The TMCA

Photo by Sarah Robertson The Dorsey Trademark, Copyright + Advertising team is back from the 2025 International Trademark Association Meeting. It was one for the books. We mixed and mingled with old and new colleagues and as well as our friends from around the world. In between all the meetings and social events, we did manage to attend a few of the important panels and of course, our committee meetings. Here are the highlights: AI-Driven Advertising: Copyright Issues in the New Frontier – This was a lively and engaging panel that focused on managing the chaos that the burgeoning use of AI by companies and independent contractors has caused relating to ownership and authorship of AI-created content. The panel several times reiterated the mantra: Be Fair, Be Bold, Be Reasonable. They encouraged companies to ask whether they actually need to own the content that is created. They also discussed contract clauses “from the wild” and pointed out what works and what can be unreasonable. The most important takeaway was to make sure that whoever is using AI to create content is documenting the process carefully, regardless of whether it is a vendor or an employee. This is because the Copyright Office will require an explanation as to the use of AI to determine whether, and how much of, a work is registrable. USPTO Update: Fireside Chat with Acting Under Secretary of Commerce for Intellectual Property and USPTO Acting Director Coke Morgan Stewart – Acting Director Stewart answered questions about the PTO’s direction under the current administration. She indicated that the USPTO has explained to the administration that as a fee generating agency – rather than a taxpayer funded agency – the USPTO should not be subject to current cost-cutting measures. Despite this, Acting Director Stewart believes the agency can continue to reduce pendency and maintain quality without filing open positions. She also indicated the USPTO is looking into the use of AI to help with review of design marks and to detect fraud. Our neighbors to the North, the Canadian Intellectual Property Office (CIPO), also provided updates about the examination process and efficiency, indicating that they hoped to clear their backlog in just a few months. Greenwashing, Greenhushing and Sustainably: INTA’s Brands and Sustainability Committee met at this year’s conference to discuss the hot topics of greenwashing and greenhushing. If you are not familiar, greenwashing is essentially the false marketing of green/environmental or sustainable claims. Most recently, we’ve seen a lot greenwashing in the context of aspirational claims, namely brands striving to be carbon neutral or reduce their emissions by a certain year. Greenhushing, on the other hand, is when brands do good for the environment, but don’t publicize it. Greenhushing can occur for various reasons including, fear of accusations of greenwashing, consumer perception that “green” products are more expensive or inferior, or even for political reasons. While we didn’t make any promises or claims, the committee was proud to support a digital business card initiative and encourage the use of reusable water bottles to help make the conference more sustainable for all. Crafting Successful Agreements with Branding Agencies: A roundtable discussion took place between practitioners from Canada, the UK, and US on how brands can best partner with their creative agencies and areas of best drafting practices for agreements between the two. Discussion of the scope of services and consideration of AI-generated work product dominated the conversation, including how best to allocate risk created by the use of AI particularly where this work product is specifically contemplated or where influencers are involved. Discussion of the extent of preliminary clearance work members of the group were carrying out on behalf of agencies, or that agencies were otherwise expected to conduct, also took place. An overall downward trend in full, in-depth trademark search orders more generally, as shared by the one of the leading search companies present, was also covered. The unique risks attached to working with smaller agencies, including the absence of enterprise software licenses, was also discussed. Law and Policy | Rules of the Road in Engaging with Celebrities, Influencers, and Fans: This session brought a global perspective to how companies interact with and negotiate with celebrities and influencers in relation to the promotion of their brands. The panelists focused on how they prioritize and make use of time and resources depending upon the nature and length of a promotion, as well as the potential impact of the promotional activities on their brands. Interestingly, in Argentina, many companies create specific scripts that must be used by influencers to help minimize regulatory and legal risks. Aside from potential pitfalls in agreements, the panelists also discussed deepfakes and artificial intelligence and the impact on their promotional activities and on their brands, as well as issues with poor influencer behavior and even taxation issues. Truly, an ever-evolving area as technology becomes even more intwined in the influencer landscape. Successfully Mediating IP Disputes: Key Insights and Practical Tips – INTA’s ADR Committee hosted a panel discussion on trademark mediation, highlighting the growing value of mediation in resolving IP disputes. Panelists emphasized its advantages over litigation, including lower costs, reduced risk, and the opportunity for creative, business-focused solutions. They discussed the qualities of effective mediators, such as neutrality, communication skills, and business acumen, and considered whether mediators should propose solutions or simply facilitate dialogue. The consensus favored a balanced approach that maintains neutrality while offering constructive suggestions. The discussion also addressed the importance of preparation, confidentiality, and having decision-makers present. Challenges of virtual mediation were noted, including distractions and reduced engagement, as well as the supportive but limited role of AI. Real-world examples illustrated the need for mediators to guide the process while allowing parties to retain control over outcomes. Annual Review of Trademark Cases: Always an attendee favorite, this session featured an overview of trademark decisions over the last 12 months lead by Theodore Davis of Kilpatrick Townsend and John Welch of The TTABlog fame. Notable decisions include those upholding the validity of the Lanham Act’s “names clause” (requiring written consent to register a mark containing a person’s name) under the First Amendment (Vidal v. Elster, 602 U.S. 286 (2024)), confirming that inaccurate patent claims may provide grounds actionable false advertising claims (Crocs, Inc. v. Effervescent, Inc., No. 22-2160 (Fed. Cir. 2024)), holding mere use of a party’s name in a judicial proceeding is not actionable under Lanham Act (Dieujuste v. Sin, No. 24-1522-cv (2d Cir. 2025)), confirming that the TTAB’s “something more” doctrine applies only to the relatedness of goods to services and not to goods to goods (In re Samsung Display Co., Ltd., No. 90502617 (T.T.A.B. 2024)), and clarifying that product color resulting from practicing an expired patent cannot also have trademark significance because the color is functional under the expired patent (CeramTec GmbH v. Coorstek Bioceramics LLC, No. 2023-1502 (Fed. Cir. 2025)). John Welch also recounted his top losing TTAB arguments, with the number one slot belonging to arguments that attempt to impart in real-world limitations to goods/services in an application/registration (since the TTAB typically only considers the goods/services as listed), and listed some of his pet peeves, such as using the word “trademark” as a verb (ironically used as such by the Supreme Court in its Elster decision).

The UK Government has issued important guidance on fake reviews, clarifying new obligations for businesses under the Digital Markets, Competition and Consumers Act 2024 (the “DMCC Act”). The Competition and Markets Authority (CMA) now has enforcement powers to act directly against violations of the legislation, including imposing significant financial penalties (without having to act through the courts). Businesses with presence in the UK involved in the collection, management, or publication of consumer reviews are advised to take steps to ensure compliance. Overview of Prohibited Practices Under the DMCC Act and accompanying guidance (CMA208), the following practices are now expressly prohibited in the UK: Commissioning or submitting fake reviews: This includes writing or arranging reviews that are fabricated or misleading, whether by internal staff, third-party providers, or automated tools. Publishing incentivised reviews without disclosure: While incentivising reviews is not banned outright, the CMA requires any material connection (such as discounts or free products) to be clearly disclosed. Failure to do so may constitute a misleading omission under applicable consumer law. Manipulating review presentation: Selectively displaying only positive reviews or suppressing negative ones, including through algorithms or manual curation, is likely to be considered deceptive conduct. Facilitating or selling fake reviews: Platforms and intermediaries that enable or promote the sale of fake review services may also be liable under the new regime. Compliance Expectations for Businesses Businesses are expected to adopt robust internal systems to prevent and detect the use of fake or misleading reviews. Specifically, the CMA expects businesses to meet the following requirements: Develop and maintain clear internal policies and procedures on how reviews are collected, moderated, and published, with particular attention to transparency and fairness. Regular monitoring and auditing of published reviews to identify suspicious activity, such as repetitive language or unverified users. Training for staff and third-party providers to ensure awareness of legal obligations, particularly in marketing, customer service, and IT functions. Transparent disclosures whenever reviews are incentivised. Disclosures must be prominent and understandable to a typical consumer. Enforcement and Penalties The CMA now has the power to issue fines of up to £300,000 or 10% of a business’s global turnover (whichever is higher) for breaches. In addition, individuals involved in unlawful practices may face personal liability, including director disqualification in serious cases. Next Steps We recommend all businesses engaging with online reviews conduct an immediate compliance review in light of this guidance. Particular attention should be paid to contracts with third-party review providers, website review mechanisms, and any incentives offered to customers. Here is a full PDF of the CMA’s Fake Reviews guidance.

