sending emails under former employees' names may be reverse passing off

LoanDepot.com, LLC v. CrossCountry Mortgage, LLC, 2023 WL 9022893, No. 22-cv-5971 (AS) (S.D.N.Y. Dec. 29, 2023)

loanDepot alleged that CCM, its chief competitor, “improperly poached” 32 employees, and CCM and various former employees. CCM counterclaimed for abuse of process and for violations of the Lanham Act and related state laws; one ex-employee also brought counterclaims against loanDepot for breach of contract and breach of the implied covenant of good faith and fair dealing. I’m only going to discuss the false association/false advertising bits; as to the latter, state law provides more protection than federal because of the “commercial advertising or promotion” requirement for Lanham Act false advertising.

Counterclaims for false association and false advertisement under the Lanham Act, unfair competition under New York common law, and unfair business practices under the New York Deceptive Practices Act were all based on allegations that loanDepot sent blast marketing emails advertising loanDepot’s services from the loanDepot email addresses of former employees after those employees had begun working for CCM.

The false association/coordinate state law claims survived. loanDepot allegedly violated the Lanham Act by using “the name and likeness of CrossCountry employees, including Scott Bonora, Faheem Hossain, and others, in false advertisements sent to potential customers in May and July 2022,” which “wrongly passed off the products and services of CrossCountry as products and services of loanDepot.” There was no requirement that CCM’s name or reputation be invoked for a false association claim, because the Lanham Act also covers “reverse passing off,” in which “A promotes B’s products under A’s name.” Thus, it sufficed to allege that loanDepot “was falsely passing off the services of Mr. Bonora and Mr. Hossain as the services of loanDepot rather than services of CrossCountry.” (I’m not sure this works—at least not without secondary meaning in Bonora and Hossain’s names.)

loanDepot argues that the names weren’t material, but CCM alleged that “loanDepot knew that the identity of Mr. Bonora’s and Mr. Hossain’s employer was material to those contacts, as it was important to the decision by customers to apply for a loan or by referral sources to refer a borrower” and that loanDepot was attempting to “influence a consumer to apply for a loan at loanDepot, or for a referral source to refer a borrower to apply for a loan at loanDepot.” Claims brought by former employees themselves (citing Rubris, Inc. v. Ankura Consulting Grp., LLC, 2021 WL 7210782 (D.D.C. Mar. 26, 2021)) were distinguishable because the employee would have to allege “a commercial interest in his name that could be damaged” and because “nothing about the advertisement itself gives rise to a plausible inference that [the employee’s] name holds commercial value.” And CCM pled that it lost customers based on the use of its employees’ identities in these emails. But the court noted that loanDepot could reprise its arguments at summary judgment (citing Reed Const. Data Inc. v. McGraw-Hill Companies, Inc., 638 F. App’x 43, 45–46 (2d Cir. 2016) (affirming summary judgment on Lanham Act claim when “[d]iscovery revealed only one customer who arguably relied upon [defendant’s] advertising in deciding between” the defendant and plaintiff)). This also allowed the state-law unfair competition claim to move forward; the extra requirement of bad faith was pled by alleging, inter alia, that loanDepot continued to send the emails months after the loan officers left CCM and after CCM sent cease-and-desist letters, and that loanDepot sent similar emails from the accounts of other loanDepot employees who also left to join CCM.

But false advertising failed because “[m]aking allegedly false statements to a finite number of identifiable individuals does not constitute ‘advertisement or promotion’ for Lanham Act purposes.” It was possible that the emails could constitute “an organized campaign to penetrate the market,” as the Second Circuit requires, allegations that emails were sent to “all” of a former employee’s contacts were insufficient. “These allegations provide no information about the size of the market or the number of customers to receive the allegedly false advertising.” Dismissed without prejudice.

The result under NY GBL §349 differed, because it requires alleging only that “(1) the defendant’s deceptive acts were directed at consumers, (2) the acts are misleading in a material way, and (3) the plaintiff has been injured as a result.”

Amazon escapes liability for its Brand Registry advertising

Deetsch v. Lei, 2023 WL 6373073, No. 22-cv-1166-RSH-BLM (S.D. Cal. Jul. 21, 2023)

Deetsch alleged that he owned design patents for CPAP pillow products, which the Lei defendants infringed. They also allegedly used Deetch’s image in ads and on packaging, and allegedly falsely claimed on Amazon that their pillow products “were designed in the United States but are manufactured in China.”

In December 2020, Deetsch notified Amazon of his patents through the Brand Registry portal and asked Amazon to remove the Lei defendants’ products. He sent two letters by mail in March 2022, but was told he needed to use the Brand Registry … which he had already done.

Amazon’s Brand Registry advertises “Automated Protections” that are “[p]owered by Amazon’s Machine Learning.” Amazon claims its service will “save valuable time,” allows users to report “patent[ ] and design right violations,” uses “advanced machine learning that prevents bad listings,” and can “[r]emove counterfeits instantly” “without the need to contact [Amazon].” Deetch signed up for and paid for a Brand Registry service subscription, and submitted multiple complaints through that system, allegedly to no avail.

Since the designs were not plainly dissimilar, infringement was plausible.

False advertising, Lei defendants: The complaint didn’t explain how “designed in the United States but … manufactured in China” was materially deceptive and thus didn’t meet FRCP 9(b) pleading standards. A “true statement that a product was designed in the United States” is not “a representation that the product does not infringe any third party’s intellectual property rights.” Motion to dismiss granted.

False advertising, Amazon defendants: The complaint didn’t explain how any of the statements about the Brand Registry were false or misleading. It wasn’t enough to suggest that “taking all of the statements together, a consumer would reasonably expect the Brand Registry service to work better or faster than it did for Plaintiff.” Even a reasonable consumer’s “disappointment that a service did not work as well or as quickly as hoped” doesn’t show false advertising. Also, plaintiff was a customer, not a competitor, and not within the relevant zone of interests. (State law claims would have been better.)

