Consumer Advertising Law Blog

The Empire Strikes Back: FTC Sues POM

We've blogged a lot about POM lately.  We have yet one more quick update on our recent blog post about POM's suit against the FTC.  The FTC struck back this week, filing suit against POM, its sister corporation Roll International Corp., and principals Stewart Resnick, Lynda Resnick and Matthew Tupper, alleging that the Company's advertising overstated the health benefits of its products.

The Complaint against POM alleges that the Company's advertising contains "false or unsubstantiated claims" about preventing or treating a number of diseases, including prostate cancer, heart disease, and erectile dysfunction.  The FTC's proposed relief, among other things, would require POM to have FDA approval for any future claims it wishes to assert relating to the preventative or curative nature of its products.  Because the FTC filed an administrative complaint the requested relief does not include consumer redress but the agency reserves the right to petition a federal court for such relief. 

- Randy Shaheen and Jessica Halbert

UK Regulator Bans Advertisement Glamorizing Alcohol

The UK’s advertising regulator, the Advertising Standards Authority (ASA), has banned an advertisement for Virgin Holidays’ ‘Rockstar Service’ campaign on the grounds that is likely to encourage unwise drinking styles (the decision can be found here).

The advertisement showed four rockstars drinking champagne in a jacuzzi, with a number of empty bottles and glasses lying around. One of the rockstars and a female staff member were pouring champagne into the jacuzzi. Virgin Holidays defended the advertisement by stating that the rationale behind the campaign was to emphasise that the service allowed every customer’s desires to be met. They said that the advertisement portrayed “an example of the most outlandish and decadent request” that someone might make, and the emphasis was on that request being met, not on the drinking. The ASA stated that although Virgin Holiday’s intention had been to promote the level of service offered, the prominent feature of alcohol and the depiction of rockstars, which are “widely accepted as glamorous and exciting figures”, indicated a casual attitude towards the handling and consumption of alcohol. As such the ASA concluded that the scene would be likely to encourage people to adopt unwise drinking styles.

Moral: Take care when featuring the use of alcohol in advertising.

- Richard Dickinson and Jake Marshall

Visual Implied Claim Butts Out Express Claim Says NAD

Little baby bear didn’t pass inspection when he had pieces of the non-Charmin Rippled Brand of toilet paper all over his rear end, according to the narrator of P&G’s latest Charmin Ultra Strong television commercial. The cartoon scene opens with a cute “uh oh” exclamation and a distressed baby bear examining little bits of toilet paper on his bottom with his Mom watching disapprovingly before handing him Charmin ultra strong. Kimberly-Clark, maker of rival Cottonelle, challenged P&G, maker of Charmin, before the National Advertising Division, contending that the superiority performance claims in several of Charmin’s commercials were unsubstantiated and overstated a “typical consumer experience”. At issue were the claims that Charmin Ultra Strong “leaves fewer pieces behind than the Ultra Ripple Brand” and that “Charmin Ultra Strong holds up better.”

After the cute bears, the commercials contained comparative demonstration showing small pieces of wet toilet paper left behind from an unnamed Ultra Rippled Brand while the Charmin Ultra Strong area was completely clean. Several layers of toilet paper were placed on the felt floor attached to a string, sprayed with some sort of liquid, a weight placed upon the toilet paper, and the string was used to drag the toilet paper across the ground for 15 seconds. Cottonelle took issue with all of the above, noting, for example, that consumers do not moisten toilet paper and wait before wiping and that the toilet paper is not typically dragged that far during normal use.

Charmin, with the initial burden of providing a reasonable basis for its claim, presented evidence of wet tensile strength testing to show that Charmin ultra Strong is two and a half times stronger than Cottonelle Ultra, and of a dry rub test across felt and clinical tests to show the amount of pieces leftover to be minimal. NAD was satisfied that Charmin had a reasonable basis for its claim that it leaves behind fewer pieces. Therefore the burden shifted to Cottonelle to show that there was a material flaw in the advertiser’s evidence or that it has more reliable evidence demonstrating a different result. NAD did not find that Cottonelle met this burden because Charmin’s actual clinical evidence was relevant and established the reasonable basis for the claim underlying the demonstration in its ad. However, NAD determined that the visual demonstrations reasonably conveyed the unsupported message that Charmin Ultra Strong leaves no pieces behind and exaggerates the performance differences of the parties’ products, using its own expertise after rejecting Cottonelle’s consumer perception evidence as unrealiable. It found that Charmin’s voiceover saying “fewer pieces behind” did not detract enough from the “no pieces behind” message that consumers received from the cartoon bear's clean bottom. NAD also found that the demonstration overstated the performance differences demonstrated by Charmin and deemed it not entirely “consumer relevant.” NAD recommended discontinuing both the comparative demonstrations and the bare bottom cartoon depiction.

