The Brand Protection Blog

"Humane” producers of foie gras unable to duck false advertising claims

2013-05-09T17:03:00.001-05:00

by Kathy Grant and Saul Perloff

Last month, the United States District Court for the Northern District of California refused to dismiss federal Lanham Act claims, as well as claims based on California’s unfair-competition and false-advertising laws, against Hudson Valley Foie Gras (“HVFG”), a New York producer of foie gras and other duck products. See Apr. 12, 2013 Order.

Foie gras is produced from the livers of specially fattened ducks or geese. The delicacy is typically made by force-feeding the water fowl through a “gavage” (a long feeding tube) causing their livers to become greatly enlarged. In 2004, California enacted a law banning force-feeding of birds for the purpose of producing an enlarged liver, as well as banning the sale in California of any products resulting from force-feeding. Cal. Health & Safety Code § 225980. This law does not, however, prohibit out-of-state foie gras producers from marketing and shipping their products to California.

HVFG is the largest producer of foie gras in the United States. On its website and its Facebook page, HVFG markets its foie gras as “The Humane Choice.” Like other producers, HVFG apparently feeds its ducks with a gavage. The “humane” slogan is based on the cage-free environment in which HVFG ducks are raised and the company’s claim that its “trained caretakers spend four times as much caring [sic] for each animal as is the case in other foie gras farms.”

On November 13, 2012 the Animal Legal Defense Fund and Regal Vegan filed suit against HVFG alleging that the “humane choice” slogan is false and misleading. Regal Vegan – which produces a non-meat, spreadable product it calls “Faux Gras” – also claimed the allegedly deceptive slogan harms sales of Faux Gras. See Complaint.

HVFG moved to dismiss these claims arguing that Regal Vegan lacked standing to bring a Lanham Act claim because it was not a direct competitor in the foie gras market. Order at 9. The Court disregarded this argument, noting that a plaintiff need not be a direct competitor of the defendant to have Lanham Act Standing. Id. at 10. The Court held: “When one product is marketed to compete with another product whose advertisements may mislead consumers, then the first product’s maker may be harmed” and standing will be conferred. Id. The Court noted that in this case, the market for which the parties competed could be described as “spreadable pâtés for consumers interested in animal welfare.” Id. Accepting as true the allegation that HVFG’s ducks were not treated humanely, the Court concluded Regal Vegan had plead facts sufficient to provide Lanham Act Standing. Id.

HVFG also argued that its “humane choice” slogan was not actionable because it was not a “specific and measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact.” Id. Instead, HVFG characterized its slogan as a statement of opinion, i.e., puffery. Id.

The Court rejected this argument as well. While acknowledging that the “meaning and import of the word ‘humane’ are hard to pin down,” the Court noted that Congress had previously defined “humane” twice, both times in reference to the killing of animals. Id. at 11. Although neither definition was applicable in the present case, the Court found that both definitions had a theme of “pain,” i.e., that the animals be killed in a way to minimize the pain caused. Id. The Court therefore noted that “humane” is a term susceptible of definition, and therefore, a claim that a product is “the humane choice” might constitute a statement that could be proved false or “reasonably interpreted as a statement of objective fact.” Id.

While Regal Vegan’s false advertising claims again HVFG will proceed, the Court did dismiss the claims of the Animal Legal Defense Fund for lack of standing, concluding the non-profit group could not be considered business competitors. Id. at 8.

Source: Animal Legal Defense Fund et al v. HVFG, L.L.C. et al, Case No. 3:12-cv-05809-WHA (N.D. Cal.)

This article was prepared by Kathy Grant (kgrant@fulbright.com / 210 270 7182) and Saul Perloff (sperloff@fulbright.com / 210 270 7166) of Fulbright’s False Advertising Practice.

"As clear and as manifest as the nose in a man’s face"

2013-05-09T14:41:00.002-05:00

By Sue Ross

So said Robert Burton almost 400 years ago, and the Federal Trade Commission (FTC) staff recently made similar comments with respect to online advertising disclosures. On March 12, 2013, the FTC staff issued “.com Disclosures: How to Make Effective Disclosures in Digital Advertising” updated guidelines relating to disclosures made by mobile and other online advertisers. Brand owners should note that although these are guidelines, rather than enforceable regulations, the guidelines indicate ways that the FTC staff believe online advertisements can make effective disclosures under the FTC Act requirements.

Some advertisements require disclosures in order to provide readers with complete information. The recently issued guidelines provide descriptions of how advertisement disclosures can meet the FTC’s standard of “clear and conspicuous,” which can be particularly tricky in the online world given the variety of media and devices that consumers can use. The FTC staff provided 20 pages of text and 22 examples illustrating both compliant and non-compliant disclosures. The staff emphasized that the determination of whether a disclosure is clear and conspicuous is fact-specific and depends on the “overall net impression of the ad.” A banner ad on a web site can differ from an ad on Twitter, which can be different from a product description on a seller’s mobile app, and consequently the FTC’s analysis will vary for each.

The factors that the FTC staff recommend for evaluating whether online advertising disclosures are clear and conspicuous can be thought of as the “8 Ps”:

Placement of the disclosure in the advertisement. Does the disclosure appear on the same screen as the advertisement, even if the user has a mobile device?
Proximity of the disclosure to the claim it is qualifying. The staff prefers disclosures next to the product or service to which they relate, but hyperlinks may be necessary “if the disclosure is lengthy or if it needs to be repeated.” Nevertheless, “required disclosures about serious health and safety issues are unlikely to be effective when accessible only through a hyperlink.”
Prominence of the disclosure. Elements such as type size, color and graphics can all make a disclosure more noticeable to consumers.
Can a user proceed without seeing the disclosure, or is it unavoidable? Demonstrating how the factors can be varied, the FTC staff states: “If scrolling is necessary to view a disclosure [proximity is decreased], then, ideally, the disclosure should be unavoidable—consumers should not be able to proceed further with a transaction, e.g., click forward, without scrolling through the disclosure.”
Do parts of the advertisement distract a user’s attention from the disclosure? The staff is concerned that “flashing images or animated graphics may reduce the prominence of a disclosure.”
Different paths to the site may require the disclosure to be repeated so that consumers can see it regardless of how they get to the site. The staff pointed out that “consumers may access a site through its home page, but others might enter in the middle, perhaps by linking to that page from a search engine or another website.”
Pace, volume and cadence of audio messages, and duration of visual disclosures. The format of the disclosure should match the format of the claim. For example, audio claims should have audio disclosures with a volume and cadence “sufficient for a reasonable consumer to hear and understand it.” With respect to written claims, disclosures should also be written, and not solely audio or video: “Consumers who do not have speakers, appropriate software, or devices with audio capabilities or who have their sound turned off will not hear an audio disclosure.”
Phrasing of disclosures so that they are understandable to the intended audience. Not only should disclosures “avoid legalese or technical jargon,” the FTC staff cautioned: “Icons and abbreviations are not adequate to prevent a claim from being misleading if a significant minority of consumers do not understand their meaning.”

Note that if “it is not possible to make the disclosure clearly and conspicuously, then that ad should not be disseminated.”

Source: Federal Trade Commission, “Dot Com Disclosures” Guidance Updated to Address Current Online and Mobile Advertising Environment (Mar. 12, 2013).

This article was prepared by Sue Ross (sross@fulbright.com / 212 318 3280) of Privacy, Competition and Data Protection Practice.

Nutrition content claims and health claims

2013-04-30T17:00:00.003-05:00

By Kate Sherburn of Norton Rose Australia

The Australia New Zealand Food Standards Code sets out standards for food (“Standards”) that are legislative instruments under the Legislative Instruments Act 2003. A new Standard to regulate nutrition content claims and health claims on food labels and in advertisements became law on 18 January 2013 -- Standard 1.2.7 - Nutrition, Health and Related Claims. The new Standard sets out conditions for making such claims.

Under the new Standard, health claims can only be made if they are based on food-health relationships that have been substantiated according to the Standard. There are more than 200 pre-approved food-health relationships set out in the Standard that can be used for general level health claims. Businesses may also self-substantiate a food-health relationship by notifying Food Standards Australia New Zealand of the relationship before making the health claim. Businesses are not able to rely on a food-health relationship that has been self-substantiated by another business, they will still need to undertake their own review. There will be a public record of food businesses that have self-substantiated a food-health relationship.

Foods carrying health claims must also meet certain compositional requirements that are set out in the Standard, including the nutrient profiling scoring criterion (NPSC). This means that before making a health claim, food businesses will need to ensure that the food meets a certain nutrient profiling score.

From 18 January 2013, Australian and New Zealand food businesses have three years to meet the requirements of the new Standard 1.2.7 - Nutrition, Health and Related Claims. Review the new Standard.

This article was prepared by Kate Sherburn (kate.sherburn@nortonrose.com / 61 3 8686 6716) of Norton Rose Australia.

Obama administration approves FDA survey of doctors about drug advertising

2013-04-24T15:44:00.000-05:00

by Megan Fanale Engel

On April 18, the Obama administration approved the Food and Drug Administration’s (“FDA”) survey project, which will allow regulators to survey physicians, nurse practitioners, and physician assistants about the advertising and marketing practices of drug companies. The purpose of this survey is to ask clinicians their opinions about how pharmaceutical companies promote drugs to consumers and healthcare professionals. It is expected to cost approximately $365,000 over two years.

The FDA initially asked the White House to conduct this survey in January. The request was posted in the Federal Register and five comments were received. The last time the FDA undertook such a survey about the impacts of direct-to-consumer advertising was more than 10 years ago. In the new study, the FDA plans to survey approximately 2,000 healthcare professionals, and the agency is particularly focused on how perceptions regarding direct-to-consumer advertising has changed since the 2002 survey. In 2002, physicians were divided whether drug advertising had a negative, positive, or negligible effect on their practices. Now, however, drug company advertising has significantly increased, and the FDA is interested in how social media and online marketing has affected physicians’ opinions.

This article was prepared by Megan Fanale Engel (mengel@fulbright.com / 202 662 4733) of Fulbright’s Health Care practice.

Selling Applications Presents a Problem In Branding For Apple, Microsoft and Amazon

2013-04-10T15:24:00.000-05:00

by Bob Rouder and Saul Perloff

In July 2008, Apple began selling applications (colloquially, “Apps”) for its mobile devices through its APPSTORE. Contemporaneously, Apple applied to register the APP STORE mark with the U.S. Patent and Trademark Office. Two years later, in July 2010, Microsoft challenged the registration because, among other things, they claimed the proposed mark was a generic term. That challenge was brought to the Trademark Trials and Appeals Board (“TTAB”) for adjudication. Notice of Opp’n (Jul. 4, 2010).