California workplaces may finally see new regulations addressing the use of artificial intelligence (AI) – specifically automated-decision systems (ADS) –in the employment context go into effect this summer. After years of proposed legislation fizzling out and proposed regulations undergoing several revisions, one agency – the California Civil Rights Council (CRC) – voted on March 21, 2025, to approve the final and modified text of the "Employment Regulations Regarding Automated-Decision Systems" (ADS Regulations). If approved by the California Office of Administrative Law and published by the California Secretary of State, the ADS Regulations could become effective as early as July 1, 2025. The CRC’s approval of the ADS Regulations comes after Assembly Bill (AB) 2930, as previously discussed, died in the California Senate in 2024, following AB 331 failing to pass the previous year. AB 2930, entitled “Automated Decision Tools,” tried to prohibit the use of any ADS tools – systems or services that use AI to make consequential decisions, such as those impacting employment – that resulted in discrimination. The CRC, which issues regulations implementing California’s civil rights laws, takes a different approach in accomplishing what California legislators set out to do: the CRC’s ADS Regulations update California’s existing anti-discrimination laws to include prohibitions against discrimination caused by ADS use in recruitment, screening, hiring, promotion, pay, leave, and other employment decisions. Key Provisions of the New Regulations Should the ADS Regulations be effective on July 1, employers will need to note that California’s anti-discrimination regulations will include the following key provisions: The definition of "Automated-Decision Systems": ADS tools are defined as: A computational process that makes a decision or facilitates human decision making regarding an employment benefit, as defined in section 11008(i) of these regulations. An Automated-Decision System may be derived from and/or use artificial intelligence, machine-learning, algorithms, statistics, and/or other data processing techniques. The ADS Regulations provide examples of common HR tasks that ADS performs, such as (a) using computer-based assessments or tests to make predictive assessments about an applicant or employee; (b) using computer-based assessments or tests to measure an applicant’s or employee’s skills or personality traits; (c) directing job advertisements to targeted groups; (d) screening resumes; (e) analyzing facial expressions, word choice, or voice; and (f) analyzing employee or applicant data acquired from third parties. An explicit ban on discrimination resulting from ADS use: The ADS Regulations specifically state that it “unlawful for an employer or other covered entity to use an [ADS] or selection criteria a (including a qualification standard, employment test, or proxy) that discriminates against an applicant or employee or a class of applicants or employees on a basis protected by the [California Fair Employment and Housing] Act [FEHA], subject to any available defense.” An emphasis on the importance of anti-bias testing: The ADS Regulations provide that the evidence, or lack of evidence, of anti-bias testing or similar proactive efforts to avoid unlawful discrimination will be relevant to any such ADS-related discrimination claim or available defense. An expansion of FEHA liability to include “Agents”: The ADS Regulations define “agent” to include “any person acting on behalf of an employer, directly or indirectly, to exercise a function traditionally exercised by the employer or any other FEHA-regulated activity, which may include applicant recruitment, applicant screening, hiring, promotion, or decisions regarding pay, benefits, or leave, including when such activities and decisions are conducted in whole or in part through” ADS use. The ADS Regulations make clear that the for the purposes of FEHA, “agents” are also an “employer.” Enhanced recordkeeping requirements: The ADS Regulations require employers and covered entities to preserve personnel and other employment records for four years, rather than two years. This mandate to preserve records extends to ADS data, which the ADS Regulations define as any data used in or resulting from ADS use and/or any data used to develop or customize an ADS for use by a particular employer or other covered entity. Looking Ahead If the ADS Regulations are approved by the Office of Administrative Law and become effective on July 1, then employers should continue to take proactive efforts to ensure their use of AI, including ADS, complies with anti-discrimination laws. With the definition of “employer” expanded to include “agents,” employers using ADS will need to closely review vendor agreements. And, as previously discussed, employers should continue building processes and designating personnel to perform impact assessments, perform bias audits, and report any adverse findings from the assessments and audits to relevant internal stakeholders. Dorsey continues to monitory new developments in the AI employment and workplace privacy space. Contact Melonie Jordan or your preferred Dorsey attorney for guidance in this fast-evolving area.

For years now we’ve been blogging about how much the FTC and even the SEC on occasion love scrolling Instagram posts to see what influencer are up to. This post is about another three letter organization who likes to scroll to confirm advertiser and influencer compliance with the FTC’s now very well-known Endorsement Guides. If You Don't Know Now You Know - The National Advertising Division or the NAD was founded in 1971 as an independent self-regulatory, non-profit organization, whose mission it is to ensure adverting claims are truthful and accurate. The NAD is part of the BBB National Programs, an independent non-profit organization that oversees more than a dozen national industry self-regulation programs. Advertisers can bring challenges against one another and the NAD also initiates its own challenges.  Participation is voluntary (this is not a court of law) and there is no possibility for fines or damages, but the NAD is friends with the FTC and refers cases on occasion. With that introduction out of the way, we are here to update you on a recent case filed by the NAD itself against Skims, the underwear, lounge wear and shapewear brand. While this blog probably won’t make you look slimmer, this post might just give your brand’s influencer advertising a clearer and more conspicuous look . Like many brands, Skims hires celebrities to promote the brand on social media. The case focused on whether social media posts by Lana Del Ray and Brittany Mahomes adequately disclosed the financial relationship between the influencers and the brand. At the outset, the NAD noted that: The FTC’s Endorsement Guides state that when there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement, and that connection is not reasonably expected by the audience, such connection must be disclosed clearly and conspicuously. With that in mind, the NAD reviewed Instagram posts by Lana Del Ray that show her wearing Skims products, which either mentioned the brand by name or tag @skims in the caption of the post. The Brittany Mahomes’s posts feature her and her family wearing Skims products, but no specific mention of the brand in the caption of the post and while she tagged the brand in the picture, she did not tag @skimms in the caption. The NAD found that neither influencer had complied with the FTC Endorsement Guides. In reference to Lana Del Ray’s posts with the tag, the NAD stressed that: The FTC has further made it clear that tagging a brand you are wearing in a social media post is an endorsement of the brand. However, tagging a brand does not constitute a sufficient material connection disclosure, as an influencer could be tagging a brand simply because they like it and want their followers to be able to find it. The FTC makes it clear that just like any other endorsement, a social media post tagging a brand may require a material connection disclosure if the influencer has a relationship with that brand. As for Brittany Mahomes, the NAD put itself in the shoes of a reasonable consumer and found that even though the photos show the celebrity and her family with hair and makeup done, they are not so highly stylized that a consumer would understand them to be a paid advertisement campaign on direct viewing. Disclosures are still necessary. So we’ve told you what the influencers did and did not do (and you can see above how Brittany Mahomes corrected her post), but what about Skims? For their part, Skims followed three key practices that all brands should follows: Skims contractually required its influencers to comply with the Enforcement Guides. Skims provided its influencers with instructions on how to comply – suggesting the use of #ad and/or #sponsored Skims monitored their influencers and in the case of Lana Del Ray, contacted her team when they saw that she was not providing adequate disclosures. None of the three letter organizations that spend time on social media expect your brand’s influencers to be perfect, but the brand is ultimately responsible for its influencers’ behavior and engaging in these three best practices will go a long way to clearer and more conspicuous disclosures.

