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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context matters: “mineral-based” sunscreen with chemical-based active ingredients is plausibly deceptive

Posted on August 7, 2020 by rtushnet

Prescott v. Bayer Healthcare LLC, 2020 WL 4430958, No.
20-cv-00102-NC (N.D. Cal. Jun. 31, 2020) (magistrate)

Plaintiffs alleged that defendants deceived consumers by
labeling their sunscreens as “mineral-based” when the sunscreens contain active
chemical ingredients. As the court explains,  

“Mineral-based” sunscreens are
distinguished from “chemical-based” sunscreens through the compounds used to
absorb or deflect ultraviolet (“UV”) radiation. Some compounds commonly used as
active ingredients in sunscreens, such as zinc oxide and titanium dioxide, are
considered inorganic minerals. Other common compounds commonly used as active
ingredients in sunscreens, such as octisalate and octocrylene, are considered
chemicals. Each of the four challenged products contain both mineral active
ingredients and chemical active ingredients.

Plaintiffs alleged that they were concerned about potential
adverse health effects of chemical active ingredients and thus sought out
“mineral-based” sunscreens. They brought the usual California claims.

The court rejected Bayer’s express FDCA preemption argument.
There are various FDA requirements for OTC sunscreens as well as a general prohibition
on “claims that would be false and/or misleading on sunscreen products.” But
the FDA neither specifically mandates nor prohibits the use of “mineral-based”
claims, and doesn’t preempt state law that allows consumers to sue for
violations of federal standards. If the suit ultimately requires the removal of
“mineral-based” from the labels, there’d be no conflict.

Primary jurisdiction arguments also failed. Turns out, there
was a directive to the FDA in the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act), and the FDA is also supposedly considering further regulations
regarding ingredient disclosures. Nonetheless: “false advertising suits like
this one are squarely within the conventional experiences of judges and courts.”
And “this lawsuit does not involve technical or policy considerations within
the FDA’s field of expertise,” such as whether the active ingredients were
harmful or safe. Though the details of chemical active ingredients are part of
the suit, its crux is whether the label is misleading.  The parties even appeared to agree which
active ingredients are “minerals” or “chemicals.” (Citing POM Wonderful LLC v.
Coca-Cola Co., 573 U.S. 102 (2014) (noting that the FDA does not have the
expertise to evaluate nor authority to enforce false advertising claims).)

The FDA’s consideration of whether to introduce a labeling
requirement that all active ingredients be disclosed on a sunscreen product’s
principal display panel didn’t change anything. If plaintiffs were right about
the average consumer’s understanding of “mineral-based,” defendants’ use of the
phrase would be misleading or inaccurate regardless whether all active
ingredients were disclosed on the products’ principal display panel. Also, that
regulation was proposed in February 26, 2019, and the public comment period
concluded on May 28, 2019; its proposed effective date was originally November
26, 2019. Under the Ninth Circuit’s guidance that “[t]he deciding factor should
be efficiency,” “it makes little sense to halt this lawsuit because of a
proposed rule that was under consideration over a year ago.” So too for the
CARES Act, for which the FDA is required to propose an order by September 2021.
“Dismissing or staying this case for over a year is not efficient. This is
particularly true here, when the Act’s mandate is fairly vague and does not
require the FDA to regulate the specific issue in this case”—it just required
the FDA to “amend and revise the final administrative order concerning
nonprescription sunscreen.”

Plaintiffs also had standing for products they hadn’t
purchased that allegedly were misleadingly labeled in the same way. And, under
the Ninth Circuit standard, they had standing to sue for injunctive relief.
Defendants argued that from now on they could just look at the back labels. “But
it is not clear why the burden to avoid future misunderstanding lies with
Plaintiffs and not Defendants when it is Defendants’ actions that are allegedly
unlawful.” Also, even if they know now, “it is plausible that they would forget
to do so or instead choose to rely on Defendants’ principal representations.” And
as the Ninth Circuit has said, “the threat of future harm may be the consumer’s
plausible allegations that she will be unable to rely on the product’s
advertising or labeling in the future….” And even reviewing the label might
not help, since plaintiffs might not know which active ingredients are
“minerals” and which are “chemicals.” “[A]bsent an encyclopedic knowledge of
sunscreen active ingredients, Plaintiffs may not be able to truly know whether
a sunscreen is truly ‘mineral-based.’”

Misleadingness: Defendants argued that “mineral-based”
simply means that mineral active ingredients play the “supporting or carrying”
role or is “the fundamental part of something.” Plaintiffs argued that
reasonable consumers would interpret the phrase to mean that the product
contains no chemical active ingredients. Plaintiffs alleged that “nearly all
other sunscreens on the market (other than Defendants’) that are advertised as
mineral or mineral-based contain only mineral active ingredients.” On a motion
to dismiss, that was enough to create a question of fact.