False association, Lei defendants: Although he alleged that they used his image, he didn’t allege that this would cause confusion, mistake, or deception as to his association with the Lei defendants’ products, nor any facts that would establish that his likeness is recognizable by would-be consumers. Again, right of publicity would’ve been better.

A copyright claim was dismissed because the plaintiff had yet to receive his registration; this couldn’t be corrected by amendment in order to implement the command of Fourth Estate; the dismissal was without prejudice to refiling a new action.

odd 2d Circuit case about misleadingness versus confusion

Gibson v. SCE Gp. Inc., 2023 WL 4229913, No. 22-916 (2d Cir. Jun. 28, 2023)

Another models (and one model’s sister) v. nightclubs case. Gibson et al. appealed partial summary judgment against them on on their claims for false endorsement under section 43(a) of the Lanham Act, and violations of New York Civil Rights Law sections 50 and 51. Appellant Burciaga also appealed a judgment awarding her $5,000. The court of appeals affirmed.

The “falsity of the implied association” between plaintiffs and defendant didn’t relieve plaintiffs of the burden of showing likely confusion. (As I’ve said before, it’s worth noting that the FTC generally thinks that appearing in what is obviously an ad does not itself constitute an endorsement, consistent with this outcome.)

Somewhat oddly, the court then says:

To the extent that this approach to the false endorsement claim diverges from our caselaw involving false advertising, that result is consistent with the fact that the two types of claims are distinct. See Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 122 (2014) (explaining that false association and false advertising claims under the Lanham Act are distinct). Whereas the text of the Lanham Act’s false association provision requires that the false or misleading representation of fact be “likely to cause confusion,” its false advertising provision requires only that a person “misrepresent[ ].” Compare 15 U.S.C. § 1125(a)(1)(A), with id. § 1125(a)(1)(B).

This is one reason people don’t like unpublished opinions; false advertising cases have also required resulting deception, but presumed it in cases of literal falsity—not implied falsity.

This seems like unthinking textualism which future courts will rightly not take seriously. How do you know if something is a misrepresentation (as opposed to literally false) without looking at likely deception?

False CMI isn't plausibly related to consumers' decisions to buy/watch TV show

Livn Worldwide Ltd. v. Vubiquity Inc., 2022 WL 18278580, No. 21-cv-09589-AB-KS (C.D. Cal. Jul. 22, 2022)

Interesting Dastar case thrown up by Westlaw. LW alleged that it was the exclusive licensee allowed to distribute and sell a 60-episode series, Martial Universe, in the US. As part of preliminary discussions with Vubiquity about a distribution agreement for iTunes, LW provided master copies of all 60 episodes, but no agreement was ever reached. Nonetheless, Vubiquity allegedly uploaded the series to iTunes for sale and download. This allegedly involved false copyright and release date information, as well as “drastically low bargain-rate prices” and failure to distinguish between HD and SD versions.  

LW sued for copyright infringement, violations of both sections of Lanham Act §43(a), §1202 CMI violations, fraud, and state-law statutory unfair competition.

Both §43(a)(1)(A) and (B) claims failed. §43(a)(1)(A):

[U]nder Dastar’s interpretation of “origin of goods,” the origin of the Martial Universe episodes on the iTunes platform is not determined by who originated or created the ideas behind the Series (Plaintiff). Instead, the origin of the episodes, as it relates to the Lanham Act, is the producer of the Series on iTunes for sale, which is Defendant because Defendant made the content available for sale on the platform. But neither of Plaintiff’s Lanham Act claims rely on allegations that Defendant caused confusion about who placed the Series on iTunes. Instead, Plaintiff’s Lanham Act claims assert that Defendant incorrectly identified the copyright owner of the Series, which is not within the scope of the Lanham Act.

False advertising: Sybersound Recs., Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008), held that misrepresentations about copyright licensing status did not relate to the “nature, characteristics, and quality” of a good under §43(a)(1)(B), unlike “the visual and audio quality of the good.” So too with the allegedly inaccurate release date information.

The fraud claim was preempted by §301 of the Copyright Act. The allegations that defendant (1) generated images from the series to sell it on iTunes; (2) knowingly provided false CMI to induce the public to buy it; and (3) priced the content badly, in ways that didn’t signal its value, did not provide qualitatively distinct extra elements. The fraud claim was, at its core, about “unauthorized use, reproduction and distribution of the Series.” As to pricing, LW didn’t identify what was concealed or misrepresented. Claims under California Business & Professions Code § 17200, which prohibits “unfair competition,” were preempted for the same reason.

CMI: § 1202(a) requires that the plaintiff “plausibly allege that the defendant knowingly provided false copyright information and that the defendant did so with the intent to induce, enable, facilitate, or conceal an infringement.” It’s not enough to allege that a defendant provided false information about the copyright owner without the resulting inducement etc.

First, a release date is not CMI.

Copyright ownership information is CMI. But LW didn’t allege facts sufficient to plausibly establish that Defendant knowingly distributed that false CMI with the intent to induce infringement:

Plaintiff argues that by distributing false copyright ownership information, Defendant had to have done so with the intent to induce and enable iTunes subscribers to purchase and download the content, thereby satisfying the intent requirement of section 1202(a). However, “formulaic recitation of the elements of a cause of action, including allegations regarding a defendant’s state of mind, are not sufficient to satisfy Rule 8.” … [F]alsely identifying a copyright owner does not seem to further, or have any correlation with, iTunes subscribers buying the series, or with any sort of infringement in this case. In other words, regardless of who Defendant said the copyright owner of the Series was, it is not plausible that the number of purchasers and downloaders of the content would change.

[This seems absolutely correct as to purchasers/downloaders. But surely the copyright ownership claims affected Apple’s behavior. But then again, does Apple look at CMI on/associated with works, or is there a separate form, and would that separate form constitute CMI?]

Likewise, LW failed to allege facts showing injury based on the use of its name as opposed to its licensor’s name or nothing at all.

