bottle water authorized it to label that water as “spring” water, the safe
harbors mostly did not preempt claims under consumer protection law that the water was
in fact groundwater and thus misleadingly labeled. 

Nestlé moved for summary judgment on all of plaintiffs’
claims arising under the laws of Connecticut, Maine, Massachusetts, New
Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island. The court
denied the motion except as to plaintiffs’ statutory claims under Rhode Island
law. 

Nestlé argued that there was no private right of action for
the violation of state “spring water” standard laws and, alternatively, that
any right of action was foreclosed by safe harbor exemptions under state law
and by doctrines that limit collateral attacks on state-issued permits or
licenses. Going state by state, the court concluded that the lack of a specific
right of action for the violation of a state law spring water standard didn’t “foreclose
the underlying conduct from being actionable under separate state statutes that
prohibit unfair and deceptive trade practices or from being actionable to the
extent that they amount to fraud and breach of contract.” Note that this is not
the broader California rule making violations of other statutes violate the UCL
as “unlawful”; rather, the court simply holds that conduct that misleads
consumers is generally actionable under state consumer protection law, even if
another statute that doesn’t provide a private cause of action also prohibits
such conduct. Also, with the exception of Rhode Island, there was at least a
genuine issue of fact about whether Nestlé was entitled to the benefit of regulatory
safe harbor exemptions/whether plaintiffs’ claims were an impermissible
collateral attack on state-issued licenses or permits. 

Generally speaking, Nestlé had licenses that allowed it to
bottle water, but it did not appear that the relevant regulatory agencies had
specifically evaluated whether its water was “spring water” according to state
standards (which generally adopt the federal standard). 

In Connecticut, for example, “a plaintiff may predicate a
CUTPA claim on violations of statutes or regulations that themselves do not
allow for private enforcement.” But a safe harbor expressly exempts from
liability “[t]ransactions or actions otherwise permitted under law as
administered by any regulatory board or officer acting under statutory
authority of the state or of the United States,” and it places “[t]he burden of
proving exemption … upon the person claiming the exemption.” The court must determine
whether the conduct at issue—here, the sale of bottled water as “spring
water”—is “expressly authorized and pervasively regulated.” But the licenses it
submitted “reflect permission for bottled water in general and without any
further reference or approval specific to spring water.” Although
correspondence to the Connecticut Department of Consumer Protection stated
Nestlé’s intent to sell its water as “spring water,” the relationship of those
communications to the approval and issuance of licenses was “unclear.” 

In Maine, similarly, the court found that the safe harbor
applied only if Nestlé’s conduct was either required or specifically authorized
by law. Although “similar exemption provisions have been interpreted
differently by other states, such that entire industries are exempt if
regulated under a separate statutory scheme” (citing a Georgia case), the court
found such interpretations “in the minority and textually unpersuasive,”
because the Maine safe harbor exemption from the unfair/deceptive trade
practice law required that conduct be “in compliance with,” not simply
“regulated by,” certain other laws. Maine’s statutes didn’t make the grant of a
license contingent on approval of how the bottled water was to be labeled or
otherwise marketed. Nestlé’s submitted licenses didn’t even refer to “spring
water,” just “water.” As for a “hodgepodge of letters it received at various
times over the course of two decades from various compliance officers and
geologists at the Drinking Water Program of the Maine Department of Health and
Human Services,” many appeared to be non-binding “advisory rulings,” rather
than binding orders, licenses, permits, or other approval necessary for the
safe harbor. The remaining letters did state that certain boreholes “[a]re
approved by the DWP as public water supply sources” and that they “[m]eet the
U.S. FDA definition of ‘spring water,’” but assuming they qualified Nestlé for
the safe harbor, Nestlé didn’t show that the approvals covered all sources of
water and the entire time period at issue in this action, and its own declaration
was equivocal about that. 

And so on with the other states (detailed discussion that will be useful to other courts omitted). In New Hampshire, the safe
harbor exempts only “[t]rade or commerce that is subject to the jurisdiction of
the bank commissioner, the director of securities regulation, the insurance
commissioner, the public utilities commission, the financial institutions and
insurance regulators of other states, or federal banking or securities
regulators who possess the authority to regulate unfair or deceptive trade
practices.” Bottled water is regulated by the New Hampshire Department of
Health and Human Services, not by any of these, so the safe harbor didn’t apply
at all. And Pennsylvania’s UTPCPL doesn’t even have a safe harbor exemption. 

Nestlé had more success with the Rhode Island claims. RIDTPA
“quite broadly” exempts “actions or transactions permitted under laws
administered by the department of business regulation or other regulatory body
or officer acting under statutory authority of this state or the United
States.” Critically, the Supreme Court of Rhode Island held that “the
exemption applie[s] to all activities subject to monitoring by governmental
agencies, not simply activities permitted under state or federal law.” Nestlé
successfully showed that its general activities of labeling bottled water were “subject
to monitoring or regulation” by a government agency. The burden shifted to
plaintiffs to show that the “specific acts at issue” were “not covered by the
exemption.” But Rhode Island had specific standards of identity for spring
water and its labeling. Nestlé could lose its license for violating the
standards. Thus, Nestlé qualified for the Rhode Island safe harbor under RIDTPA. 