In September 2010, Amazon began soliciting developers to submit offerings for Android applications to be sold through its yet-to-be-launched Amazon Appstore. On March 18, 2011, Apple filed suit against Amazon for trademark infringement and dilution under the Lanham Act and for unfair competition under California’s Business & Professions Code § 17200. Apple Original Complaint (Mar. 18, 2011) (N.D. Cal.).

Three days later, Amazon went live with its “Amazon Appstore for Android.”

The Preliminary Injunction

Soon after filing its suit against Amazon, Apple moved for a preliminary injunction arguing that it was likely to prevail upon the merits of its trademark infringement and dilution counts and would suffer irreparable harm if an injunction did not issue. Apple Motion for Prelim. Inj.

United States District Judge, Phyllis J. Hamilton, disagreed that Apple was likely to prevail on either its infringement or dilution claims. The Court “assume[d] without deciding” that “APP STORE” is not a purely generic name as Amazon claimed but also that the name was not suggestive as Apple claimed. Rather, the Court said that “APP STORE” was descriptive and that the term arguably acquired a secondary meaning rendering it protectable. Order Denying Motion for Prelim. Inj.

The Court found that Apple had not established a likelihood of success as to its infringement claim because of Apple ’s inability to show there was a likelihood of consumer confusion. The test for confusion is “whether

a reasonably prudent consumer in the marketplace is likely to be confused as to the origin of the good or service bearing the mark.” Insofar as the offerings at the APP STORE are exclusively for Apple devices and the offerings at the Amazon site exclusively for Android users, Amazon persuaded the court that most of the so-called Sleekcraft factors used to determine whether a “’likelihood of confusion’ exists” fell in its favor.

Similarly, the court determined that Apple's dilution claim was not likely to succeed. First, the court found that Apple failed to show that the “APP STORE” mark is famous. Second, Apple could not demonstrate that blurring occurred as a function of Amazon ’s use of the term “Appstore.” Although the terms are similar, the use of either by many companies to describe a place to obtain software applications for mobile devices reduces the liability of Amazon, which the court found “did not intend to create an association between its Android apps and Apple’s apps….” Finally, the court found inadequate evidence of tarnishment as Apple did not offer testimony that Amazon used “App Store” in a disparaging or degrading context. See generally Order on Motion For Preliminary Injunction.

The False Advertising Claim

In November 2011, Apple amended its Complaint to include a claim alleging false advertising under the Lanham Act. Second Amended Complaint. The following month, at Microsoft’s request, the TTAB issued an order suspending Microsoft’s challenge pending the outcome of the Apple suit against Amazon. Amazon then moved for partial summary judgment on the false advertising claim. In January 2013, the court granted Amazon’s motion. Order on Summary Judgment.

Apple alleged that by using the phrase “Appstore,” Amazon was equating its “store” with Apple when in fact the two are different in nature and breadth of offerings. Amazon argued that it had made no false statement and that the false advertising claim was a trademark infringement allegation in disguise.

Apple conceded that it had no evidence that Amazon made any affirmative or overt false claim. Rather, it argued that a false statement could be “’implied’ because the Lanham Act’s false advertising prong embraces innuendo, indirect intimations and ambiguous suggestions” and would be actionable when the consuming public misapprehends an advertisement. However, Apple did not introduce a market study or consumer survey in support of the idea that the term “app store” includes “specific qualities or characteristics or attributes of the Apple APP STORE, or that customers were misled by Amazon’s use of the term.” The Court concluded that absent such evidence, Apple could not establish that Amazon was liable for false advertising and dismissed the claim.

The Brand Protection Blog will continue to cover this matter.

Sources: Apple Inc. vs. Amazon.Com Inc., Case No. 4:11-cv-01327-PJH (N.D. Cal.) (Docket Nos. 1, 18, 52, 56 and 102); Trademark Trials and Appeals Board Opposition No. 91195582.

This article was prepared by Bob Rouder (rrouder@fulbright.com / 512 536 2491) of Fulbright’s False Advertising and Saul Perloff (sperloff@fulbright.com / 210 270 7166) of Fulbright’s Intellectual Property and Technology Practice.

WEB EVENT: International Brand Management — How to Protect Your Company's Most Important Asset Worldwide

2013-03-25T13:40:00.000-05:00

On Tuesday, April 2, 2013, Fulbright will be hosting its 62nd presentation in the Fulbright Forum Monthly Web Seminar Series.

This month, the topic is “International Brand Management—How to Protect Your Company's Most Important Asset Worldwide.”

Fulbright IP partner Patrick Gallagher and 3 very experienced and highly regarded in-house trademark lawyers will discuss establishing and maintaining brand value through strong trademark protection.

Also joining the panel will be a highly-esteemed trademark lawyer from the global law firm Norton Rose.

Learn more about the Fulbright Forum: International Brand Management—How to Protect Your Company's Most Important Asset Worldwide.

Register for this one-hour program which will begin at 1:00 pm EDT on April 2, 2013.

Anonymous Yelp! Reviews Used as Proof of Actual Confusion

2013-03-21T08:00:00.000-05:00

by Justin Haddock

In any trademark infringement lawsuit, evidence of actual consumer confusion between two marks can play a key role in a court’s “likelihood of confusion” analysis. This evidence frequently takes the form of a consumer survey demonstrating that certain individuals were in the marketplace, saw the two marks, and believed that they were somehow related.

On February 11, 2013, however, the United States District Court for the Middle District of Florida allowed use of an anonymous Yelp! review to support a finding of likelihood of confusion and a preliminary injunction against the defendant. See You Fit, Inc. et al v. Pleasanton Fitness, LLC et al, Case No. 8:12-cv-01917-JDW-EAJ (M.D. Fla.).

In You Fit Inc. v. Pleasanton Fitness LLC, the defendant—a former franchisee of the plaintiff’s You Fit fitness clubs—began operating its own line of gyms under the name “FIT U.” You Fit sued for trademark infringement, among other claims, and at trial You Fit provided the following Yelp! review as proof that consumers were actually confused:

I am soo confused. I was a member at Youfit in [Arizona] and when I moved back to [California] I saw this place by my house and thought great my gym is here! When I went into the gym, I realized it was called Fit U. They use the same basic color scheme on their sign and the motto seemed the same. When I asked the girl at the desk, … [she] said her owner created this brand. I said what are you [sic] rates? Seemed very similar to me as when I was a member at Youfit. Very confusing and a big let down.

Overruling the defendant’s hearsay objection, the court noted that “[w]hile these anonymous posts are not conclusive evidence of actual confusion, they are indicative of potential consumer confusion,” and found that the “actual confusion” factor in its “likelihood of confusion” analysis weighed in favor of You Fit. Pleasanton has filed a Notice of Appeal.

This article was prepared by Justin Haddock (jhaddock@fulbright.com and 512 536 3024) of Fulbright’s Intellectual Property and Technology Practice.

Supreme Court Holds “First Sale” Doctrine Applies to Grey Market Goods - Resale of Copyrighted Items Made Overseas Not Copyright Infringement

2013-03-20T17:12:00.000-05:00

By Laura J. Borst, Rita Weeks and Shelby Knutson

In a landmark ruling on March 19th, the Supreme Court held in Kirtsaeng v. John Wiley & Sons, Inc., No. 11-697, that the “first sale” doctrine – which permits lawfully acquired copies of copyrighted works to be resold by their owners – also applies to works manufactured overseas.

By holding that the first sale doctrine applies to goods manufactured abroad as well as those manufactured in the United States, the Court reversed a Second Circuit decision upholding a jury determination that Petitioner Supap Kirtsaeng was liable for willful copyright infringement and owed publisher John Wiley & Sons $600,000 in damages. See Mar. 19, 2013 Slip Op.

The Story Begins in Thailand

Supap Kirtsaeng, a Thai citizen who attended graduate school in the U.S., asked his friends and family in Thailand to purchase and ship him copies of foreign edition, English-language textbooks, that were less expensive than the U.S. editions. Kirtsaeng subsequently resold the textbooks to students in the U.S. for profit.

U.S. book publisher Wiley assigned the right to publish, print and sell its foreign versions of English-language textbooks abroad to its wholly-owned Asian subsidiary. Each of Wiley’s Asia-manufactured textbooks state that absent permission, the textbooks may not be taken into the United States. In 2008, Wiley sued Kirtsaeng in United States District Court for the Southern District of New York, alleging that Kirtsaeng’s unauthorized importation and resale of the textbooks constituted copyright infringement.

The “first sale” doctrine in copyright law allows the owner of a “lawfully made” copy of a copyrighted work to sell or otherwise dispose of that copy without limitations imposed by the copyright owner. 17 U.S.C. §109(a). For example, once a copy of a copyrighted novel has been lawfully sold or transferred, the buyer has the right to sell or otherwise distribute that particular copy. Section 603(a)(1) of the Copyright Act, however, provides that importation, without the owner’s permission, of a copyrighted work acquired abroad is an act of infringement.

“First Sale” Defense Prohibited

In the district court, Kirtsaeng was prohibited from asserting the “first sale” defense. After the trial, the jury found that Kirtsaeng willfully infringed Wiley’s copyrights and assessed statutory damages of $600,000. The United States Court of Appeals for the Second Circuit affirmed, holding that the “first sale” doctrine only applies to copies of copyrighted works that are “lawfully made under this title,” which it interpreted to mean only copyrighted works manufactured in “territories in which the Copyright Act is law,” i.e., not to works manufactured abroad.

The Supreme Court granted certiorari to resolve the conflict between the Copyright Act’s first sale defense and Section 602(a)(1) of the Copyright Act, which prohibits the importation of a copyrighted work “without the authority of the owner,” as applied to a copy of a copyrighted work that was made and legally acquired abroad and then imported into the United States.

6-3 Opinion Finds No Geographical Limitation

In the 6-3 opinion authored by Justice Breyer, the Court focused on the geographical limitation arguments made by both parties.

Wiley argued that the “first sale” doctrine did not apply because copies can only be “lawfully made under this title” if the copies were made in the United States. Therefore, it argued, the “first sale” doctrine only limits the publisher’s rights to control distribution of copies if the copies are made in the United States.

In contrast, Kirtsaeng argued that the “first sale” doctrine applies to all copies that are manufactured “in accordance with” or “in compliance with” United States copyright law, regardless of the location where those copies were printed or manufactured.

The textbooks at issue were manufactured in accordance with United States law, Kirtsaeng argued, because Wiley had authorized its subsidiary to manufacture the textbooks, and therefore the “first sale” doctrine permitted him to import and resell the textbooks without Wiley’s permission.

The majority found Kirtsaeng’s arguments persuasive. The Court reasoned that Section 109(a)’s plain language, its context, and the common-law history of the “first sale” doctrine “favored a non-geographical interpretation.” Kirtsaeng v. John Wiley & Sons, Inc., No. 11-697, slip op. at 8 (S. Ct. Mar. 19, 2013) (emphasis in original).