While not at all certain we want to see a demonstration in a toilet paper ad that is more "consumer relevant," we will leave that one to the inspired imaginations of genius personal care products manufacturers. The broader takeaway for marketers of all sorts is to carefully examine ads for what express or implied claims a reasonable consumer could take away from the visuals in your ads, as they must be substantiated and may not be found to be qualified by a voiceover or written text.

- Amy Mudge and Deborah Birnbaum

Green Tea Antioxidant Claims Trigger FDA Warning Letters as Agency Focuses More on FOPs

Last October, we wrote about FDA’s intention to adopt a more aggressive approach to regulating “Front-of-Package” (FOP) food labels. On March 3, 2010, FDA wrote an open letter to the food industry outlining its focus on developing “practical, science-based” criteria for FOP labeling as well as its plans to review FOP labels to determine compliance with existing regulations. At the time, the Agency issued 17 Warning Letters asserting that FOP statements for various products were misleading because they were unauthorized or unsubstantiated health or nutrient claims or were supplemented by or linked to claims or health information on company websites or in other materials that created an mistaken impression about the product or its potential health benefits.

A Warning Letter issued on August 30, 2010 to Dr Pepper Snapple Group and directed at FOP statements regarding antioxidants suggests that FDA is continuing its aggressive approach to regulating FOP statements as well as statements on company websites to which consumers are referred by the product labels (For example, see a warning about dietary supplements focused on a company website here).

The principal display panel of Dr Pepper Snapple Group’s “Sparkling Green Tea Ginger Ale” label contained the claim, “ENHANCED WITH 200 mg OF ANTIOXIDANTS FROM GREEN TEA & VITAMIN C” with the double asterisk referring to the statement, “**Each 8oz serving contains 200mg of antioxidants from Green Tea Flavonoids and Vitamin C.” The warning letter suggests that this claim is misleading for the following reasons:

• The use of the term “enhanced” suggests that the Ginger Ale is fortified with antioxidants - i.e., that it contains at least 10 percent more of the Reference Daily Intake or Daily Reference Value for antioxidants. However, “the FDA does not consider it appropriate to fortify snack foods such as carbonated beverages.”
• The Nutrition Facts on the back label of the bottle indicate that Vitamin C only accounts for 60mg of the 200mg of antioxidants identified. This implies that the remaining 140mg of antioxidants come from “green tea” or “green tea flavonoids;” however, “green tea” is not a recognized source of antioxidants by the FDA.

These “Green Tea” letters are yet another example of FDA’s renewed focus on food labeling as a part of its broader food safety agenda. They illustrate that FDA’s regulatory approach to food labeling focuses not only on the individual label statements, but what those statements imply about the product’s nutrient content when examined in conjunction with the Nutrition Facts on the back panel and the package as a whole. Moreover, as FDA increases its focus on regulating product-related internet and social media content, online content that supplements or explains FOP or package label statements will receive greater scrutiny. For companies, this trend underscores the importance of coordinating the development and review of FOP and other labeling with any supplemental online marketing.

Consistent with FDA’s practice, Dr Pepper Snapple Group had 15 days to respond to FDA with its plan to correct current violations and prevent future violations. Failure to correct the violations may result in regulatory actions without further notice, such as seizure or injunction.

- Vernessa Pollard and Daniel Stuart

Government Tries to Round-Up Truth about Botanicals Claims

In the 1970s Euell Gibbons seemed like a radical when a commercial for Post Grape Nuts featured him telling all of us that you could eat cat tails.

 

Even just a few years ago most of us would have thought that acai was something you shouted during a taekwondo match or that mangosteen was the name of a former Soviet Republic. Today, though, almost everyone wants to add botanicals to their food products, sometimes with claims and sometimes without. With big business comes big scrutiny, and the federal government has stepped up its oversight of botanicals both in terms of their efficacy and safety. NIH through its offices of Dietary Supplements and the National Center for Complementary and Alternative Medicine, has recently awarded over $37 million in grants for the study of botanicals such as plant oils, garlic, elderberry, St. John’s wort, soy and licorice. (No word yet on whether the grants require growing the botanicals, which would put a new twist on “shovel ready” stimulus projects.) This is on top of over $250 million that has been awarded in recent years. According to the Wall Street Journal (subscription may be required), these studies have suggested that chamomile really does make you calm and milk thistle may have an effect on the hepatitis c virus. but that gingko won’t help your memory and that St. John’s wort doesn’t help treat symptoms of ADHD in children. All of this follows on the heels of the FTC’s recent effort to require tighter substantiation standards for at least some dietary supplement claims. In light of these developments, anyone adding botanicals to their product, particularly those making claims, may want to stay abreast of the results of these government funded studies.