As for common law fraud and breach of contract claims, Nestlé
didn’t explain how its arguments should apply to the common law differently
than to the statutory claims. For the seven states as to which the court denied
summary judgment as to the statutory unfair trade practice claims, it seemed
reasonable that if a legislature wanted consumers to be able to sue under the
statute, it would also want the common law to remain available. “Even for Rhode
Island . . . , it is a stretch to conclude that the legislature’s enactment of
a statute-specific exemption should be extrapolated to bar any common law cause
of action for conduct that is subject to government regulation.” Thus, the
court denied Nestlé’s motion for summary judgment on the common law claims.

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fake not-really-third-party reviews can be commercial advertising or promotion

Posted on August 14, 2020 by rtushnet

Sanho Corp. v. KaiJet Tech. Int’l Ltd., No.
1:18-cv-05385-SDG, 2020 WL 4346881 (N.D. Ga. Jul. 29, 2020)

Sanho owns rights in a design patent that claims the
ornamental design for a multi-function docking station colloquially known as
the “HYPERDRIVE,” and a design patent “directed at the technology underlying
Sanho’s HYPERDRIVE product.” [???] It sued KaiJet for misappropriation and
infringement.

KaiJet US counterclaimed for, among other things, false
advertising under the Lanham Act. It alleged that Sanho paid third parties— “falsely
disguised as independent reviewers, not paid-for advertisement—to submit positive
reviews of Sanho’s HYPERDRIVE product on various online platforms,” and “to
remove negative reviews of Sanho’s product.” Sanho argued that this wasn’t “commercial
advertising or promotion,” but the court disagreed, rightly without needing
much analysis. That the reviews purported to come from a third party did not
take them outside the scope of the Lanham Act if they did in fact come from
Sanho (which of course remains to be seen).

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statements to 3 of 15 market participants weren’t “commercial advertising or promotion”

Posted on August 13, 2020 by rtushnet

Globe Cotyarn Pvt. Ltd. v. Next Creations Holdings LLC, No. 18
Civ. 04208 (ER), 2020 WL 4586892 (S.D.N.Y. Aug. 10, 2020) 

Globe, a fabric manufacturer, sued a fabric patent holder,
AAVN, and its subsidiary, Next Creations, for allegedly falsely telling certain
of Globe’s potential customers that Globe sold infringing products. Globe
alleges Lanham Act false advertising and tortious interference and unfair
competition under New York law. The court dismissed the amended complaint. 

Background: AAVN previously filed an ITC complaint against certain
imported textiles. An (unrelated) respondent defended on the basis that its
allegedly infringing product had been on sale before AAVN even received the
relevant patent. The parties settled, but Globe alleged that in filing the ITC
complaint AAVN had determined that the prior art product practiced claims of one
patent, and also was within certain claims of other patents. Another company
petitioned the PTO for review of three AAVN patents as invalidated by prior
art; as to two of them, the PTAB found that “more likely than not that [the
challenger] will prevail in showing that at least one of the challenged claims
in each of the patents is unpatentable” (it didn’t rule on the third, which was
challenged separately). The parties settled. 

Globe argued that defendants contacted a number of Globe’s
customers and falsely accused Globe of selling infringing materials. Globe
identified three importers, but contends on “information and belief” that defendants
also spoke to the buyers of certain retailers who, in turn, relayed the message
to other importers. For example, Next Creations’ CFO wrote to one importer: “I
am reaching out to you today in regard to product your company sells to
retailers throughout the United States that infringe upon AAVN’s CVC Patent.
Your company is not authorized to sell this CVC product.” He wrote a similar letter
to another, and the named inventor/alleged owner/officer of defendants, told
another importer that it should not purchase CVC bed sheets from Globe because
the sale of those products in the U.S. would infringe AAVN’s patent. Globe
alleged that he also told buyers for five retailers the same thing.

Globe alleged that these five retailers, along with another,
sell the “vast majority of CVC bed sheets” in the United States, and that the
buyers informed importers of CVC bed sheets what defendants told them. According
to Globe,“[o]ver half of the 15 to 25 companies who import CVC bed sheets into
the United States for sale” sell or have sold CVC bed sheets to the five stores
the buyers represent.

Lanham Act claims: Commercial advertising or promotion was a
barrier. Globe still didn’t show that the messages were sufficiently
disseminated to the relevant purchasing public. As the Second Circuit has held,
a business “harmed by isolated disparaging statements do[es] not have redress
under the Lanham Act” and should instead “seek redress under state-law causes
of action.” Prior cases have held that, for example, “[d]issemination of a
statement to one customer out of 36 simply does not meet [the necessary]
standard,” and that “six statements, most directed at a single individual,”
were not sufficiently disseminated to qualify as commercial advertising or promotion,
“[e]ven if the relevant market, jewelry retailers, is in fact … smaller than
that for [previous Second Circuit precedent].” 