The Court found that Section 109(a) made no mention of geography. See id. at 9. (“neither ‘under’ nor any other word in the phrase means ‘where’”).

Additionally, the Court determined that because the definition of “under” can mean “in accordance with,” Section 109(a)’s “lawfully made under this title” language, when read literally, meant “made in accordance with” or “in compliance with” the Copyright Act. Id.

Moreover, the Court found that that historical and contemporary statutory context indicated that Congress “did not have geography in mind” when writing Section 109(a). Id.

The Court also discussed the “first sale” doctrine’s common law history and the effect of a geographical limitation on specific entities in holding that the “first sale” doctrine applies to goods lawfully manufactured abroad. Specifically, the Court found that the common-law “first sale” doctrine, with its “impeccable historic pedigree” made no geographical distinctions and had played an important role in American copyright law. Id. It also considered examples of how entities, such as libraries, book dealers, technology companies and museums, would be affected by a geographical limitation on the “first sale” doctrine because these entities had long-relied on the “first sale” doctrine when operating their businesses. The Court found that a geographical interpretation of Section 109(a) would “fail to further basic constitutional copyright objectives, in particular ‘promot[ing] the Progress of Science and useful Arts.’” Id. citing U.S. Const., Art. I, §8, cl. 8.

Dissent Warns of Consequences to Publishers

Justice Ginsburg (joined by Justice Kennedy and partially joined by Justice Scalia) authored a forceful dissent, warning of the serious consequences the decision would have for publishers. Ginsburg rejected the Court’s adoption of an “international exhaustion” regime, under which the authorized distribution of a particular copy anywhere in the world exhausts the copyright owner’s distribution right everywhere with respect to that copy. Justice Ginsburg explained in detail that the legislative history of the Copyright Act shows that Congress intended

to provide copyright owners with a remedy against the unauthorized importation of foreign-made copies of their works, even if those copies were made and sold abroad with the copyright owner’s authorization.

Therefore, Justice Ginsburg concluded, the United States should adhere to a national-exhaustion regime, under which a copyright owner’s right to control distribution of a particular copy is exhausted only within the country in which the copy is sold. In that scenario, Kirtsaeng’s unauthorized importation of foreign-made textbooks would have infringed Wiley’s copyrights, Justice Ginsburg explained, and thus she would have affirmed the Second Circuit’s judgment.

Justice Kagan concurred, joined by Justice Alito, and indicated full support for the Court’s application of the first sale doctrine to works manufactured abroad. Justice Kagan also noted that, “[i]f Congress thinks copyright owners need greater power to restrict importation and thus divide markets,” Congress can alter the impact of the decision by legislating to establish a broader importation right.

Sources: Kirtsaeng v. John Wiley & Sons, Inc., Case No. 11-697 (Sup.Ct.)

This article was prepared by Laura J. Borst (lborst@fulbright.com / 612 321 2206), Rita Weeks (rweeks@fulbright.com / 212 318 3213) and Shelby Knutson (sknutson@fulbright.com / 612 321 2207) of Fulbright’s Intellectual Property and Technology Practice.

The Battle For the iPhone Trademark in Brazil

2013-03-18T15:37:00.000-05:00

by Mariano De Alba

Apple is battling to obtain the iPhone trademark registration in Brazil, one of the world’s largest economies.

The National Institute of Industrial Property—known as “INPI” in Portugal—recently announced its denial of Apple’s application to register the “iPhone” since a Brazilian company Gradiente Electronica (“GE”), already owns a registration for the mark.

In 2000, seven years before the worldwide launch of Apple’s iPhone, GE applied for registration of the trademark “iphone g gradiente”.

Although the INPI formally granted registration in 2008, GE did not effectively use the trademark until December 2012, when it finally announced the release of the “gradiente iphone,” ensuring registration for itself. Apple appealed the INPI’s decision seeking cancellation of GE’s registration since it did not use the name within a five-year limit.

INPI’s decision, once issued, should not affect iPhone sales in Brazil, since only a court ruling could prohibit Apple’s use of the name.

Even though GE is seeking such court judgment, its chairman, Eugenio Emilio Staub recently declared to Bloomberg: “We’re open to dialogue for anything, anytime…we’re not radicals.” Bloomberg Feb. 5, 2013.

It is noteworthy that Apple had branding problems when it released the first iPhone in 2007, prompting it to sign a deal with Cisco Systems, Inc. Apple also recently paid $60 million to a Taiwanese company to end litigation in China over the iPad trademark.

This article was prepared by Mariano T. De Alba Uribe (Mariano.DeAlba@nortonrose.com and 58 212.276.0764) of Norton Rose’s Antitrust, Competition and Regulatory Practice.

Canada Gets Real: Serious Action on Counterfeits and Trade-mark Amendments

2013-03-06T09:52:00.000-06:00

The Brand Protection Blog welcomes its first Norton Rose contributor, Mr. Brian W. Gray, Senior Partner, Lawyer, Patent Agent, Trade-mark Agent for Norton Rose Canada.

Fulbright & Jaworski L.L.P. will join forces with Norton Rose on June 1, 2013, offering significant depth of experience across Africa, Asia, Australia, Canada, Central Asia, Europe, Latin America, the Middle East, and the United States.

By Brian W. Gray

On March 4, the Canadian Government announced the introduction of a bill to amend the Trade-marks and Copyright Act to combat counterfeiting. However, in addition Bill C-56 (Combating Counterfeit Products Act) makes substantial amendments to the Trade-marks Act which will take some time to consider fully.

Bill C-56 – Combating Counterfeit Products

Lax Canadian laws (particularly with respect to border enforcement) had frequently been a subject of criticism among Canada’s trading partners and a number of parliamentary standing committee reports recommended increased power for border officials . In addition, the lack of effective border enforcement had been one reason why Canada had continued to be on the U.S. Trade Representative’s 301 Watch List.

According to the Canadian Government’s Press Release, Bill C-56 will:

“. . . reduce trade in counterfeit goods by providing new enforcement tools to strengthen Canada’s existing enforcement regime for counterfeit goods, as well as bolster our existing protections against commercial counterfeiting activities.”

New Combat Powers

Specifically, Bill C-56 will:

give border officers the authority to detain suspected commercial shipments and contact the rights holders;
allow Canadian businesses to file a request for assistance, with the Canada Border Services Agency (CBSA), in turn, enabling border officers to share information with rights holders regarding suspect shipments;
provide new criminal offences for the commercial possession, manufacture or trafficking of counterfeit trademark goods;
provide legitimate owners with new tools to protect their rights and take civil action against infringers;
create new offences for trademark counterfeiting; and
provide better tools to investigate commercial counterfeiting.

Bill C-56 will include new powers for the Canada Border Service Agency (CBSA) to search and seize and destroy counterfeit goods. However, under the Bill as drafted, the warehousing or destruction of goods will be at brand owner’s cost and the CBSA will not investigate or impound shipments where Canada is not the final destination. The Bill provides a specific exception at the border for individuals importing or exporting counterfeit trademark goods, which are intended for personal use, as part of their personal baggage.
Bill C-56 Cloudy on Grey Goods

The Bill is somewhat confused about the question of “grey goods.” Certain portions of the Bill seem to allow importation of so-called grey market goods (i.e., where the work was made outside Canada with the consent of the owner of the copyright in the country where the copy was made). These provisions do not seem entirely consistent with other portions of the Bill and further analysis and study is required.

Trade-mark Amendments

Many of the proposed Trade-mark Act amendments do not specifically deal with anti-counterfeiting enforcement. For example, Bill C-56 amends the definition of trade-mark to specifically refer to packaging, colour, shape, sound, scent, hologram or moving images. The Bill proposes amendments to limit the registration of such marks that have not been proven distinctive, or which are dictated “primarily by a utilitarian function.” In addition the definitions of “distinguishing guise” and “wares” have been removed, the definition of certification mark changed and the concept of a “proposed certification mark” introduced for the first time. See Bill C-56.

Canadian Trade-mark Expansions

The Canada Government has taken the opportunity to expand significantly the types of trade-marks that can be registered. This follows upon the Trade-marks Office’s own initiative last year to interpret the Act to allow such marks. However, along with the expansion of the types of trade-marks that may be registered, Canada has taken steps to limit more explicitly the registration of trade-marks that are utilitarian or are not distinctive in fact. Many of the amendments make explicit that marks which are “dictated by a utilitarian function” are not registrable and that such registration does not prevent a person from “using any utilitarian feature embodied in the trade-mark.” Such limitations had previously only applied with respect to the now soon to be defunct “distinguishing guise.” In addition, the Federal Court is given explicit power to expunge (cancel) any registration that is “likely to unreasonably limit the development of any art or industry.”

Concurrent with this, the Registar will be given expanded powers to require evidence that any trade-mark is distinctive if the trade-mark consists exclusively of a single color or combination of colors without delineated contours or the trade-mark consists exclusively or primarily of a shape, packaging, sound, scent, taste or texture.

In respect of oppositions, the Canada Trade-marks Opposition Board is given power to strike all or part of a statement of opposition and opponents will be required to serve the written representations on each other rather than to file with the Board as was the previous practice.

Finally for the first time, Canadian applicants will be able to file a divisional trade-mark application limiting the original application to some of the goods or services and filing a divisional for the remainder.

This article was prepared by Brian W. Gray (brian.gray@nortonrose.com and 416.216.1905) of Norton Rose’s Trade-mark and Branding Practice and Intellectual Property Practice.

Comment Period Deadline Approaching On Closed Generic TLDS

2013-03-05T16:58:00.002-06:00

By Sheri M. Hunter

The Internet Corporation for Assigned Names and Numbers (ICANN) is the organization that coordinates the Domain Name System, including generic (gTLD) and country code (ccTLD) top-level domain name management.

Generic top-level domains include the familiar .com, .net, .info, .org, etc. domain extensions, while country codes are those extensions specific to a particular country, such as .us, .ca., .fr, etc.

In June 2011, ICANN authorized the launch of a new gTLD program, whereby applicants can apply to register and operate gTLD extensions that include brand names, acronyms, geographical names, industry terms, generic words, etc.

As a result of ICANN’s expansion of the number of available gTLDs, over 1900 applications have been filed for new gTLDs. Many of these applications are for brand gTLDs or open generic gTLDs, but there are also a number of applications for closed generic gTLDs, whereby the applicants have filed for gTLD strings that are generic terms in the industries in which they compete and the applicants propose to maintain and control the registries exclusively for their own benefit.

The governments of Australia and Germany, as well as registrars and brand owners, have espoused warnings that closed generics will allow their owners to compete unfairly by using generic, common words associated with an entire industry for their own specific corporate goals.

Arguments have been presented that the companies owning closed generic gTLDs will have an unfair advantage in search engine results, will become associated with the market sector they fall within, and will be able to prevent competitors perpetually from registering substantially similar gTLDS.

