Proskauer on Advertising Law
Proskauer on Advertising Law

Second Circuit Affirms Preliminary Injunction of “Identical” Gray Goods

The Second Circuit recently affirmed a district court’s grant of a preliminary injunction halting the alleged sale of gray-good diabetes test strips made by Abbott Laboratories under the “Freestyle” trademark.  The decision is notable because the authentic test strips were identical to the gray-good versions.

Read more here.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

IntenseX False Advertising Claims Lack Power and Performance

Last month, in Kanfer v. Pharmacare US, Inc., U.S. District Judge Marilyn Huff of the Southern District of California dismissed on what were essentially puffery grounds a consumer suit styled as a class action alleging that defendant PharmaCare falsely advertised its nutritional supplement, IntenseX, as an aphrodisiac that “would improve. . .sexual power and performance.” This decision contrasts with another decision we covered two years ago in which a judge in the Central District of California held that claims for a sex enhancement pill were not mere puffery.

The IntenseX packaging at issue contained statements including “Sexual Power and Performance,” “Fast Acting!” and “designed to intensify your endurance, stamina, and sexual performance.”  PharmaCare moved for summary judgment asserting that these statements were too vague and generalized to be actionable.

The court agreed, finding that it was simply not plausible that a significant portion of the public would be misled by the vague claims on the IntenseX label.  In reaching its decision, the court emphasized that a “[p]laintiff has a claim for false advertising only to the extent the product claims are false or misleading, as opposed to merely unsubstantiated.”  The plaintiff’s own expert admitted that the “vague language” regarding the effects of IntenseX “remain[ed] scientifically undefined and therefore untestable.”  The court determined that this “untestability” presented an insurmountable hurdle to plaintiff’s advertising claims.

The court also rejected the plaintiff’s claims related to statements on the IntenseX website because the plaintiff admitted that he did not look at the IntenseX website before purchasing the product.

Judge Huff previously denied PharmaCare’s motion to dismiss the lawsuit.  Then in June, the court denied class certification finding problems with the proposed nationwide class, including difficulties with reliance, standing, statute of limitations, and damages.  Just last week, plaintiff filed a notice of appeal of the court’s latest decision to the Ninth Circuit. Watch this space for further developments.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

Second Circuit Affirms Ruling that SPD Swiss Precision Diagnostics Falsely Advertised Clearblue Weeks Estimator Home Pregnancy Test and Did so Intentionally and Egregiously

In an important recent false advertising decision in a suit brought by home pregnancy test manufacturer Church & Dwight against its principal competitor SPD Swiss Precision Diagnostics, a Second Circuit panel unanimously affirmed orders by Judge Alison Nathan of the Southern District of New York, following a bench trial on liability, (i) holding that SPD labeling and other advertising for its Clearblue Advanced Pregnancy Test with Weeks Estimator (the “Weeks Estimator” or “Product”) constituted intentional and egregious false advertising in violation of the Lanham Act, and (ii) granting permanent injunctive relief that included a nationwide recall of all Weeks Estimator packaging, a prohibition on all Weeks Estimator advertising that was the subject of the complaint, and a corrective advertising campaign. Proskauer represented Church & Dwight.

When SPD launched the Weeks Estimator in the U.S. in August 2013, it unleashed an extensive advertising campaign that the trial court found “was intentionally designed to mislead consumers” by communicating the false message that the Product “provides an estimate of weeks pregnant that is consistent with a doctor’s estimate of weeks pregnant.” In truth, the Weeks Estimator estimates the number of weeks that have passed since a woman last ovulated.  Doctors, by contrast, use a “universal [] convention for expressing pregnancy duration” in terms of “the number of weeks since a woman’s [last menstrual period],” which generally occurs approximately two weeks before ovulation. “Thus, the Weeks Estimator provides an estimate of ‘weeks’ that is expressed differently from the standard convention for expressing pregnancy duration,” contrary to the message communicated in SPD’s advertising for the Product.  On this basis, Judge Nathan found that SPD’s advertising – including the packaging, television advertising, in-store advertising, and other promotional materials – was false and misleading, and ordered the injunctive relief described above, setting the stage both for the damages phase of the case and SPD’s appeal.