Though the allegations here were broader than that, they
insufficiently alleged that defendants’ actions “were part of an organized
campaign to penetrate the market.” Globe alleged specific communications to
three importers, but the court declined to consider other allegations “on
information and belief” withouth a further “statement of the facts upon which
the belief is founded.” Statements relating to communications to buyers didn’t appear
to be based on more than “conjecture and speculation.” With only communications
to three of the “15 to 25” importers, “apparently made in private over a
10-month period,” the facts didn’t reasonably suggest “the contested
representations [were] part of an organized campaign to penetrate the relevant
market.” Instead, they appeared to be “isolated events, for which Globe should
seek redress under state law, rather than the Lanham Act.” Out-of-circuit
precedent was not to the contrary; compared to other cases, the three targeted
importers didn’t allegedly “represent an outsized share of the relevant market.” 

Bad faith: both Lanham Act and state law claims required a
showing of bad faith to avoid patent law preemption. “Bad faith is determined
on a ‘case by case basis,’ but the Federal Circuit has held that if a
patentholder knows that its ‘patent is invalid, unenforceable, or not
infringed, yet represents to the marketplace that a competitor is infringing
the patent, a clear case of bad faith representations is made out.’” Bad faith
has both objective and subjective elements: that “no reasonable litigant could
realistically expect to prevail in a dispute over infringement of the patent” and
that the “lack of objective foundation for the claim was either known or so
obvious that it should have been known.” 

Globe failed to allege objective baselessness.  It suggested that, having done analysis to
show that the product at issue in the ITC proceedings practiced its patents and
been through part of a PTAB proceeding, defendants now knew that these patents
were invalidated by prior art. But the complaint didn’t sufficiently allege
that all claims of the AAVN patents were invalidated by prior art, which
matters because “statements that Globe products infringed its patents could not
have been made in bad faith if only some portion of its patents were invalid.”
[I’m not sure this is always true but it might require additional facts about
the claimed infringement.] 

Tortious interference: without sufficient evidence of bad
faith/falsity or misleadingness, this also failed.

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Trademark first sale still exists, at least when owner retroactively withdraws consent

Posted on August 13, 2020 by rtushnet

Oneida Consumer, LLC v. Fox, No. 2:20-cv-2043, 2020 WL
4582704 (S.D. Ohio Aug. 10, 2020)

Oneida sells flatware through a network of authorized
retailers, partners, dealers and resellers, as well as through Oneida’s own
website and third-party websites such as Amazon. It used to work with Robinson
Home Products, which acted as the exclusive licensor and paid royalties to
Oneida, but Oneida terminated that relationship in 2018.

Fox runs Finest Flatware, which first purchased and resold ONEIDA flatware in
2002. Her primary sales channels are through her own website, Amazon and eBay. “From
2005 to 2009, Ms. Fox purchased ONEIDA flatware directly from Oneida and, with
Oneida’s knowledge and approval, resold it on Amazon and eBay.” After Robinson
took over the brand in the US, she bought millions of dollars’ worth of
flatware from Robinson, reselling it online with Robinson’s “full approval and
support.” Indeed, Robinson manufactured large, custom orders of flatware for
Fox and appointed her in 2016 as the “brand manager” of ONEIDA flatware on
Amazon, which gave her authority over all ONEIDA product listings on Amazon,
including control over the product details and descriptions.  The flatware had a limited lifetime warranty,
which Fox was authorized to pass on to her customers.

Around when Oneida terminated Robinson, Fox provided Oneida
with details about her business, explaining that she resold products and
sometimes repackaged the flatware to better suit the needs of her customers. Oneida’s
representatives expressed enthusiasm, and designated her as an “authorized
distributor” in late 2018. It sent an Authorized Dealer Policy (ADP) in
December 2018, which Fox found inconsistent with her earlier understanding,
including Oneida’s assurance that she could sell products on Amazon and eBay
and could sell custom product configurations, so she didn’t sign it and instead
continued to sell online, including custom configurations, as Oneida
specifically authorized. Oneida also agreed to cover any warranty claims made
by her customers. This worked for about a year, until the people she worked
with left Oneida, Fox told Oneida that she wouldn’t be buying new products from
Oneida and instead would concentrate on selling her existing inventory, and
Oneida told her that it would enforce the ADP, which in Oneida’s view meant
that she couldn’t sell her inventory on Amazon or eBay.  