On October 16, 2024, the Federal Trade Commission (FTC) announced a revision to its negative option rule. The rule, formally entitled the “Rule Concerning Recurring Subscriptions and Other Negative Option Programs,” is a robust governmental intervention into the marketing and sales of products or services that involve “negative option features.” A “negative option feature” exists if seller provides a contract “under which the consumer’s silence or failure to reject goods or services or to cancel the agreement is interpreted by the [ ] seller as acceptance or continuing acceptance of the offer.” 16 C.F.R. 425.2. Although the revised negative option rule does not prohibit negative option programs, it imposes certain requirements on sellers using them. I.     Negative Option Programs The FTC explains that many negative option programs fall into one of four familiar categories: Prenotification plans, such as book-of-the-month clubs, where “sellers provide periodic notices offering goods to participating consumers and then send—and charge for—those goods only if the consumers take no action to decline the offer.” Continuity plans, where “consumers agree in advance to receive periodic shipments of goods or provision of services . . . which they continue to receive until they cancel the agreement.” Automatic renewal plans, common in the magazine subscription context, where sellers “automatically renew consumers’ subscriptions when they expire, unless consumers affirmatively cancel the subscriptions.” Free-to-pay plans, in which “consumers receive goods or services for free . . . for a trial period” but afterward “sellers automatically begin charging a fee (or a higher fee) unless consumers affirmatively cancel or return the goods or services.” II.     Requirements for Negative Option Programs Regardless of the form of the negative option program, the FTC’s new rule, which is set to go into effect in part on January 14, 2025, and in full on May 14, 2025, imposes four principal requirements on all negative option programs, whether offered online or via more traditional channels. The FTC considers any negative option program that fails to meet each of the four requirements to be a per se violation of section five of the Federal Trade Commission Act, and the FTC may seek civil penalties for each violation. A.   No Misrepresentations; Information Requirements The first two requirements are closely related. The first requirement prohibits the misrepresentation of any material fact related to the transaction, including facts about the negative option feature and the underlying goods or services. The second requirement is that sellers clearly and conspicuously disclose all material terms related to the negative option feature. These material terms include: (1) “[t]hat consumers will be charged for the good or service, or that those charges will increase after any applicable trial period ends, and, if applicable, that the charges will be on a recurring basis, unless the consumer timely takes steps to prevent or stop such charges; (2) [t]he deadline (by date or frequency) by which the consumer must act in order to stop all charges; (3) [t]he amount (or range of costs) the consumer will be charged and, if applicable, the frequency of such charges a consumer will incur unless the consumer takes timely steps to prevent or stop those charges; (4) the date (or dates) each charge will be submitted for payment; and (5) the information necessary for the consumer to cancel the negative option feature.” The prohibition on misrepresentation takes effect on January 14, 2025, while the second requirement relating to the disclosure of material terms (along with the other requirements discussed below) take effect on May 14, 2025. 16 C.F.R. § 425.3 to § 425.4. B.   Consent The third requirement is that a seller promoting or offering goods or services with a negative option feature must “obtain the consumer’s unambiguously affirmative consent to the negative option feature offer separately from any other portion of the transaction,” “not include information that interferes with, detracts from, contradicts, or otherwise undermines the ability of consumers to provide their express informed consent,” and to maintain records regarding that consent for three years, unless consumers cannot complete a transaction without providing such consent. 16 C.F.R. § 425.5. C.   Click to Cancel The final requirement is the so-called “click to cancel” component of the rule. It requires that a seller offering a negative option program provide a “simple mechanism” for cancellation. 16 C.F.R. § 425.6(a). The cancellation mechanism must be “at least as simple” as the sign-up process and must be offered “through the same medium” as the sign-up. 16 C.F.R. § 425.6(b) and (c). For online negative option programs, consumers cannot be required to “interact with a live or virtual representative . . . to cancel if the consumer did not do so” to sign-up. 16 C.F.R. § 425.6(c)(1). And, for in-person programs, the seller must offer both an in-person cancellation option “where practical” as well as a telephonic or online option. 16 C.F.R. § 425.6(c)(3). III.     Challenges The negative option rule has been challenged by a number of industry groups. The litigation challenging the Rule was subsequently consolidated under Custom Communications Inc., v. FTC, 8th Cir, No. 24-3137. The challengers are seeking a stay of the rule prior to certain provisions taking effect on January 14, 2025. Additionally, there has been speculation as to whether the new administration will continue to support the negative option rule. The rule was passed by the FTC on a 3-2 party-line vote, with the recently named FTC Chair, Andrew Ferguson, voting against the rule. Stay tuned for more from the TMCA as the rule progresses through the courts and the Federal Trade Commission under the new administration. IV.     More Information The FTC has made a fact sheet about the revised negative option rule available and provided a plain language description of the rule.

How many years must pass before a grisly murder can support a marketing effort? Apparently, something less than the 132 years since Lizzie Borden’s father and stepmother were axe murdered in Fall River, Massachusetts. (Yes, the passive voice is intentional—a jury acquitted prime suspect Lizzie, and the murders remain unsolved.) Fall River is city of about 100,000 people that abuts the Rhode Island state line. It was once home to numerous textile mills and now hosts a collection of World War II-era naval vessels at Battleship Cove. Portions of the music video for Aerosmith’s 1993 hit Cryin’ (perhaps NSFW, if your boss won’t appreciate 90s-era rock’s visual themes) were filmed in Fall River. The city’s top attraction, however, is the 1800s-era house that was the scene of the double murder. Today, US Ghost Adventures, LLC owns the Lizzie Borden House and offers ghost tours; overnight stays; and a collection of tasteful merchandise, like the “Bloody Axe in Head Play Headband.” Ghost Adventures owns several federal trademark registrations, including U.S. Trademark Reg. Nos. 2,070,882, for the word mark LIZZIE BORDEN and 4,397,555, for a hatchet logo, both for restaurant and hotel services. The hatchet logo features a notch along the bottom edge and, unlike the “bloody axe” merch, is not bloody. The Lizzie Borden House has operated as a tourist attraction since the 1990s, and Ghost Adventures’ federal registrations are incontestable. In 2023, Miss Lizzie’s Coffee LLC opened a coffee shop in the building adjacent to the Lizzie Borden House. A small grass strip and driveway separate the two buildings, which face a courthouse across the street (although not the courthouse where the jury weighed Lizzie’s fate). Miss Lizzie’s Coffee calls itself “The Most Haunted Coffee Shop in the World!” The original sign for Miss Lizzie’s Coffee featured letters made to look written with blood, and a stylized hatchet spewing blood. (Miss Lizzie’s Coffee’s website now reflects a sign with a coffee cup set against an appetizing blood splatter background.) Ghost Adventures was not thrilled with its new neighbor and sued the coffee shop shortly after it opened. Ghost Adventures alleged that several visitors, and at least one city official, incorrectly assumed that the coffee shop was related to Ghost Adventures’ business. Ghost Adventures asserted, among other things, trademark infringement under the U.S. Lanham Act and sought an injunction against Miss Lizzie’s Coffee. The U.S. District Court for the District of Massachusetts denied the injunction request, and Ghost Adventures appealed to the U.S. Court of Appeals for the First Circuit. The First Circuit affirmed the district court’s decision, agreeing that Ghost Adventures had not shown a sufficient likelihood of confusion to support its claim. Similar to courts around the country, the First Circuit applies an eight-factor likelihood-of-confusion test, which requires courts to weigh: “(1) the similarity of the marks; (2) the similarity of the goods; (3) the relationship between the parties’ channels of trade; (4) the relationship between the parties’ advertising; (5) the classes of prospective purchasers; (6) evidence of actual confusion; (7) the defendant’s intent in adopting its mark; and (8) the strength of the plaintiff’s mark.” Here, the court concluded that the marks were not similar, given that the trademarked hatchet has a “spotless,” notched blade, while Miss Lizzie’s hatchet is not notched, spews blood, and has a handle. The court observed that “Miss Lizzie’s” is incidentally similar to LIZZIE BORDEN, but noted that Ghost Adventures had not shown that its mark had displaced the story of Lizzie Borden in the minds of consumers—that is, there was no evidence that a consumer who hears of LIZZIE BORDEN thinks of the business instead of the murder. The court then weighed the market similarity factors, that is “the similarity of the parties’ goods, the relationship between their channels of trade, the relationship between their advertising, and the classes of prospective purchasers.” Ghost Adventures sought to portray both businesses as sharing the category of “hospitality services,” but the court rejected this characterization as merely a “broad economic sector,” insufficient to support likely confusion. The court found the businesses were better characterized as serving different groups—Ghost Adventures targets “sophisticated tourists who purchase tickets in advance and travel to Fall River to visit the historical site of the Lizzie Borden House, whereas Miss Lizzie’s attracts passersby hoping for a caffeine kick or a bite to eat.” Although both businesses rely on the Lizzie Borden story, confusion due to proximity or common reference to historical lore was not the type of confusion that Ghost Adventures was entitled to prevent. As the district court explained, “Ghost Adventures has not demonstrated that its mark bears the strength which might give it the ‘secondary meaning’ reach that, for example, ‘Sam Adams Beer’ might claim regarding the historical figure Sam Adams.” As such, Ghost Adventures could not use its LIZZIE BORDEN mark to prevent other hospitality businesses from opening in the vicinity of the crime and marketing themselves by using the Lizzie Borden story. The court also rejected Ghost Adventures’ reliance on consumer confusion evidence. The court decided there was insufficient evidence that any confusion was caused by an infringing mark, as opposed to confusion due to nontrademarked similarities between businesses or products. As the court explained, “if two outdoor Saturday farmers’ markets opened on the same block, causing wandering shoppers to think that they were affiliated, their proximity and similar business models, without more, would not be suggestive of trademark infringement.” This tussle over the use of the Lizzie Borden legacy shows the limits businesses face when they seek to market off historical sites and events. Had Lizzie Borden been the product of Ghost Adventures’ imagination and the Lizzie Borden House devoid of historical significance, there would be little doubt that Miss Lizzie’s Coffee would be deemed an infringer. But someone did “whack” Borden’s father and stepmother, although perhaps not 40-41 times, and her story became infamous. Given that historical reality, a business seeking to build its brand would need that brand to eclipse the story itself to demonstrate the strength needed for trademark enforcement. Until then, Ghost Adventures’ tours, hospitality, and merchandise may have to coexist with Miss Lizzie’s food and beverage, each invoking Fall River’s most notorious resident. For their part, the two businesses don’t quite seem ready to bury the hatchet—they filed papers in the district court on December 20, 2024, stating their intent to proceed with discovery in the litigation. Should they continue, Massachusetts may end up the scene of the most famous trial involving Lizzie Borden since 1892.