In light of the concerns voiced by the community regarding closed generic gTLDS, ICANN has opened a 30-day comment period seeking public comment on whether requirements should be adopted with respect to applications for closed generic registries.

Specifically, ICANN requests comments addressing:

how to determine whether a string is generic, and
the circumstances under which a particular TLD operator should be permitted to adopt open or closed registration policies.

» The comment period is set to close on March 7, 2013. «

For more information or to submit a comment, visit the ICANN web site.

This article was prepared by Sheri Hunter (shunter@fulbright.com and 512 536 3092) of Fulbright’s Intellectual Property and Technology Practice.

Yankees Recognized as EVIL EMPIRE … The Board is With Them

2013-02-27T11:07:00.001-06:00

By Tara Vold

In a ruling earlier this month, the Trademark Trial and Appeal Board officially recognized the New York Yankees as the exclusive “EVIL EMPIRE” of baseball.

In an entertaining decision, the Board sustained an opposition lodged by the baseball club against a trademark application for “BASEBALLS EVIL EMPIRE” (no possessive) for various clothing items filed in the name of Evil Enterprises, Inc. See TTAB Opinion (Feb. 8, 2013).

The phrase “EVIL EMPIRE” became part of our popular lexicon back in the 1970s and early 1980s in connection with the STAR WARS trilogy and was famously used by Ronald Reagan in a 1983 speech before the British House of Commons to refer to the Soviet Union.

In 2002, Red Sox CEO Larry Lucchino bestowed the title on the Yankees after the club signed a highly acclaimed Cuban pitcher, commenting “the evil empire extends its tentacles even into Latin America.” While not exactly intended to be complimentary, the phrase stuck among sports journalists, fans and detractors.

As a result of this public association, the Yankees organization, which has never itself used the EVIL EMPIRE moniker, was able to establish rights in the mark in connection with products and services associated with baseball. Specifically, the organization submitted numerous third party uses of the name referring to the Yankees in news stories, internet blogs, message boards and Wikipedia references.

Further, the Yankees identified similar associations in Applicant Evil Enterprises’discovery responses and web materials. In light of such evidence, the Board found that Evil Enterprise’s registration and use of BASEBALLS EVIL EMPIRE mark would create both a likelihood of confusion and a false association of connection with the New York Yankees.

The USPTO regulations clearly recognize an entity/individual’s right to nicknames developed through the media, but one wonders whether we would have seen the same result if Evil Enterprises had either filed an application for “EVIL EMPIRE” (without the BASEBALL modifier) (a 2003 application filed for EVIL EMPIRE (App. No. 78/285,579) by a third party for hats, shirt and jackets went unopposed) and/or had the foresight to file its application back in 2002.

While the USPTO has recognized nickname association in circumstances involving only a short time period of use, those instances appear most common where the nickname is, on its face, uniquely and unmistakably associated with the referenced individual (e.g. LINSANITY). The USPTO may likely require more significant evidence where the association requires a mental leap.

Finally, it is interesting that the Board did not find the BASEBALLS EVIL EMPIRE mark disparaging, noting the offensiveness of the term “evil” is not obvious in matters of public opinion. The New York Yankee’s own evidence showed that a number of fans adopted the moniker as a “badge of honor” and that the Yankees “implicitly embraced” the designation by playing John William’s ominous “The Imperial March” (a/k/a “Darth Vader’s Theme”) during home games.

In the Board’s words “having succumbed to the lure of the dark side” the New York Yankees “will not now be heard to complain about the judgment of those who prefer the comfort of the light.” See TTAB Opinion.

Sources: New York Yankees Partnership v. Evil Enterprises, Inc., Opposition No. 91192764. (February 8, 2013).

This article was prepared by Tara Vold (tvold@fulbright.com / 202 662 4657) of Fulbright’s Intellectual Property and Technology Practice.

Every Inch Counts: Subway Sued Over “Short” Footlong Sandwiches

2013-02-26T14:44:00.000-06:00

By Brandon Crisp

In a series of recent lawsuits, plaintiffs have sued Subway Sandwich Shops, Inc., (“Subway”) under various consumer protection laws claiming that the world’s biggest fast-food chain has been serving customers “footlong” sandwiches that are not, in fact, 12 inches. What started with customers posting pictures of their sandwiches next to rulers on Facebook, has resulted in class actions against the sandwich giant.

On January 22, 2013, plaintiff Nguyen Buren filed the first lawsuit in a federal court in Chicago, alleging a “pattern of fraudulent, deceptive, and otherwise improper advertising, sales and marketing practices.” Buren v. Doctor’s Assocs., Inc., No. 13-498 (U.S. Dist. Ct., N.D. Ill.). Mr. Buren made claims under the consumer protection laws of all 50 states, as well as a claim for unjust enrichment, and seeks over $5 million in damages.

According to the Chicago Tribune, Buren’s lawyer, Tom Zimmerman, claimed in reference to the suit: “This is no different than if you bought a dozen eggs and they gave you 11 or you bought a dozen doughnuts and they gave you 11.”

A short time later, New Jersey residents John Farley and Charles Pendrak also brought one of the first class actions in state court where they allege, “Despite the repeated use of uniform language by Subway stating that this sandwich is a ‘footlong,’ the product in question is not, in fact, a foot long. Rather this product consistently measures significantly less than 12 inches in length.” Pendrak et al v. Subway Sandwich Shops, Inc. et al, Case No. 3:13-cv-00918-FLW-DEA (U.S. Dist. Ct., D. N.J.) (removal from N.J. Super. Ct. filed February 13, 2013).

Stephen DeNittis, the lawyer representing Farley and Pendrak said, “Subway is profiting hundred[s] of thousands and potentially millions of dollars at consumers’ expense through mass uniform widespread misrepresentation about the size of its ‘Footlong.’ It is important that large companies like Subway promote and advertise their products accurately and deliver what they promise to consumers.” See Stephen DeNittis’ Statement.

Subway quickly responded to the allegations by issuing a company statement to the Chicago Tribune, saying it would work harder to achieve sandwich-length uniformity. “We have redoubled our efforts to ensure consistency and correct length in every sandwich we serve,” the statement said. “Our commitment remains steadfast to ensure that every Subway Footlong sandwich is 12 inches at each location worldwide.” See Chicago Tribune story.

This article was prepared by Brandon Crisp (bcrisp@fulbright.com and +1 512 536 2422) of Fulbright’s Litigation Practice.

Sterling Jewelers Fails to Enjoin Zale Advertising

2013-02-25T14:00:00.000-06:00

By Bob Rouder and Saul Perloff

As we recently reported, Sterling Jewelers, owner of the Kay Jewelry and Jared Galleria brands, sued Zale, owner of the Zale and Gordon Jeweler brands, for false advertising under the Lanham Act. See Jan. 16, 2013 BPB Post, "The Brilliance of a Girl's Best Friend is Challenged."

Sterling claimed that the Zale’s promotion of its Celebration Fire diamonds as “the most brilliant diamonds in the world” is false.

In addition, Sterling alleges that Zale’s representation that independent testing demonstrated that the Celebration Fire diamond was the world’s most brilliant diamond is an establishment claim that cannot be shown to be truthful.

In addition to damages and a permanent injunction, Sterling also petitioned the court for a preliminary injunction. Preliminary injunctions are considered extraordinary remedies.

Generally, to preliminarily enjoin the actions of the defendant, the plaintiff must show:

there is a strong likelihood that it will prevail on the merits at trial;
it will suffer irreparable harm if the injunction does not issue;
that the injunction would not cause substantial harm to others; and
the public interest will not be disserved by the issuance of an injunction.

A hearing was held in late December and the Court ruled on January 24th, 2013 that Sterling was not entitled to a preliminary injunction because it had not demonstrated irreparable harm.

Specifically, the Court found that if Zale continues its current promotion, the harm to Sterling “at most would be lost sales and possibly lost customers.”

The Court concluded that both items “could be remedied through an award of monetary damages.” Read the Sterling Decision.

Source: Sterling Jewelers, Inc. v. Zale Corporation, Case No. 5:12-cv-02823 (N.D. Oh.).

ITC Denies K-V Pharmaceutical’s Complaint

In October 2012, KV-Pharmaceuticals filed a 337 petition with the International Trade Commission asking the ITC to block importation of the active ingredient 17-HPC.

That ingredient is used in compounding preparations that compete with KV’s Makena brand, an FDA-approved orphan drug indicated for the prevention of premature deliveries in women with at-risk pregnancies. See The Brand Protection Blog Post, "K-V Pharmaceuticals Calls Upon the ITC To Defend Its Makena® Brand,"

Late last year, the ITC declined to investigate the matter and dismissed KV’s complaint. In a December 21, 2012, letter to KV’s counsel the ITC wrote “KV’s complaint does not allege an unfair method of competition or an unfair act congnizable under 19 U.S.C. § 1337(a)(1)(A), as required by the statute and the Commission’s rules.” Read the International Trade Commission’s Letter.

Typically, 337 petitions allege that the importation of goods violate the intellectual property rights of domestic holders of patent, copyright and trademark rights. KV’s complaint did not allege that the importation of 17-HPC infringed any Makena patent, trademark or copyright.

Rather, KV asserted that the U.S. Food and Drug Administration (FDA) had granted the company market exclusivity—akin to the exclusivity enjoyed by patent holders—when it approved Makena under the Orphan Drug Act. KV had previously filed suit to compel the FDA to enforce this grant of exclusivity but a federal court refused to do so. See The Brand Protection Blog post, "Can a Drug Company Require the FDA to Protect the Market Exclusivity of its Brand Drug?"

This history was apparently important to the ITC which cited the federal court decision dismissing the suit and noted that the FDA “is charged with the administration of the Food, Drug and Cosmetic Act.”

Source: International Trade Commission

These updates were prepared by Bob Rouder (rrouder@fulbright.com / 512 536 2491) and Saul Perloff (sperloff@fulbright.com / 210 270 7166) of Fulbright’s False Advertising Practice.

Mobile Apps, Children, and an $800,000 Settlement

2013-02-22T11:55:00.000-06:00

By Erika Brown Lee and Sue Ross

Many brand owners would like to build brand awareness and loyalty among young people, even if these minors are not yet able to purchase the branded good or service. One way companies seek to engage the younger generation is by offering brand specific applications (“apps”) for smartphones and other mobile devices.

On February 8, 2013, the Federal Trade Commission (FTC) approved a consent decree filed in the U.S. District Court for the Northern District of California to resolve a complaint charging Path, Inc., a mobile application developer, with making deceptive statements and violating the Children’s Online Privacy Protection Act (COPPA).^[1] See FTC Feb. 1, 2013 Release; see also 16 CFR Part 312.

The Consent Decree orders Path to pay $800,000 in civil penalties, and subjects the company to a permanent injunction, as well as other equitable remedies. See Feb. 8, 2013 Consent Decree.