The dictionary definition of “base” wasn’t sufficient to
protect defendants. “Base” can also mean “a main ingredient,” but in some of
the challenged products, chemical active ingredients made up a larger
percentage of the ingredients than mineral active ingredients. As the court perceptively
noted—and recognizing the reality missed by the “white”/chocolate cases—context
matters. “For example, a ‘plant-based meal’ is generally understood to contain
only plants and no meat.”

Defendants argued
that “mineral-based” was nevertheless not misleading because in each of their
products, the largest single active ingredient by percentage is a mineral
active ingredient. “But the challenged statement is ‘mineral-based’ not, for
example, ‘zinc oxide-based.’” A reasonable consumer could receive the message
that mineral active ingredients in the aggregate were the “main ingredients,” but
in the challenged products, mineral active ingredients made up a roughly equal
proportion of the active ingredients as chemical active ingredients (e.g, mineral
active ingredients constituted 9.7% of all ingredients and chemical active
ingredients constituted 12% of all ingredients in defendants’ Sports Lotion). And
the ingredients list didn’t fix the problem, under Ninth Circuit law, where the
list arguably contradicted rather than explaining the label. 

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No contributory liability for athlete union’s endorsement of supplement

Posted on August 6, 2020 by rtushnet

DNA Sports Performance Lab, Inc. v. Major League Baseball, 2020
WL 4430793, No. C 20-00546 WHA (N.D. Cal. Aug. 1, 2020) 

Courts seem to perceive people affiliated with TM/(c) infringers as more blameworthy than people affiliated with false advertisers. One could argue that this reflects underlying reality, but it remains the case that, for example, vicarious liability is broader in copyright than in many other situations. Similarly, contributory liability claims against retailers for false advertising fail when the retailers would be treated as direct infringers of a similar TM claim. Anyway, here the court finds that an endorsement isn’t sufficient participation in allegedly false advertising about the underlying supplement, without more involvement.

Plaintiffs sell health supplements “extracted from the shed
tissue of elk antlers,” which contain a “naturally occurring, bio-identical
form of IGF-1,” a performance-enhancing substance. They sued MLB and the MLB
Players Association, which banned both natural and synthetic IGF-1 under their
Joint Drug Prevention and Treatment Program, for false advertising and unfair
competition. The court dismissed the claims and heavily suggested that
sanctions would be imposed if they tried and failed to successfully amend the
complaint. 

There is a lot of litigation before this; the court gives a
limited history: In February 2014, plaintiffs sued MLB and several of its
employees in Florida state court, challenging its investigation into “the
illegal sale of performance-enhancing drugs to players” as unfair and
discriminatory. This case was dismissed for failure to prosecute. A later suit
against the Office of the Commissioner of Baseball and several league employees
alleging tortious interference with prospective economic advantage, based on
the investigation, was voluntarily dismissed. Then, DNA Sports sued MLB, the
Office of the Commissioner of Baseball, and several league employees for
hacking plaintiffs’ social media accounts, tortious interference with economic
advantage, and defamation of plaintiff/DNA Sports owner Nix, again in the
course of the investigation. Defendants removed to federal district court based
on the hacking claim, which plaintiffs voluntarily dismissed. The New York
state court then dismissed the complaint as res judicata, barred by statute of
limitations, and for failure to state a claim. The state court then denied DNA
Sports’ motion to reargue the dismissal as frivolous and imposed sanctions. 

DNA Sports also sued ESPN, the Associated Press, and USA
Today in federal court in Florida, alleging that they defamed plaintiffs by
publishing or republishing a statement from the league that DNA Sports’ July
2016 tortious interference lawsuit “admits Nix and his company used
bioidentical insulin-like growth factor (IGF-1), which is derived from elk
antlers and is on baseball’s list of banned substances.” The defamation theory
was that the statement didn’t differentiate between natural and synthetic
IGF-1, giving readers the impression that DNA Sports had engaged in illegal or
legal-but-banned drug sales. The court held that the statement at issue was
substantially correct and the omission did not render the report untrue, thus
it was not defamatory; the decision was affirmed on appeal by the Eleventh
Circuit. 

Apparently related to that last suit, in July 2018, DNA
Sports and its new counsel contacted the players union seeking a sworn
statement corroborating an alleged July 2016 phone call between DNA Sports’
counsel and the union’s in-house counsel, who had allegedly informed plaintiffs
that deer antler “was not and has never been banned in baseball and that no
animal products are banned.” But the union reaffirmed the position eventually accepted
by the Eleventh Circuit: the Joint Drug Prevention and Treatment Program banned
both natural and other sources of IGF-1 as a performance enhancing substance. 

After the Eleventh Circuit ruled, DNA Sports and their lawyer
contacted the union requesting their “factual position [on] the presence of
IGF-1” in a union-licensed product, Klean Athlete. The union refused to provide
their “factual position with respect to the presence of IGF-1 in the accused
products.” The suit hear concerns the union’s former licensing agreement with
Klean Athlete and the league’s licensing agreement with Gatorade “Recover” whey
protein bars, Muscle Milk protein shakes, and Eyepromise nutritional
supplements. 