- Randy Shaheen

Verdict in Pom v. Welch Suit: Deception But No Harm

A quick update on the The Pom Wonderful LLp v. Welch Foods Inc. et al. Lanham Act case previously blogged about here and here. The case finally saw resolution last week when the jury found that Welch had deceptively marketed its product but Pom had not proven that it suffered lost sales. This left both sides claiming victory.

The jury agreed with Pom that Welch’s labeling and packaging for its White Grape Pomegranate juice was misleading and deceptive. The jury also found that Welch intended to deceive consumers through the labeling and packaging of its product. However, the jury returned an answer of “No” when asked if Pom had proven by a preponderance of the evidence that it suffered injuries consisting of lost sales or lessening of goodwill as a result of Welch’s conduct. As a result, the trial did not proceed to the second stage to determine the amount of injury. Some press reports (here, here and here) have stated that the judge excluded Pom’s damages expert. We talked to Welch’s counsel, Rick Shackelford at Greenberg Traurig LLP, and he explained that the experts were not excluded; rather because the trial did not proceed to the second stage, they simply did not have an opportunity to testify.

Pom views the verdict as a win for Pom and for consumers, since the jury recognized that Welch’s practices were deceptive. Welch's counsel, on the other hand, has noted to us that the verdict was in its favor and that Pom lost the trial. Judgment will be entered either this week or next week. In the meantime, as noted in prior blogs, Pom’s lawyers will not lack for other things to do.

- Randy Shaheen and Deborah Birnbaum

Privacy in the Cloud

In a recent report, the Privacy Committee of the Chief Information Officers Council --a government body that works to improve the use of information resources within government agencies--issued recommendations on how federal agencies can protect privacy interests when they store information on servers not owned or controlled by the government. The Committee’s recommendations come on the heels of concerns that have been expressed by other governmental and private-sector entities.

The overall goal of the report is to make it clear that federal agencies must consider privacy and security while sharing information over the internet, often referred to as working within the cloud. In doing so, the report offers help to federal agencies seeking to offset the inherent risks of storing mass amounts of information online. Government contractors wishing to submit requests for proposal (RFPs) and do work for the government in setting up cloud services or engaging in other projects involving privacy should familiarize themselves with the report, especially as the Privacy Committee is in the process of writing key contractual language that agencies will likely want to include in their agreements.

The body of the report focuses on the protection of personally identifiable information (PII), which is the type of information that “can be used to distinguish or trace an individual’s identity.” The report recognizes that as agencies collect even more PII, they struggle with storing all this information in a proper manner. Many agencies have looked to cloud computing --which enables information to be stored offsite and accessed via the internet--as a possible solution. While this solution helps handle storage concerns, it often leads to PII being stored on non-government servers, thereby creating concerns over whether federal privacy requirements are being complied with.

In order to guarantee that these requirements do not take second seat to capacity constraints, the Committee’s report offers a set of suggestions for agencies to follow when moving PII into the cloud so that they do not run afoul of the Privacy Act of 1974 or the E-Government Act of 2002. When the government moves PII offsite in agreement with a Cloud Computing Provider (CCP), certain risks are involved. These risks include CCP contracts that do not sufficiently protect PII from outside disclosure, breach of CCP firewalls, inadequate recordkeeping, and data loss.

The report indicates that many of these concerns can be alleviated through the use of cloud services created by federal agencies. Absent this, the report recommends that agencies specifically contract with CCPs rather than simply utilizing terms of use. Such contracts should consider the information that the agency will put into the cloud, the reason for the agency’s possession of information, the intended use of private information, who the information will be shared with, how information will be secured, where the data will be located, and whether individuals must consent to (or are given the ability to decline) the government’s use of their private information.

The Committee’s report goes on to recommend that agencies be proactive and inform the public that private information is being stored within the cloud. The report also suggests that agencies include Senior Agency Officials for Privacy and similar individuals in their CCP selection process and in any analysis of potential threats to private information. The Committee concludes that when handled properly, cloud computing can help agencies save costs and create other efficiencies while maintaining the integrity of individual privacy during a period when such protections are as important as ever. Private contractors who work with the government should be aware of these recommendations, and may be able to reap rewards by offering privacy and security assurances that better comply with government agencies’ evolving expectations.

- Ronald Lee, Nancy Perkins, and Michael Thorpe

And They’re Off!! Elizabeth Warren to Help Organize CFPB. Transfer Date Set For July 21, 2011. Mortgage Forum Set for Tomorrow

Developments are starting to occur in rapid fire succession in the highly anticipated organization of the CFPB.

As expected, on Friday, President Obama appointed Elizabeth Warren as Assistant to the President and Special Adviser to the Secretary of the Treasury on the Consumer Financial Protection Bureau. According to an official White House statement, Ms. Warren will play the lead role in setting up the Bureau and ensuring it is as effective as possible. It is expected that she will assist the Treasury Department, which is tasked under the Dodd-Frank Act with organizing the Bureau, in the structure of the agency and in recruiting staff. She also likely will have a voice in who is nominated to serve as the Bureau’s first director.