According to the Complaint, Path operates, through a mobile app, a social networking service that allow users to share journals, photos and other information with the users’ network of friends.

The federal complaint charged that Path’s privacy policy was deceptive under Section 5 of the FTC Act because, contrary to its privacy policy, the company’s mobile app automatically collected personal information such as first and last names, addresses, phone numbers, birth dates, and email addresses from the user’s mobile device address book each time the user logged in to the app, whether or not the user had authorized the collection. See Complaint.

The Complaint also alleged that the Path app collected birth date information during user registration. As a result, the FTC claimed that the company was aware it was collecting personal information from approximately 3,000 children under the age of 13.

The Complaint asserted that Path violated COPPA by failing to notify parents and obtain verifiable parental consent prior to collecting personal information from children.

The FTC announced the Path Consent Decree a week after the Commission issued a Staff Report relating to mobile apps and consumer privacy. The FTC Staff Report, issued on February 1, 2013, contained privacy recommendations for various participants in the mobile app ecosystem: From platforms to developers to advertising networks to trade associations.

Although the Staff Report contained no binding regulations, it offered insight into the FTC staff’s views on how to improve privacy disclosures in the dynamic world of the very small screen.^[2]

Specifically, the FTC Staff recommended that app developers:

Have a privacy policy and make it available through the platform’s app store. Id. at 22.
Provide just-in-time disclosures to consumers and to obtain “affirmative express consent when collecting sensitive information outside the platform’s API, such as financial, health, or children’s data, or sharing sensitive data with third parties.” Id. at 23 (footnote omitted). The Report stressed that “it is important that these app-level disclosures not repeat the platform-level disclosures.”
“Improve coordination with ad networks and other third parties that provide services for apps so that the apps can provide truthful disclosures.” Id. at 24.
Consider participating in self-regulatory programs and app trade associations for their guidance on “uniform, short-form privacy disclosures.” Id.

The Staff Report noted that the National Telecommunications and Information Agency (part of the U.S. Department of Commerce) has initiated a multi-stakeholder process to develop a “code of conduct” for mobile apps. “To the extent that strong privacy codes are developed, the FTC will view adherence to such codes favorably in connection with its law enforcement work.” Id. at iii.

Recently, the FTC has emphasized the applicability of the COPPA rule to sites not targeted at children. In a blog statement describing the Path settlement, Senior FTC Attorney Lesley Fair stated: “COPPA isn’t just for kids’ sites. Yes, the rules apply when sites and online services are specifically designed for the under-13 set, but don’t be too quick to assume you’re not covered. The Rule also imposes legal responsibilities on operators who have actual knowledge they’re collecting person info from kids.” See Fair’s Statement.

The FTC is also reportedly moving enforcement of the Children’s Online Privacy Protection Act from its Division of Advertising Practices to its Division of Privacy and Identity Protection (DPIP). See Broadcasting & Cable Report.

Any company that collects information from visitors to its website may consider incorporating COPPA compliance into its planning process and may wish to consider joining the process to develop a code of conduct for mobile apps.

This article was prepared by Erika Brown Lee (ebrownlee@fulbright.com / 202 662 0398) and Sue Ross (sross@fulbright.com / 212 318 3280) of Fulbright’s Privacy, Competition and Data Protection Practice.

Sources: United States v. Path Inc., No. 3:13-cv-00448-JCS (N.D. Cal.); Federal Trade Commission: Path Social Networking App Settles FTC Charges it Deceived Consumers and Improperly Collected Personal Information from Users' Mobile Address Books (Feb. 1, 2013); 16 CFR Part 312, Children’s Online Privacy Protection Rule (Final Rule) (Jan. 17, 2013); Federal Trade Commission: Staff Report Recommends Ways to Improve Mobile Privacy Disclosures (Feb. 1, 2013); John Eggerton, FTC Moving COPPA Under Privacy Division, Broadcasting & Cable (Feb. 15, 2013).

[1] Note that this complaint and proposed consent order relate to the current COPPA requirements. New COPPA regulations go into effect on July 1, 2013. The new regulations can be found at 78 FR 3972, Jan. 17, 2013.

[2] “Here, however, staff is not imposing rules on any members of the mobile ecosystem. Rather, it is identifying areas where ecosystem participants, including mobile platforms, should consider improving mobile privacy disclosure practices.” Staff Report at 15 n.70.

Can a Lanham Act Case Generate a Lanham Act Claim?

2013-02-18T15:02:00.000-06:00

By Bob Rouder and Saul Perloff

That is the issue raised by a fight between two laboratories that perform sophisticated analyses of urine for the presence of drugs in order that physiacists (pain doctors) might manage patient compliance with opioid dosing.

Millennium Laboratories Inc. sued Ameritox, Ltd. alleging false advertising under the Lanham Act and advancing a number of theories. See Millennium Complaint.

Ameritox counter-claimed that Millennium falsely represents their services as having the fastest turnaround time and as being the only company to use a certain technology. See Ameritox Counterclaim.

The Pre-Trial Motions Practice

After many pre-trial motions, the court dismissed each of Ameritox’s counterclaims because there was no factual evidence presented that Millennium’s advertising was false. Further, Millennium produced evidence showing their ads were literally true.

The court also dismissed several of Millennium’s false advertising claims.

Under the Lanham Act, a representation is either false on its face, in which case deception is presumed, or it is literally true or ambiguous but likely to mislead or confuse consumers. In the latter situation, absent “stark evidence” that the deception was willful, there must be extrinsic evidence that consumers were or would likely be deceived. In this case, the Court concluded Millennium’s consumer survey evidence purporting to demonstrate deception was flawed because it did not contain “any meaningful form of control.”

As a result, the Court dismissed Millennium’s allegations that Ameritox’s ads were misleading.

The only surviving claims were Millennium’s allegation that four Ameritox advertisements were literally false when they asserted that Ameritox’s tests could “tell a doctor whether the patient was compliant.”

Millennium claimed that the nature of these tests can determine the presence or absence of a drug and in what quantity at a given moment. What it cannot do is determine what dosage was originally consumed and at what rate it was metabolized.

Ameritox countered that, when read fairly, the ad meant that the test, with its sophisticated algorithm based upon a parametric treatment of metabolism, “afforded doctors another tool to ‘help’ or ‘assist’ them in monitoring their pain patients.” See Court Memorandum.

The Case Goes To Trial

The judge ordered a bifurcated trial. The first phase called for the jury to issue an advisory verdict as to the literal falsity of the Ameritox advertisements. If the jury made such a finding, the judge would independently decide “whether each of the four ads conveyed a message that was literally false.”

At the end of this phase, both jury and judge found the Ameritox ads literally and unambiguously false. The trial then moved onto the second phase which evaluated whether the ads caused Millennium injury and if so, what remedies would follow.

Here, the court determined that Millennium could only speculate, but not show, what damages it had suffered. The judge then ordered the parties to mediate the remaining issues surrounding equitable relief. The parties agreed to a Consent Order in which Ameritox would cease using the offending language and the CEO would communicate with customers disclosing the jury’s advisory verdict that its four ads were literally false.

The New Lanham Act Claims

Within hours after the judge entered the Consent Order, both sides issued press releases and public statements concerning the litigation. Each side then filed a Lanham Act claim against the other based upon alleged falsities in the public pronouncements.

In this instance, the judge noted that there was a significant legal hurdle for each side insofar as he doubted that press releases constituted “commercial advertising or promotion” under the Lanham Act. In addition, the judge found that both sides would be unable to show monetary damages or loss of goodwill arising from the releases.

Thus, according the Court, “the characteristic relief” would be equitable and to convene a jury to examine the issues, facts and actions from the first trial in order to reach a proper result in the second, would be wasteful and unproductive.

Therefore, the judge decided that under his inherent authority to enforce the Consent Order, the Court would moot each side’s claims by issuing a Memorandum “that neutrally and objectively recounted the earlier litigation.” Find Court Memorandum here.

Sources: Millennium Laboratories, Inc. v. Ameritox, LTD., Civil Case L-10-03327 (D. Md.)

This article was prepared by Bob Rouder (rrouder@fulbright.com / 512 536 2491) and Saul Perloff (sperloff@fulbright.com / 210 270 7166) of Fulbright’s Practice.

EDITORIAL: Is The New York Times Promoting Counterfeiting?

2013-02-11T17:00:00.000-06:00

On Sunday, February 10, the New York Times devoted a full page in its Magazine to report on a shopping trip to Canal Street’s infamous “Knockoff Row.”

However, this was no piece of investigative journalism, blowing the lid off of widespread counterfeiting in the midst of New York City.

Instead, the article, enticingly titled “Canal Street Booty,” showcases a “sampling of counterfeit goods” available on Canal Street. In addition to photographs of copies of popular designer handbags, the article compares the price of the “real thing” and the [asked- and bargained-for] price of the fake. It even informs readers where they can buy the illegal knockoff.

Whatever reason the Times had for publishing the piece—To seem current? To highlight New York’s edgy sophistication?—the result is deplorable.

Trademark counterfeiting is a serious and widespread crime. If a branded product has some popularity, someone, somewhere is likely knocking it off.

Seemingly everything—from the medicine we take, to the clothes we wear, to the movies we watch, to the toys our children play with—is counterfeited. People are hurt and die from counterfeit pharmaceuticals, airplane and automobile parts, electrical goods, and other items. Child labor makes counterfeits, organized crime and terrorists are among those who benefit from it, and governments lose billions of dollars in tax revenues because of it.

For these reasons, governments, brand owners and other interested groups, are engaged in a global effort to fight counterfeiting.

Organizations including the International AntiCounterfeiting Coalition, the International Trademark Association, a Global Congress and Interpol’s annual IP Crimes Conference, seek to strengthen laws and encourage cooperation aimed at stemming the problem. There have been numerous broadcasts, news articles and other publicity, to educate the public to the fact that counterfeiting and piracy is illegal and potentially dangerous.

It is remarkable the New York Times could be so tone deaf to the global efforts to stop counterfeiting, particularly when that effort is often centered right here in New York City. Fortunately, comments to the on-line version of the New York Times piece indicate its readers know better.

The media should uncover, and report on crime; certainly they have a responsibility not to encourage it with a cynical wink. The Times is no exception.

This article was written by Mark Mutterperl (mmutterperl@fulbright.com / 212 318 3183) and Saul Perloff (sperloff@fulbright.com / 210 270 7166) of Fulbright’s Intellectual Property and Technology Practice. The views expressed in this article are those of the authors and do not necessarily represent the views of, and should not be attributed to, Fulbright & Jaworski L.L.P.

Big Score for NFL Brand Owners: U.S. Seizes Fake NFL Merchandise and Websites Before Super Bowl

2013-02-01T13:32:00.000-06:00

By Sue Ross

“Operation Red Zone” may sound like something from an NFL team playbook, but on January 31, 2013, the results of this sting operation were announced by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations, which teamed up with the NFL, the U.S. Customs and Border Protection, the U.S. Postal Inspection Service, PayPal, and state and local police departments around the country.