On appeal, a unanimous Second Circuit panel affirmed the District Court’s liability and injunction orders in their entirety. The Second Circuit first agreed with Judge Nathan that SPD’s original (or “launch”)  advertising for the Weeks Estimator was literally false in that it unambiguously communicated “the false message that the Product provides a measurement of weeks-pregnant that is consistent with the measurement a doctor would provide.”  The Court of Appeals also agreed that the District Court “correctly found the launch advertising to be impliedly false,” as supported both by survey and other evidence of actual consumer confusion and by the “extensive evidence in the record” of “Defendant’s intent to deceive,” which was “sufficient to support a presumption of consumer confusion.”  Second, the Court of Appeals affirmed the District Court’s finding that SPD’s revised Weeks Estimator packaging, which SPD began using after the FDA expressed concerns about the launch package, was also impliedly false.  Like the launch package, the revised package “did not adequately communicate that its measurement was not consistent with the metric used by doctors.”  The Second Circuit noted “the ample evidence that [SPD] was aware of [the] widespread consumer ignorance” about the conventional medical practice of dating the beginning of pregnancy from a woman’s last menstrual period, and that SPD nevertheless “took no effective steps to guard against misunderstanding of [its] messages attributable to that ignorance.”

Noting that the evidence supported the conclusion that the falsity of SPD’s advertising was both material and likely to cause injury to Church & Dwight, the Second Circuit affirmed the District Court’s finding that Church & Dwight had met its burden of proving each of the elements of a Lanham Act false advertising claim, and was entitled to the District Court’s award of injunctive relief. The Court of Appeals also rejected SPD’s argument that Church & Dwight’s Lanham Act claim was precluded by the FDA’s regulation of the Product through the Food, Drug & Cosmetics Act § 510(k) process, and the FDA’s acceptance of the revised package.  Citing the Supreme Court’s 2014 decision in POM Wonderful v. Coca-Cola, the panel noted “that a Lanham Act claim is not precluded by FDA regulation under the FDCA because the two statutes serve distinct and complementary purposes.”

The Second Circuit also affirmed the permanent injunction that, among other things, enjoined SPD from communicating in any advertising that the Weeks Estimator provides an estimate of weeks pregnant that is the same as a doctor’s estimate; required SPD to remove all Weeks Estimator packaging from points of sale; enjoined SPD from using certain phrases, such as “weeks pregnant,” in the marketing of the Product; and required SPD to distribute corrective advertisements and notices acknowledging, among other things, that it had been found to have engaged in false advertising. The panel rejected SPD’s argument that the terms of the injunction were excessively harsh and that the District Court had abused its discretion.

The damages phase of the case is now proceeding, with trial scheduled to take place next year. In the meantime, SPD has petitioned the Second Circuit for rehearing or rehearing en banc, despite the unanimity of the panel decision.  We will let you know of future developments.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

 

Proskauer: Principal Sponsor of 38th Annual BAA Marketing Law Conference

On Wednesday November 9 through Friday November 11, the Association of National Advertisers and the Brand Activation Association (BAA) held their 38th annual Marketing Law Conference at the Downtown Chicago Marriott Hotel, 540 N. Michigan Avenue, Chicago, IL 60611.  Proskauer was a principal sponsor of the conference, and two of our partners – Lawrence Weinstein, the co-chair of Proskauer’s Intellectual Property Litigation Group and of our False Advertising and Trademark Practice, and Alexander Kaplan – spoke at the Conference.  This Conference is the largest advertising and marketing law conference in the country, with over 700 attendees, 65 sessions and 145 speakers.

Courtesy of Proskauer, people who registered as a result of this post received a $500 discount off the regular registration price.