At the same time, the Treasury Department published the anticipated “transfer date” for the official transfer of the consumer protection functions of various federal bank agencies, HUD and the FTC to the Bureau. This date has been set for July 21, 2011 - one year from the date of enactment of the Dodd Frank Act. On that date, for example, the CFPB will take over supervision of consumer financial protection for large financial institutions (ie., those over $10 billion in assets), as well as certain non-bank providers of financial services, such as mortgage companies, pay day lenders, debt collectors and credit reporting agencies.

As of that date, the CFPB also will be able to take over the promulgation of regulations under the various consumer financial laws, such as the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Truth in Savings Bank, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act and Fair Credit Reporting Act, among others.

According to the Federal Register notice, published today, in the intervening period, the CFPB will lay the groundwork for an efficient transfer of these functions. For instance, the notice states that prior to the designated transfer date, the CFPB “will begin to conduct research relating to consumer financial products and services, develop its nationwide consumer complaint response center, plan and take steps to implement the risk-based supervision of non-depository covered persons, and prepare for the opening of outreach offices.” The notice goes on to note that development of the supervision program - particularly the hiring and training of examination staff, and the development of supervision policies and procedures - for certain nondepository covered persons is particularly significant because no Federal agency previously has had the responsibility of supervising these entities.

Finally, the Treasury Department and the CFPB are holding a roundtable tomorrow to begin gathering public input regarding the merger of overlapping mortgage forms required by TILA and RESPA. This form merger is required to be completed within a year of enactment of the Dodd Frank Bill - or by the designated transfer date of July 21, 2011.

Given the large number of things that need to occur to get the CFPB in place by July 21, 2011, we expect that developments will continue to occur on a regular basis going forward. We will stay on top of these developments as they occur and let you know their implications.

- Beth DeSimone

POM Takes the FTC to Court Over New Substantiation Standards

On September 13, 2010, POM Wonderful LLC, the maker of POM juice products, filed suit in Federal Court in Washington against the FTC claiming that the FTC’s recently modified substantiation standard for advertising encroaches on the authority of the FDA, violates POM’s 1st and 5th Amendment rights of free speech and due process, and violates the FTC’s Administrative Procedures Act’s own rulemaking procedures. (Click here for the complaint)

We’ve previously blogged about the new substantiation requirements found in recent consent orders against Nestle U.S.A. and Iovate Health Sciences, Inc. POM alleges first that it has been told by the FTC that food and dietary supplement advertisers must now obtain FDA approval before making claims that a product treats, mitigates or prevents disease. This requirement applies irrespective of whether the claims are supported by competent, reliable evidence. Second, POM alleges that the FTC has told it that food and dietary supplement advertisers must have two well-controlled clinical studies for non-disease claims - a requirement that POM argues “represents a dramatic change in the level of substantiation required to establish the truth of these types of claims.”

POM’s Complaint asserts that the FTC has violated the First Amendment by imposing a “prior restraint” in the form of FDA preapproval on truthful speech. POM also alleges a violation of the Fifth Amendment in that

“to its detriment, [it] has relied on the FTC’s long standing policies and rules that used a ‘substantiation’ standard to evaluate advertising and speech. POM invested tens of millions of dollars in establishing a research program to better understand and promote the nutritional qualities and health benefits of pomegranates. The new FTC rules essentially bar POM from discussing or disclosing the results of its research and the benefits of its products.”

POM claims that the rules effectively cut off its speech about its research and deprive it the value of its research as property.

POM has requested a declaration that the FTC’s new standard is invalid and that the agency has overstepped its authority, improperly restrained POM’s 1st and 5th amendment, and improperly usurped the power of the FDA.

- Randy Shaheen and Jessica Halbert

Consumer Financial Protection Bureau - When Will Treasury Pull the Switch?

Everyone it seems is focused on whether and when Elizabeth Warren will be named as the director of the new Consumer Financial Protection Bureau. Today, the reports are that she will not be named either a permanent or interim head, but rather just to install her as a special advisor at the Treasury Department.

The identity of the CPFB director is important, as that person will set the tone and priorities of the new agency, and lend legitimacy to its efforts.

Arguably, however, a more important and looming deadline is the designation by the Treasury Secretary of the date by which the functions of the CFPB are to be transferred from the Treasury Department, the various federal banking agencies, and the FTC (the so-called Designated Transfer Date). This designation is required to be made by the Dodd Frank Act by 60 days from the date of enactment of the Act or by this Sunday, September 19, 2010. The date itself is required to be a date between 180 days and 12 months from the Act’s enactment date, but can be extended by the Treasury Secretary to 18 months from the enactment date.

Designation of this date is important because it will become the inauguration date of the new agency. Existing regulations will come under the purview of the agency as of that date and new regulations can be issued and enforced by it as of that date. Thus, priorities will be set and the effectiveness of the CFPB in meeting those priorities will be measured as of that date.