Because distribution rights weren’t violated merely by “making available” the work, or allowing subscribers to download or stream copies, the copyright claims were dismissed in part, but obviously the core copyright claim remains.

putting a label on a product you produce isn't direct false advertising, but could be direct false association

OK, I admit I'm pretty baffled by this.

Hawaii Foodservice Alliance, LLC v. Meadow Gold Dairies Hawaii, LLC, 2023 WL 159907, No. 21-00460 LEK-WRP (D. Hawai’i Jan. 11, 2023)

Plaintiff alleged that defendant MGD advertises and sells milk that is one hundred percent from cows outside of Hawai‘i. Defendant dairy farmers allegedly apply labels to the pre-packaged milk products “indicating such products originate from ‘Hawaii’s Dairy,’ are ‘Made with Aloha,’ and, in some instances, are associated with the farmers in Oahu who produced milk from their cows in Hawaii through the ‘Dairymen’s Association’ beginning in the late 1800s, before they are shipped to MGD in Hawaii.” Some mainland milk was allegedly pasteurized in California, shipped to and re-pasteurized on the Island of Hawaii, and then packaged by MGD with identical labeling. “Hawaii’s Dairy” and “Made with Aloha” on the labels allegedly falsely represented origin, as did MGD’s website claims of “AN ISLAND TRADITION,” “that MGD is proud to be locally owned and operated” and MGD “continue[s] to produce your Meadow Gold favorites always made with aloha.” “MGD’s website also prominently features the MGD mascot known as ‘Lani Moo’ in local Hawaii attire, along with several photographs of farmland and a cow in Hawaii[.]” Plaintiff alleged, however, that “MGD owns zero cows in Hawaii ... and owns zero dairy farms in Hawaii.” Allegedly, a different “Meadow Gold” entity long ago operated dairy farms in Hawaii, but MGD didn’t.

Plaintiffs’ claims sought to hold the dairy farmers directly or contributorily liable under the Lanham Act, and alleged unfair competition/false advertising/deceptive trade practices under Hawaii law. The dairy farmers sought dismissal.

Was a false geographic origin claim one for false association, § 1125(a)(1)(A), or false advertising, § 1125(a)(1)(B)? Courts have treated them as one, the other, or both; the court here said that they could be both.

Why does this matter? Perhaps because courts are tougher on false advertising claims in a lot of ways, including with precedent that, for false advertising, direct liability only attaches to actors who actively make false or misleading claims, while false association allows direct liability for those who only “use” such claims (note this doesn’t actually matter to the outcome of this case, but it matters to retailers). Here, under §43(a)(1)(A), “Plaintiff need only allege that the Dairy Farmers used in commerce any word (or words) which is likely to cause confusion as to the geographic origin of their milk products by another person.” That was sufficiently alleged. The defendants allegedly put the products in interstate commerce and applied the labels to them. The court didn’t bother to analyze contributory liability.

What about direct liability for false advertising? Defendants argued that there was no literal falsity, but misleadingness and materiality was also alleged. Here, the dairy farmers allegedly individually produced, packaged, and labeled the milk products on the mainland then sent them to Hawai’i for MGD to sell on the island.  “[H]owever, Plaintiff does not allege that the Dairy Farmers had control over, or involvement in, creating the statements on the labels. Thus, the Court cannot determine whether the Dairy Farmers are the entities that made ‘the specific, false statements at issue in the litigation[,]’ even if they ultimately applied the labels to the products.” [This strikes me as a really constrained reading of direct liability, and very much in contrast to the leniency IP claimants get. Compare an allegedly false statement presented in an ad as a quote from an endorser: would the advertiser not be directly liable because it wasn’t the first to make the statement?] Thus, the direct liability claim for false advertising was dismissed with leave to amend.

Contributory false advertising: This requires that the defendant contributed to direct false advertising either by knowingly inducing or causing the conduct, or by materially participating in it. Participation can occur when “the defendant directly controlled or monitored the third party’s false advertising,” or possibly when the defendant provided “a necessary product or service, without which the false advertising would not be possible.” On a motion to dismiss, courts look for a plausible inference of knowing or intentional participation, examining “the nature and extent of the communication” between the third party and the defendant regarding the false advertising; “whether or not the [defendant] explicitly or implicitly encouraged” the false advertising; whether the false advertising “is serious and widespread,” making it more likely that the defendant “kn[ew] about and condone[d] the acts”; and whether the defendant engaged in “bad faith refusal to exercise a clear contractual power to halt” the false advertising.

Here, plaintiff sufficiently alleged direct false advertising against MGD.  And it alleged that the milk producers knew that their respective milk products were not sourced from Hawai‘i and that the labels they applied to those products were false, misleading, and/or deceptive, but supplied the milk products to MGD nonetheless.

But plaintiff didn’t adequately allege that the Dairy Farmers “intended to participate or actually knew about the false advertising.” Labeling products with packaging that said “Hawaii’s Dairy” and “Made with Aloha,” does not on its own “suggest[ ] a plausible inference of knowing or intentional participation.” [Um, if they were doing it on the mainland, why not? Surely they knew they were doing it on the mainland, and not in Hawai’i?] Plaintiff failed to allege “the nature and extent of the communications between” the dairy farmers and MGD regarding the statements and thus they didn’t allege material participation. [I also have no idea how a plaintiff is supposed to allege internal communications.]

In addition, plaintiff failed to plead the requisite knowledge with particularity. [I’m not a civ pro expert, but I thought that, even with fraud, knowledge and intent can be alleged generally as matters entirely within the knowledge of the defendant.]

“Ultimately, Plaintiff does not sufficiently allege the Dairy Farmers induced, caused, or worked to bring about the alleged misleading statements.” But there was leave to amend.

Unfair competition under Hawai’i law: This requires unfair conduct that “offends established public policy and … is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers,” plus injury that negatively affects competition or harms fair competition. This too failed as to the dairy farmers, who allegedly did nothing more than labeling and packaging their milk product. So too with state law false advertising.