Standing to Assert Injunctive Relief is Not in the Tea Leaves, Court Says

In Lanovaz v. Twinings North America, Inc., Judge Whyte of the Northern District of California recently decided that the plaintiff lacked standing to pursue injunctive relief, and granted summary judgment for defendant Twinings.  The class action alleged that Twinings tea products were misbranded under California law as “natural source[s] of antioxidants.”

In an earlier decision, the court had certified a Rule 23(b)(2) class for injunctive relief, although it had denied class certification for a damages class because the plaintiff had not presented a sufficient damages model to calculate the price “premium” attributable to the allegedly misleading labels.  Twinings then filed a motion for summary judgment, contending that plaintiff lacked standing to pursue injunctive relief for three reasons: (1) Twinings had stopped using statements about antioxidants on its labels; (2) the plaintiff did not intend to purchase Twinings products in the future; and (3) the plaintiff could not be deceived in the future by the antioxidants claim now that she was “better informed” about the claim.

The court noted that the named plaintiff in a class action must have standing to seek injunctive relief in order to represent a class seeking such relief.  It evaluated each of Twinings’ arguments in turn.  First, the court agreed with Twinings that because the challenged labels had been discontinued, the plaintiff lacked standing to pursue injunctive relief.  The court stated that it was “unaware” of any authority finding standing to pursue injunctive relief where there was no evidence that the challenged conduct was likely to continue.

Second, the court also agreed with Twinings (albeit with greater reluctance) that plaintiff lacked standing because she did not plausibly allege that she intended to purchase the Twinings tea products again.  In so doing, the court reversed its previous position that to deny plaintiff standing because she did not intend to purchase Twinings products again would “eviscerate the intent of the California legislature” by “effectively bar[ring] any consumer who avoids the offending product from seeking injunctive relief.”  The court’s more recent decision adopts the majority view in the Northern District of California that a plaintiff must have future intent to purchase the challenged product in order to have standing to seek injunctive relief.  The court also noted that it was reaching the same conclusion that was recently reached in two near-identical Northern District of California lawsuits concerning Bigelow’s tea products, brought by the same class counsel.

As for Twinings’ third standing argument – that plaintiff lacked standing because she could not be misled again by the same labels – the court recognized a split in Northern District of California authority.  In some cases, “future deception” standing arguments had been successful in surviving a dispositive motion and in others they had not.  The court did not decide the issue because Twinings’ first two standing arguments had already shown that the plaintiff lacked standing to pursue an injunction.  The court therefore granted summary judgment for Twinings.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

Accurate Net Weight Disclosures May Defeat Slack-Fill Claims in California

Last April, we reported on Ebner v. Fresh, Inc., in which a Ninth Circuit panel held that the plaintiff failed to state a claim that Sugar lip balm packaging was misleading because it contained non-functional “slack-fill.” Last month, the Ninth Circuit rejected plaintiff’s petition for rehearing en banc but also amended its earlier opinion. Though largely similar, the amended opinion includes new language that may have implications for slack-fill actions going forward.

As our readers may recall, plaintiff Angela Ebner filed a putative class action against Fresh, Inc. alleging that the label, design and packaging of its Sugar lip balms deceived consumers about the amount of available product. Sugar lip balm, which comes in a variety of colors and retails for approximately $22.50–$25 per unit, is sold in a weighty metallic tube dispenser and packaged in a cardboard box. In the original Ninth Circuit opinion, the panel held that the non-functional slack-fill claim failed because plaintiff was not actually alleging that a portion of the container was empty, but rather that a portion of the lip balm product was inaccessible due to a mechanical feature of the container.

In the amended opinion, the panel included new paragraphs explaining that the plaintiff’s claims were distinguishable from those in Williams v. Gerber Prods. Co. (a Ninth Circuit case holding that an ingredient list could not “shield” deceptive front labeling, previously mentioned here) because unlike in Williams, the Sugar product did not have other deceptive labeling to be dispelled. To the contrary, Sugar’s weight label complied with federal and California law, and it did not contradict other representations or inferences on the packaging. The court held that in the absence of words, pictures, diagrams, or other depictions about lip balm accessibility adorning the package, there was no plausible claim under the reasonable consumer standard.