Lanham Act claim: Plaintiffs alleged that the union
misrepresented Klean Athlete as free from banned substances by endorsing the
product. By allowing Klean Athlete to use its logo and announce a partnership
in Klean Athlete’s promotional press release, the union allegedly necessarily implied
that the product was free of any substances banned by the league, which was
false because Klean Athlete allegedly contained animal protein and, thus,
IGF-1. 

First, plaintiffs didn’t pick the right defendant: “typically
those who made the allegedly false or misleading statement at issue.” While
contributory liability is theoretically possible, it requires that (1) a third
party engaged in false advertising that injured the plaintiff; and (2) the
named defendant contributed to this false advertising by knowingly inducing or
causing the conduct or materially participating in it. But the complaint didn’t
allege any facts about the union’s specific licensing agreement with Klean
Athlete; “the union neither made the accused statement nor conducted Klean
Athlete’s product testing.” There were no facts pled about the union’s
knowledge or material participation in the falsity. 

“Second, the complaint alleges no economic or reputational
harm.” Though lost sales and damage to business reputation would count, “these
typical injuries still require sufficiently detailed allegations.” Allegations
of “lost revenue and market share, reduced asset value[,] increased advertising
costs, [and] damage to its business, reputation, and goodwill” have been deemed
conclusory without a relevant timeframe or facts to defendant’s causation. “So
too here.” Although it was plausible that Klean Athlete’s press release
constituted commercial advertising, the complaint didn’t explain how that press
release caused sales diversion or lost contracts. 

Third, the April 2016 press release was outside California’s
three-year statute of limitations for fraud, which the Ninth Circuit borrows
for §43(a)(1)(B) claims. 

State false advertising under the FAL, California Business
and Professions Code § 17500: likewise failed to identify the union’s
participation in the alleged false advertising. Under state law, liability
requires a defendant’s personal “participation in the unlawful practices” and
“unbridled control” over the practices violating § 17500; vicarious liability
isn’t enough. The Ninth Circuit dismissed a false advertising claim against a
defendant who allowed violating merchants to use the defendant’s logo because
“there is no duty to investigate the truth of statements made by others.”
Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788 (9th Cir. 2007). Plaintiffs
didn’t allege any facts relating to how the union knew or should have known
Klean Athlete products contained banned substances (if it did), or how the
union exerted control over Klean Athlete’s “certified for sport” determination. 

Unfair competition: same, plus there were no available
remedies. Unfair competition claims under § 17200 are limited to restitution
and injunctive relief, which requires ongoing injury. DNA Sports never
conducted business with the union, so there was no restitution possible. And injunctive
relief was unvailable because the union’s licensing agreement with Klean
Athlete was over and would likely not be repeated. 

Before ruling on the union’s motion for sanctions, the court
offered plaintiffs an opportunity to amend, though “their better course might
be to walk away.” If they did, they needed to address not only the problems
identified by the opinion, but the union’s other criticisms.

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selling w/in another distributor’s exclusive territory isn’t plausibly false advertising of authorization

Posted on August 4, 2020 by rtushnet

Northern Bottling Co. v. Henry’s Foods, Inc., No.
1:19-cv-021, 2020 WL 4208526 (D.N.D. Jul. 22, 2020) 

Northern is a PepsiCo bottler/distributor; it has some Exclusive
Bottling Appointments that appoint Northern as PepsiCo’s “exclusive bottler, to
bottle and distribute” a specific PepsiCo soft drink, such as Pepsi-Cola or
Mountain Dew, in a designated geographic territory. “PepsiCo produces the
concentrate—the flavor base for the beverages—and sells it to independent
bottlers. The independent bottlers, such as Northern, manufacture, sell, and
deliver the finished soft drinks to retailers in their geographic territory,
who, in turn, sell the products directly to the consuming public. The EBAs
provide that PepsiCo is the owner of the beverage trademarks and Northern does
not have ‘any right or interest’ in the trademarks.” 

Henry’s sells food and beverages, including Pepsi products,
to retail sales outlets, including gas and convenience stores. It is allegedly
a “third-party transshipper” of PepsiCo products, to wit, someone who sells in
a bottler’s exclusive territory other than the licensed bottler itself. Henry’s
allegedly transshipped PepsiCo products to six gas stations or convenience
stores located within the geographic territory established in the
Northern-PepsiCo EBAs. 

Henry’s allegedly implicitly (but never explicitly) misrepresented
that: Henry’s was licensed or authorized to manufacture, sell, and distribute
PepsiCo products; Henry’s’ sales were conducted in association with, or with
the approval of, PepsiCo and/or Northern; Henry’s’ products were of the same
quality or freshness as Northern’s; Henry’s’ “pricing was legitimate”; and
Henry’s’ “poor customer service” was caused or condoned by Northern. It
allegedly made these implicit representations by: “calling on [Northern’s]
exclusive customer base,” selling PepsiCo brand soft drinks to Northern’s
customers, “using and handling” PepsiCo trademarks, and listing PepsiCo soft
drinks for sale in promotional brochures. 

