Pattishall IP Blog

September 3, 2015

California Amends Advertising Law to Provide Guidance for “Made in USA”

Filed under: Advertising, False Advertising — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 4:06 pm

BLC - Low Resby Bradley L. Cohn, Partner

Good news for manufacturers! On September 1, 2015, California amended its false advertising law to provide much-needed guidance on use of “Made in USA” and similar designations of domestic origin.

Effective January 1, 2016, California law provides that “Made in USA” may be used on products where the foreign content is 5% or less of the wholesale value of the product. The law also allows “Made in USA” to be used where the foreign content is up to 10% of the wholesale value of the product, if the manufacturer can show that the foreign components or ingredients cannot be produced or sourced in the United States.

California’s “Made in USA” law has been the subject of significant discussion in recent years, because the statute itself had not provided a clear threshold requirement for domestic or foreign content. There were also concerns that the law was not in conformity with the Federal Trade Commission’s approach for use of “Made in USA”. Multiple class-action lawsuits have been filed over the years against businesses accused of violating the California law, even where defendants claimed that they were in compliance with federal “Made in USA” guidelines.

California’s “Made in USA” statute can be found at Section 17533.7 of the Business and Professions Code. The amendment is California Senate bill 633, approved by the governor on September 1, 2015.

If you have any questions concerning California’s “Made in USA” statute, or false advertising class action defense generally, please feel free to contact Bradley Cohn or Jessica Ekhoff.

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Bradley L. Cohn is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, false advertising, copyright, trade secret and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and advertising issues. Mr. Cohn’s practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, advertising, data privacy unfair competition, trade secret, right of publicity, Internet, and copyright law.

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May 20, 2014

Can California Chrome THREE-PEAT? Its Owners Sure Hope So

Filed under: Advertising, TM Registration — Tags: , , , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:28 pm

Paul Borovay F LRBy Paul A. Borovay, Associate

California Chrome, the horse that won both the Kentucky Derby and the Preakness Stakes over the last three weeks, has the opportunity to be the first Triple Crown winner in 36 years if it wins the Belmont Stakes on June 7. While California Chrome flirts with history next month, its owners are securing its rights in the horse’s name to capitalize on its (potential) legacy.[1]

As ESPN.com reported this morning,[2] Steven and Carolyn Coburn and Perry and Denise Martin, who make up the horse’s ownership entity of Dumb Ass Partners, filed for the trademark CALIFORNIA CHROME, Ser. No. 86/281,678, for “[a]thletic apparel, namely, shirts, pants, jackets, footwear, hats and caps, athletic uniforms.” According to the article, California Chrome’s owners hope to cash in on licensing deals that are likely dependent on California Chrome winning at the Belmont Stakes.

California Chrome’s owners will not be the only ones this spring hoping to cash in on an outcome dependent trademark. Pat Riley, the owner of the trademark THREEPEAT, Reg. No. 4,051,757, hopes to capitalize on the mark once again if the Miami Heat manage to repeat as NBA champions for a third straight year. [3] Riley first applied for the THREE-PEAT mark in 1988, Reg. No. 1,552,980, when his Los Angeles Lakers were on the cusp of winning three consecutive NBA championships only to be swept by the Detroit Pistons in the championship series.

While he was unable to exploit the mark in the 1980s, Riley has monetized it several times since then. For example, Riley reported earned over $300,000 in licensing revenue when the Chicago Bulls won three consecutive championships (twice) in the 1990s.[4]   Meanwhile, the New York Yankees and Los Angeles Lakers have also won three consecutive championships each, adding even more licensing revenue to Riley’s coffers.