Deceptive trade practices: This applied to a person who, inter alia, caused likely confusion about source etc. or used deceptive representations or designations of geographic origin. This was plausibly alleged. The dairy farmers “used those labels and statements insofar as they packaged, labeled, and shipped the milk products to Hawai’i.”

Google's "order delivery/takeout" results aren't misleading/TM infringement

Left Field Holdings v. Google LLC, 2022 WL 17072948, No. 22-cv-01462-VC (N.D. Cal. Nov. 18, 2022)

Short opinion, summarized by the opening paragraph:

The plaintiffs in this case don’t like how Google facilitates online orders from their restaurants. They try to articulate claims for trademark infringement, counterfeiting, false association, and false advertising. They don’t succeed, especially considering Rule 9(b)’s heightened pleading requirements for claims sounding in fraud.

The court analyzes in detail only the theory that the “Order Online” or “Order Delivery” button is misleading by itself “because it is near the restaurant’s name and is surrounded by links that would otherwise ‘directly connect the consumer to the restaurant,’” that is, the “Website” and “Call” links. But the “Directions” link is also right there and whether that would produce a direct connection is “debatable,” and so is a button to save the restaurant to one’s own Google account, as is a star rating and a blue link to “Google reviews,” “which are obviously not provided by the restaurant.” Thus, “[i]n context, the contested button is not false association or false advertising.”

The use of the restaurant’s name was “a textbook example of nominative fair use: There is no other way to identify the restaurant; Google uses only the plain name, not a stylized logo; and there is no improper suggestion of sponsorship or endorsement.”

The plaintiffs argued that “Order Online” or “Order Delivery” led users to a third-party delivery provider “unbeknownst to the restaurant.” “But the involvement of a delivery provider is not hidden from the user.” Plaintiffs’ screenshots showed that the delivery provider’s name was disclosed, and the complaint alleged that, if there are multiple delivery providers available, the user selects which to use. “Those facts are not consistent with false association or false advertising,” and using the restaurant’s name here was also nominative fair use. Nor was this counterfeiting: “A customer who places an order gets food from the restaurant, not Google.”

In cases where users didn’t get a “storefront” page to place an order, they would see a “landing” page offering “a list of options to place an order for pickup or delivery.” The court couldn’t imagine how this page would support any of the plaintiffs’ claims, especially since the plaintiffs’ submissions omitted the page footer and its prominent Google logo, undercutting any misleadingness argument. Yikes: “[I]n a complaint alleging misleading design choices, cropping out such an important part of the page raises serious Rule 11 concerns about the twelve lawyers who signed the amended complaint.”

But there’s leave to amend!

 

Zamfir, master of the Casper blockchain protocol?

Zamfir v. CasperLabs, LLC, No. 21-CV-474 TWR (AHG), 2022 WL 14915618 (S.D. Cal. Oct. 25, 2022)

Previous discussion. Note that plaintiff loses on all claims where he has to allege damage, but for TM claims one doesn't, so his proceed.

Zamfir is a researcher in blockchain technology and adopted the name “Casper” for his blockchain consensus protocol. He alleged trademark and related claims based on CasperLabs’ use of the name.

Zamfir’s branch of research was called “CBC Casper,” currently known throughout the industry as “Casper.” He alleged that he used the CBC Casper and Casper names exclusively to promote his work to the public, and that, by 2017, he used the Casper mark in commerce in connection with distributing downloadable Casper CBC software and specifications under open-source licensing agreements in the United States. He alleged that his work on Casper has brought him attention and material rewards.

In 2018, CasperLabs asked Zamfir to collaborate on developing a new blockchain. “Zamfir entered into a Licensing Agreement with CasperLabs, granting CasperLabs limited rights in the use of his name and image to promote the collaboration in exchange for CasperLabs helping to fund Zamfir’s work on CBC Casper.” But the relationship broke down. Nonetheless, CasperLabs allegedly continued to associate CasperLabs’ Casper products and services with Zamfir and his Casper products and services.

CasperLabs registered the CASPERLABS mark in its own name. The same year, CasperLabs allegedly represented that it would register the CASPER mark on Zamfir’s behalf, but instead filed to register it in its own name for services related to cryptocurrency; one application issued in 2020 and another is still pending. Zamfir alleged that, though continued to inquire about the status of the CASPER trademark application CasperLabs represented it would file on his behalf, he didn’t learn that CasperLabs had registered the CASPER mark until early 2021.

Zamfir alleged that CasperLabs’ products would be confused with his own work, and that CasperLabs’ protocol never met Zamfir’s advertised design requirements for CBC Casper, risking his reputation and forcing him to “resolv[e] ambiguity and phras[e] communications to avoid unintentionally promoting CasperLabs, making it harder for Zamfir to market the genuine products of his research.” He alleged that he was regularly contacted by people who were confused about his affiliation with CasperLabs and that the confusion lead to difficulty securing funding for his further research/investment in CBC Casper.

Lanham Act false association/common-law unfair competition: Previously, Zamfir didn’t sufficiently allege harm, and that continued, even though he pled likely confusion. Confusion was plausible based on CasperLabs statements like “The consensus protocol is built on Vlad Zamfir’s correct-by-construction (CBC) Casper work.” “The statements in the Second Amended Complaint can be read to mean CasperLabs’ protocol not only parallels Zamfir’s CBC Casper protocol, but also meets Zamfir’s standards for the CBC Casper Protocol…. Any assertion that Zamfir’s CBC Casper is the process behind CasperLabs’ protocol would be false, as Zamfir does not believe the process implemented by CasperLabs follows CBC Casper specifications.”