Northern sued for tortious interference with business
expectancy, violation of the Lanham Act, and declaratory relief. The court
dismissed the complaint. 

Tortious interference: requires “an independently tortious
or otherwise unlawful act of interference by the interferer.” Northern alleged:
(1) deceit, (2) false advertising, and (3) the consumer sales fraud prevention
statute. Rule 9(b) applied.

Under North Dakota law, deceit means that “[o]ne who
willfully deceives another with intent to induce that person to alter that
person’s position to that person’s injury or risk is liable for any damage
which that person thereby suffers.” Northern didn’t plead fraud with the
requisite specificity, failing to identify by name a single gas station or
convenience store that Henry’s allegedly deceived or any dates. It also didn’t
allege any express representation. Matrix Essentials, Inc. v. Emporium Drug
Mart, Inc., 988 F.2d 587 (5th Cir. 1993), held that a seller’s offering to sell
products and stocking shelves with those products did not amount to a misleading
representation that the seller was “authorized” to sell those products. Scott
Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477 (5th Cir. 2004), held that a
mere truthful reference to selling a marked product didn’t suggest affiliation. 

Here, it wasn’t enough to allege that Henry’s misrepresented
itself as authorized by calling on Northern’s “exclusive customer base.” Thus,
even if there had been more detail, the court was skeptical that Henry’s’
alleged actions—“offering to sell, displaying the product for sale in a
brochure, and selling PepsiCo soft drinks—absent more, amount to a misleading representation.”  Northern didn’t plead any other potential deceit—misrepresentations
that Henry’s was authorized and that its pricing was “legitimate”—with the requisite
specificity. Northern didn’t explain what “legitimate” pricing even was. Alleged
misrepresentations that Henry’s products had the “high-caliber characteristics,
quality controls, and freshness associated with Northern’s products” were also
not specifically identified. 

False advertising/consumer fraud under state law: Same
problems. 

Lanham Act: Statutory standing was an issue: did Northern
have any interest in asserting harm when PepsiCo owns the relevant trademarks?
Under Lexmark, the answer was yes: Northern alleged “an injury to a
commercial interest in reputation or sales” and proximate causation in that
customers switched. 

The court also considered in detail the split over applying
Rule 9(b) to the Lanham Act claim, since some courts hold that proof of fraud
or mistake isn’t required for §43(a)(1)(B) false advertising liability. But this
court disagreed, based on other Eighth Circuit cases, the language of the
statute, and the allegations here. Given that holding, the same flaws doomed
the federal claim.

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IPSC, Trademark

Posted on July 31, 2020 by rtushnet

IPSC – Trademark Law I

Moderator: Mark McKenna 

Trademark Depletion in a Global, Multilingual Economy: Evidence
from the European Union (abstract)

Jeanne Fromer and Barton Beebe, NYU School of Law 

Notes on the EU system: runs in parallel with national
systems. Must be protectable in all EU nations (in theory); if generic in one nation,
unregistrable via EU. Also, EU does not review applications for relative
grounds for refusal (confusion). They generally remove diacritical marks for purposes
of generating similarity reports. Translational similarity matters: same
meaning in different language could bar registration. Not use-based as US is. 5
year grace period. Germany is biggest user of EU system, followed by US. Over
60% of applications contain English words—it’s the dominant language
commercially. 

Datasets: EUIPO applications, registrations; gathered
opposition data. Compared to corpora in English, French, German, Italian, and
Spanish, and translated words into those languages as well as looking for
positive/negative meanings. 

Results: nearly all good terms carrying positive affect are
already registered. 1000 most frequently used words are 65% registered as
single-word marks, covering 69.4% of all word usage, and of the most 20,000
frequently used words, 77.3% of all word usage is a word registered as a
single-word marks. Of the unclaimed marks, they’re not great: worst, problem,
than, thank, their, said, problems, worse, worry, etc. Some classes like apparel
are very crowded; if you look at similarity (small edit distance) then it gets
close to 90% coverage. Character, word, and number of word lengths are
increasing in applications, suggesting increasing resort to longer/less “shorthandy”
marks that may function less well as marks. Trends got really bad about 10
years ago. In other languages: About 95% of French usage is currently claimed.
Very high proportions of multi-language words are registered: of the top 1000
English words, 55 are highly intelligible in the other languages, and 54 are
registered (not REPUBLICAN). 

Opposition rates are declining, not increasing! 2017: 1 in
10. But those who bother to oppose increasingly win. 70% based on confusing similarity
resulted in a refusal either in whole or in part in 2017. 

EUIPO system is very different from US: allowing enormous TM
crowding, where lots of similar marks are registered at the same time.
Registration rate initially declines w/# of entities opposing the application.
Where no opposition, 92% registration. When # of opposers increases to 8 or
more, though, the rate increases again: the EUIPO just says: everyone gets a
registration; the field is already so crowded that there’s no problem. 