Earlier this week we met up in lower Manhattan with friends, colleagues and many news faces at the 2024 National Advertising Division (“NAD”) conference. As always, it was great to see and hear from experienced practitioners, the NAD attorneys as well as representatives from the Federal Trade Commission on hot topics in advertising ranging from green washing to privacy and dark patterns to subscriptions. If you didn’t make it this year, we prepared a quick cheat sheet to keep you informed: Artificial Intelligence – AI is now part of daily life and so it is not shocking the NAD attorneys and the FTC representatives spent a good amount time discussing the legal implications of this emerging technology. If we learned nothing else from the conference this year, we learned that the FTC is spending time learning and thinking about AI. In particular, we heard that the FTC is looking into platform AI tools and we should expect to hear some statements on those in the coming months. FTC Commissioner Melissa Holyoak talked about targeted enforcement actions instead of sweeping rules as the agency grapples with the complexities of the technology and the many, many ways in which businesses are applying AI. The agency seems concerned that AI can and has been used to perpetrate fraud (we have already seen some FTC enforcement on this front). At the same time, it also knows that AI is here to stay and can be used in very beneficial ways (think how voice cloning helps those unable to speak). Samuel Levine, Director of the Bureau of Consumer Protection at the FTC also spoke about the enforcement action against Rite Aid, which concluded with a stipulated order prohibiting the company from using facial recognition technology for security or surveillance for five years to settle charges that the retailer failed to implement reasonable procedures to prevent harm to consumers in its use of AI technology in its stores. Consumers Reviews – Consumer reviews have been a hot topic at the NAD conference for a number of years now. You’d think it would cool off. Not that case this year because the FTC accounted its Final Rule Banning Fake Reviews and Testimonials just a few months ago. The rule is effective October 21, 2024. Violations of the rule will allow the FTC to seek civil penalties of up to $51,744 per violation as well as other relief. One of the most interesting parts of the rule relates to review suppression and how companies can legally withhold reviews based on certain criteria. Influencers – We got to hear from Emese Gormely, a real live content creator and podcast host. She told her tales from the front lines of Instagram and sponsored content. We also heard from a panel of legal experts on current trends in influencer marketing. The controversial topic of platform disclosure tools reared its head and we saw first-hand how some platforms have disclosures tools that may look clear and conspicuous on their own platforms, but when you share the content to other platforms, those disclosures disappear, rending the tools completely ineffective. Also, disclosures that leave us guessing at the sponsor’s identity are probably ineffective. In addition, the panel discussed how sometimes content paid for by brands featuring influencers still needs disclosure even it is shared on the brand’s social media feed. Until next time…

The company behind social media phenomenon, Poppi Soda (“Poppi”) may be in fizzy waters for its claims the beverage provides prebiotic benefits to consumers. In a recently-filed California suit, named plaintiff, Kristin Cobbs, initiated a class action lawsuit against the owner of Poppi, VNGR Beverage LLC (“VNGR”) claiming its advertisement and on-label representations of Poppi’s health benefits are unfounded and in violation of several California statutes. Founded in 2016, Poppi is marketed as a healthy alternative to traditional sodas whose popularity took off in 2018 after an appearance on the well-known TV show, Shark Tank. As stated by Cobbs, “[Poppi’s] success is largely owed to its ability to preserve the flavor and sweetness of traditional sodas while claiming to be ‘gut healthy’ due to its inclusion of ‘prebiotics’ – a specific type of dietary fiber commonly found in food like bananas and whole grains.” On each can of Poppi, consumers can see the company’s tagline “Be Gut Happy. Be Gut Healthy,” along with the claim that the soda contains “Prebiotics for a Healthy Gut.”[1] Each Poppi beverage contains the natural soluble fiber, inulin, which when processed in the large intestine, promotes the growth of healthy gut bacteria known as “probiotics”. Cobbs’ claim, however, centers on the fact that each Poppi beverage contains just two grams of prebiotic fiber — an amount which has apparently been shown to be “too low to cause meaningful gut health benefits for [a] consumer from just one can.” In fact, to see any health benefits from the prebiotic fiber, Cobbs claims the science shows a consumer would need to drink more than four cans of Poppi every day for twenty-one consecutive days. Notably, consuming this amount of the soda would also mean consuming a substantial amount of cane sugar, which would allegedly “offset most, if not all, of [the] purported health benefits.” Cobbs contends that these unsubstantiated claims are harmful to consumers who rely on beverage manufacturers to “accurately and honestly” advertise a product’s benefits. The Complaint as filed alleges violation of California’s False Advertising Law, California’s Consumer Legal Remedies Act, California’s Unfair Competition Law, and unjust enrichment as a result of these misrepresentations. To prevail on all of these claims, it will need to be proven that VNGR: Knew or should have known its advertisements for Poppi were untrue or misleading in violation of Cal. Bus. & Prof. Code § 17500; Represented that Poppi has “sponsorship, approval, characteristics ingredients, uses, benefits, or quantities which they do not” in violation of Civil Code § 1770(a)(5); Represented that Poppi beverages are “of a particular standard quality, or grade” when in fact they are of another in violation of Civil Code § 1770(a)(7); Advertised goods with the “intent not to sell them as advertised” in violation of Civil Code § 1770(a)(9); and Engaged in unlawful and fraudulent business practices as a result of these advertising claims in violation of Cal. Bus. & Prof. Code § 17200. In a day and age where consumers are increasingly seeking out healthier alternatives to their favorite products, food and beverage manufacturers may need to tread carefully when touting the medical benefits of these products, as it’s clear consumers (and California law) want the science to back up these claims. For those who may be fans of the beverage (author’s note: Orange is objectively the best flavor), the real outcome of this lawsuit may be whether we will all by humbled by our superiority complex that we only drink “healthy soda”. Keep an eye on the TMCA blog for further updates as this lawsuit progresses. [1] Since the time of the lawsuit’s filing, these taglines have been removed from the Poppi website.