To me, this highlights the serious First Amendment problems with current open-ended confusion doctrines. By the allegations, there is a historical relationship. At most, Zamfir should be able to get an additional disclaimer, not suppression of the historical story of the firm. But the court was unpersuaded “that the confusion arises from the prior relationship with Zamfir and not the use of the mark is also unpersuasive,” given the continued use of the Casper name. The court cited tweets stating that CasperLabs should try to “distinguish themselves and perhaps change their name[ ], it just confuses people” and that a consumer had seen emails from CoinList and wrote, “I am an example of how CasperLabs’ marketing material easily confused investors.” This wasn’t just from the prior relationship.

Damages: Zamfir identified: (1) having trouble seeking funding from the Ethereum Foundation and other potential investors; (2) lessening of “the marketable value of his reputation and goodwill in the industry;” and (3) being forced to let go of contractors, and thereby delay the production of promised protocols under the Casper name.” Specifically, he allege that he encountered trouble seeking funding from the Ethereum Foundation because of “industry confusion.” But this was still too conclusory and generalized.

Trademark infringement under state and federal law: Still sufficiently pled. Zamfir has the burden of rebutting the presumption of ownership conferred by CasperLabs’ registered mark, but that burden can be met by showing that the registrant had not established valid ownership rights in the mark at the time of registration. Even if he wasn’t using Casper as the name of his consulting service, he might have made trademark use or analogous use sufficient to generate public association, given that he allegedly named his formal specification CBC Casper and provided consulting services in relation to it. “This is not a case where the trademark bears ‘no reference to, or association with’ the consulting service at issue; rather, Zamfir’s use of CASPER is in direct connection to the service he is providing.”

Zamfir also sought to cancel CasperLabs’ trademark registrations and sufficiently pled that under 2(d). He didn’t sufficiently plead fraud based on alleged misrepresentations that CasperLabs would register Casper for him. He pled falsity, but didn’t sufficiently plead harm. On falsity, a promise to apply for a registration on Zamfir’s behalf is not puffery because it’s capable of objective verification. He also adequately alleged reliance on the statement that CasperLabs was “trying to get [the] Casper trademark [registration] set up and done for CoorTech.” Adding further support to Zamfir’s reliance, CasperLabs allegedly assured Zamfir “that [it] would not use the CASPER mark to refer to [its] blockchain and/or blockchain token.” That was sufficient to be the basis of reliance.

But his claimed damage—that he didn’t seek his own registration—wasn’t enough to be sufficent harm. The court was, however, unimpressed by CasperLabs’ argument that the promise was futile because any transfer to Zamfir would have failed as an assignment in gross, because there could have been an assignment of the registration + underlying business to fulfill the promise, and anyway the harm was also that Zamfir didn’t seek his own registration. Moreover, “CasperLabs’ argument is especially questionable because its General Counsel … a member of the California bar, asserted that the trademark would be registered and transferred, and that … another attorney, was ‘handling’ this registration. Even if obtaining a trademark on Zamfir’s or CoorTech’s behalf would be invalid, it would be reasonable for Zamfir to expect that [the lawyers] would be privy to that information and would not promise a legal impossibility.”

California UCL based on the 43(a) claim: Failed for want of sufficient connection to California and want of injury. Zamfir is a Canadian resident, though CasperLabs’ principal place of business is in California. Still, that wasn’t enough to presume that the falsity originated from California; Zamfir didn’t allege conduct occurring in California. He also didn’t allege lost money or property, as required under the UCL. While numerous courts have held that the “[d]evaluation of ... intellectual property or intangible business assets is sufficient to meet the injury requirements under § 17200,” Zamfir offered no non-conclusory allegation that the value of the his Casper service had decreased.

Clone wars: truthful statements about cloned horses don't constitute false association

La Dolfina S.A., LLC v. Meeker, 2022 WL 6507718, NO. 20-82231-CIV-CANNON/Reinhart (S.D. Fla. Aug. 19, 2022)

Judge Cannon has done some other stuff, too. “This case concerns major players in the world of professional polo, their efforts to produce and clone genetically superior horses, and the ownership disputes that have arisen from those efforts.” Plaintiffs raise allegedly awesome polo ponies. Defendants compete with La Dolfina; an individual plaintiff previously dealt with defendant Meeker for purposes of exploring the possibility of equine cloning, allowing a defendant to “select four mares from [plaintiff’s] stock for the purpose of extracting tissue samples for cloning” at a price of $250,000 per mare. The defendant was initially given “complete and exclusive licensing rights in and to [the selected mares] and all cloned foals.” Eventually, the parties parted ways. Then defendants entered into agreements with “entities associated with La Dolfina’s competitor, the Park Place Polo Team.” Litigation ensued, with lots of claims, including the Lanham Act claims on which I will focus, though breach of contract claims were prominent and survived a motion to dismiss.

The Lanham Act claims were styled as false association, “false association with celebrity status,”  false designation of origin, and false advertising.

The court found that plaintiffs failed to state a claim; the gravamen of the claim was “explicit and implicit representations” that defendants “were authorized to clone and sell the La Dolfina horses at issue.” Allegedly, these statements, plus the use of the horses’ names as given by La Dolfina, constituted false advertising and false association.

However, “truthful and undisputed acknowledgement that the horses at issue are genetically identical copies of La Dolfina horses” didn’t constitute an “actionable representation of association or endorsement.” Judge Cannon is not alone in using ipse dixit to get over the significant difficulties that endorsement theories pose for truthful statements of historical fact. The full reasoning, which courts usually avoid because it acknowledges the existence of trade-offs, is: There is important consumer value in being able to tell the truth (these products have some historical connection to X). But some consumers might take away the misleading implication of continued connection to X. Given the importance of the truth and the unimportance of the implication, that risk is justified and, indeed, forcing defendants to bear the costs of litigation is unjustified. The lack of plausibility here is actually the result of a cost-benefit analysis. And in many first sale cases, like the ongoing luxury resale cases, courts have not been willing to protect truthful statements of historical origin.

What about statements about the right to sell clones? That, the court said, “concerns the scope of their rights under the parties’ numerous and somewhat ambiguous agreements; it does not mislead as to the ‘origin, sponsorship, or approval’ or ‘nature, characteristics, qualities, or geographic origin’ of the identical clones themselves."