Interestingly, Riley’s first registration for THREE-PEAT, the ’980 Registration discussed above, was cancelled in 2008 because he failed to file an acceptable declaration under Section 8 of the Trademark Act. Additionally, an individual filed a petition to cancel the ’980 Registration in 2001, arguing that the mark did not serve as a trademark and had become generic.[5] Holding that the petitioner failed to show that the mark did not function as a trademark or that the mark was generic, the Trademark Trial and Appeal Board (“TTAB”) noted that a type of athletic accomplishment in itself (i.e., winning three consecutive championships) did not necessarily indicate that the term “conveys any meaning, let alone a generic meaning, about [Riley’s] goods.” Pet. Cancel, p. 9. Additionally, the TTAB stated that the placement of Riley’s THREE-PEAT mark on t-shirts was consistent with how trademarks are generally used as a source identifier. Id. Last, the TTAB said that as long as Riley controls the nature and quality of his licensees’ goods, “the mark does not have to indicate a single physical source of the goods, but may also indicate a single, i.e., consistent, source of quality, regardless of the actual physical source or producer of the goods.” Id at 10.

While Riley’s most recent THREEPEAT mark, Reg. No. 4,051.757, was filed in 2010 under Section 2(f), there remains the question whether the mark has now become generic for the feat of winning three consecutive championships. While the petition to cancel the mark was unsuccessful in 2001, a mark can become generic over time. With more teams winning consecutive championships, and with more individuals invariably using the mark in a descriptive or generic manner for winning three consecutive championships, time will tell whether someone will contest the marks validity in the future and what will be the ultimate result.

With that said, Riley’s ability to monetize a mark that only has value when a series of exceptional events occurs in the future proves that patience really can pay off. While it may look like California Chrome’s owners’ gaze is affixed on the finish line on June 7, their foresight to file a trademark application last week demonstrates that their vision for both California Chrome and CALIFORNIA CHROME really starts when the race is over.

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Paul A. Borovay is an associate with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.   Paul’s practice focuses on litigation in trademark, media, online gaming and entertainment, advertising, as well as trademark prosecution and counseling.

 

[1] ESPN.com reports that the horse was bred for $10,500 and has now won $3.45 million on the track. See http://espn.go.com/horse-racing/triplecrown2014/story/_/id/10957336/california-chrome-owners-file-trademark-horse-name

[2] Id.

[3] As reported on this blog only July 25, 2012, there is some debate as to whether Riley or ex-Los Angeles Lake Byron Scott coined the term THREE-PEAT. Nevertheless, Riley owns the rights to the mark. See https://blog.pattishall.com/2012/07/25/who-owns-a-trademark-jeremy-lin-wins-linsanity-as-anthony-davis-fights-for-his-unibrow/

[4] http://espn.go.com/nba/story/_/id/9360787/miami-heat-owner-pat-riley-had-foresight-patent-three-peat-not-three-heat-espn-magazine

[5] Christopher Wade, Pet. Cancel No. 21,869, 2001 WL 1028372 (Trademark Tr. & App. Bd. Sept. 6, 2001).

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March 25, 2014

Lexmark Case Decided – U.S. Supreme Court Creates New Standard for False Advertising Claims

Filed under: Advertising, Trademark (General) — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 5:45 pm

Widmaier_Uli_1 F LRBy: Uli Widmaier

In Lexmark Int’l, Inc., v. Static Control Components, Inc., No. 12-873 (March 25, 2014), the U.S. Supreme Court held that a party alleging false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), must show “an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.”

This holding creates a new standard for false advertising claims and invalidates familiar legal doctrine.

THE FACTS OF THE CASE
Lexmark, the defendant in this lawsuit, manufactures laser printers and sells toner cartridges for these printers. Static Control, the plaintiff, makes components for remanufacturers of Lexmark printer cartridges.
Static Control had alleged “lost sales and damage to its business reputation” as a direct result of Lexmark’s false, misleading, and derogatory statements about Static Control and its clients, the remanufacturers of Lexmark toner cartridges.

THE LAW PRIOR TO LEXMARK
U.S. courts had long used “three competing approaches to determining whether a plaintiff has standing to sue [for false advertising] under the Lanham Act.” A plaintiff who did not have the requisite standing could not bring a false advertising claim.