Ebner v. Fresh differs from some slack-fill actions because it involved inaccessible product rather than empty space in the packaging. Nevertheless, the amended language has already been applied in at least one run-of-the-mill slack-fill case. In Bush v. Mondelez Int’l, plaintiff alleged that certain Go-Pak products (such as Mini Oreo) had container sizes that led consumers to believe that there was more snack food than was actually contained therein, despite plaintiff’s admission that the product labels accurately disclosed the products’ net weights. In dismissing the claim, the district court for the Northern District of California wrote that “[n]o reasonable consumer expects the overall size of the packaging to reflect precisely the quantity of product contained therein,” and cited to Ebner v. Fresh in support of its holding that in the absence of other indications of snack quantity on the package aside from admittedly accurate net weight disclosures, it is not plausible that reasonable consumers would be misled into thinking the container would be “packed to the brim with snack.”

In sum, it appears that courts in California may now be approaching slack-fill suits with greater incredulity where a manufacturer accurately labels its product’s net weight. Watch this space for further developments.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

De-certifiably Natural – Ninth Circuit Finds “All Natural” Label May be Misleading While Upholding Class Decertification

The Ninth Circuit Court of Appeals recently reversed in part and affirmed in part a Northern District of California ruling (discussed previously, here) concerning the “All Natural Fruit” labeling on Dole’s packaged fruit products. Brazil v. Dole Packaged Foods, LLC, No. 14-17480, 2016 WL 5539863 (9th Cir. Sept. 30, 2016). The appeals court reversed the lower court’s order granting summary judgment in favor of the defendant on plaintiff’s false advertising and unfair competition claims, finding that a trier of fact could conclude that the label is misleading to a reasonable consumer. Notably, the Ninth Circuit also ruled that the district court did not err in decertifying the class where plaintiff failed to show how damages could be calculated with proof common to the class.

With respect to decertification, the Ninth Circuit found that the district court properly limited damages to the difference between the prices customers paid and the value of the fruit they brought – otherwise known as the “price premium” attributable to the “All Natural Fruit” labels. The court held that the district court did not abuse its discretion in decertifying the class because the plaintiff failed to explain how this premium could be calculated with proof common to the class. The court also rejected the plaintiff’s claim that he would be entitled to damages under a theory of “nonrestitutionary disgorgement” if a price premium were not available. Although a disgorgement award could theoretically exceed an award of restitution, the court found that this was not the case here because the portion of Dole’s profits that were wrongfully obtained equaled the price premium paid by misled purchasers. As a result, restitution and disgorgement were functionally the same remedy, the plaintiff failed to show that either could be calculated with common proof across the class, and the class was properly decertified. The panel did allow the plaintiff to pursue an individual claim for restitution and class-wide injunctive relief on remand.

Although the Ninth Circuit affirmed the district court’s decision on class certification, it reversed the district court’s order granting summary judgment for Dole on plaintiff’s deceptive advertising claims. The plaintiff argued that Dole’s labels are deceptive because the products contain synthetic citric and ascorbic acid. The FDA has not directly addressed the meaning of “natural” since 1993, when the FDA informally defined it to mean “that nothing artificial or synthetic… has been included in, or has been added to, a food that would not normally be expected to be in the food.” However, the plaintiff cited to recent warning letters the FDA sent to food sellers who described their products as “all natural” even though the products included, among other substances, synthetic citric acid. In the warning letters, the FDA stated that foods which naturally contain citric acid, such as tomatoes, could not be labeled “all natural” if synthetic citric acid had been added. These warnings were made without reference to whether the synthetic substances would “not normally be expected to be in the food.”

Multiple “all natural” labeling suits have been stayed pending the Ninth Circuit’s decision in this case. While the panel’s decision in this case is unpublished, it will be interesting to see whether other courts take the same approach in relying on FDA warning letters to determine what goods can be labeled “all natural.” The court’s decision also highlights the importance of providing a damages model that can calculate a “price premium” across an entire class of plaintiffs at the class certification stage.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

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