Compare to US: “all or nothing” rule may make it harder to
find marks. Is it a good system to have third parties doing the opposing/have
no examination on relative grounds? Businesses are arguably in the best
position to know what is detrimental. But also businesses might need a sense of
what’s potentially confusing, and EUIPO may not give it. Search reports of
EUIPO to ping third party businesses are really thin. CREMOLAIT triggered
nothing—they appear to identically match whole words in the registration. 

Jeremy Sheff: Disclaimer practice? Does that happen at all
where common word is disclaimed?  

Fromer: in the US, disclaimers are everything: if you
disclaim, you get your registration. Not clear what’s going on in EUIPO.

Irene Calboli: Applicants (except for largest) are usually
just looking at 2-3 countries. With enforcement still country by country, similar
rights in other nations aren’t much of a problem. Difficult to factor that in
looking just at EUIPO. Licensing/coexistence agreements may also be in place. 

Lisa Ramsey: if European companies aren’t worrying about
crowding, should we? Maybe rights should just be very narrow. Companies may
think that they can distinguish themselves with packaging etc. 

Beebe: tests our basic assumptions about TM law. Crowding may
not cause much consumer confusion; we will probably argue that European example
shows that narrow rights are generally fine; businesses aren’t very worried
about that when they have to express their preferences by paying. 

Fromer: want to be sure we’re covering large businesses v.
small businesses with less sophistication that may not know what’s actually
available. Multinationals in the US seem worried about TM depletion as a
problem, but not in the EU; legal differences or differences on the ground may
matter. 

Endorsing After Death, Andrew Gilden, Willamette University
College of Law

Exclusive rights to control post-death endorsements given to
families/heirs. While “it’s hard to argue wit h a straight face that a dead
person is endorsing a product,” we see Elvis face coverings, Marilyn Monroe
perfume, Muhammad Ali quotes selling Gatorade. Ordinarily an individual
endorsement involves voluntary association/approval; post-death endorsements
don’t fit that model, but TM increasingly supports the idea of posthumous
endorsement. Project identifies this trend and identifies serious problems.
Proposes narrower framework to better represent interests of decedents, fans,
and survivors. 

False endorsement claims: estate/heirs claim that something
will cause confusion about whether the decedent or the estate endorsed the product.
Registered “selfmarks.” Lanham Act 2(a): false association: ability to block
other registrations, gives estate leg up in establishing priority. Verified
accounts on Instagram: can get a check mark as authentic presence of a global brand
represented by a public figure. Allows estates to post and speak as if they are
the decedent. Project brackets the right of publicity, which raises different
concerns. 

First major concern: continuity problems. Fails to meaningfully
distinguish b/t decedent and successor in interest: courts require plaintiffs
to demonstrate confusion over endorsement from decedent or estate. But estate
can be practically anyone: estate of Marilyn Monroe is an entity Authentic
Brands Group that bought the rights to the Monroe IP from the wife of her acting
coach. Endorsement by Monroe means something v. different from endorsement by ABG
but courts have refused to distinguish those things. 

Second: autonomy/agency of the deceased. Endorsement signals
some desired connection b/t endorser and endorsed. Conscripting the deceased
into activities they may not have supported. Marilyn Monroe, Elvis, and
Muhammad Ali all “participated” in #blackoutuesday, but did that reflect their
views? 

Third: discursive problems: controlling cultural meanings of
the celebrity. Official account frames her as “Paris Hilton” of her day, downplaying
other issues around addiction and femininity; so too w/Whitney Houston.
Pernicious b/c posthumous endorsement gives “official voice” to the estate. 

Might still want to recognize some rights b/c they are
material to consumers. Purchasing endorsed products can be a way of mourning/processing
a celebrity’s death; may also want to support surviving family members/causes
the celebrity cared about. Posthumous endorsements can also push back against
exploitation—merchandise sold w/names & images of George Floyd and other
victims of police violence. Misrepresentations of official endorsement can be
bad. This can also happen politically—Reagan Foundation sent a C&D to the Trump
campaign for selling Reagan/Trump merchandise. 

What to do? Proposal: recognize endorsement rights not just
on the chain of title (as courts currently do) but require privity and power: a
meaningful connection b/t rightsholder & decedent. Should be empowered to
make legal decisions on behalf of the decedent—personal representative, trustee—w/corresponding
duty to their interests. Consistent with HIPAA, Stored Communications Act, attorney-client privilege. 

Finally, where there’s no entity w/legal authority to act on
behalf of the decedent but a risk of deception, false advertising law can pick
up the slack. 

Ramsey: Monroe used a different perfume than the one
proposed to endorse—should that matter? Literature on compelled speech. 

RT: different perfume example suggests that privity/power is
quite complex: (1) naked licensing/assignment in gross issue: what would it
even mean for “Monroe” to endorse a perfume; (2) conflating materiality of
decedent’s endorsement while alive w/estate’s endorsement—courts make it way
too easy by allowing conflation; (3) compelled speech arguments in this context
make me nervous b/c they are usually deployed against people who have speech interests of their own. 