There is some speculation that, if an interim director is named, or the nomination of a director is postponed, the Treasury Secretary will designate a later Designated Transfer Date, so as to allow the interim or named director time to organize the CPFB and set priorities. However, we do not know what actually is being contemplated as the Designated Transfer Date, and little has been written about it. The Act allows the Secretary to set a date and then change it, upon consultation with heads of the federal banking agencies and the FTC, the Secretary of HUD and the Director of the OMB.

Regardless, the Obama Administration can use this deadline to create some momentum about the CFPB that appears to have been somewhat lost amid the speculation as to its Director.

- Beth DeSimone

States Appoint New Chief NAAG-er for Consumer Protection Committee

Indiana AG Greg Zoeller will co-chair the National Association of Attorneys General Consumer Protection Committee, according to Bloomberg. The NAAG consumer protection committees supports multi-state consumer protection enforcement efforts, including promotion of information exchange between states and federal enforcers to aid investigations. Continuing the focus of many states on the on-going consumer financial fraud epidemic, AG Zoeller will take the lead on considering what effect the Dodd-Frank Wall Street Reform and Consumer Protection Act will have on state consumer protection laws. He will be part of a working group to watchdog regulations implemented by the new Bureau of Consumer Financial Protection to ensure that states have all of the enforcement powers provided by the statute, as the states typically frown on courts concluding their laws are preempted by federal regulation. If you are interested in keeping up on multi-state consumer protection enforcement, NAAG publishes an e-newsletter.

AG Zoeller was appointed by North Carolina AG Roy Cooper, who was elected President of NAAG in June. AG Zoeller has spent considerable time in Washington, including serving as the Assistant to VP Dan Quayle in the White House from 1989-91. Prior to his election as Indiana’s 42nd Attorney General in November of 2008, he was the chief deputy for the prior AG and chief of the litigation division. Observers expect coordination between the FTC and the states to be heightened for many reasons, including that it takes a village to deal with rampant consumer financial fraud and that Commissioner Julie Brill was with the Vermont and then North Carolina AGs office for almost the entirety of her career before heading to Washington (and she is widely known in the AG consumer protection community).

- Amy Mudge

Ninth Circuit Finds Trademark Dispute Too "Delicious" for Summary Judgment

In a recent trademark infringement decision, the Ninth Circuit reaffirmed that issues of confusion, fair use and the weight to be given survey evidence are factual issues which are to be decided at trial.  In Fortune Dynamic, Inc. v. Victoria’s Secret Stores Brand Management, Inc., No. 08-56291 (August 19, 2010), the Ninth Circuit reversed the district court’s entry of summary judgment in favor of defendant Victoria’s Secret, whose use of the stylized word DELICIOUS on tank tops was alleged to violate plaintiff’s DELICIOUS trademark.  Holding that, “because of the intensely factual nature of trademark disputes, summary judgment is generally disfavored in the trademark arena,” the appellate court ordered the case be tried. 

Plaintiff Fortune Dynamics owns a registered trademark for the DELICIOUS mark for women’s shoes, which are advertised in popular women’s fashion magazines.  This dispute arose when Victoria’s Secret launched a promotional campaign for its Beauty Rush makeup.  Without conducting a trademark search, Victoria’s Secret sold hot pink tank tops with the word DELICIOUS in silver lettering across the front.  Fortune Dynamics alleged the use of its DELICIOUS mark on Victoria’s Secret tanks constituted trademark infringement. 

The district court granted summary judgment for Victoria’s Secret, “holding that the factors used to determine whether there is a likelihood of confusion weighed” in favor of defendant, and that Fortune’s claims were “entirely barred by the fair use defense.”  The district court also excluded Fortune’s trademark expert, including his confusion survey.

Last month, the Ninth Circuit reversed and remanded the case for trial, reiterating several times that the district court improperly decided issues of fact that are the province of the jury.  The appellate court carefully analyzed the relevant legal issues, identifying the factual issues that must be reserved for the jury.  On the question of likelihood of confusion, the Ninth Circuit reviewed many of the relevant factors and determined that a reasonable jury could come out either way on each of them.  For example, Victoria’s Secret had argued that confusion was unlikely because the tank top was sold only in Victoria’s Secret stores, which sells only Victoria’s Secret merchandise.  The appellate court observed that post-sale confusion was within the scope of the Lanham Act and was relevant in this case when the tank top was observed being worn outside of Victoria’s Secret stores. 

With regard to plaintiff’s trademark expert and his survey, the appellate court acknowledged the alleged shortcomings in the survey and the court’s role as a gatekeeper with respect to expert evidence.  Nonetheless, the Ninth Circuit held that the “side-by-side,” internet survey of prospective purchasers met the basic standards of acceptable survey techniques and, thus, should be admitted.  Critiques of the survey went to the “weight” of the survey to be determined by the jury.