The Supreme Court rejected each of these tests. They are no longer valid law.

THE NEW LAW
In Lexmark, the Supreme Court held that a plaintiff’s ability to sue for false advertising is no longer a question of “standing.”

Rather, it “presents a straightforward question of statutory interpretation: Does the cause of action in Sec. 1125(a) extend to plaintiffs like Static Control?” Put another way, the question is “whether Static Control falls within the class of plaintiffs whom Congress has authorized to sue under Sec. 1125(a).”‘

The courts must answer this question by considering two factors: (a) the zone of interests protected by the law invoked, and (b) proximate cause.

(a)    Zone of Interests – For the zone of interests inquiry, the Supreme Court held that the plaintiff must allege and prove “an injury to a commercial interest in reputation or sales.”

This requirement is not met by “a consumer who is hoodwinked into purchasing a disappointing product,” or by “a business misled by a supplier into purchasing an inferior product.”

(b)    Proximate Cause – For the proximate cause inquiry, the Supreme Court held that the plaintiff must allege and prove “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff.”

This requirement is not met “when the deception produces injuries to a fellow commercial actor that in turn affect the plaintiff.”

APPLYING THE NEW LAW TO STATIC CONTROL’S FALSE ADVERTISING CLAIM

(a)    Zone of Interests – Static Control alleged that its “position in the marketplace has been damaged by Lexmark’s false advertising.” Therefore, the Supreme Court held, Static Control is “within the zone of interests” protected by Section 43(a) of the Lanham Act.

(b)    Proximate Cause – Static Control also satisfied the proximate cause requirement because it alleged “that Lexmark disparaged its business and products by asserting that Static Control’s business was illegal.” As the Supreme Court explained, “when a party claims reputational injury from disparagement, competition is not required for proximate cause; and that is true even if the defendant’s aim was to harm its immediate competitors, and the plaintiff merely suffered collateral damage.”

In addition, Static Control’s specific business model supported a finding of proximate cause. Static Control’s products “both (1) were necessary for, and (2) had no other use than, refurbishing Lexmark toner cartridges.” Therefore, any false advertising directed at remanufacturers of Lexmark toner cartridges “necessarily injured Static Control as well.”

The Supreme Court noted that its approval of Static Control’s false advertising claim extends only to Static Control’s allegations. Static Control still has to prove both the zones of interest element and the proximate cause element of its Section 43(a) claim with factual evidence.

EDWARD S. ROGERS AND THE MEANING OF “UNFAIR COMPETITION”
The term “unfair competition” does not mean that the plaintiff and the defendants must actually be competitors.

To drive home that oft-misunderstood point, the Supreme Court quoted a 1929 (!) article in the Yale Law Journal by the drafter of the Lanham Act and former name partner of the Pattishall law firm, Edward S. Rogers. Rogers – whom the Supreme Court calls a “leading authority in the field” – put the matter memorably: “There need be no competition in unfair competition, just as there is no soda in soda water, no grapes in grape fruit, no bread in bread fruit, and a clothes horse is not a horse but is good enough to hang things on.”

In other words, it is a mistake, explained the Supreme Court, “to infer that because the Lanham Act treats false advertising as a form of unfair competition, it can protect only the false-advertiser’s direct competitors.”

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Uli Widmaier is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals. The firm advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues. Uli’s practice focuses on domestic and international trademark, copyright, trade dress and Internet law and litigation.

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April 25, 2013

The FTC Issues Revised Guidance for Mobile Device and Social Media Advertising Claims

Filed under: Advertising, Social Media — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:33 pm

PB LRby Phillip Barengolts, Partner

On March 12, 2013, the Federal Trade Commission issued revisions to its digital advertising guidelines, “.com Disclosures: How to Make Effective Disclosures in Digital Advertising” (the “Guides”).[1]  The Guides do not break new ground, but they provide advertisers with valuable examples of compliant disclosures that qualify advertising claims appearing on mobile devices, on social media such as Twitter and Facebook, and through any other non-traditional platform.