A: family endorsements can sometimes be material but in a
different way—need analysis. [And of course “family” is not the same thing as “estate.”]
Would like law to disaggregate these situations. 

Mark McKenna: really stuck on the label “endorsement” for a
dead person. Consumers can’t possibly think that’s happened if they know the
person is dead. Many of these examples are more about association or dilution
than confusion—this person stood for X and is being used for Y. Where the heir
is standing in for the person, there’s an extreme level of circularity—only if
heirs have the right to license do consumers think it’s the heirs doing the
endorsing. 

Jeremy Sheff: unpleasant flashbacks to NY ROP debate. Once
you start dealing w/postmortem rights, you get into complex issues of trust
& estates & tax law, which your privity requirement brings to the
front. The idea of this being an asset passed from one generation to the next
is something those bodies of law have things to say about—taxing on its
distribution depends on its worth, which depends on its use before death, which
might be different from use after death. Or you could do an objective valuation
which would be potentially inconsistent w/decedent’s own desires and/or desires
of family. How will you engage w/ those bodies of law—Eva Subotnik has been
doing related work in © context. 

A: definitely a goal is to bring TM into dialogue with
T&E. Even weirder than ROP and © b/c it’s unclear what needs to be assigned
to bring endorsement rights. Nebraska courts say ROP is inalienable so there’s
no transferable endorsement right; NY courts said that even though there was no
post-ROP there’s still an endorsement right. 

Calboli: compare theories on moral rights postmortem. 

Trademarking “Covid,” “Covid-19” and “Coronavirus”: An
Empirical Review and Considerations of a Larger Pandemic, Irene Calboli, Texas
A&M University School of Law

Also looking at “social distancing” and “six feet apart”—using
these as a measure/example of certain issues in the system. More than 600
applications for these in less than 3 months. Looking at a sample: Medical-related
(124), unrelated existing businesses like baby clothes (64), merchandising
products/promotional goods (135), slurs (also merchandising, 7).  A considerable number disclaim “COVID” etc.
and are combination or design marks. Some could in theory be inherently
distinctive given the unrelatedness of the goods. Although she’s ok with the
merchandising right for established businesses like Mercedes cars, here there
are a bunch of clear examples of failure to function. 

Is there a problem? What are the costs for the PTO given that
vast majority will be rejected? Time invested by examiners, including possible office
actions/appeals. Costs minus fees generated: hard to determine. 

Cost to possible legitimate business from being cut off from
using descriptive terms? Costs from possible litigation—C&Ds?  There’s a backlog in the system—too many
applications? A lot of waste to sift through. 

RT: Carol Rose talks about how a property system is in some
ways a commons of its own; overuse can impose unexpected costs/externalize
harms. Here, one possible immediate result is elevating failure to function as
a free floating reason to reject registrations (or even recognition as marks).
As with slurs, even when the result might be inherently distinctive according to
our usual tools for identifying what is functioning as a mark, the non TM meaning
overwhelms the usual signals of what constitutes a mark such as placement on
the product. (This breakdown in old standards for what counts as a TM is also
happening on the other end of the Abercrombie spectrum with Booking.com telling
us that consumer perception is all.) I don’t think that Corona Legal Services
is going to work as a mark! The corrosive effect of overclaiming on our usual
tools for identifying trademark function is itself a problem, and it also
raises the question of what comes next to identify TM function. Crystals &
Mud in Property Law offers some ways of thinking about how property systems
might react to overuse. 

Ramsey: do other national systems have a similar problem?

Beebe: costs on the system are a real question. PTO
examiners might like these b/c they’re so easy to reject—helps their numbers!
Saw it as a revenue making thing, but there aren’t that many of these; still,
on balance assumed that PTO was making money off of these. Finally, people can
waste their money if they want to apply for registrations that won’t succeed—not
sure what we could do to stem the flow of these (given right to petition!). 

Alexandra Roberts: consider whether these are deceptive
marks too—grabbing attention at a desperate time is not good. Consumer health
& safety are also relevant. 

Headaches and Handbags: A Fragility Theory of Trademark
Functionality, Matthew Sipe, University of Baltimore School of Law 

Placebo effect is powerful & often mediated by TM.
Subjects who took marked Nurofen experienced much more relief than unmarked;
subjects who took Nurofen-branded sugar pills even did better than people who
took unbranded actual Nurofen. Pink is associated with soothing/care in Western
cultures, so pink Pepto-Bismol will work better than red or green. Traffix
says that a product feature is functional if it’s essential to use/purpose or if
it effects the cost/quality. If so, no need to proceed further. TM names of
drugs clearly affect quality, as do the color of drugs. We do have cases
finding color functional on these grounds, but not the names. 

Traffix language can’t mean what it says, b/c any TM
affects costs by reducing search costs and any TM affects quality by increasing
the incentives to preserve quality. So lower courts have added de jure/de
facto, aesthetic/utilitarian distinctions. But TM has fumbled towards a
consensus on functionality. 