Fox eventually removed the phrase “Authorized Oneida
Retailer” from her online sales channels, but continued to offer ONEIDA flatware from her inventory for sale online.
Her listings stated that the products were backed by a limited lifetime
warranty. Oneida sued for Lanham Act and coordinate state violations, including
false designation of origin and false advertising on the theory that Fox
improperly held herself out as an “Authorized Oneida Retailer” and represented
in her Amazon product listings that her products are “by Oneida.” Oneida also
alleged tarnishment because Fox purported to sell flatware with the
manufacturer’s warranty when the products were allegedly not covered by a
warranty.  It sought a preliminary
injunction.

Oneida “expressed concerns” about the source and
authenticity of Fox’s inventory, but for purposes of the preliminary injunction
didn’t dispute that they were Oneida products, as Fox stated.  “Defendant therefore has established at this
stage that she lawfully acquired the products in her inventory and that those
products are genuine ONEIDA flatware.” And yet, we must go on.

Oneida argued that, once it terminated the ADP, Fox no
longer had a right to resell her inventory. [Framed that way, I don’t see why
she shouldn’t get attorneys’ fees for this aspect of the case. I’m not sure the
court is willing to go that far, but if discovery confirms that she never agreed to the ADP….] “Oneida believes that it, as the trademark
owner, has the right to control the products which Ms. Fox has in her
possession.” Oneida attempted to evade first sale because it argued that it
terminated its warranty, making Fox’s products materially different from what
they were when she purchased them.

Even without first sale, there was no likely success on the
merits, because infringement requires use of the mark without authorization.
But the affidavits here established Oneida’s and Robinson’s consent to “sell ONEIDA
flatware online, including on Amazon and eBay; use the ONEIDA name, including
the phrase ‘by Oneida,’ in her product listings; offer custom product
configurations; and pass the warranty on to her customers.” In selling existing
inventory, Fox was “merely exercising her rights according to the permission
granted by Oneida and Robinson at the time she purchased the products from
them.” Though the affidavits were self-serving, they were unrebutted. They were
not conclusory, vague, contradictory or a sham. Oneida argued that Robinson
lacked the authority to give Fox permission to resell as she did, because it
was only a licensee and not an agent. Even so, there was evidence of consent
from Oneida’s own agents after Fox disclosed the relevant details of her
business operations to Oneida.

Oneida argued that it could retroactively withdraw its
consent by terminating the relationship, but didn’t show that was true
according to their agreement. For example, it didn’t show that termination
obligated Fox to tender unsold inventory to Oneida. Though the ADP provided
that a dealer was to cease selling ONEIDA products upon termination of the ADP,
Fox submitted evidence that she never agreed to it and that Oneida’s employees exempted
her from it.

First sale: Oneida argued that first sale was unavailable to
a licensee. As a general matter, the court agreed (where the license so
specifies): “The licensee acquires the goods subject to the terms of the
license, and if the license prohibits a post-expiration selling of inventory by
the licensee, then it cannot be said that the first sale was authorized by the
trademark owner.” [I expect to see more of the license/sale distinction being manipulated
by trademark owners as it has been by copyright owners; then good luck reselling
your used Ford!] But Oneida didn’t show that the ADP governed the
parties’ relationship. It wasn’t in effect when Fox purchased a large volume of
goods from Robinson from 2009 to 2018. And Robinson, as Oneida’s exclusive
licensee in the US, was authorized to make the first sale. Fox also showed that
she never agreed to the ADP.

Oneida argued that selling a product without its warranty was
a material difference. Its COO declared that Oneida’s lifetime warranty to the
original purchaser is “an essential feature of its products and its brand.” Fox
also agreed that the warranty was important, as she stated that she wouldn’t
have resold the product without the warranty passing to her customers.

Again, it was true that material difference negates first
sale because a “material difference in a product is likely to cause consumer
confusion and could dilute the value of the trademark.” [This has always been way
too hasty a statement: full disclosure, as with disclosure that a product is
used, is all that is required to protect against confusion; otherwise you couldn’t
resell anything used or with an expired warranty.] And “[a] missing or inferior
warranty term may constitute a material difference that would defeat the first
sale defense.” But again the Fox submitted unrebutted evidence that Robinson
and Oneida authorized her to pass the warranty to her customers and that they
in fact handled her customers’ warranty claims. “Thus the product she would now
resell from her inventory would be identical to what she purchased from
Robinson and Oneida.” [This implies that if Oneida now refuses to honor the warranty it offered when Robinson/it parted with title to the goods, it would breach its obligations both to Fox and to the customers. That seems consistent with the warranty law I know.]

Irreparable injury: Also no. Oneida didn’t show that Fox was
selling non-genuine or inferior goods. There was no irreparable injury as to the
allegedly false advertising “Authorized Oneida Retailer” because she removed
all references to being an “Authorized Oneida Retailer” prior to the filing of
the lawsuit.

And a preliminary injunction wouldn’t serve the public
interest because it would be anti-competitive to bar Fox from selling her lawfully-obtained
goods.