"Zestimates" are nonactionable opinion, but state law might govern alleged listing agent misrepresentation

Demetres v. Zillow, Inc., 2022 WL 4367597, No. 3:21cv00802 (JBA) (D. Conn. Sept. 21, 2022)

Demetres, a real estate salesperson/broker, alleged that Zillow violated the Lanham Act, the Sherman Act, and the Connecticut Unfair Trade Practices Act, and engaged in tortious interference with contractual relationships. The court dismissed some of the claims.

Demetres challenged Zillow’s use of Advertising Agents (real estate agents) and “Zestimates.” Zillow’s customers are real estate agents, and they allegedly pay Zillow “so they can be associated with properties [with] which they do not have a listing relationship ....” and “directly solicit [ ] prospective homebuyers [ ]via other agents’ exclusive listings.” This practice allegedly harms the listing agent and reroutes prospective homebuyers so they can’t reach the actual listing agents for properties that interest them. Agents found on Zillow allegedly have “a greater incentive to steer the buyer to a property other than the property that caused them to initiate the process in the first place.” And this allegedly increases the number of dual agency situations “without the careful disclosures normally required.”

As for Zestimates, these are Zillow’s “own, self-devised, internally-standardized opinion of the value of the particular property.” Zestimates allegedly competes for a “listing price that is developed through proper industry appraisal standards; and also through the listing agent’s actual, personal, intimate knowledge of the property in question and the neighborhood where it is situated.” Demetres alleged broken agreements with property sellers and buyers as a result of Zestimates.

Falsity: First, Zestimates weren’t plausibly alleged to be literally or impliedly false. The complaint didn’t identify specific advertising statements that would plausibly misrepresent what the Zestimates were, “or even a particular home estimate produced by the Zestimate tool that allegedly conflicts with the real market value.” The facts alleged didn’t establish falsifiability—only Zillow’s “opinion of the value of properties.” Demetres argued that consumers viewed a Zestimate as a factual statement of the home’s value due to Zillow’s popularity and influence in the housing market. But Demetres didn’t allege that the Zestimates were an incorrect estimate of the property’s value— “only that it was different from her own appraisal as the listing agent.”

However, Demetres did plausibly allege that using Advertising Agents on its site created a false impression that the agents who pay Zillow for access were the listing agents for a given property, misrepresenting Zillow’s relationship with listing agents and the Advertising Agents alike. “For example, when a consumer views a particular property it may be offered what appears to be a URL link to reach the listing agent, but when it is clicked on the consumer is again sent straight to a screen asking it to provide lead information to an Advertising Agent.” In short, “displaying an option for a customer to contact a listing agent, which does not in fact allow the customer to contact the listing agent, is a falsity actionable under the Lanham Act.”

But was that material? In the Second Circuit, that’s a question of whether it’s a misrepresentation of an “inherent quality or characteristic,” but it’s really just materiality.

The court thought that this wasn’t material, but conflated false advertising and false association (which was plausibly alleged). Zillow arguably presents itself as a resource to consumers when in fact, it is an advertising platform for agents, but that’s true of almost all websites. Dismissed. (This seems like a fixable problem with an amended complaint if it’s essentially bait and switch: consumers want help with that particular listing and don’t get it/get someone who may charge them more.)

Sherman Act: failed because it’s an antitrust claim (deficient market definition/conspiracy allegations/monopoly power allegations).

CUTPA: Covers both deceptiveness and unfairness. Unfairness under CUTPA requires consideration of

(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to consumers, [competitors or other businesspersons].

Can Zestimates be unfair if they are opinions? The court thought the answer was no. But the ad relationships with agents plausibly violated CUTPA by creating a false impression that they were the listing agents for a given property. And plaintiff alleged an ascertainable loss thereby.

Tortious interference was also plausibly alleged; “Plaintiff was not required to include proof at the motion to dismiss stage that actual contracts exist.”

maintaining ex-employees' voicemail/email doesn't violate Lanham Act or right of publicity

At least there's something that doesn't?

3M Co. v. Continental Diamond Tool Corp., 2022 WL 2355481, No. 1:21-CV-274-HAB (N.D. Ind. Jun. 30, 2022)

“This case began as a routine suit for breach of a noncompete provision in an employment contract. But to raise the price of poker, Defendants have counterclaimed alleging a litany of offenses, many related to Plaintiffs’ egregious act of failing to shut down the email and voicemail accounts of former employees [who are now individual defendants].” As to be expected from this intro, the court dismissed the counterclaims, mostly without leave to amend.

The individual defendants are former 3M employees who went to work for Continental. 3M maintained their email and voicemail accounts even after they left.

Lanham Act false advertising: Failing to delete email and voicemail accounts is not “commercial advertising or promotion.” Omissions and inactions of this sort do not constitute either ordinary advertising or “a systematic communicative endeavor to persuade possible customers to buy the seller’s product.” Even if a customer called an individual defendant’s former phone number and got a message suggesting that person was still employed by 3M, that wasn’t 3M’s advertising or promotion: “any misleading information is then conveyed as a matter of computer programming.”

Lanham Act false endorsement: Even if the individual counterclaimants’ names had protectable commercial value, the present maintenance of a past link is not false endorsement. The court cited Mktg. Prods. Mgmt., LLC v. Healthandbeautydirect.com. Inc., 333 F. Supp. 2d 418 (D. Md. 2004), in which the defendant continued to run an infomercial after its agreement with the individual plaintiff, Lundin, featured in the infomercial expired. The plaintiff alleged that the “present broadcast of a past endorsement [was] allegedly ‘likely to confuse customers’ as to [his] continued endorsement of the [bicycle],” but the court dismissed the claim: “Manifestly, this case bears no resemblance to those leading cases in which courts upheld false endorsement claims. In those cases, the facts generally involved depictions of or statements attributed to well-known individuals who in fact were in no way associated with the defendant’s product.”