Finally, Victoria’s Secret argued that its use of “DELICIOUS” on a tank top was a descriptive use of the word and not a trademark use prohibited by the Lanham Act.  See 15 U.S.C. § 1115(b)(4).  Victoria’s Secret witnesses had testified that the DELICIOUS word was selected for non-trademark purposes:  (1) “delicious” “accurately described the taste of the BEAUTY RUSH lip glosses and the smell of the BEAUTY RUSH body care”; and/or (2) “the word served as a ‘playful self-descriptor,’ as if the woman wearing the top is saying, ‘I’m delicious.’”  Finding an issue of disputed fact, the Ninth Circuit noted that there was contrary evidence which a reasonable jury could conclude proved that Victoria’s Secret was using DELICIOUS as a trademark.  In fact, Victoria’s Secret’s own use of its trademarks on clothing was significant to the court:

Perhaps most important, Victoria’s Secret’s used “Delicious” in a remarkably similar way to how it uses two of its own trademarks — PINK and VERY SEXY.  PINK is written in bold capital letters on different items of Victoria’s Secret clothing, while VERY SEXY was written, in hot pink crystals, across the chest of a similar black-ribbed tank top during a very similar promotion.  The fact that Victoria’s Secret used “Delicious” in the same way that it uses other Victoria’s Secret trademarks could be persuasive evidence to a jury that Victoria’s Secret used, or at least intended to establish, “Delicious” as a trademark.

The appellate court concluded that a jury must decide these issues, not the district court. 

Although both plaintiffs and defendants frequently obtain summary judgment orders from federal courts, this case serves as a good reminder that factual issues are the purview of the jury.  The jury must decide questions about the context and uses of trademarks even though the evidence appears to favor one side.  When a trademark plaintiff presents admissible evidence on issues such as likelihood of confusion and descriptiveness, the jury and not the judge must weigh it.

- Suzy Wilson and Amie Medley

FTC Launches New Business Center Website

For marketers and their lawyers, the FTC has launched a terrific new website, the Bureau of Consumer Protection Business Center. It is still in test phase and the BCP welcomes comments from users, both on technical glitches you discover and any comments on substance. (You can pass them on directly to Alvaro Puig, Leslie Fair, or send to us and we will pass along.) It includes pages on advertising & marketing, credit & finance, and privacy & security, as well as dedicated pages to select industry materials. All of these same materials are available on the FTC’s website, but the new business center organizes business guidance, staff reports and other relevant material in a more intuitive, user friendly format, along with video links and other fun stuff. BCP Staff are even blogging now! BCP Director David Vladeck’s kick off blog promises “We’ll do our best to keep things to the point with a minimum of ho-hum, a maximum of how-to, and as little yadda yadda yadda as a legal website can manage.” We have a number of FTC Staff signed up to receive our blog feeds, so perhaps we inspired them? In any event, we whole heartedly welcome the BCP to the blawgosphere community and encourage our readers to check out the new site.

- Amy Mudge

Federal Circuit Smashes Standing Requirement for False Patent Marking Lawsuits

In a much anticipated decision, the Court of Appeals for the Federal Circuit recently held in Stauffer v. Brooks Brothers, Inc., that “any person” has standing to bring a false patent marking action, regardless of whether or not that individual suffered any personal harm and without any allegation of competitive harm to the marketplace from the false marking. The Stauffer case has been closely watched by legal observers, and several false marking cases have been stayed pending the decision. The Federal Circuit’s holding places essentially no standing limitation on a person’s right to sue for false patent marking, and potentially opens the door to even more false marking litigation.

In Stauffer, a patent attorney acting on his own behalf sued Brooks Brothers for selling bow ties containing adjustment mechanisms that were marked with two patents that had been expired for over fifty years. Stauffer argued that continuing to mark the ties with expired patent numbers constituted false patent marking in violation of the false marking statute. Brooks Brothers moved to dismiss Stauffer’s complaint for lack of standing and for failure to allege an intent to deceive the public with sufficient specificity to meet the heightened pleading requirements for claims of fraud. The district court held that Stauffer did lack standing to assert a false marking claim because he had not sufficiently alleged an injury in fact to the United States or to himself.

The Federal Circuit reversed. According to the Court, in order to have standing, Stauffer was required to allege that the United States suffered an injury in fact causally connected to Brooks Brothers’ conduct. That requirement was met because Congress’ decision to enact § 292 reflected its determination that deceptive patent mismarking is harmful and should be prohibited, and a violation of § 292 inherently constitutes an injury to the United States. Because the government would have standing to enforce its own law, Stauffer, as the government’s assignee, also had standing to enforce § 292, even if Stauffer himself had not suffered a concrete injury. The court found that either a proprietary or sovereign (i.e., the government’s right to enforce its own laws) injury of the United States conferred standing on the government, and therefore Stauffer.