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properly labeled keyword advertising isn’t confusing, court rules

Posted on August 13, 2020 by rtushnet

Sen v. Amazon.com, Inc., No. 16cv1486-JAH (JLB), 2020 WL
4582678 (S.D. Cal. Aug. 10, 2020)

Keyword advertising with proper labeling doesn’t infringe
trademarks, dooming this lawsuit even if a prior agreement hadn’t applied. Of note: from the court’s description, it sounds like the results page on Amazon includes both the trademark owner’s products and alternatives, though the court barely mentions this in passing because the ads themselves are properly labeled as ads coming from Amazon.

Sen owns the trademark Baiden for skin-exfoliation products.
Amazon bought the keyword “Baiden” through Google’s AdWords program and on
similar programs offered by Bing and Yahoo! In 2012, Sen sued Amazon for trademark
infringement and unfair competition based on Amazon’s use of “Baiden” in online
pay-per-click campaigns and keyword advertising on various search engines. In
2013, the parties reached a settlement agreement and executed a Settlement
Memorandum of Understanding, though they were unable to agree to the terms of a
long form agreement; the court there ultimately granted Amazon’s motion to
enforce the settlement on the terms set forth in the MOU. The court here
determined that the current claims had been released.

But regardless, Sen failed to show likely confusion.
Comment: The analysis here makes clear, as is often the case, how keyword ad
claims are not really about trademark infringement, but unfair competition—note
that there is no analysis at all of the similarity of the marks, because to
analyze that would force the court to talk about the parties’ differing use
of/use as marks. The district court is of course just doing what the court of
appeals said, so this isn’t a criticism.

Network Automation says the most important factors in a
keyword case are: “(1) the strength of the mark; (2) the evidence of actual
confusion; (3) the type of goods and degree of care likely to be exercised by
the purchaser; and (4) the labeling and appearance of the advertisements and the
surrounding context on the screen displaying the results page.”

Strength:  the court bungles conceptual strength (conflating suggestive and descriptive),
but it doesn’t matter because (a) there’s not much evidence of marketplace strength
and (b) it doesn’t matter anyway because this is a labeling case [the court
doesn’t say (b) outright but it’s true].

Actual confusion: Sen argued that someone returned a
competitor’s product to Sen, evidencing actual confusion. The evidence was a
single email message, but it appeared to be one between two Baiden
representatives using terms such as “we” and “us.” The discussion is of a
returned package containing a product of both plaintiff and a competitor. But
Amazon could have mistakenly placed a competitor’s product in plaintiff’s
packaging before the return, or a customer could have returned a different type
of a competitor’s exfoliating product, which was “markedly different,” in
plaintiff’s packaging “for what could have been for a number of reasons other
than confusion.” Even assuming the customer was confused, it was speculative to
think that Amazon was liable for the customer’s confusion. Since Amazon wasn’t
involved in making or packaging the product, all this would show was
post-purchase confusion anyway, and that wasn’t relevant confusion. At best,
one confused consumer was de minimis

Type of goods/purchaser care: Disputed. Although plaintiff’s
products appeared inexpensive, they were above market price on Amazon, e.g. the
Baiden Mitten retails on Amazon for $48.00, while a competitor’s Korn
Exfoliating Bath Washcloth retails on Amazon for $4.49. Consumers would likely
be more careful with Baiden’s more expensive products, and “a reasonably
prudent consumer is likely to exercise a high degree of care when purchasing
facial and body products. Specifically, to avoid a potential outbreak or
allergic reaction.”

Labeling/appearance of the ads: “the parties both agree that
the labeling and appearance of Amazon’s keyword advertisements are clear.”

Tortious interference: the alleged conduct (the keyword ad
campaign) was not a wrongful act independent of the alleged interference
itself. “Interference that is based on lawful competition is not actionable.”

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Lack of competitive injury dooms false advertising claim against unauthorized image use by strip club

Posted on August 13, 2020 by rtushnet

Geiger v. Creative Impact Inc., No. CV-18-01443-PHX-JAT, 2020
WL 4583625 (D. Ariz. Aug. 10, 2020)

The court rejects a motion to reconsider its ruling
rejecting Lanham Act false advertising claims based the unauthorized use of plaintiffs’
images by a strip club. Plaintiffs alleged that the unauthorized use falsely
implied that they were strippers at the strip club or that they were otherwise
affiliated with or promoted the strip club. They argued that the court erred
by, effectively, holding that the claims couldn’t proceed because plaintiffs
weren’t in the strip club business, in defiance of Lexmark.