The goal of “Operation Red Zone” was not a touchdown but rather the seizure of fake NFL merchandise and tickets during the days, weeks, and months leading up to the Super Bowl. See ICE Jan. 31, 2013 News Release.

“Operation Red Zone” began in September and has so far resulted in 23 arrests, seizure of $13.6 million in fake merchandise (more than 160,000 items, including jerseys and hats), and seizure of 313 websites. Visitors attempting to reach the affected websites are now greeted with a banner that notifies the visitor of the government seizure and educates the visitor about the federal crime of copyright infringement.

The team of brand enforcers is benefiting from the previous two years’ experience: The seizures in the current “Operation Red Zone” represent approximately three times the amount from last year. Brandon Butler, Super Bowl Bust: US Takes Down 313 Websites, Snags $13.6 M in Counterfeit NFL Merchandise, NetworkWorld, Jan. 31, 2013.

ICE Director John Morton said, “The Super Bowl is one of the nation’s most exciting events. Organized criminals are preying on that excitement, ripping consumers off with counterfeit merchandise and stealing from the American businesses who have worked hard to build a trusted brand. The sale of counterfeit jerseys and other sports items undermines the legitimate economy, takes jobs away from Americans and fuels crime overseas.” News Release.

“Operation Red Zone” is already scheduled to go into overtime. The current sting operation will extend until February 6—the Wednesday after the Super Bowl.

Sources: News Release, “ICE, CBP, USPIS Seize More than $13.6 Million in Fake NFL Merchandise during ‘Operation Red Zone’ 313 Websites Seized and 23 Individuals Arrested Nationwide for Selling Counterfeit NFL Merchandise,” Jan. 31, 2013; and Brandon Butler, “Super Bowl Bust: US Takes Down 313 Websites, Snags $13.6 M in Counterfeit NFL Merchandise,” NetworkWorld, Jan. 31, 2013.

This article was prepared by Sue Ross (sross@fulbright.com / 212 318 3280) of Fulbright’s Intellectual Property and Technology Practice.

Supplemental Register Registration Doesn’t Have Desired “Impact”

2013-01-30T09:04:00.000-06:00

by J. Paul Williamson, Tara Vold and Tracy DeMarco

On December 18, 2012, the Trademark Trial and Appeal Board, in Otter Products LLC v BaseOneLabs LLC, 105 USPQ2d 1252, decided that a Supplemental Register registration for the mark IMPACT SERIES did not establish that the opposer owned a proprietary interest in this mark. See Dec. 18, 2012 Opinion.

The opposition was filed against an application for IMPACTBAND for cellular telephone and handheld computing device covers. Opposer asserted prior use of IMPACT SERIES and ownership of a Supplemental Register registration covering protective cases for interactive, handheld electronic devices, namely portable music players, portable video players, phones and computers. For its evidence, opposer relied solely on its Supplemental Register registration.

Applicant filed a motion for involuntary dismissal under Trademark Rule 2.132 claiming the Supplemental Register registration of opposer was “evidence of nothing” because Supplemental Register registrations are not entitled to any statutory presumptions.

While the Board found that a Supplemental Register registration was sufficient for establishing an opposer’s standing and priority in an opposition, such a registration did not establish a proprietary right in the covered mark – a required element of an opposer’s evidentiary burden.

The Board specifically distinguished the impact of a Supplemental Register registration in an inter partes case versus an ex parte case. In the ex parte context, the Patent and Trademark Office does not and cannot question the validity of a mark in a registration cited against another under Section 2(d). In an inter partes case, the asserter of a Supplemental Register registration must independently prove the ownership and validity of the mark, i.e. that the mark has acquired distinctiveness to the registrant.

Given this result, if the owner of a Supplemental Register registration has questions about its ability to prove acquired distinctiveness, and if it learns in a timely-enough fashion of a problematic application under Section 2(d), it may want to consider the “Letter of Protest” procedure (TMEP §1715; TBMP §215). Likelihood of confusion issue resolutions may typically not be favored in the Letter of Protest process, but this approach may offer more opportunity for success when proof of acquired distinctiveness in an opposition context is uncertain.

Source: Trademark Trial and Appeal Board

This article was prepared by J. Paul Williamson (pwilliamson@fulbright.com / 202 662 4545), Tara Vold (tvold@fulbright.com / 202 662 4657) and Tracy DeMarco (tdemarco@fulbright.com / 202 662 4653).

The FTC’s New COPPA Requirements, Advertising and Strict Liability

2013-01-18T17:21:00.000-06:00

By Sue Ross

Does your company offer mobile apps with animated characters or with “kids” in the title or description? Does your website have a section aimed at students, explaining your goods or services in a fun and educational way? Does your company run a contest for students to submit artwork or essays on your social media site?

It doesn’t matter if your company is involved in healthcare or financial services or manufacturing, these offerings could bring your company within the scope of the Children’s Online Privacy Protection Act (COPPA) and the Federal Trade Commission’s new amended regulation, which goes into effect on July 1, 2013.

On September 27, 2011, the FTC proposed updates to its COPPA regulation, which initially went into effect in 2000. 76 Fed. Reg. 59804 (Sept. 27, 2011). The current regulation imposes restrictions on companies that operate websites or provide online services directed at children under the age of 13, and those that have actual knowledge that they are collecting personal information online from children under 13. Those site operators must obtain parental consent before obtaining and using a child’s “personal information.”

On December 19, 2012, the FTC announced the final version of its amendments to the COPPA rule. See FTC Announcement. The new amendments do not change many of COPPA’s guiding principles—so everyone who had been subject to COPPA will likely continue to be—but the new amendment does expand the scope and adds a strict liability standard for site operators with respect to certain third-party actions.

Among many other changes, the FTC’s new amendments added an exception to the parental notice and consent requirements that is probably very important to many companies: the parental notice and consent requirements do not apply for personal identifiers used “solely to support for internal operations” of the web site. This new “internal operations” exception contains a broad swath of services that many web sites currently provide for themselves:

authentication of users,
contextual advertising,
frequency capping,
legal compliance,
maintaining or analyzing site functioning,
network communications,
security and integrity, and
site analysis.

The COPPA requirements of parental consent still apply, however, with respect to any uses or disclosures of information collected to contact a specific person, including through behavioral advertising, regardless of whether that information was collected to create a profile on that person or for any other purpose.

When the COPPA regulations were first promulgated, plug-ins and advertising networks were not commonly in use. The FTC wrestled with these topics in 2011, and had initially considered amending the COPPA rule to make the creator of the plug-in a “covered co-operator” of the child-directed site and thus subject to COPPA’s requirements.

In response to the comments received, however, the FTC has instead focused the regulatory obligations on the site operator, but has placed strict liability on that operator if the operator allows other online services—such as plug-ins or advertising networks—to collect personal information through the child-directed site. Note that the FTC stated that it will “deem a plug-in or other service to be a covered co-operator only where it has actual knowledge that it is collecting information through a child-directed site.” 78 Fed. Reg. at 3975.

Sources: 76 Fed. Reg. 59804 (Sept. 27, 2011); 78 Fed. Reg. at 3972 (Jan. 17, 2013); “FTC Strengthens Kids’ Privacy, Gives Parents Greater Control Over Their Information By Amending Children’s Online Privacy Protection Rule,” Dec. 19, 2012.

This article was prepared by Sue Ross (sross@fulbright.com / 212 318 3280) of Fulbright’s Privacy, Competition and Data Protection Practice.

The Brilliance of a Girl’s Best Friend is Challenged

2013-01-16T15:37:00.000-06:00

By Bob Rouder and Saul Perloff

On November 13, 2012, Sterling Jewelers filed a complaint charging its competitor, Zale Corporation, with false advertising under the Lanham Act and deceptive trade practices under Ohio law. Sterling operates 1,300 jewelry stores under the Kay Jewelers and Jared the Galleria of Jewelry brand names. Zale is a retailer operating 1,870 stores under the brand names Zales and Gordon’s Jewelers.

The Sterling Allegation

At issue are the Zales advertisements for its Celebration Fire™ diamond collection (“Celebration Fire”) which Zales promotes as “The Most Brilliant Diamond in the World.”

The Celebration Fire promotions appeared on the Zales’ website, in the social media, and on point-of-purchase displays. In addition, the Zales catalog asserts that the Celebration Fire diamond “shines with more brilliance than any other diamond in the world based on independent laboratory testing conducted in 2012 of round-cut diamonds from select leading national jewelry store chains.” See Sterling Complaint.

In the suit, Sterling characterizes the catalog advertisement as an establishment claim. According to Sterling, not only is the Celebration Fire diamond not the most brilliant diamond in the world, but the representation that “independent laboratory testing” proves the claim, is also false.

The Puffing Issue

Advertising claims that are exaggerations unlikely to be believed by consumers or those that are laudatory and phrased in broad and vague terms are generally not actionable because they are considered to be acceptable “puffing.” Thus, an entertainment company’s advertisement opining that its property was the “happiest place on earth” or an insurance company’s claim that “you are in good hands” would likely be considered non-actionable puffing because “happy places” and being in “good hands” do not lend themselves to measurement where truth or falsity might be discerned. Other claims represent closer calls and must be viewed in the context of the entire advertisement. For example, when Papa John’s Pizza advertised “Better Ingredients. Better Pizzas” the Fifth Circuit held that the slogan by itself was puffing because the phrase lacked an empirical means of being judged true or false. However, in the same ad Papa John’s asserted it used “fresh, vine-ripened tomatoes” and “clear filtered water” rather than “remanufactured tomato paste” and “tap” water. When considering its context, especially the comparison of food ingredients, the Court held the slogan “Better Ingredients. Better Pizza” was actionable. Pizza Hut, Inc. v. Papa John’s Int’l Inc., 227 F.3d 489 (5th Cir. 2000).

In their respective pleadings, both parties appear to agree that “the brilliance of a diamond is a recognized property that is capable of being systematically, reliably and scientifically measured.” See Sterling Complaint; Zale Answer. Indeed, Zale refers to such tests in its advertising. In that context, the court may conclude Zale’s claim is less a laudatory opinion and more a statement of purported fact that can be shown by evidence to be false. However, there are experts in the industry who point out that while brilliance can be measured, there is no single, agreed-upon methodology to do so. At least one gemologist dismisses efforts to measure brilliance as “pseudoscience” and a mere marketing technique. In that light, the Sterling court might view the Zale advertisement as acceptable puffing.

The Establishment Claim

When testing or some other means of empirical analysis is asserted or implied to be the basis of an advertisement’s factual statement, the ad itself is said to contain an “establishment claim.” Establishment claims have inherent means to be shown as either true or not true: A study was or was not performed; it did or did not produce the reported result; the result can or cannot be reproduced in subsequent testing; the study protocol was or was not validated; and so forth.