The Federal Circuit’s decision removes a potential standing defense to false marking claims, if not overturned by Supreme Court review or congressional action.. At the same time, however, the Court hinted at other potential defenses to such a claim. First, in Stauffer, an amici asserted [insert brief if libref finds] that the government’s assignment of a false marking claim without retaining control over the assignee’s actions violated the “take Care” clause of Article II, § 3 of the Constitution. The Federal Circuit noted that Ciba raised “relevant points” but expressly declined to decide the constitutionality of § 292 because the issue had not been raised or argued by the parties. The constitutionality of the false marking statute may well be the next battleground in such cases. Second, the court remanded the case to the district court with instructions to consider the merits of Stauffer’s case, including Brooks Brothers’ motion to dismiss pursuant to Rule 12(b)(6) “that the complaint fails to state a plausible claim to relief because it fails to allege an intent to deceive the public with sufficient specificity to meet the heightened pleading requirements for claims of fraud imposed by” Rule 9(b). It may be exceedingly difficult for false marking plaintiffs to meet that burden. Indeed, at least one district court has already dismissed two false marking suits on this basis.

See here for more information on the decision and its import.

- James Blackburn and Matthew Bathon

Defendant’s Thirst For Dismissal Not Quenched With the Unclean Hands Defense

In the ongoing pomegranate juice wars waged by Pom Wonderful, using 43(a)(1)(B) of the Lanham Act as one of its weapons of choice, a California district court denied Welch’s renewed attempt for summary judgment based on the unclean hands defense.

We have previously blogged about Pom Wonderful’s multi-suit offensive against several juicemakers here. The cases have examined many interesting questions, including preemption and standing under California state law (see here). Pom’s false advertising Lanham Act suit against Welch surrounds the use of the word “pomegranate” in Welch’s 100% White Grape Pomegranate juice, and whether it is deceptive to call it pomegranate juice if it is mostly grape juice. Welch has mounted a vigorous defense, first counterclaiming  in November, then moving for summary judgment in May, and most recently moving for summary judgment again claiming that Pom has unclean hands due to Pom’s own alleged deceptive and misleading advertising practices.

Here is the basic nutshell primer on the unclean hands defense (routinely included as a canned affirmative defense in an answer but rarely carted out for judicial review). The unclean hands defense denies a plaintiff the aid of the court where the plaintiff has behaved very badly (i.e. deceitfully, immorally, inequitably or unethically) in relation to the subject matter of the lawsuit at hand. It cannot be used to challenge prior conduct but only current acts. The unclean hands defense is used sparingly in Lanham Act cases and tends to be disfavored as a matter of policy under the old adage that two wrongs do not make a right. Courts have broad equitable powers to use the defense as appropriate to craft injunctive remedies applicable to both parties. In order to prevail under the unclean hands doctrine, courts are split on whether a defendant has to show injury to its business or only injury to consumers generally.

In this case, the Court explained the narrowness of the unclean hands defense, and found that Welch’s allegations that Pom misled consumers to believe its juices are not from concentrate were not sufficiently related to Pom’s claims in the lawsuit. He also found, and there is a pleading lesson here, that Welch had not sufficiently given Pom notice in its answer that its unclean hands defense included a challenge to implying the product was not from concentrate. The claims that Pom’s 100% Pomegranate Juice contained trace amounts of elderberry and that Pom’s other beverages contained other juices not mentioned in the product name were more similar to the claims that Pom asserted against Welch, but the Court did not believe they were sufficiently egregious or material in consumer purchasing decisions to prohibit Pom’s suit against Welch from continuing. The Court found it was Welch’s burden to demonstrate injury or actual and material consumer deception before Pom’s labeling may be considered egregious.

The bottom line in this case is that for an unclean hands defense to succeed, it cannot be a “they did it too” statement, but the defense has a considerable burden to show that the actual deception related to the main claims in the case were material to consumers before the conduct can be considered egregious. Trial started last week with opening arguments on Wednesday. We will provide any further juicy details for our readers to swallow.

- Amy Mudge and Deborah Birnbaum

UK Power to Regulate Online Advertising Going Viral?

As a result of a “landmark” decision by the Committee of Advertising Practice (the UK body responsible for writing the advertising codes) the scope of the UK Advertising Standards Authority’s (the body responsible for regulating advertising in the UK) digital remit to regulate online advertising has been significantly extended.

The ASA’s current digital remit only applies to advertisements in e-mails and advertisements in paid-for space online (including, for example, banner and pop-up advertisement) and sales promotions in paid-for space and non-paid-for space online. However, as from 1 March 2011, the ASA will also regulate advertisers’ own marketing communications on their own websites and for other non-paid-for space online under their control (such as social networking sites used to target marketing communications at UK consumers).