“There is no doubt that the Supreme Court expressly rejected
any requirement that a plaintiff show direct competition to prevail on a false
advertising claim.” However, summary judgment for defendant on this claim was
still appropriate because plaintiffs couldn’t show competitive injury.
The parties don’t vie for the same dollars from the same consumers, and
plaintiffs didn’t offer any evidence that showed that their ability to compete
with anyone in the marketplace was harmed/that defendant’s alleged
deception caused consumers to withhold trade from them. [It’s a bit unclear
whether the court (wrongly) treated vying for the same dollars from the same
consumers as a predicate; at times it seems to treat that as a requirement, instead
of as a common way that competitive harm can be shown, though the latter view resolves the tension
it sees between Lexmark’s holding and prior Ninth Circuit references to “competitive”
harm.] Lexmark held that “a plaintiff suing under § 1125(a) ordinarily
must show economic or reputational injury flowing directly from the deception
wrought by the defendant’s advertising; and that that occurs when deception of
consumers causes them to withhold trade from the plaintiff.” Plaintiffs didn’t
establish the existence of an issue of material fact on competitive injury or
proximate cause.

The court elaborated a bit: Although direct competition
isn’t required, market overlap is still relevant; it was important that the
parties in Lexmark were both in the printer-related-products market
because on the facts pleaded, a lost sale for plaintiff was likely to mean a
sale for defendant. Here, with no evidence of competition for consumers between
plaintiffs and defendant, and no other evidence of damage to plaintiffs’
ability to compete in the marketplace (such as evidence of damaged reputation
or lost modeling jobs or other business opportunities), there was no cognizable
competitive injury. Plaintiffs argued that their evidence that strippers at defendant’s
strip club are concerned about being publicly associated with a strip club was
evidence of harm, but that created only “metaphysical doubt,” not a genuine
factual dispute, even with a damages expert estimating the “embarrassment
factor” for each of the models to calculate how much they would have charged
for use of their images. The expert didn’t tie those calculations to “any
concrete effect on their business reputations.”

The court also cites a case I missed: Adweek LLC v. Carnyx
Grp. Ltd., No. 1:18-CV-09923-GHW, 2019 WL 8405297 (S.D.N.Y. June 3, 2019)
(dismissing false advertising claim based on false representation that
plaintiff endorsed defendants’ business—despite allegations that false
representation gave defendants’ services an increased “salable character” as a
result of false representation and caused damage to plaintiff’s brand—as there
were no allegations that any deception had an effect on plaintiff’s consumers).

Even if plaintiffs had shown injury to a commercial interest
in sales or business reputation, they failed to raise a material factual issue
over whether such injury “flow[s] directly from the deception wrought by the
defendant’s advertising” such that the “deception of consumers causes them to
withhold trade from” plaintiffs. That plaintiffs license their images for a
living and that they were concerned about embarrassment/reputational damage
from being associated with a strip club were not enough to create a triable
issue on whether they lost trade from consumers. (Notably, this is the kind of
argument that courts routinely think creates a triable issue on trademark
harm.)

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SEC v. Liu supports FTC’s pursuit of restitution in federal court

Posted on August 10, 2020 by rtushnet

Federal Trade Comm’n v. Elegant Solutions, Inc., Case No.
SACV 19-1333 JVS (KESx), 2020 WL 4390381 (C.D. Cal. Jul. 6, 2020) 

I mostly try to find interesting legal issues, but sometimes
it’s good to point out the importance of the FTC going after ordinary
fraudsters–and as a bonus we get a holding on the effect of SEC v. Liu on the FTC’s restitution authority.  Defendants falsely
represented, among other things, that they would take over servicing student
loans, but instead collected victims’ money and decided on a case by case basis
how much to pay the actual holder of the debt. The FTC asserted violations of
the FTCA and the Telemarketing Sales rule. 

The court found that a permanent injunction with monitoring
provisions was appropriate, given a pattern of defendants’ “corporate
repackaging and rebranding of the same fraudulent scheme” despite
investigations in multiple states. The court also awarded nearly $27.6 million
in equitable recovery for consumers—a remedy now under threat, but necessary to
make consumers whole. 

Defendants argued that they “modified and improved their
sales policies and procedures in November 2017,” making injunctive relief unavailable.
But the FTC showed ongoing violations of the law beyond that time.
Telemarketing scripts continued to include deceptive , such as “I’m calling
regarding your federal student loans to inform you that you qualify for a lower
payment, reduced rate, and possible loan forgiveness”  and  “Your monthly payments are going to be
________, which we can start as soon as tomorrow ….” And defendants continued
to collect advance fees—not allowed under the Telemarketing Sales Rule for debt
relief services—after November 2017. 

Defendants challenged the availability of equitable
restitution pursuant to Section 13(b) of the FTCA, which states “[t]hat in
proper cases the Commission may seek, and after proper proof, the court may
issue, a permanent injunction.” In F.T.C. v. Credit Bureau Center, LLC, 937
F.3d 764 (7th Cir. 2019), the Seventh Circuit held that Section 13(b) does not
authorize restitutionary monetary relief. And Owner-Operator Indep. Drivers
Ass’n, Inc. v. Swift Transp. Co. (AZ), 632 F.3d 1111 (9th Cir. 2011), found
that ancillary remedies including restitution and disgorgement were not
appropriate as to Truth-in-Lending regulations because the statute confined the
court’s equitable powers to injunctive relief. However, the Ninth Circuit has
“repeatedly held that § 13 ‘empowers district courts to grant any ancillary
relief necessary to accomplish complete justice, including restitution.’ ”
F.T.C. v. AMG Capital Mgmt., LLC, 910 F.3d 417 (9th Cir. 2018). 