In its suit, Sterling contends that by testing only round cut diamonds and by limiting the samples tested to those supplied by “select leading national jewelry store chains” the study is fatally flawed if used to establish a claim of comparative brilliance among all diamonds worldwide. There are at least nine other cuts of diamonds beside a round cut. And Sterling points out that the “select chain” limitation excludes regional chains; independent jewelers; national chains not judged to be “leading;” the internet; and any seller outside the U.S.

The Zale Answer

In its answer to the complaint, Zale denies Sterling’s allegations and also asserts several defenses including laches, estoppel, and “unclean hands.” See Zale Answer (Doc. 27). The doctrine of unclean hands holds that a plaintiff may not seek the aid of a court to remedy an act when the plaintiff itself has engaged in similarly improper conduct that harmed the defendant. Zale’s answer does not set forth the facts upon which it bases its unclean hands defense. It is possible the defense is related to Sterling’s own advertising. According to the Wall Street Journal, The Leo Diamond sold at Kay and Jared has been promoted as “the first diamond ever to be certified visibly brighter.”

The Preliminary Injunction

Sterling requested that the court halt the Zale advertisements and on December 17 & 18 a hearing was held on the matter. Sterling presented two experts, one to testify about the issue of brilliance and one who did a survey of consumers viewing the Celebration Fire ads. Zale presented two experts on the topic of brilliance and testing and was denied the ability to present a consumer survey expert because he was a last minute surprise. From the hearing, a glimpse of the themes that each side is pursuing come into focus.

In post-hearing briefing, Sterling argued that unlike cars or televisions which they characterize as “identical commodities,” diamonds are unique. In fact, says Sterling, Zale markets the Celebration Fire product as if “each diamond is the most brilliant available.” Therefore, despite the fact that there is no single accepted industry method of defining brilliance, in order to substantiate its claim, Zale would need to “test every individual Celebration Fire diamond against every competing diamond in the market.” See Sterling Post-Hearing Brief (Doc. 33) and Sterling Reply Brief (Doc. 37).

Zale counters that it used a reliable test for brilliance, that its claims are in general accord with the database maintained by Sterling’s expert, and that its results are not contraindicated by any reliable methodology. More importantly, Zale points out that in Sterling’s consumer survey, many customers perceived “the most brilliant diamond in the world” to carry different meanings. Some perceived it as puffing, others thought the ad referred to a single diamond; some thought it referred to a class of diamonds and yet others thought it referred to the average brilliance of the Celebration Fire line. As such, the ad was ambiguous and therefore cannot be literally false. See Zale Post-Hearing Brief (Doc. 35).

No decision has been issued yet relative to the preliminary injunction. The Brand Protection Blog will continue to monitor this case.

Sources: Sterling Jewelers Inc. v. Zale Corporation, Case No. 5:12-cv-02823 (N.D. Ohio); Pizza Hut, Inc. v. Papa John’s Int’l Inc., 227 F.3d 489 (5th Cir. 2000).

This article was prepared by Bob Rouder (rrouder@fulbright.com / 512 536 2491) and Saul Perloff (sperloff@fulbright.com / 210 270 7166) of Fulbright’s False Advertising Practice.

Hybrid Fuel Efficiency Claims Targeted in Class-Action Lawsuit

2013-01-09T10:38:00.000-06:00

By Kathy Grant and Saul Perloff

The owner of a new 2013 Ford C-Max Hybrid has filed a consumer fraud class-action lawsuit against the Ford Motor Company, alleging Ford has engaged in a “false and misleading marketing campaign” for its 2013 C-Max Hybrid and Fusion Hybrid vehicles.

The complaint alleges the cars “consistently achieve[] gas mileage far below the advertised mileage under normal real-world use.” The suit, filed in U.S. District Court in the Eastern District of California seeks a variety of damages, including reimbursement for the purchase price of Ford's new hybrid vehicles, disgorgement of profits and punitive damages. See Pitkin Complaint.

Richard Pitkin, the lead plaintiff in the lawsuit, asserts that Ford’s advertising claim that the C-Max achieves 47 miles per gallon (“mpg”) of gasoline was the primary reason he purchased his C-Max and that he reasonably believed the C-Max would actually achieve 47 mpg in real-world driving. However, according to the complaint, since purchasing the vehicle, Mr. Pitkin has averaged only 37 mpg. In seeking damages on behalf of himself and the putative class, he alleges that his experience was “not the exception, but rather the rule.”

C-Max Hybrid Fuel Efficiency Discrepancy

This lawsuit was filed one day after Consumer Reports reported that its tests show the fuel efficiency of Ford’s C-Max and Fusion Hybrids was significantly below the EPA fuel economy estimates reported on the autos’ window stickers.

According to Consumer Reports, the C-Max Hybrid’s fuel economy was found to be 37 mpg overall, with 35 mpg for city driving and 38 mpg on highways. The report posted similar numbers for the Fusion Hybrid: 39 mpg in testing overall, with 35 mpg during city driving and 41 mpg on the highway. See “Tests show Ford Fusion, C-Max hybrids don't live up to 47-mpg claims.”

Since releasing its test results, Consumer Reports has posted a follow-up on its blog concerning the differences between its test procedures and test procedures the EPA employs. See “Why do Ford’s new hybrids ace the EPA fuel economy tests?”

Consumer Reports suggests the discrepancy between the EPA estimates Ford reported and the results Consumer Reports found are linked to the way the Ford hybrids work.

As hybrid vehicles, both the C-Max and the Fusion can travel in electric-only mode, without any consumption of gasoline. However, unlike other hybrids (e.g., the Toyota Prius) which operate in electric-only mode at relatively slow speeds (e.g., under 25 mph), both Fords are capable of traveling at a top speed of 62 mph in electric-only mode. Only at higher speeds do the cars’ gasoline engines start and help to recharge the cars’ batteries.

EPA Fuel Economy Requirements

The U.S. Environmental Protection Agency (EPA) requires that vehicle manufacturers must provide consumers with city and highway mpg estimates to help consumers compare the fuel economy of different vehicles when shopping for new cars. The EPA has enacted regulations that prescribe how manufactures must test their vehicles, and measure, calculate and report fuel economy information in regulations at 40 CFR Part 600 -- Fuel Economy of Motor Vehicles.

Under these regulations, EPA fuel economy estimates must be derived from laboratory testing of a representative vehicle (typically a pre-production prototype) under controlled conditions, using a standardized test procedure specified by federal law.

Each new car and truck is tested on an indoor dynamometer, i.e., a set of rollers that turns the vehicle’s wheels while the car or truck sits in place. A test driver runs the vehicle through two standardized driving schedules, one each to simulate city and highway driving conditions.

The “city” cycle is designed to replicate an urban rush-hour driving experience in which the vehicle is started with the engine cold and is driven in stop-and-go traffic with frequent idling. The vehicle is driven for 11 miles and makes 23 stops over the course of 31 minutes, with an average speed of 20 mph and a top speed of 56 mph.
The “highway” cycle is designed to emulate rural and interstate freeway driving with a warm engine, making no stops. The vehicle is driven for 10 miles over a period of 12.5 minutes with an average speed of 48 mph and a top speed of 60 mph.

Both fuel economy tests are performed with the vehicle's air conditioning and other accessories turned off. Notably, under both sets of conditions, Ford’s hybrids can operate in full-electric mode, without any gasoline consumption.

In contrast, Consumer Reports investigators measured average fuel usage during actual highway driving at 65 mph. i.e., at a speed when the Ford’s hybrid gasoline engine is in operation.

The EPA has stated that while its fuel efficiency ratings are intended to help consumers compare the fuel efficiency of vehicles in the same class, consumers should not rely on these estimates to provide an accurate projection of the actual gas mileage they will get for a particular vehicle.

Nonetheless, a comparison of EPA estimates with other on-road fuel economy estimates often shows the measurements are closely correlated. Consequently, and as Consumer Reports has pointed out , the EPA may need to examine and make changes in its protocols “to address new challenges in predicting fuel-economy for emerging technologies.”

The discrepancy between EPA and “real-life” fuel efficiency estimates poses a quandary for car manufacturers seeking to highlight fuel efficiency-improving technologies in their marketing campaigns, at time when fuel efficiency is a critical consideration among many new-car buyers.

Notably, the lawsuit against Ford does not allege the company incorrectly performed the EPA tests or otherwise misrepresented the data, to derive the 47 mpg EPA fuel economy estimate. Instead, the complaint alleges Ford’s advertising scheme “misleadingly and unfairly uses the existing EPA mileage numbers to represent and imply that the miles-per-gallon EPA estimate reflects actual, expected mileage under normal real-world driving conditions.”

Preemption Argument

Because Ford has yet to file an answer to the lawsuit, it is not clear how the company will respond. The fact that federal law required Ford to post the EPA estimates might seem to provide a sympathetic preemption defense. However, other manufacturers who have asserted this defense have not succeeded.

For example, in, True v. Am. Honda Motor Co., Inc., 520 F. Supp. 2d 1175 (C.D. Cal. 2007), the court refused to dismiss the plaintiff’s California state law claims based on allegations that Honda had made false and deceptive advertisements regarding the fuel efficiency and cost savings of its Honda Civic Hybrid automobile.

Honda argued that the plaintiff’s state law claims were preempted by federal law, and specifically the EPA’s requirements that car manufacturers post the EPA-derived fuel economy estimates on the window stickers of its new cars.

The court rejected this argument, finding, “[i]t would be an unreasonable assumption, however, that Congress intended to preempt states from regulating false or misleading advertising of a vehicle's fuel efficiency and cost savings.” See 2007 Order Denying Defendant’s Motion to Dismiss.

Sources: Richard Pitkin vs. Ford Motor Co., Case No. 2:12-cv-02973-KJM-DAD (E.D. Cal.); U.S. Environmental Protection Agency website; John True vs. American Honda Motor Co., Inc., Case No. EDCV 07-287-VAP (OPx) (C.D. Cal.); Code of Federal Regulations, Title 40: Protection of Environment, Part 600 – Fuel Economy and Greenhouse Gas Exhaust Emissions of Motor Vehicles (Jan. 4, 2013); Consumer Reports on-line.

This article was prepared by Kathy Grant (kgrant@fulbright.com / 210 270 7182) and Saul Perloff (sperloff@fulbright.com / 210 270 7166) of Fulbright’s False Advertising Practice.

California Court Finds Opening in 9th Circuit Preemption Ruling

2013-01-04T15:46:00.000-06:00

By Brandon Crisp

A federal court in California ruled last month that certain mislabeling claims against the Hershey Co. were not preempted by federal law. Khasin v. Hershey Co., 2012 U.S. Dist. LEXIS 161300 (N.D. Cal. Nov. 9, 2012).