The move is being justified on the basis of extending the ASA’s established principles of effective consumer protection and fair competition to the online world. According to ASA Chairman Lord Chris Smith “We have received over 4,500 complaints since 2008 about marketing communications on websites that we couldn’t deal with, but from 1 March anyone who has a concern about a marketing communication online will be able to turn to the ASA”.

Sanctions for breach of the new extended code will include the removal of paid-for search advertising and advertising paid for by the ASA to highlight an advertiser’s continued non-compliance. To fund the new remit, the industry has agreed to apply a 0.1% levy on paid-for advertising appearing on internet search engines through media and search agencies.

See here for full details of the decision. For the current versions of the UK broadcast and non-broadcast advertising codes.

- Richard Dickinson and Jake Marshall

No Cash? No Problem. Grab Your Phone and Charge It! Consumer Protections Included

Leave your ATM cards at home; forget the drive thru at the bank; heck, leave your whole wallet on the kitchen counter -- mobile banking is here and becoming all the rage. Well, maybe not all the rage just yet (like it is in Japan, but certainly, it is becoming easier, with the popularity of the I-Phone and similar devices with interactive capability.

For example, the office supply store, Staples, Inc. reported this month that more than one-fourth of small business owners report having a phone device capable of making mobile payments. About 24% use these devices to make purchases and 3% always do so. Those that do so shop on line frequently. In response to this trend, Staples has enhanced its mobile website.

Other press reports have noted that mobile banking is particularly popular with the young and the underbanked. Indeed, the market research firm Celent reported this month that the attraction of mobile banking lies in ease of access and portability. A lot of the underbanked may not have online access but do have a cell phone. As a result, prepaid card issuers, such as Green Dot are offering mobile account access and intend to upgrade their mobile device offerings.

Banks also are getting in the act, testing new technologies that will allow bank customers to access their accounts and make purchases through their smart phones.

In adopting new banking applications, however, it would be advisable for companies to understand consumers’ rights and the risks. Mobile payment applications are subject to the same banking rules as their technologically older counterparts. Thus, if a user links her phone to a credit card, the consumer protections afforded by federal law to credit cards would apply. These protections limit a consumer’s liability to $50 for unauthorized use (although many credit card issuers have a zero liability policy).

If a user links her phone to a debit card, the consumer protections afforded by federal law to debit cards would apply. These protections also limit a consumer liability for unauthorized use to $50 if the consumer notifies its institution of the unauthorized use within two business days. Otherwise, the liability can go as high as $500.

The protection afforded prepaid cards may differ, depending on the type of card. Payroll cards are given the same protection as debit cards, while other prepaid cards may not provide any protection against unauthorized use at all - they are the equivalent of cash and thus, if there is unauthorized use of the card, it is like your cash has been stolen.

A more insidious risk, however, is the risk that someone not just uses the phone for an unauthorized transaction, but actually hacks into the mobile applications or the merchant’s site, and access consumer account information - taking not just someone’s funds but also potentially their identity.

Consumers Union highlighted some of the these risks in a report issued on Tuesday. While the Consumers Union report focused on consumer risk, and called for possible changes in law, it would be wise for stores or other companies contemplating offering apps for mobile payments to consider data security and other risks, and plan accordingly. Users of mobile payments may want to carefully review the disclosures for the payment mechanism being linked to the phone to know what consumer protections apply to them.

- Beth DeSimone

P2P Users - Upgrade Your Software Before Sharing Your Latest Vacation Pics!

For many of us who did not learn to use a computer keyboard and mouse before we could walk, terms like downloading files using BitTorrent or talking to friends on the Gnutella network sounds like having some dental procedure. But others in this generation, and certainly our kids, use those protocols and networks daily to chat and share pictures and videos with their friends though peer to peer or P2P file-sharing networks.

But the same feature of P2P software that underpins its functionality -- its ability to access and share files on your computer across the Internet -- also creates potential security vulnerabilities. The Federal Trade Commission investigated the reportedly largest provider of these P2P services - Limewire. The FTC alleged that older versions of the Limewire software contained security vulnerabilities that put users at risk of inadvertently sharing personal information, including social security numbers, bank account numbers and other matters, stored on their computers.

Limewire upgraded its software, incorporating safeguards into its user interface to help users avoid the inadvertent sharing of sensitive information. The company also said it would tell consumers to upgrade their Limewire software and inform consumers on how to best avoid inadvertent sharing, even though the company could not force users to upgrade (one version is free and the other is a one-time download for $39.99). In large part for those reasons, and the fact that the FTC found that users tended to upgrade voluntarily at a high rate (undoubtedly wanting the fastest service possible to share their latest creations), the FTC closed the investigation without action.

While no computer connected to the Internet is invulnerable, using the most recent version of P2P software may help reduce the vulnerability of your personal information to unintended disclosure.

- Ronald Lee and Beth DeSimone