The Guides highlight the FTC’s fundamental belief about advertising claims: the medium does not matter; the advertising claim must be true and not misleading from the viewpoint of a reasonable consumer or else it violates Section 5 of the FTC Act.[2]

Disclosures that qualify an advertising claim must be clear and conspicuous – which can be difficult when dealing with social media or mobile devices due to space constraints.  The FTC’s revised Guides helpfully explain that an advertiser must place a disclosure as close as possible to the qualified claim and must communicate the disclosure in a manner that a consumer is likely to notice and understand.

What if a platform does not provide an opportunity for an adequate disclosure (e.g., Twitter)?  The FTC is clear: don’t use the platform or modify the claim for that platform so that a disclosure is unnecessary.  The Guides do have some detailed suggestions, including:

  • If a consumer has to scroll to view a disclosure, then the disclosure should be unavoidable;
  • Linking to the text of a disclose is permissible, but not if the disclosure is integral to the claim or inseparable from it;
  • Don’t use pop-ups because many browsers block them and most users ignore them;
  • Disclosures should be made before a user clicks “add to cart” or “order now”;
  • If the advertised product is available through outlets other than the advertiser, for example, at an online or brick-and-mortar retailer, the disclosure must be in the ad itself; and
  • for Tweets, the advertiser should use clear terms such as “Ad” or “Sponsored” at the beginning of the Tweet.

The most useful part of the Guides for advertisers are the many examples of compliant and non-compliant disclosures.  Just to highlight a few:

  • the advertiser should optimize its website for mobile devices to ensure that users zooming on a phone will not miss a disclosure;
  • hyperlink disclosures should be right next to the claim they modify (if they can be used at all); and
  • Tweets should include the necessary disclosure not link to it.

Advertisers must be aware of the impact of their claims, intentional or unintentional, and use proper disclosures – suitable to every platform on which the claim will be seen by a consumer –  to qualify any potentially misleading claims.  The Guides provide the FTC’s position on the adequacy of a disclosure to avoid enforcement action.  Of course, advertisers should consult their advertising review counsel to ensure compliance with the Guides and other advertising rules and regulations.

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Phillip Barengolts is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, false advertising and unfair competition litigation, trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Mr. Barengolts’ practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, Internet, advertising and copyright law.  He teaches trademark and copyright litigation at John Marshall Law School, and co-authored Trademark and Copyright Litigation: Forms and Analysis, published by Oxford University Press.


[1] The entire 53-page Guidelines can be found here: http://www.ftc.gov/os/2013/03/130312dotcomdisclosures.pdf.

[2] It should be noted that the Guides, like all other FTC guide, are not laws, but if a company fails to comply, the FTC “might bring an enforcement action alleging an unfair or deceptive practice.”

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October 10, 2012

Pattishall Client Prevails On Counterfeiting and Infringement Claims Over Marks for Vehicle Braking Systems; Court Awards Over $13 Million in Damages, Attorneys’ Fees, Costs and Sanctions

Pattishall client Robert Bosch LLC (“Bosch”) was awarded judgment of over $13 Million by default on its claims of counterfeiting, infringement, unfair competition, and false advertising after nearly three years of litigation and “extensive and cumbersome discovery” in Robert Bosch LLC v. A.B.S. Power Brake, Inc., Case No. 09-14468 (E.D. Mich. August 2, 2012).  Pattishall attorneys Belinda Scrimenti, Bradley Cohn, Thad Chaloemtiarana, and Jeffrey Wakolbinger represented Bosch in this litigation in the United States District Court for the Eastern District of Michigan before the Honorable Patrick J. Duggan.