The Ninth Circuit issued two opinions in BBK Tobacco & Foods LLP v. Central Coast Agriculture, Inc. finding judicial power over pending trademark applications and an exception shielding trademark registrations for marks used with cannabis products. BBK Tobacco & Foods LLC (“BBK”) markets a variety of smoking accessories, including rolling paper, rolling machines, lighters, shredders, and grinders under the RAW brand, largely marketed to cannabis users. Central Coast Agriculture, Inc. (“CCA”) on the other hand markets cannabis concentrates and pre-rolled cannabis products under the RAW GARDEN brand. While BBK sued CCA for trademark infringement, unfair competition, and related claims, the interesting development in this case relates to each party’s attempt to cancel the other party’s trademarks. CCA filed four trademark applications for RAW GARDEN relating to various smoking accessories and products. Each application was filed on an intent to use basis under Section 1(b) of the Lanham Act. BBK sought to void the RAW GARDEN applications, alleging that CCA lacked the requisite bona fide intent to use the marks in commerce. CCA, for its part, lodged a counterclaim seeking to cancel BBK’s RAW trademark registrations, alleging that they are based on “unlawful use” because BBK’s products are “drug paraphernalia” marketed for use with cannabis. On appeal, the Ninth Circuit addressed these claims in two separate opinions. For BBK’s attempt to void CCA’s applications, the Ninth Circuit, for the first time, addressed whether federal district courts have the power to alter or void pending trademark applications. In a published opinion, the split Ninth Circuit panel said “yes.” The majority examined 15 U.S.C. § 1119, which provides that “in any action involving a registered mark the court may determine the right to registration. . . and otherwise rectify the register with respect to the registrations of any party to the action.” It found that the plain language of the statute grants a district court jurisdiction to consider challenges to a pending application, so long as the action involves a registered trademark, here BBK’s RAW registrations. This is because a challenge to an application “necessarily affects the applicant’s ‘right to a registration.’” Further, the parties and the Court have an interest in resolving all registration disputes in one action. The dissent disagreed. It read Section 1119 as permitting federal courts to cancel registrations only, not “to prematurely cancel pending trademark registration applications.” According to the dissent, the language of Section 1119 requires a completed registration—a Court cannot “determine the right to registration” or “rectify the register” absent an issued registration. The dissent also notes that the Trademark Trial and Appeal Board (“TTAB”) agrees, having previously found that district court authority under Section 1119 “concerns registrations” and that courts are “without authority to direct the USPTO to grant or deny pending applications.” Still, the majority opinion rules. In its appeal, CCA did not contest the district court’s finding that it lacked a bona fide intent to use the RAW GARDEN mark on the applied-for goods. As a result of the Ninth Circuit’s opinion, those applications are ordered to be voided. While the panel did not agree on the Section 1119 issue, all of the judges agreed that CCA’s counterclaim seeking to cancel BBK’s registrations is dead in the water. In an unpublished memorandum opinion, the Ninth Circuit found BBK’s RAW marks are not subject to cancellation for unlawful use. Only lawful use of a mark can be a basis for a trademark registration. Generally speaking, this means a party cannot obtain or maintain a trademark registration if the mark is used for illegal conduct, including the sale of illegal products. The Controlled Substances Act (“CSA”) prohibits the sale of controlled substances and “drug paraphernalia” including products designed to aid in preparing or inhaling controlled substances. While the legal status of cannabis has been in flux for some time, cannabis is still considered a controlled substance under federal law and is subject to the CSA. Luckily for BBK, the CSA includes a “tobacco exception” which excludes products that are “traditionally intended for use with tobacco products, including any pipe, paper, or accessory” from the CSA’s definition of “drug paraphernalia.” The court found that RAW rolling papers, rolling machines, shredders, grinders, and other smoking accessories are traditionally used with tobacco and shielded by the tobacco exception. The fact that BBK advertises its RAW products for use with cannabis was not sufficient to make BBK’s trademark use unlawful. Indeed, according to the Ninth Circuit, BBK’s subjective intent is wholly irrelevant to whether the tobacco exception applies. Finding RAW products fall within the exception, CCA’s counterclaim went up in smoke and the RAW trademarks remain valid. The unpublished memorandum gives some hope and guidance to cannabis companies seeking to protect their brands. But, they still face hurdles obtaining trademark registrations in the first place. The Trademark Manual of Examining Procedure (TMEP) is clear that “evidence indicating that the identified goods or services involve the sale or transport of a controlled substance or drug paraphernalia in violation of the [CSA]” is a basis for refusal of a trademark application. TMEP § 907. It even directly addresses cannabis stating: “regardless of state law, marijuana and marijuana extracts remain Schedule I controlled substances under federal law and are subject to the CSA’s prohibitions.” Id. As we reported previously, when applying these rules, the UPSTO has considered a party’s advertising and denied registration of marks that relate to cannabis. For example, in In Re Brown, the applicant sought to register HERBAL ACCESS for “retail store services featuring herbs.” As with the RAW marks, the claimed services encompass legal activity—the sale of legal herbs. Nonetheless, the USPTO examined the applicant’s website and determined that the mark also, perhaps primarily, encompasses unlawful activity—the sale of cannabis. The TTAB, reviewing this advertising, affirmed the refusal to register the HERBAL ACCESS mark. Still, if cannabis companies are able to obtain registrations for products traditionally used with tobacco, the Ninth Circuit’s opinion suggests those registrations will not be disturbed, regardless of how the products are marketed.

The 2010s were a heyday for bridal fashion. TLC’s “Say Yes to the Dress” reality series captivated viewers watching brides navigate family opinions and emotions while shopping for “the dress” at Kleinfeld’s Bridal in New York City. Instagram became a new medium for the engaged to search for bridal fashion and plan the big day. The @misshayleypaige Instagram account used by bridal fashion designer Hayley Paige Gutman was particularly successful, amassing over 1.1 million followers by the end of 2020. Gutman was employed by JLM Couture, Inc., which manufactures and markets bridal fashion collections, including under a number of brands under the name “Hayley Paige” or variations thereof. The Instagram account features posts relating to both Hayley Paige designs and Gutman’s personal life. But, Gutman’s employment agreement with JLM contained provisions regarding the use of the names “Hayley,” “Paige,” “Hayley Paige,” and even “Hayley Paige Gutman.” Starting in 2019 into 2020, JLM began to take issue with Gutman’s use of the Instagram account, as well as her creation and use of a misshayleypage TikTok account. JLM accused Gutman of seizing control over the Instagram account and using “misshayleypage” handles to promote third party goods like olive oil, beer, and nutritional supplements without JLM’s approval. Things came to a head in late 2020, when JLM’s CEO confronted Gutman during a meeting at Kleinfeld’s, of all places. In December 2020, JLM sued Gutman in the Southern District of New York, alleging claims of trademark dilution, false designation of origin, unfair competition, and breach of Gutman’s employment agreement, among others. As The TMCA previously reported, JLM won a temporary restraining order that prohibited Gutman from using social media accounts bearing the misshayleypage name. Following the TRO ruling, Gutman resigned from JLM and took to Instagram on a new account tearfully describing the legal dispute and explaining that she was avoiding use her own name. In the years since then, the SDNY granted JLM a preliminary injunction, and the dispute bounced back and forth between the SDNY and Second Circuit Court of Appeals. In October 2023, JLM filed for chapter 11 bankruptcy with just $151,000 cash on hand, citing damage to its brand caused by litigation with Gutman as a primary driver of its financial decline. Gutman filed a motion seeking to convert JLM’s case to a liquidation under chapter 7 of the U.S. Bankruptcy Code, arguing the harm caused by the litigation to JLM’s relationships with vendors is so severe that JLM cannot successfully reorganize. On May 17, 2024, JLM filed a motion seeking bankruptcy court approval of a settlement with Gutman. The parties’ settlement agreement provides that JLM will dismiss its suit against Gutman and transfer a number of “Hayley Paige”-related intellectual property rights to Gutman in exchange for a payment that is not publicly disclosed. The transferred IP rights will include trademarks, rights of publicity, social media accounts, and copyrights embodied in Gutman’s copyrightable works owned by JLM, among other things. The bankruptcy court orally approved the settlement during a hearing on May 23, observing that the settlement payment will facilitate JLM’s reorganization. The court entered an order approving the settlement on May 24. Gutman has already recommenced posting on @misshayleypaige. The JLM-Gutman dispute showcases the power of a social media following. JLM’s CEO testified at the settlement hearing that JLM’s finances were negatively impacted by Gutman’s resignation and harsh criticism of the company on social media. JLM’s financial condition deteriorated notwithstanding its victories against Gutman and control of @misshayleypaige social media accounts, to the point that selling the disputed IP rights to Gutman is necessary for the company to have a chance at surviving. The case surely is and will continue to be a beacon for other brand owners seeking to establish and control social media presence.