The Supreme Court’s recent decision Liu v. SEC, 2020 WL
3405845 (June 22, 2020), further supported this conclusion. There, the Court noted
that when equity jurisdiction has been invoked, the district court may exercise
its “inherent equitable powers … for the proper and complete exercise of that
jurisdiction,” including ordering monetary remedies. The Court reasoned that
“[t]he equitable nature of the profits remedy generally requires the SEC to
return a defendant’s gains to wronged investors for their benefit.” 

The court also imposed individual liability. The individual
defendants’ status as officers of the various corporate defendants, and their
authority to sign documents on the companies’ behalf, gave rise to a
presumption that they had the authority to control the businesses. Given their
degree of participation and control, the individual defendants were or should
have been aware of consumer complaints regarding misrepresentations and
consumer cancellations, and there was evidence that each knew about earlier
state enforcement actions based upon violations of state consumer protection
statutes.

 

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FTC restrains unsubstantiated coronavirus claims

Posted on August 10, 2020 by rtushnet

Federal Trade Comm’n v. Golden Sunrise Nutraceutical, Inc., 2020
WL 4501968, No. 1:20-cv-01060-DAD-SKO (E.D. Cal. Aug. 5, 2020) 

Dealing with coronavirus-related claims, the court grants a
TRO against defendants, including Tieu (president and CEO of the corporate
defendants) and Meis (medical director/board member of one corporate
defendant). Tieu was also indicted based on the same underlying conduct, and
his pretrial release required him, among other things, to cease representing
any Golden Sunrise product as having been approved or having proven itself to
the FDA and to cease representing that his product has been approved or
recognized by any government entity as preventing, treating, or curing COVID-19. 

The alleged conduct predates the pandemic. “Since at least
2016, defendants have promoted and sold a variety of products labeled as
dietary supplements,” claiming numerous health benefits for them, “including
treatment of serious diseases.” Defendants’ homepage stated that their “plans
of care” “are intended to treat, modify, reverse, or cure a Serious or
Life-threatening disease or condition; and real-world evidence indicates that
the G.S. Nutraceutical treatments have potential to address unmet medical needs
for such disease or condition.” Defendants also claimed that the FDA had
reviewed and accepted their products, e.g., claiming that one product “was the
first dietary supplement in the United States to be approved as a prescription
medicine and also for the indication to treat Serious or Life-threatening
conditions. It qualified for both of these under the Regenerative Medicine
Advance Therapy (RMAT). This designation acknowledges not only the
effectiveness of these herbs, usually only associated with pharmaceutical
drugs, but also [that they] caus[e] no side effects, a quality of dietary
supplements.”  

The FTC argued that, in fact, defendants’ products lack any
FDA approval, as RMATs or otherwise. The dietary supplements allegedly consist
almost entirely of common herbs and spices (e.g., olive leaf extract, yarrow
extract, turmeric extract, cayenne extract, and eucalyptus extract). 

“In March 2020, defendants began marketing their Emergency
D-Virus treatment plan as a cure for COVID-19.” After the FTC issued a warning
letter, defendants removed express references to COVID-19, instead using terms
such as “the virus,” “viral,” or “the viral pandemic.” (OK, that’s just
insulting.) 

The complaint alleged violation of sections 5(a) and 12 of
the FTCA (reminder that the latter covers false advertising of food, drugs,
devices, services, or cosmetics): (I) false and unsubstantiated disease claims
pertaining to COVID-19; (II) false and unsubstantiated claims pertaining to
cancer; (III) false and unsubstantiated disease claims pertaining to Parkinson’s
Disease; and (IV) false claims about the use for which the FDA cleared Golden
Sunrise products. The FTC sought and received a TRO on I and IV, requesting
that defendants be temporarily restrained from further violations of the FTCA
as alleged in the complaint, as well as related measures such as an order
restraining them from destroying or disposing of business records or clinical
tests or studies and requiring them to provide a copy of the order to their
employees and affiliates. 

The court found that the requested relief was within its
authority to grant ancillary relief. Defendant Meis argued that he resigned as
medical director two days after the suit was filed and requested that defendants
remove website references to him in that capacity. He argued that he was no
longer a primary participant and couldn’t control defendants’ advertising. But
the court accepted the FTC’s argument that it had no information that he’d
actually stopped participating; he hadn’t met the stringent test for showing
that the action was moot due to voluntary cessation.

Since the FTCA authorizes injunctive relief, irreparable
harm was presumed, and the only thing to do was to weigh the equities and
consider the likelihood of success on the merits. 