Specifically, Judge Duggan:

  • awarded Bosch $12,875,997.96; consisting of $3,931,220 in defendant’s profits (which the court trebled to $11,793,660), $993,309.00 in reasonable attorneys’ fees, and $89,028.96 in costs;
  • awarded Bosch $142,082.52 as a judgment for previously entered sanctions;
  • enjoined defendants from future use of Bosch’s HYDRO-BOOST and HYDRO-MAX marks in connection with hydraulic vehicle braking systems or remanufactured, reconditioned or rebuilt Bosch products; and
  • ordered the defendants to destroy all infringing products and promotional materials.

The Court’s opinion highlighted the difficulty of assessing actual damages given the actions of the defendants in discovery and found the Pattishall team’s method for estimating damages to be reasonable.  Relying on survey evidence of law firms nationwide, Judge Duggan also found Pattishall’s Chicago-based attorneys’ fees request reasonable and consistent with rates of comparably-situated firms in Detroit with large intellectual property practices under the traditional lodestar analysis.

The defendants’ alleged violations covered a range of activities, including manufacturing of counterfeit products sold under Bosch’s trademarks, use of identical and similar infringing marks on generic products, sale of refurbished Bosch products that failed to meet genuine Bosch specifications, and false advertising of refurbished hydraulic brake products as new, genuine Bosch products.

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March 14, 2012

Sky Diving for Dollars: Ninth Circuit Upholds Jury’s $6 Million Award to Skydive Arizona for Defendants’ Trademark Infringement, False Advertising, and Cybersquatting

Filed under: Advertising, Litigation, Trademark (General) — Tags: , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 11:12 am

by Phillip Barengolts, Trademark Attorney

Skydive Arizona sued a group of defendants, collectively called “Skyride” by the court, for trademark infringement, false advertising, and cybersquatting.  At trial, the jury awarded Skydive Arizona $1 million in actual damages for false advertising, $2.5 million in actual damages for trademark infringement, $2,500,004 in defendant’s profits from the trademark infringement, and $600,000 for statutory cybersquatting damages.  The district court, upon its own initiative, then doubled the two actual damages awards, for a total of $10.1 million.  Finally, the district court enjoined Skyride from operating in Arizona.  Skyride appealed and, except for the doubling of actual damages, lost.[1]  See Skydive Arizona, Inc. v. Quattrocchi, No. 10-16099 (March 12, 2012), available here: http://www.ca9.uscourts.gov/datastore/opinions/2012/03/12/10-16099.pdf.

Trademark and false advertising litigation is different from other commercial litigation in many respects, but what the Ninth Circuit opinion highlights is the difference in precision required to support monetary damages.  Skyride’s appeal focused on the lack of evidentiary support for the jury award.  Specifically, Skyride argued that the district court abused its discretion by:

(1) upholding the jury’s actual damages award, because Skydive Arizona did not present sufficient evidence concerning the amount of damages; (2) upholding the jury’s lost profits award, because the jury failed to deduct SKYRIDE’s expenses and costs based on the “clearly erroneous” testimony of Skydive Arizona’s expert; (3) enhancing the jury’s damages award to punish SKYRIDE; and (4) upholding and enhancing the entire actual damages, lost profits, and statutory damages award, because the judgment was grossly excessive.

Other than (3), the Ninth Circuit found these arguments unpersuasive.

Under the Lanham Act, a court may award the following in its discretion: (1) defendant’s profits; (2) any damages sustained by the plaintiff; and (3) the costs of the action.  15 U.S.C. § 1117(a).  “In assessing profits the plaintiff shall be required to prove defendant’s sales only.”  Id.  A mark holder is held to a lower standard in proving the exact amount of actual damages.  See La Quinta Corp., 603 F.3d 327, 342 (9th Cir. 2010).  Plaintiff’s damages are measured in the same manner as in tort cases: “the reasonably foreseeable harms caused by the wrong.”  A jury award may be supported by “crude” measures “based upon reasonable inferences.”  See Intel Corp. v. Terabyte Int’l, Inc., 6 F.3d 614, 621 (9th Cir. 1993).