Three themes: (1) preference for bright line heuristics; (2)
intentional focus on welfare maximization; (3) conceptual unity b/t marks and
dress. 

But Nike golf clubs improve consumer performance versus
unbranded or irrelevant branded clubs; 3M branded earplugs improve performance
on a math test in a noisy space; Red Bull improves performance on cognitive
tests v. Sprite. 

There is also social functionality: conspicuous consumption,
conspicuous giving. Organizational functionality: a certification mark allows
product manufacturers to avoid costs in warranties, demos, etc. Credibly
certifying place of origin allows producers to compel buy in for advertising,
research, etc. that would be dissipated by free riding.  And design functionality: granting protection
to one shape allows producer to introduce variation w/o losing recognizability
and brand prominence: Zippo lighter shape and Funko pop general configuration.
Also allows them to avoid tags or other marks. Interlocking functionality:
makes other products from the same producers higher quality b/c of match/fit: Lego
shapes, or Tiffany blue earrings as only match for Tiffany necklace, or John
Deere green accessories being only match for John Deere tractor. 

All these functions are fragile: the use/purpose would be
destroyed through unchecked copying. Only nonfragile functionality truly
prevents TM eligibility in practice. Pepto pink still soothes even if other
producers use pink. But the word mark Pepto-Bismol only works if exclusive and would
eventually dissipate if freely used. His proposal: any use, purpose or effect
dependent on TM exclusivity itself doesn’t count. But any time there’s a mix of
exclusivity-dependent and non-dependent functionality, secondary meaning
(fragile functionality) won’t save the matter from ineligibility.  Allows us to dispense with aesthetic
functionality b/c test no longer needs it. 

Application: overlapping TM & © protection. Fragility model:
overlapping protection shouldn’t be allowed in vast majority of cases. Traffix
tells us patented subject matter is only nonfunctional when it’s an arbitrary
embellishment. If it’s being used for its innovation, that affects cost/quality.
So too w/©. Unless © subject matter is being used for reasons unrelated to
creative expression, will affect product in impermissible ways. Of course a
Batman backpack is being used for its creativity. Dastar thus follows. 

By contrast, dilution and post-sale confusion: to prevent
unwinding of signal, have to protect exclusivity. 

Protecting fragility is welfare-enhancing. Benefits that can
be shared are, benefits that can’t be shared aren’t. Leaves space/incentives
for branding. But there are distributionally regressive outcomes: healthcare,
athletic/academic performance. Inferior products to those who can’t afford
them. Potentially anticompetitive. 

Barton Beebe: Metaphysically convoluted. Is SCt approach as
expressed in reputation-related functionality v. non reputation related
functionality already what you’re getting at? Samara Bros. does seem to
get at the distinction you’re making. How is fragility different? 

Different dichotomy: exclusivity related functionality
versus non exclusivity related functionality? Not just the high fashion brands
that advertise into our heads; all consumer goods participate in economy of
exclusivity to some extent, including K-Mart. TM law just talks about the high
end brands as a matter of class. Other things to consider: (1) Easterbrook’s
approach to functionality: a design that produces a benefit other than source
identification is functional. Bright line! (2) Consider definition of useful
article in © and recent struggles with that. Similar vibe. 

A: For “non-reputation-related”: two problems. (1) They tell
us we don’t ever hit that test if you trigger Inwood first. You can
dance around this a little w/a gloss on whether this is a two-step test. (2) It
doesn’t deal with all these functionalities. The word “significant” is
precisely what starts to look like an antitrust rule of reason. 

Fromer: lots of literature about functionality, including
Lunney, Litman, McKenna; grapple explicitly how what you say differs from or
works with what they say. 

RT: From the paper: “All trademarks affect cost and quality.
Full stop. Trademarks reduce search costs for consumers by providing a
“consistent signal,”

–assumes the existence of secondary meaning; b/c search
costs aren’t reduced w/o that, this description assumes a de facto functionality
that may not exist in mere TM function

–framing elides one of the hardest Qs in functionality: it
is good to have a mark, or to have a shape, but does that mean that every mark
or every shape is functional? No! That’s just de facto functionality.  (Can see that most clearly in the possible
response to my first point: even having an unknown TM signals that “this isn’t
the TM you know,” thus reducing search costs in some sense, but of course the
actual content of the TM is completely irrelevant to that message. The relevant
information is that the product/service is “not-known.”) Some of the paper
reads like semantic games: you’ve labeled the credence benefits of trademarks
as functional, but I think it doesn’t work without a better account of the
level of generality at which you are analyzing functionality. 

I wish I thought this reformulation worked, but because of
the level of generality issue I don’t think it does any better than current
doctrine. Consider the Apple logo or the design of a Rolex watch: they are
beautiful designs; certainly under your view of what constitutes an effect on
quality they at least marginally increase the quality of the products simply because
of their beauty: even on first exposure with no secondary meaning, they are
nice designs. I don’t see how your test helps us with the issue that has
confounded every attempt to reformulate functionality doctrine: When does that
marginal effect, which rests on generalized features of human perception like
our preference for curves, override the effect of the specific trademark
meaning?  This is why some courts ask for
a substantial non reputation related benefit in the aesthetic
functionality test. 