If the plaintiff didn’t negotiate a limitation on the use of his likeness, the court wouldn’t impose it by federal law; it would be “extraordinary” to “regulat[e] the truthful use by a defendant of the plaintiff’s donated image” without any contractual provisions specifying that “his likeness would only be used as long as he was employed and compensated.” The court analogized to first sale.

Here too, the email and voicemail accounts were created when there was a real employment relationship and “[a]ny attribution or endorsement . . . was true when made.” The parties had a written employment agreement, and the court wasn’t going to imply additional provisions in it.

Pennsylvania right of publicity: Pennsylvania protects the name or likeness of any natural person that has commercial value and is used for any commercial or advertising purpose without written consent. The law defines “commercial or advertising purpose” as including “the public use or holding out of a natural person’s name or likeness: (i) on or in connection with the offering for sale or sale of a product, merchandise, goods, services or business; (ii) for the purpose of advertising or promoting products, merchandise, goods or service of a business; or (iii) for the purpose of fundraising.” “The Court finds no cases in which liability under the Pennsylvania statute has been based on mere maintaining email and voicemail accounts.” Receiving a benefit from the use of a name isn’t sufficient. “[T]here must be some public-facing commercial use of the likeness. That is, the likeness must be distributed to members of the public in a way calculated to bring in money. There are no allegations of such use here.”

Florida right of publicity: This one says “No person shall publish, print, display or otherwise publicly use for purposes of trade or for any commercial or advertising purpose the name, portrait, photograph, or other likeness of any natural person without...express written or oral consent.” Relevant case law holds that the statute is violated only when the name or likeness is used to “directly promote a product or service.”

John Daly Enters., LLC v. Hippo Golf Co., Inc., 646 F. Supp. 2d 1347 (S.D. Fla. 2009), held a golf club manufacturer liable based on a photo of a former spokesman on its website with the following caption:

The twice major winner and golfing superstar, John Daly, will continue to be synonomous [sic] with Hippo. Renowned as the longest hitter in the professional game, Daly truly had the power of Hippo behind his game, working closely with the Hippo design teams over the years to produce some of the most technologically advanced woods to hit the golf market.

It was “incredibl[e]” to claim that this case was on all fours with John Daly, to which the facts bore “no meaningful similarity.” There was no allegation that the counterclaimant’s name or likeness appeared on 3M’s website, were “front and center as part of a marketing campaign to sell Plaintiffs’ products,” or that 3M stated that he “will continue to be synonymous” with 3M. Live but dormant voicemail and email accounts do not “directly promote a product or service.”

Minnesota unfair competition: Under Minnesota law, “[u]nfair competition is not a tort with specific elements; it describes a general category of torts which courts recognize for the protection of commercial interests.” This includes product disparagement, tortious interference with contractual interests and improper use of trade secrets. “For a claim to survive dismissal, it must identify the tort that is the basis for the unfair competition claim.” Counterclaimants didn’t, so the claim was dismissed.

However, two counterclaimants did successfully plead tortious interference with business relationships; 3M’s justifications for asserting noncompete rights could be tested later.

  

"false association with EPA" claim can be brought by competitor

ISK Biocides, Inc. v. Pallet Machinery Group Inc., No. 3:21-cv-386, 2022 WL 122923 (E.D. Va. Jan. 12, 2022)

The parties compete in the market for wood protection products. ISK alleged that defendants misrepresented the safety, environmental impact, and regulatory status of their products. The court denied the motion to dismiss the Lanham Act claims but kicked out the coordinate Virginia state law claims.

Wood pallets, widely used in the supply chain, are at risk for mold, mildew, and fungus, which is bad for cargo and workers. Fungicides like those sold by the parties are one answer. FDA and EPA share regulatory authority—because pallets are used for food—but EPA does the lion’s share of the work. The delightfully named Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) requires fungicides—which are pesticides under the law—to be registered by the EPA to be sold.

According to the complaint, one of defendants’ products has a hazardous ingredient, IPBC, that “has been found to have certain adverse effects” on humans, “including irritation, sensitivity, and toxicity to various systems,” even at a concentration of 0.5. EPA advises that those who handle products containing IPBC wear personal protective equipment such as “long-sleeve shirt[s] and long pants, chemical-resistant gloves, [and] shoes plus socks.” Others have a different ingredient, OIT, which allegedly “is harmful if swallowed, toxic in contact with skin, causes severe skin burns and eye damage, may cause allergic skin reactions, and is toxic if inhaled.” Thus, people handling products containing OIT should wear gloves, safety goggles, a face shield, and body protection. OIT is on the EPA’s Safer Chemical Ingredients List, but the EPA notes that OIT “is not associated with a low level of hazard concern for all human health and environmental endpoints.” Moreover, ISK alleged that none of the products are registered as pesticides with the EPA.

ISK challenged various ad claims; the court focused on a few.

For example, it was plausibly false/misleading to advertise that users handling one of the products “need not wear protective equipment.” Since defendants’ data sheet said that it contained a maximum of under 10% of IPBC, it was reasonable to infer that it was at least 0.5% of the product, which was allegedly enough to have adverse effects on humans. Given the EPA’s advice about using protective equipment, the complaint plausibly alleged falsity.

Moreover, an ad on a public Facebook page that referred customers to the data sheet was a commercial advertisement within the meaning of the Lanham Act; it was intended to bolster sales and was “sufficiently disseminated” to fall within §43(a)(1)(A). Proximately caused injury was also plausible because the lack of need for personal protective equipment could plausibly drive sales that would otherwise have gone to ISK.

Likewise, against the other defendant, an ad that it plausibly placed in Pallet Central Magazine which said that “WoodLock Bio-Shield Mold Inhibitor is safe for employees and machinery” was also plausibly false advertising. [Side note: I am endlessly pleased by the existence of these niche industry publications. There’s a magazine for pallets! I can only assume that there actually is a magazine for storage jars out there.] Defendants argued that their products were safe for employees “because the products do not exhibit the same characteristics as the hazardous ingredients they contain.” Although this might be borne out by discovery, ISK sufficiently alleged falsity at this stage.