The jury had only the following evidence to support the actual damages award: three exhibits showing Skydive Arizona’s advertising expenditure for the years 1997-2007, declarations and witness testimony blaming Skydive Arizona for problems caused by Skyride’s acts, and counsel’s request that the jury consider Skydive Arizona’s need to engage in corrective advertising.

To establish Skyride’s profits, Skydive Arizona presented an expert who calculated Skyride’s revenues by:

calculating the number of Arizona residents identified in SKYRIDE’s records and then increasing that number by 2.131 to account for files missing residence information.  He then multiplied that number by an average transaction amount, and then adjusted for resulting revenue from out-of-state residents who also jumped in Arizona.  Lastly, [he] added an interest factor of 10%, using the prejudgment interest rate applicable under Arizona law.

Skyride argued after trial and on appeal that this expert testimony was clearly erroneous because “he did not properly deduct vendor payments or overhead costs, and he applied an improper interest rate.”  The Ninth Circuit stressed that Skyride did not challenge the admissibility of this expert testimony under Federal Rule of Evidence 702 through a Daubert challenge at any point during the trial and, therefore, upheld the award of profits.  Of course, both courts could also have pointed out that, under the Lanham Act, the burden of deducting vendor payments and overhead was Skyride’s and not Skydive Arizona’s.

Skyride finally won a point on appeal by successfully arguing that the district court doubled the damages awards to punish Skyride.  Lanham Act damages must be compensatory and cannot be punitive. 15 U.S.C. § 1117(a).  The district court’s commentary surrounding the doubling conveyed its distaste for Skyride’s “purposefully deceitful” conduct and need for Skyride to “accept the wrongfulness of [its] conduct.”

Skyride’s last argument was that the overall award of $10 million at trial was grossly excessive and punitive for a company with “only $23 million” in nationwide gross revenues.  The Ninth Circuit easily dismissed this contention that, essentially, Skyride was “too small to justify such a large award.”

So, here is what you need to support a $6 million damages award in a trademark and false advertising case: an unsympathetic defendant, proof of your advertising expenditures, proof of defendant’s revenues, and evidence suggesting the need for corrective advertising.  Your results may vary.

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 Phillip Barengolts is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Mr. Barengolts’ practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, Internet, and copyright law.  He teaches trademark and copyright litigation at John Marshall Law School, and co-authored Trademark and Copyright Litigation, published by Oxford University Press.


[1] Skydive Arizona appealed the geographic scope of the injunction as being too narrow and lost, but we won’t address that here.  For further background on this case and the facts at issue, see http://blog.ericgoldman.org/archives/2010/05/geographic_trad.htm.

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January 13, 2012

False Advertising Claim Over Statements In Billing Letter To Patients Not Sufficiently Pled Under Lanham Act

Filed under: Advertising, Litigation — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 2:24 pm

by Phillip Barengolts, Trademark Attorney

Ameritox is “the nation’s leader in pain medication monitoring, offering urine drug testing services to help physicians assess medication adherence of patients on chronic opioid therapy.”  Millennium Laboratories is “a national, research-based medication monitoring company whose test offering, technology, customer support, educational resources and experts are specifically focused on clinicians who treat chronic pain.”  Essentially, the companies are urine testing labs that compete in the market for monitoring drug levels in patients who complain of chronic pain because such drugs are very susceptible to abuse.  Ameritox sued Millennium over an alleged scheme to provide improper inducements to physicians to use Millennium’s testing services over those of other companies.  The claims included false advertising under the Lanham Act and a related claim of common law unfair competition.[1]  Millennium moved to dismiss these claims and prevailed (with leave to amend). See Ameritox Ltd. v. Millennium Laboratories, Inc., 8:11-cv-775 (M.D. Fla. Jan. 6, 2012).[2]

As part of this alleged scheme, Ameritox claimed that Millennium provided an “advertisement” to its physician customers that informed patients that they would not be responsible for any additional charges beyond those billed to the patients’ insurance companies or Medicare.  The court identified this “advertisement” as a billing letter, i.e., the letter a patient receives that shows the amounts charged, covered by insurance/Medicare, and owed by the patient.  Ameritox asserted that this letter was misleading because “patients enrolled in Medicare, by law, are not subject to any deductible or co-payments for clinical laboratory services, thus any benefit to a Medicare patient is, in fact illusory.”  It was this letter primarily at issue under the Lanham Act and common law unfair competition claims.