In Khasin, a putative class representative brought California state-law claims against Hershey for alleged misrepresentations on the label of some Hershey products.

The defendants moved to dismiss and argued that the state-law claims were preempted by the FDCA, largely relying on the Ninth Circuit's recent decision in Pom Wonderful LLC v. Coca-Cola Co. 679 F.3d 1170 (9th Cir. 2012). But U.S. District Judge Edward Davila of the Northern District denied Hershey's preemption bid and found that the plaintiff's state-law claims should not be dismissed.

A few months back, the Ninth Circuit's Pom Wonderful decision was seen as a major victory for the food and beverage industry. In Pom Wonderful, the plaintiff claimed that the defendant violated the Lanham Act because it misled consumers with the naming and labeling of its juice product. The Lanham Act "broadly prohibits false advertising," and authorizes a lawsuit by anyone who believes that she will be damaged by the false advertising.

The Ninth Circuit concluded, however, that there was a potential conflict between plaintiff's claims under the Lanham Act and the FDCA, because the FDCA comprehensively regulates food and beverage labeling.

Because of this conflict, the court held that the FDCA trumps the Lanham Act and therefore barred both the name and labeling aspects of plaintiff's Lanham Act claim. The court reasoned that private parties should not able to use a Lanham Act claim to undermine the FDA's judgment with regard to food labeling. The court did not decide, however, whether plaintiff's state-law claims were preempted and instead remand them to the district court for reconsideration of a standing issue.

That remand was the opening that the Khasin plaintiff tried to use to avoid preemption. In moving to dismiss, Hershey first argued that plaintiff's state law claims were preempted by federal law because the FDCA explicitly precludes private actors from enforcing this federal law and FDA regulations.

The defendant cited Pom Wonderful, but the court rejected this argument, noting that Pom Wonderful decision only recognized the FDCA's preemption of other federal claims and remanded the state-law claims for determination of a standing issue. Although the FDCA has a provision that explicitly leaves its enforcement to the United States, the Khasin court found the plaintiff's claims appropriate because they were seeking to enforce state, not federal statutes.

The court relied on the medical device parallel violation exception language from the Supreme Court's Riegel decision, which held that similar provisions of the FDCA "do [] not prevent a State from providing a damages remedy for claims premised on a violation of the FDA regulations; the state duties in such a case 'parallel,' rather than add to, federal requirements." Riegel v. Medtronic, Inc., 552 U.S. 312, 330 (2008).

Defendant's also argued that the express preemption language from the FDCA acts as a bar to Plaintiff's state-based claims. Id. at 16. The express preemption clause states:

. . . no State or political subdivision of a State may directly or indirectly establish under any authority or continue in effect as to any food in interstate commerce—(1) any requirement for a food which is the subject of a standard of identity established under section 341 of this title that is not identical to such standard of identity or that is not identical to the requirement of section 343 (g) of this title . . .

21 U.S.C. §343-1(a)(1) (emphasis added). But the court held that plaintiff's claims sought to enforce state-law standards that were identical to the FDCA, and therefore the court found no preemption. Going forward, the Khasin strategy will certainly serve a blueprint for future food-labeling plaintiffs as they attempt to survive preemption arguments at the dismissal stage. But both plaintiffs and defendants should note that this does not guarantee all state-law claims will survive dismissal.

First, many courts have favored dismissal in similar cases (e.g., Lateef v. Pharmavite LLC, 2012 U.S. Dist. LEXIS 152528 (N.D. Ill. Oct. 24, 2012)) and Khasin's narrow reading of Pom Wonderful might not widely adopted by other courts.

Additionally, the Ninth Circuit could still get the chance to explain why the Khasin court misinterpreted their Pom Wonderful decision. What we do know is that reasoning in Khasin leaves future motions to dismiss up the air until higher courts address whether identical state-law claims are preempted.

This article was prepared by Brandon Crisp (bcrisp@fulbright.com / +1 512 536 2422) from Fulbright’s Litigation Practice.

Newman's Own Voluntarily Recalls Dressing Due to Allergy Issues in Product Labeling

2013-01-02T16:55:00.000-06:00

By Megan Engel

On November 26, 2012, Newman's Own voluntarily recalled batches of its Lite Honey Mustard Dressing because the product label on the bottle did not mention the fact that the dressing contained milk, a major food allergen. Individuals who are allergic to milk should not consume the Lite Honey Mustard Dressing because doing so could cause a serious or life threatening reaction.

Newman's Own initiated the recall after learning that the 16-fluid ounce bottles of its dressing were labeled with an incorrect back label failing to include milk as an ingredient of the product. The recalled batches of products were sold in stores from the eastern to midwestern United States. See Newman's Own, Inc. Issues Voluntary Recall of Newman's Own Lite Honey Mustard Dressing Due to Undeclared Milk, FDA Press Release, November 23, 2012.

The Food Allergen Labeling and Consumer Protection Act of 2004 ("FALCPA") requires manufacturers to clearly label any food product containing a "major food allergen" on food labels. A "major food allergen" is defined by the law as an ingredient that is one of the following foods or has any ingredient containing protein from one of the following foods:

milk;
eggs;
fish;
crustacean shellfish;
tree nuts;
peanuts;
wheat; and
soybeans.

The FALCPA requires manufacturers to identify on product labels that the product contains one or more of these major food allergens. The law applies only to packaged foods, including products imported into the United States, but excludes from regulation poultry, meat, and egg products. The label must either:

disclose the name of the food source of the major food allergen in parentheses after listing the ingredient's common name or
next to or immediately after listing the ingredients, put the word "contains" and then the name of the major food allergen.

If the food label does not adequately disclose the presence of the allergen, the food product may be recalled by the company or FDA. Other penalties for failing to comply with the FALCPA include civil sanctions, criminal penalties, and the seizure of food products.

The Food Allergy & Anaphylaxis Network ("FAAN") estimates that as many as 15 million people in the United States have some type of food allergy. Approximately nine million, or four percent, of adults have food allergies, while approximately six million, or eight percent, of young children have food allergies.

The prevalence of food allergies has been on the rise; the Centers for Disease Control and Prevention noted in a 2008 study that an 18% increase in food allergies was seen between 1997 and 2007. The eight foods regulated by the FALCPA&emdash;milk, eggs, peanuts, tree nuts, wheat, soy, fish, and shellfish&emdash;account for 90% of all food allergies. See Food Allergy Facts and Statistics for the U.S., The Food Allergy & Anaphylaxis Network.

Read more about the FALCPA.

This article was prepared by Megan Engel (mengel@fulbright.com / 512 536 2491) from Fulbright’s Health Care Practice.

Consumer Group Claims The Un-Cola’s Ads are Un-True

2012-12-21T08:14:00.000-06:00

By Bob Rouder and Saul Perloff

The 7UP product line is the latest food or beverage the Center for Science in the Public Interest (CSPI) has sued under its now-familiar model of private enforcement. The 7UP brand is part of the Dr. Pepper Snapple Group Inc.’s (DPSG) stable of consumer products.

The Center for Science in the Public Interest

CSPI is a consumer advocacy organization formed in the 1970s. According to the CPSI website the group’s twin missions are to “conduct innovative research and advocacy programs in health and nutrition, and to provide consumers with current, useful information about their health and well-being.”

CSPI underwrites marketing campaigns that address what it consider to be health risks inherent with some consumer foods and beverages.

The CSPI Litigation Project

In 2004, CSPI initiated what it calls its Litigation Project to privately pursue so-called “corporate misbehavior” and fill what the organization perceives as a void left by “inactive government agencies.” CSPI monitors the marketing and content of foods and beverages.

The organization then sends demand letters to companies it contends sell unhealthy products or sell products in a misleading manner. Should the demands not yield corrective action, CSPI initiates or joins litigation.

CPSI’s current docket features demands made to Nestles, Welch’s Foods, and Amways’s Nutrilite. Current litigation involves complaints against Kellogs, Pepsico, Johnson & Johnson Nutritionals, General Mills, and now, Dr. Pepper Snapple Group, Inc.

The Complaint Against 7UP

Last month, CSPI acting as co-counsel, initiated a putative class action suit claiming consumers were misled about the nutritional qualities and healthfulness of certain 7UP products and that the Dr. Pepper Snapple Group Inc.’s alleged deception caused them to purchase 7UP when they ordinarily would not have done so. The products include “7UP Cherry Antioxidant,” “7UP Mixed Berry Antioxident,’ and “7UP Pomegratite Antioxident” which come in both regular and diet versions.

According to the complaint, the packaging and promotion of the products imply that they contain real fruit and that the fruit is the source of antioxidants all of which would distinguish 7UP as more healthful than other carbonated soft drinks. See Complaint.

According to the suit, 7UP products contain only fruit flavoring and its only antioxidant content arises from fortification with d-alpha tocopherol acetate, a manufactured form of Vitamin E. The complaint alleges that insofar as the amounts of Vitamin E (15% of RDA) are insufficient to “provide health benefits,” 7UP is indistinguishable from other soft drinks thought to be unhealthy because of their high fructose content, or aspartame component in the case of the diet versions. See Complaint.

The 7UP suit was brought under California's Unfair Competition Law (UCL), codified at California Business and Professions Code § 17200, et seq.

This law broadly prohibits “any unlawful, unfair, or fraudulent business act.” The State, local units of government, as well as any person on his or her own behalf or on behalf of the public generally may bring suit under a variety of theories. In the case of 7UP, the complaint claims that the labeling of 7UP is false or misleading and constitutes misbranding under California’s Sherman Law. [Ca. Health & Safety Code §§ 110660, 110765].

The suit also asserts claims for false and misleading advertising under California’s Consumers Legal Remedy Act [Cal. Civ. Code §1750] and under the advertising provisions of the UCL (§17500, et seq.).

CSPI has mixed results in similar suits.

On the one hand, several consumer products companies (including Cadburry Schwepps which previously owned the 7UP brand) have voluntary dropped or changed advertising claims CSPI has asserted were misleading.

On the other hand, CSPI has lost several notable cases including a suit against the manufacture of Arizona Rx Teas—see CSPI Website—and most recently its suit against McDonald’s over the fast food giant’s inclusion of toys in its popular “Happy Meals ”—see Apr. 4, 2012 Order on Demurrers.

Sources: David Green, on behalf of himself and all others similarly situated v. Dr. Pepper Snapple Group, Inc., Case No. 12-09567 (C.D. Cal.); Monet Parham, on behalf of herself and those similarly situated vs. McDonald’s Corp. et al., Case No. 10-506178; Superior Court of California, County of San Francisco

This article was prepared by Bob Rouder (rrouder@fulbright.com / 512 536 2491) and Saul Perloff (sperloff@fulbright.com / 210 270 7166) from Fulbright’s False Advertising Practice.