The European Data Protection Board (EDPB), a board comprised primarily of representatives of the data protection supervisory authorities of the European Union’s member states, issued surprising new guidance in mid-November explaining how a key component of the European Union’s ePrivacy Directive applies to variety of commonly used technologies used for tracking on the internet. Article 5(3) of the ePrivacy Directive[1] (EPD) has long been a cornerstone of internet and privacy law in the European Union (EU). Under the directive, EU member states were required to pass laws that limited “the storing of information, or the gaining of access to information already stored, in the terminal equipment of a subscriber or user” to situations where the subscriber or user has been provided “clear and comprehensive information” about the practice and, thus informed, provided consent. The sole exceptions to this requirement are as necessary to transmit the user’s communication over a network or “as strictly necessary in order for the provider of [a service] explicitly requested by the subscriber or user to provide the service.” This aspect of the EPD has long been understood to apply to the cookies stored in users’ web browsers. Indeed, the EPD is often colloquially referred to as the “EU Cookie Directive.” It was logical that the EPD applied to cookies because cookies were designed with the express intention of allowing a website provider to store information in a user’s web browser for later retrieval. Cookies, however, are not the only ways in which a website operator or mobile app provider can store or access information in a user’s terminal equipment. Earlier guidance from the EDPB also confirmed that the EPD also applied to the tracking of a user through the practice of “device fingerprinting.” The EDPB’s new guidance, entitled “Guidelines 2/2023 on Technical Scope of Art. 5(3) of ePrivacy Directive,” goes further. It clarifies that the EPD also applies to many newer tracking technologies, many of which are ubiquitous components of the ad-supported internet. The guidance clarifies that the EPD always applies when four criteria are met: (1) the operation in question relates to information; (2) the operation relates to a subscriber’s or user’s “terminal equipment”; (3) the operation is made in the context of a publicly available electronic communications service on a public network; and (4) the operation involves “gaining of access” or “storage.” The EDPB guidance interprets all of these elements broadly enough to cover most or all tracking technologies in use on the internet. For instance, the EDPB’s guidance explains that the EPD applies to tracking of users by means of tracking pixels or tracking links. Tracking pixels are hyperlinked resources that are embedded into content to enable the collection of information about the users of the content. The information might be collected by the sender of the content or by a third party that aggregates tracking data. Tracking pixels also often contain additional information that facilitate tracking across pages, websites, and devices. Tracking links are web links that include additional information to facilitate tracking. The EDPB explains that tracking links are used, for instance, to enable e-commerce partners to identify and pay commissions to referral sources. In both contexts, the EDPB finds that the tracking meets all four of the criteria for the applicability of the EPD: information is both stored on and accessed from the user’s terminal equipment in the context of a public internet service. The EDPB guidance reaches the same conclusion with regard to tracking based on “local processing” or “processing instructed by software distributed on users’ terminal, where the information produced… is then made available to selected actors” by the software. The EDPB explains that if local code sends information “back over the network… such an operation (instructed by the entity producing the client-side code…) would constitute a ‘gaining of access to information already stored.’” This reasoning almost certainly implicates many common tracking technologies, such as Google Analytics, that operate through JavaScript code that execute within a client’s web browser. It also would almost certainly implicate tracking embedded in mobile apps running on users’ tablets and smartphones. The EDPB also explains that, under analogous reasoning, tracking via IP addresses and unique identifiers (even identifiers that are inherent in user authentication) also falls within the technical scope of the EPD. Of course, the fact that these tracking technologies fall within the scope of the EPD does not mean that these technologies cannot be used. However, it does require the providers and operators of these tracking technologies to provide users with information about the tracking and to collect users’ consent to the tracking before it begins. This will require providers and operators of tracking technologies to modify their websites and mobile apps to provide this information and to obtain and track users’ consent. Because the EDPB’s guidance is an interpretation of existing law, users of tracking technology will have no grace period to enact these changes before enforcement efforts can begin. [1] The directive was originally issued as “Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector” and amended in 2009 by “Directive 2009/136/EC.”

Last month, Vital Pharmaceuticals, Inc. (“Vital”), the manufacturer of the Bang energy drink, fell short in its post-trial challenge to a “monster” jury award in favor of Monster Energy Company (“Monster”). After nearly five years of litigation in the Central District of California, Monster’s Lanham Act, California Uniform Trade Secrets Act (CUTSA), Federal Defend Trade Secrets Act (DTSA), intentional interference with contract, and Computer Fraud & Abuse Act claims reached a jury in August 2022 that ultimately awarded Monster $293 million in damages. The parties filed post-trial briefing whereby Vital attempted to overturn or alternatively peel back the enormous award, while Monster sought, among other things, enhanced damages and attorneys’ fees. The court’s October 6, 2023 post-trial order ultimately upheld the jury award and awarded Monster nearly $21 million in attorneys’ fees under the Lanham Act’s, DTSA’s, and CUTSA’s heightened standards for fee shifting. Despite meeting this high burden for shifting fees and the jury’s finding that Vital’s trade secret violations were “willful and malicious,” the court declined to award exemplary damages under the CUTSA and DTSA. The court’s ruling demonstrates the high bar for obtaining exemplary damages in trade secrets cases. The jury awarded Monster $3 million in damages for its trade secrets claims, which was perhaps overshadowed by the $272 million lost profits award for Vital’s Lanham Act violations. (Monster’s Lanham Act false advertising claim alleged that Vital falsely advertised Bang as containing the supplement “super creatine,” which was neither a “super form” of creatine nor actual creatine with any health benefits.) Monster based its trade secrets claims on its contention that Vital recruited Monster employees to join Vital and bring with them Monster’s confidential and valuable business information in violation of the CUTSA and DTSA. Monster introduced evidence that Vital offered several Monster employees jobs with a significant salary increase, conditioned on providing Monster’s sensitive competitive information. Witnesses for Vital and Monster provided more details on this scheme, testifying that Vital interviewers asked Monster employees to bring confidential information with them, openly admitted to these recruiting practices, and circulated internal Monster documents, including about an unreleased product. Monster focused on its former Georgia regional manager who left Monster for Vital, gave Vital a link and password to Monster’s internal and proprietary database, accessed that database after leaving Monster, and took five Monster-branded USB drives containing hundreds of confidential files and gave them to Vital’s in-house counsel. Monster’s damages expert testified that Vital’s Georgia sales outperformed the rest of the United States by $4.175 million, attributable to those confidential documents, which contained information specific to Georgia. The jury found that Vital “maliciously and willfully misappropriated” Monster’s trade secrets and awarded $3 million in damages. The DTSA and CUTSA allow courts to award exemplary damages in an amount that is up to two times that of the damages award for “willful and malicious” trade secret misappropriation. Although exemplary damages are permitted by statute, the court has an independent obligation to consider the facts and calculate an equitable and constitutionally sound exemplary damages award. In determining the amount of exemplary damages, courts consider the nature of the misconduct, amount of compensatory damages, and the defendant’s financial condition. The court noted that the “largest exemplary awards are reserved for the most reprehensible acts.” And to determine if, and to what extent, misconduct is reprehensible, courts consider whether: the misconduct caused physical harm, the conducted disregarded the health or safety of others, the misconduct targeted a financially vulnerable party, the misconduct was repeated, and the harm resulted from intentional malice, trickery, or deceit, or mere accident. In light of the jury’s finding that Vital’s trade secret misappropriation was willful and malicious, Monster’s post-trial motion requested $3 million in exemplary damages, which would double Monster’s damages on its trade secrets claims. The court denied this request based on its analysis of the exemplary damages factors discussed above. The court found that Vital’s conduct “was not particularly reprehensible.” The evidence of Vital’s trade secret misappropriation, which the jury found “malicious and willful,” fell short of “reprehensible conduct” warranting exemplary damages. Specifically, Vital’s misconduct with regard to Monster’s trade secrets did not “cause physical harm, disregard the health or safety of others, or target a financially vulnerable party.” Thus, the court found that the jury’s $3 million award in trade secrets damages sufficiently “deters and punishes Vital” for misappropriating trade secrets and, accordingly, declined to award exemplary damages on Monster’s trade secret claims. The court’s denial of exemplary damages is notable because, in the same order, it granted Monster’s request for nearly $21 million in reasonable attorneys’ fees under the Lanham Act’s “exceptional case” standard and the CUTSA and DTSA’s “malicious and willful” standard. And, in finding that the case met the “exceptional case” standard for awarding fees under the Lanham Act, the court cited the jury’s unanimous finding that Vital’s false advertising was willful and deliberate (similar to the jury’s trade secrets finding) and the unreasonable manner in which Vital litigated the case. The unreasonable litigation conduct cited by the court included disparaging remarks and otherwise disrespectful conduct at trial by Vital’s CEO, and the CEO’s contradiction of his prior sworn testimony at trial, which Monster’s counsel impeached more than 50 times. Despite the court finding that this constituted an “exceptional case” in light of these circumstances, it nonetheless declined to award exemplary damages under the DTSA and CUTSA. While the DTSA and CUTSA leave open the possibility of exemplary damages for trade secret violations, the Monster ruling illustrates the difficulty in obtaining them, even where the fact finder explicitly determines that the misappropriation was willful and malicious.