Millennium argued that the letter was not “commercial advertising or promotion,” as required under 15 U.S.C. § 1125(a), because it was sent to patients while the relevant consumers were physicians.  Ameritox countered that: a) the letter was distributed both to patients and physicians; and b) patients also were potential customers.  The court rejected Ameritox’s argument because Ameritox “failed to allege that the Millennium Billing Letter was sufficiently disseminated to the relevant purchasing public.”  Specifically, the court noted that Ameritox’s amended complaint was not clear about who actually was the relevant purchasing public and “how many consumers in the relevant purchasing public Millennium contacted.”[3]

The Court found Ameritox’s factual allegations that the letter was misleading to be sufficient, but at the same time Ameritox had not plausibly pled that the billing letter was likely to deceive potential customers.  The Court did not explain these seemingly contradictory findings beyond stating that Ameritox’s allegation that “Millennium’s statements are…likely to deceive a substantial portion of the targeted customers,” was nothing more than a naked assertion devoid of further factual enhancement – the type of pleading prohibited by the Supreme Court’s decisions in Iqbal and Tombly.  It is not clear what factual enhancement the Court would accept as sufficient to support an allegation of likelihood of deception.  Professor Tushnet wonders whether Ameritox may have to plead that it has a survey in hand. See http://tushnet.blogspot.com/2012/01/pleading-standard-dooms-misleadingness.html.  It seems to this author that explaining how an advertisement is misleading usually would be sufficient to underpin how it is likely to deceive potential consumers.  For example, here (assuming what Ameritox states turns out to be true, as one must on a motion to dismiss), it seems that Ameritox is claiming that patient-consumers are likely to be deceived into believing they are receiving a benefit by having their tests conducted by Millennium because of Millennium’s statements about patients not having to make co-pays, etc.  Perhaps Ameritox needs to be explicit on this point when it amends its complaint, even if such pleading seems above and beyond the notice pleading required by the Federal Rules.

Finally, the Court found insufficient to plead materiality to the purchasing decision Ameritox’s allegation that “Millennium’s false or misleading statements have already, and will continue to, influence materially purchasing decisions to the extent that customers choose Millennium’s services instead of those offered by Ameritox.”  This author sees a pretty direct connection between conveying to a consumer that they don’t have to pay as much when using one company’s service over a competitor’s and the likelihood that the consumer will go with the cheaper provider (essentially, Ameritox alleges that Millennium’s statements convey this type of message).  That is, deception over a price difference seems very material to a consumer’s purchase decision, but maybe that’s just me.  Again, the court may be looking for Ameritox to be more explicit when it re-pleads, but it provided no guidance.

Ultimately, this Court appears to have taken a strict view of the requirements enunciated in Iqbal/Twombly regarding facts that must be pled to support allegations of false advertising under the Lanham Act.  Ameritox was given leave to amend, so we anticipate more specific allegations in the amended complaint.  This decision underscores the need for plaintiffs to be explicit about the impact of an allegedly false advertisement on the target consumers which likely will require more pre-complaint investigation and analysis, as well as artful pleading.  Whether other courts follow this precedent remains to be seen.

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Phillip Barengolts is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Mr. Barengolts’ practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, Internet, and copyright law.  He teaches trademark and copyright litigation at John Marshall Law School, and co-authored Trademark and Copyright Litigation, published by Oxford University Press.


[footnotes]

[1] Ameritox also asserted claims under the Florida Deceptive and Unfair Trade Practices Act that are not at issue here.