Defense of dilution lacks engagement w/empirical literature
where that doesn’t actually seem to happen: maybe the things you say are
fragile aren’t actually fragile. 

[[Things I didn’t have time to say: Your argument depends in part on the placebo effect being
fragile. [Similar to what McKenna is about to say.] Why not hypothesize that
the effect an effect of familiarity and allowing the brand name to become
generic would continue that familiarity, as with Pepto pink? My take:
Especially likely to persist w/pharmaceuticals b/c those are credence goods; I
understand why spitting out the generic Diet Coke in disgust would make me
distrust labels on experience goods, but the placebo effect works best on
credence goods. Might even work for Nike clubs! 

You try to deal with the placebo effect by looking at the
research on counterfeits labeled as counterfeits. But telling the consumer
they’re using a counterfeit is different than just putting the label Nurofen on
it and saying no more—among other things, the effect of telling someone they’re
using counterfeits might well be related to a generalized surprise or distrust—see
Sprigman et al on dilution: you might also find that performance using a Bic
pen also goes down after experience with a labeled-counterfeit Parker pen b/c consumers
are just more suspicious generally. Also, as far as I recall the research isn’t
conducted on the set of consumers who prefer to buy (fashion) counterfeits—hard
to test, but someone who chose counterfeits because they’re cheaper might have
a different reaction. 

Similar Q: if we could empirically show, say by looking at
China, that widespread counterfeiting and copying does not diminish the
perceived value of brands in certain categories, which is to say that
exclusivity remained somehow perhaps through subtler quality signals, would
your argument have to change? 

[Again echoing what McKenna says] The charitable signalling
& certification mark bits seem to be about false advertising: if the law
enforced a rule that everyone using the Toms mark donated a pair of shoes to
people in need, the relevant signal would continue; it would just be converted
to a certification mark, which is related to the reason that certification
marks theoretically need nondiscrimination provisions.]]

Jeremy Sheff: does fragility differ from the economic
concepts of congestion or rivalrousness, and if so how? 

Jessica Litman: why fragility and what are the other
possible terms? The term is an uncomfortable fit for the phenomenon you’re describing. 

Mike Risch: Doesn’t read cost/quality the same way the paper
does. Thinks it’s mostly about cost of manufacture, quality of physical product
outside of placebo: if made in the way it’s supposed to be made, how does it
work. There is definitely uncertainty, but cost/quality isn’t anything that might
affect how good consumers think it is or how much they’re willing to pay for
it, or you swallow all TM. 

McKenna: you have to assume quality differences for Nurofen
to stop working if freed for all to use. We could make sure that everything
labeled Nurofen had the same pharmacological characteristics. It’s really the
quality differences that derive dissipation, not mere reproduction [at least
for those things that aren’t dependent on excluding the proles].  Separately, it’s at least implicit that it has
to affect cost/quality in a way unrelated to reputation. The function has to be
distinct from reputation, but can exist along with reputation. Courts just
struggle when people want the product for non-source reasons but also want it
for source reasons. 

Overlapping and Sequential IP Rights, Lolita Darden, Suffolk
University Law School

Patent/TM and ©/TM interface: functionality takes us a long
way toward weeding out those designs that might create perpetual monopoly. Trying
to expand functionality to be more comprehensive to protect those other
systems. Distinguish types of protection available for trademark/trade dress.
Using a piece of music whose © has expired as a TM. There may be a narrow opportunity
for these things to serve as TMs. Right to copy v. need to copy can be
distinguished; functionality test proposed is built on concept of need. 

RT: Paper coming at the end made me think that something
unites all these presentations: an increased interest in bright line rules and formalism:
most of the presentations seem to be coming if not from classic formalism then from
rule utilitarianism—the case by case analysis we have been doing in a lot of
these situations has become so costly as to lead us to seek alternatives. For
this project: what is the product or service at issue? For the airline example,
does it include the advertising (theme music for the airline)? If we
confidently say no, then drawing the distinction between protectable and
unprotectable uses of music becomes easier—but why then is the Batman backpack not
a member of the class of backpacks and Batman just part of its marketing? 

A: paper does discuss Wonder Woman merchandise—may be a hard
call. 

Calboli: overlaps of protection also raise issues of
overlaps of fair use/defenses. One possibility: redesign the system from
scratch and create a “brand right” that would just tell you what you could do.

Sheff: we’ve all gone crosseyed over this problem at one
point—previous framing was often one of boundaries. Problem in functionality is
that sometimes consumers want things for both reputation and non-reputation related
reasons. Ultimately we have to make a choice about what we value more, not
necessarily as a matter of grand theory but could be tied to particular cases
like the Wonder Woman lunchbox, its markets, and its consumers.

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