As for likely success: uh, yes. Replacing the express
COVID-19 claims with claims about “the virus,” “the virus epidemic,” and “the
viral pandemic” still “implied” that the product was an effective treatment for
COVID-19. [I don’t think those are implications, but then again it doesn’t
matter much for the FTC.] The FTC argued that defendants lacked a reasonable
basis for their claims, and that the standard for substantiating these
particular claims should be very high. The court agreed. The relevant factors
for the appropriate amount of substantiation: “(1) the product involved; (2)
the type of claim; (3) the benefits of a truthful claim; (4) the ease of
developing substantiation for the claim; (5) the consequences of a false claim;
and (6) the amount of substantiation experts in the field would agree is
reasonable.” Medical claims require competent scientific or medical tests or
studies, and “a false claim could result not only in consumers not seeking
proper medical care but also in their not adhering to social and safety norms
regarding mask wearing, social distancing, and other activities designed, as
effectively as possible, to keep not only themselves but also others safe from
the COVID-19 virus.” Experts agree that controlled, scientific trials are required
to substantiate these claims (the court makes no reference to the opinions of
nonexperts like the President and his trade advisor), and that no such trials
exist.

And these claims were material; express claims are presumed material,
and implied claims about health/safety are also material. 

The court also found likely success on the FDA-related
misrepresentations.  “[B]ecause these
representations are inherently about the legitimate effectiveness of
defendants’ products … to cure or treat COVID-19,” the same high degree of
substantiation was required, and the same materiality was present.

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Announcing the Fifth Edition of Advertising & Marketing Law: Cases & Materials by Goldman & Tushnet

Posted on August 10, 2020 by rtushnet

(Crossposted from Eric’s blog, with thanks to my assistant Andrew Matthiesen and Eric for all the work they did to get the book out.) Eric Goldman and I are pleased to announce the fifth edition of our casebook, Advertising & Marketing Law: Cases & Materials. It is available for purchase in the following formats:

* A DRM-free PDF file. Price: $12
* In Kindle. Price: $9.99
* Print-on-demand hard copy from Amazon. Price is $30 + shipping and tax. Buyers of the hard copy can also get a free PDF file by emailing me a copy of their receipt showing which edition they bought.

If you are a professor, or are hoping to teach the course, and would like a free evaluation copy, please email Eric (egoldman@gmail.com) or me (rtushnet@law.harvard.edu).

A sample chapter, Chapter 14 (on publicity rights and endorsements), is available as a free download. We also have an online-only chapter, Chapter 19, providing deeper coverage of housing advertisements and political advertising (also a free download).

We’ve discussed the book’s background and our goals as authors in this essay.

What Does the Book Cover?

Preface
Chapter 1: Overview
Chapter 2: What is an Advertisement?
Chapter 3: False Advertising Overview
Chapter 4: Deception
Chapter 5: Which Facts Matter? Reasonable Consumers and Materiality
Chapter 6: Omissions and Disclosures
Chapter 7: Special Topics in Competitor Lawsuits
Chapter 8: Consumer Class Actions
Chapter 9: False Advertising Practice and Remedies
Chapter 10: Other Business Torts
Chapter 11: Copyrights
Chapter 12: Brand Protection and Usage
Chapter 13: Competitive Restrictions
Chapter 14: Featuring People in Ads
Chapter 15: Privacy
Chapter 16: Promotions
Chapter 17: The Advertising Industry Ecosystem–Intermediaries and Their Regulation
Chapter 18: Case Studies in Health and Environmental Claims
Chapter 19 (online only): Case Studies in Housing and Political Advertising Regulation

What Changed from the Fourth to the Fifth Editions?

Some of the bigger changes this edition:

  • We consolidated the hard copy into a single volume. To do this, we had to change the book size to 8×10 and manipulate the formatting some. The book has the same content as before (with some prudent trimming here and there), but having it in a single volume makes life easier for everyone. This also allowed us to reduce the hard-copy price from the prior cost of $40 for the two volumes.
  • We split the jumbo chapter on falsity (Chapter 4) into two. This should make the chapter a little less daunting and more teachable.
  • We renamed Chapters 18 and 19 to better reflect their contents.

As usual, we freshened the book throughout. We did some significant reworking of the privacy section, such as our treatment of Article III standing and coverage of the California Consumer Privacy Act (a watered-down version of this).

A personal note: I’m scheduled to teach the course in Spring 2021, my first time teaching it since Spring 2015 (when my mom died).

If You Are Teaching (Or Want to Teach) Advertising Law

For reasons why you should consider teaching an advertising law course, see this post. In addition to a complimentary book copy, we can provide (1) access to the Georgetown Intellectual Property Teaching Resources database, with digitized props galore; and (2) our PowerPoint slide decks, lecture notes, and other materials. If you are creating a new course, we can give you feedback on your draft syllabus and course proposal. Email me! You can see my old syllabi and exams on my Advertising Law course page.

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