[3] According to the opinion, Ameritox alleged only that “Millennium’s services are offered, advertised, and sold to customers throughout the country.”

January 5, 2012

Using An Employee’s Personal Social Media Accounts Without Her Authorization To Market Employer May Create Liability Under Trademark And Electronic Privacy Laws

Filed under: Advertising, Litigation, Right of Publicity, Trademark (General) — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 10:55 am

by Phillip Barengolts, Trademark Attorney

We’ve all been taught that our work e-mail and social media accounts are owned by our employers, so watch what you say and realize that you have no expectation of privacy in those accounts.  But what happens when an employee uses a personal account to promote her employer?  According to one court, the employer’s use of these accounts without the employee’s authorization can lead to liability under the Lanham Act and the Stored Communications Act. Maremont v. Susan Fredman Design Group, Ltd., Case No. 10 C 7811 (N.D. Ill. Dec. 7, 2011).[1]

The plaintiff, Jill Maremont, was the Director of Marketing, Public Relations, and E-commerce for the defendant Susan Fredman Design Group, Ltd. (SFDG), a prominent interior design firm based in Chicago.  As part of a social media marketing campaign for SFDG, Maremont created a blog on SFDG’s website.  She also promoted SFDG through her personal Twitter and Facebook accounts., including by linking to the SFDG website and blog.  She entered and stored all account access information, including passwords for her personal Twitter and Facebook accounts, on the SFDG server.  She never gave authority to anyone to access her personal Twitter and Facebook accounts. Maremont’s compensation was, in part, based on the overall sales of SFDG, so she had every incentive to promote SFDG.

After suffering a serious accident, Maremont could not work for some time and SFDG decided to continue posting to Maremont’s personal accounts to promote SFDG.  Once she found out, Maremont asked SFDG to stop – but SFDG did not.  After some back and forth about Maremont returning to work for SFDG, she went to another company and sued SFDG over the use of her social media accounts.  (more…)

October 8, 2010

FTC Issues First Proposed Revision to Green Guides Since 1998

Filed under: Advertising — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 4:44 pm

by Phillip Barengolts, Esq.

Use of environmental claims in promotions and advertising has greatly expanded in recent years.  Inaccurate or unsupported claims can result in an action by the Federal Trade Commission (“FTC”), an objection before the National Advertising Division of the Better Business Bureau or the filing of a federal lawsuit for false advertising under the Lanham Act by a competitor.  Such lawsuits have become more common as environmental claims play a greater role in consumer perception of products.[1]

To address the expanding role of environmental claims, the FTC has proposed revisions to its Guides for the Use of Environmental Marketing Claims,[2] referred to as the “Green Guides,” for the first time since 1998 (the “Proposed Revisions”).  The Proposed Revisions are available on the FTC web site: http://www.ftc.gov/os/fedreg/2010/october/101006greenguidesfrn.pdf.  Comments on the Proposed Revisions will be accepted through December 10, 2010.  Below is a brief summary of the main proposals by the FTC. (more…)

September 27, 2010

One Court’s View on the Fight over Athlete Endorsers: “Exclusive” Doesn’t Necessarily Mean What We Think It Does

Filed under: Advertising — Tags: , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:02 pm

by Phillip Barengolts, Trademark Attorney

Shelf space at grocery stores has always been in high demand.  Product marketers pay far more for eye level, end-of-aisle space than bottom shelf, middle-of-the-aisle space.  Placement of a product next to a market leader also generates increased sales – see where your neighborhood store places its private label products.

Being the exclusive sponsor of an athlete, and in turn being exclusively endorsed by that athlete, also increases sales.  But does an exclusive sponsor have the right or ability to prevent a third party from also placing products on an athlete endorser?  The District of Massachusetts addressed just such a claim in Ruggers, Inc. v. USA Rugby Football Union, Ltd., Civil Action No. 09-30051 (D. Mass. Sep. 10, 2010).[1] (more…)

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