Contributory false advertising: The court predicted that the Fourth Circuit would recognize contributory false advertising, because it recognizes contributory trademark infringement and both causes of action stem from the Lanham Act.

ISK adequately alleged contributory false advertising claim against defendant J&G by alleging that defendant PMG “directly engaged in false advertising that injured” ISK, by placing an advertisement in Pallet Central Magazine. And it alleged that J&G “contributed” to PMG’s conduct “by knowingly inducing or causing the conduct.” Specifically, “by misrepresenting the necessity of personal protective equipment,” J&G allegedly caused PMG to represent the product was safe for employees. “Put differently, PMG endorsed the safety of WoodLock Bio-Shield products in its advertisement based, in part, on J&G’s assurance that those handling WoodLock Bio-Shield I need not wear personal protective equipment.”

Likewise, ISK adequately alleged contributory false advertising claims against PMG.  As noted above, ISK successfully alleged that J&G falsely advertised, and it alleged that PMG “materially participat[ed]” in this conduct by distributing the sales data sheet that J&G created “during advertising and sales.”

False association: PMG allegedly advertised that WoodLock Bio-Shield “is a proven EPA registered product,” but it is allegedly not. This could cause false association with the EPA, to ISK’s detriment.

Virginia Consumer Protection Act: “[C]ompetitors lack standing under the VCPA because the legislature intended the statute to protect consumers.” Although remedial statutes must be construed “ ‘liberally, so as to suppress the mischief and advance the remedy’ in accordance with the legislature’s intended purpose,” “allowing a competitor to sue under the VCPA does not promote fair and ethical standards of dealing between suppliers and the consuming public.” [I don’t see why—it certainly has the potential to enhance deterrence, and in the Lanham Act context the Supreme Court has reasoned that competitors are often in the best position to identify and challenge false advertising.]  Likewise, Virginia’s common law does not protect against false advertising.

Competitor has standing to bring false association claims for false association w/3d party

FireBlok IP Holdings, LLC v. Hilti, Inc., 2021 WL 6049964, No. 3:19-cv-50122 (N.D. Ill. Dec. 12, 2021)

After Lexmark, can a competitor bring a false association claim when the false association is with an unrelated third party? This court answers yes, though limits the effect of that by applying what looks like ordinary false advertising analysis.

FireBlok owns a patent on a system and method for suppressing fire in electrical boxes using intumescent material. Through a licensing agreement, Hilti also markets and sells the Firestop Box Insert based in part on that same patent.

The labels of both products include the Underwriter Laboratories (UL) certification mark. Hilti claimed that it didn’t design the label, but that defendant RectorSeal did the final design.

RectorSeal also sells a product known as the Metacaulk Box Guard. Hilti was authorized to use the UL mark on its label through UL’s Multiple Listing service, which basically allows one product to piggyback off another identical product that is sold under another brand name. Through this process, the Firestop Box Insert was Multiple Listed with RectorSeal’s Metacaulk Box Guard, and thus—for a time—authorized to use the UL certification mark.

However, in 2008, “RectorSeal sent UL a letter withdrawing the Multiple Listing because it would no longer be manufacturing the Firestop Box Insert for Hilti, which was a requirement of the Multiple Listing program.” UL then allegedly withdrew the Multiple Listing, and therefore Hilti’s authority to use the UL mark on its labels. In 2019, RectorSeal requested that Hilti’s Firestop Box Insert be added back. Despite this, Hilti allegedly used the UL mark continuously during the period of noncertification.  FireBlok alleged that customers were likely confused into thinking that UL certified the Firestop Box Insert when it did not.

Illinois Uniform Deceptive Trade Practices Act: Plaintiff sought injunctive relief, which means that a “nonspeculative likelihood of future harm” is required under the statute (and, in federal courts, under Article III). It wasn’t enough to argue that RectorSeal withdrew the certification in the past and might do so again. Currently, the suggestion that the parties might mislabel the product was speculative.

Illinois Consumer Fraud Act: This requires that the relevant acts occur primarily and substantially in Illinois, but here they were nationwide, so that claim failed too.

Lanham Act claims did better. §43(a)(1)(A) false association with UL: FireBlok isn’t required to own the UL mark to bring a false association claim under Lexmark, since it established the relevant commercial interest and alleged proximate cause:

Nothing in the plain text of section 1125(a)(1)(A) requires trademark ownership. On the contrary, the text of the statute merely contemplates unfair competition that causes a likelihood that consumers will mistakenly believe the defendant’s product is sponsored by, affiliated with, or otherwise endorsed by another entity.

After all, Lexmark held that “the classic plaintiff in a Lanham Act case is one who is directly injured by a competitor’s false statements about its own goods or the goods of the plaintiff, and thereby induces customers to choose its goods over the plaintiff’s goods. That is precisely what FireBlok claims here.”

It was plausible that consumers would interpret the label to mean that the product was UL-certified and that this would cause them to purchase it instead of FireBlok’s product. This was literally false because the product was not UL-certified during the relevant period. “And literally false statements presumptively cause competitors harm.” [This is the ‘false advertising instead of likely confusion’ analysis I mentioned.]

§43(a)(1)(B): Same, without need to analyze materiality: “[B]ecause plaintiffs need not present evidence of actual consumer confusion in literal falsity cases, the only further requirement is that FireBlok has alleged that the literal falsity occurred in a commercial advertisement.” Materiality might have to be shown to avoid summary judgment, though.

RectorSeal argued that it couldn’t be liable for any false advertising on Hilti’s website, but the product label itself, which RectorSeal allegedly designed, also counts as a commercial advertisement. “Hilti and RectorSeal no doubt designed the label to entice customers into purchasing the product. Indeed, what other reason could they have for including the UL certification mark on the label?”