The year 2023 will likely go down in history as a major inflection point in the enactment of comprehensive consumer data privacy laws in the United States. At the beginning of the year, only five states (California, Virginia, Colorado, Utah, and Connecticut) had enacted comprehensive consumer data privacy laws. And, of these, only the California and Virginia laws are currently in effect. The privacy laws in Connecticut and Colorado go into effect on July 1, 2023, and Utah’s law becomes enforceable on December 31, 2023. Recently, however, the states of Indiana, Iowa, Tennessee, and Montana have also enacted new state consumer data privacy laws. In addition, state legislatures in Florida and Texas have passed bills to enact consumer data privacy laws; the governors of these states are widely expected to sign these bills into law. Most privacy professionals anticipate that many of the remaining states will also enact privacy laws in the next few years. It is likely that, barring preemptive federal law-making, most or all of the remaining states will eventually enact privacy laws of their own. (The state of Washington also recently enacted a landmark privacy law specific to consumer health data this year that also has some overlap with these comprehensive consumer data privacy laws.) Many businesses and other organizations have expressed concern about the compliance burdens of dealing with these emerging privacy laws, particularly since they can be subject to the laws of each jurisdiction in which they do business. Nevertheless, there is significant commonality among the laws that have passed so far. It is reasonable to assume that laws enacted in the future will continue to have these comment elements. By focusing on these common elements, businesses can design their privacy program with the confidence that it will be well positioned for the future. These common elements include the following features: Applicability thresholds. Although the specific thresholds vary, each of the state laws has applicability requirements that exempt many small and medium businesses that are not heavily involved in personal data collection or sales. Iowa and Indiana’s laws are typical in this respect. For either of those states’ laws to apply, the business or organization must process the personal data of 100,000 or more residents of the state or, if the business derives 50% or more of its gross revenue from the sale of personal data, process the data of 25,000 or more residents of the state. And, except in Colorado, non-profit organizations are exempt from compliance. Each law also has broad exemptions for organizations or personal data that is already protected under existing federal sectoral privacy laws like the Health Information Portability and Accounting Act (HIPAA) and the Gramm Leach Bliley Act (GLBA). Exclusion of personal data of employees, applicants, and former employees. With the exception of California, no state has applied its consumer data privacy law to individuals in their role as members of their employers’ workforces. Emergency contact information and personal data used for benefit administration is often also exempted from the laws’ requirements. Data subject rights. All states provide individuals in the state with rights relating to their personal data. These rights generally include the right to deletion of personal data, the right to correct inaccurate data, the right to know what data the business holds regarding the individual, and the right to receive a portable copy of the individual’s personal data. Most states also give individuals the right to opt out of the selling of their personal data or sharing of their personal data for behavioral advertising. A few states even give individuals the right to opt-out of certain kinds of processing of consumer data. Privacy notice requirements. Each of the states has requirements for privacy-related disclosures. Every state privacy law currently enacted requires businesses to state the categories of personal data that they collect and the purposes for the collection. Some states also require additional disclosures about the sharing and selling of personal data and place limits on the processing of personal data for purposes in excess of what was disclosed at the time of collection. And, all states require that privacy notices (often called privacy policies) explain the rights individuals have regarding their personal data. Sensitive data rules. Many states designate a category of personal data as “sensitive data” to reflect the higher risk of harm that could be associated with its use. Montana’s definition is typical and defines sensitive data as including: “(a) data revealing racial or ethnic origin, religious beliefs, a mental or physical health condition or diagnosis, information about a person’s sex life, sexual orientation, or citizenship or immigration status; (b) the processing of genetic or biometric data for the purpose of uniquely identifying an individual; (c) personal data collected from a known child; or (d) precise geolocation data.” Some states require consent from the individual to process sensitive data, while others allow individuals to opt out of the processing of sensitive data. Security requirements. All of the state privacy laws require organizations to protect personal data with reasonable information security safeguards. Data protection agreements. Most of the state privacy laws require businesses that engage processors (e., third parties that process personal data on their behalf) to have a contract with the processor that contains specific requirements, such as instructions for the personal data processing, the nature and purpose of the processing, the type of data subject to processing, the duration of the processing, return or deletion of the personal data at the end of the relationship, and assisting in demonstrating compliance with the law. Data protection assessments. Many of the state privacy laws have provisions that require businesses that engage in processing of personal data involving a high risk to the data subject to thoroughly analyze the processing, weigh the risks and benefits, consider ways to mitigate risks, and possibly consider alternatives and safeguards. (This assessment is sometimes also called a data protection impact assessment or privacy impact assessment.) Most of these laws consider the processing of personal data for targeted advertising or selling personal data to be activities for which an assessment is required. Similarly, the processing of sensitive data requires an assessment in many states. No Private Enforcement. In general, state privacy laws allow only governmental enforcement, and do not grant individuals a private right of action to sue for damages. California is the sole exception, but even in California, an individual can sue only if the individual was a victim of a data breach. Cure periods. Many laws provide that, prior to enforcement, a business is entitled to notice of an alleged problem and a right to cure the violation within a certain specified period. Civil penalties. All of the laws provide for civil penalties, often of $7,500 or more per violation. The following table describes how Iowa, Indiana, and Tennessee have addressed these common elements. Feature Iowa Indiana Tennessee Montana Applicability threshold Process personal data of 100,000 residents or Process personal data of 25,000 residents and receive 50% or more of gross revenue from sale of personal data Process personal data of 100,000 residents or Process personal data of 25,000 residents and receive 50% or more of gross revenue from sale of personal data Have $25 million or more worldwide annual gross revenue and process personal data of 175,000 residents or Process personal data of 25,000 residents and receive 50% or more of gross revenue from sale of personal data Process personal data of 50,000 residents or Process personal data of 25,000 residents and receive 25% or more of gross revenue from sale of personal data Data subject opt-out rights Sale of personal data, targeted advertising, sensitive data processing Targeted advertising, sale of personal data, profiling with significant consequences Sale of personal data, targeted advertising Targeted advertising, sale of personal data, profiling with significant consequences Other data subject rights Confirm processing, deletion, receive a copy, appeal Confirm processing, correction, deletion, receive a copy, appeal Confirm processing, correction, deletion, receive a copy, appeal, request information about data sales Confirm processing, correction, deletion, receive a copy Exclusions for data covered by HIPAA and GLBA and for institutions of higher education Yes Yes Yes Yes Requirement for a privacy notice required that is organized by categories and purposes and including information on rights Yes, and it must also list categories of personal data shared with third parties and categories of third parties Yes, and it must also list categories of personal data shared with third parties and categories of third parties Yes Yes, and it must also list categories of personal data shared with third parties and categories of third parties Privacy notice serves as a processing limitation (i.e. the law limits processing personal data for purposes other than those described at collection) No Yes Yes Yes Data protection assessments required No Yes Yes Yes Reasonable data security requirement Yes Yes Yes Yes Data processing agreement requirements Yes Yes Yes Yes Private right of action No No No No Right to cure Yes, 90 days Yes, 30 days Yes, 60 days Yes, 60 days, but it expires on April 1, 2026. Effective date Jan. 1, 2025 Jan. 1, 2026 July 1, 2024 Oct. 1, 2024 Civil penalty Up to $7,500 per violation Up to $7,500 per violation Up to $15,000 per violation Yes, with no explicit cap     By building a privacy compliance program that can effectively deal with these common elements, business and other organizations can feel confident that their program will also satisfy many of the elements that will be present in future state data privacy laws. Here at the TMCA, we will continue to keep stakeholders updated on further developments in the fast-moving area of consumer privacy legislation.

The crinkle sound of the gold foil. The rich smell of honey and almond. The unique design of peaks and valleys. And the delicious taste of Swiss chocolate. There is little doubt that since its creation in 1908, Toblerone-branded chocolate has made a name for itself in the chocolate world. But one of its original and defining characteristics has recently been cast into doubt—its “Swissness.” In 1868, Jean Tobler opened a confectionery shop in Bern, Switzerland that was an immediate success and grew into a chocolate factory by 1899. A decade later, Jean’s son, Theodor Tobler and his cousin, Emil Baumann, invented a unique and innovative chocolate bar, a special recipe of milk chocolate, almond-based nougat, and honey formed into a distinct triangular shape. Theodor named this new confection “Toblerone,” a combination of his last name, “Tobler,” and “Torrone,” the Italian word for honey and almond nougat. The chocolate bar’s popularity and international recognition only grew from there, including a feature at the 1964 World’s Fair in New York City and the Expo in Montreal in 1967. In 1969, different varieties of the chocolate where introduced, and in 1970, the now infamous packaging was changed to add a depiction of the Matterhorn in the Swiss Alps, Switzerland’s highest and most famous mountain. Since this time, packages of Toblerone has included various indicators that the chocolate bars were manufactured in Switzerland, including the Matterhorn icon and statements like “of Switzerland,” and “Swiss milk chocolate.” Until recently, Toblerone was undoubtedly “Swiss,” as every chocolate bar bearing the Toblerone name since 1908 has come from Switzerland. But in late 2022, Mondelez International, the now owner of Toblerone, announced that some—but not all—of the chocolate bar’s production would be moved from its location in Bern, Switzerland to Bratislava, Slovakia in July 2023. And this decision has cost it its “Swissness.” Effective January 1, 2017, the Swiss government enacted legislation to protect the “Swissness” of the goods and services emanating from the country, with the goal of protecting the “excellent reputation” Swiss indicators of source enjoy both domestically and abroad. The legislation regulates the “Made in Switzerland” statement, the Swiss cross designations, and images of the iconic Matterhorn mountain, all of which the Swiss government views as part of the overarching Swiss brand. The Swiss government notes that “Swiss products and services are associated with exclusivity, tradition and quality, with their goods reputation inspiring confidence in the product or service in question and ultimately influencing the consumer’s buying decision.” As an added benefit, strict regulation surrounding these Swiss designations provide a clear competitive advantage for manufacturers and service providers who are able to demand a higher price for their “Swiss”-branded fares. This law stems from an intellectual property principal recognized in Europe and elsewhere in the world, but not in the United States, known as “geographic indicators.” Geographic indicators, which we have previously written about, are used to label products that directly specify a product’s particular geographic origin, like “champagne” from France or “parmigiano reggiano” from Italy. Technically speaking, sparkling wine from California cannot bear the “champagne,” “prosecco,” or “cava” labels, nor can cheese from Wisconsin be called “gouda” or “feta.” Certain geographic indicators can be registered under the European Community regulations, which in turn confers certain exclusive rights to the registered owner and protects the association of certain food and beverage characteristics within that particular geographic region. The 2017 “Swissness” law falls under this geographic indictor of intellectual property protection. Anyone wishing to use a “Swiss” designation on products or in connection with rendered services must meet strict criteria in proving they are “Swiss” enough. As is relevant to Toblerone’s confections, to qualify as “Swiss,” at least 80% of the raw materials used to create foodstuffs must originate in Switzerland. However, for milk and dairy products in particular—under which chocolate falls—the weight of milk as the raw material must equal 100%. Further, essential processing for milk products must be done inside the country, with few exceptions. In short, milk products must be made exclusively in Switzerland in order to use Swiss designations. Mondelez International’s decision to move its production of Toblerone chocolate to Slovakia defies this exclusivity, and therefore, is no longer deemed “Swiss.” Although some Toblerone chocolate will still emanate from the Bern factory, in order to comply with this “Swissness” law, Mondelez International announced plans to replace the Matterhorn with a more generic mountain-shaped icon, and will instead state that the chocolate was “established in Switzerland 1908,” instead of being “of Switzerland.” Some may view this Swissness law as overly strict, but others, including the Swiss government, see it as necessary to protect the strength and reputation of its brand. Citing consumer surveys, the Swiss government as justified this legislation by claiming the value Swiss branding adds to goods is as much as 20% of the sales price, and nearly 50% for luxury goods. While the benefit to companies and goods manufacturers is clear, it is equally as strong for consumers, who can rest assured that products bearing the Swiss cross or “made in Switzerland” statements are, in fact, Swiss. Despite the fact its product packaging is changing and it may not be “Swiss” anymore, Mondelez has reassured Toblerone fans and chocolate connoisseurs alike that the recipe, taste, and distinctive product shape of the famous chocolate bars will stay the same.

Just in time for your health-focused new year’s resolutions, the FTC released an updated guide for marketers: The Health Products Compliance Guidance. This guide last issued in 1998 under a more narrow title, focusing on dietary supplements. The world of health has changed a lot since 1998. While the larger concepts in this updated guide may seems like nothing new, the FTC has helpfully walked us through more than fifty examples applying the concepts to modern products and forms of advertising. If your company advertises health-related products or services, we suggest reading this business guide cover-to-cover with a nice glass of green juice. The FTC makes every effort to draft their guides with non-lawyers in mind. If you only have a few minutes between your next walking meeting and your morning matcha, we’ll take you through the highlights: The foundational rules remain the same – (1) Advertising must be truthful and not misleading and (2) Before disseminating an ad, advertisers must have adequate substantiation for all objective product claims conveyed, expressly or by implication, to consumers acting reasonably. The FTC and FDA share jurisdiction on health-related products – Just because your products fall under FDA law does not mean you can ignore the FTC. The agencies coordinate their enforcement and regulatory efforts and the FTC’s jurisdiction extends to all advertising claims, even those made on labeling, for which the FDA has primary responsibly. However, the FTC gives deference to the FDA and health claims that meet the FDA “significant scientific agreement” standard will be presumed to be substantiated under FTC law. Health claims require competent and reliable scientific evidence – Randomized, controlled, human clinical trials (“RCTs”) are the most reliable form of evidence and are generally the type of substantiation that experts would require for health benefit claims. It is important to note that anecdotal evidence about the individual experiences of consumers, including surveys of consumer experiences, are never sufficient to substantiate claims about the effects of a health product. Similarly, public health recommendations from advisories from medical organizations cannot serve as a substitute for RCTs. Let the basic principles of scientific research guide your studies – The FTC’s guide recommends that advertisers ensure that the research upon which they rely for any health-related claims complies with the basic principles relied on by the scientific community for research. These key concepts include the use of control groups, randomization, double blinding, reliance on statistically significant results, and reliance on meaningful results. Match your claim to your study – The Guides note that this is common problem for advertisers: valid studies, but those studies don’t support the claim being made. Another warning to take to heart is that claims should be carefully worded to avoid overstating the certainty of science in areas where the science is still emerging. If there are significant limitations or inconsistences within the scientific literature, your consumers should be made aware. Advertising in the form of consumer or expert testimonials still require substantiation – As FTC guidance has repeated over and over again: advertisers should not make claims through consumer testimonials or expert endorsements that would be deceptive or deemed unsubstantiated if the advertiser made them directly. The Guide closes with two overarching recommendations: To ensure compliance with FTC law, marketers of any health-related product should follow two important steps: 1) Consider what express and implied messages consumers are likely to take from your ads. Where appropriate, carefully qualify your claims – in other words, clearly explain the limited circumstances in which the advertised benefits or results apply; 2) Carefully review the support for each claim to make sure it is scientifically sound, adequate in the context of the surrounding body of evidence, and relevant to the specific product and advertising claim. Cheers to a healthy 2023.

This week, the FTC finalized an order settling a complaint alleging that an online fashion retailer blocked negative reviews of its products on its e-commerce site. The penalty: a $4.2 Million fine, 10 years of record keeping obligations and 20 years of compliance monitoring. The charge: the retailer automatically published four and five star reviews and put lower star reviews on hold. The Director of the FTC’s Bureau of Consumer Protection noted that “Fashion Nova is being held accountable for these practices, and other firms should take note.” So what should other online retailers be doing to avoid deceiving consumers? First, implement a fair customer review publishing policy that accurately reflects the views of all customers who submit reviews. The order gives a few tips for circumstances where it might be appropriate to hold back a review (and when it would not), but on the whole, relevant reviews must be published so consumer can get the full picture. The FTC has also released some tips for brands operating in this space: Soliciting and Paying for Online Reviews: A Guide for Marketers. And if your brand employs another company to help with its online reviews, make sure they are following the guidance in the FTC’s Featuring Online Customer Reviews: A Guide for Platforms. Ultimately, your company can be held responsible for actions undertaken by contractors you employ to help manage the publication of reviews for your brand.

Earlier this week the FTC announced that it had sent more than 700 Notice of Penalty Offense letters to major advertisers, leading retailers, large consumer product companies and major ad agencies to put everyone on notice that fake consumer reviews and other misleading endorsements will not be tolerated. The letters also placed the recipients on notice that significant civil penalties will be imposed on those who use these deceptive tactics. In fact, the letters referenced the FTC’s power to impose fines up to $43,792 per violation. To be clear, just because a business received a letter does not mean the FTC suspects any wrong doing. The FTC suspects that fake reviews and other misleading endorsement are widespread, especially on social media. Fresh from the 2021 NAD conference, we did not find this announcement surprising at all. Readers of our blog will know that consumer reviews have been a focus of both the FTC and the NAD for many years. Whether your brand received one of these letters or not, the FTC wants you to know that it will not tolerate any of the following: falsely claiming an endorsement by a third party misrepresenting whether an endorser is an actual, current, or recent user continuing to use an endorsement without good reason to believe that the endorser continues to subscribe to the views presented misrepresenting that an endorsement represents the experience, views, or opinions of users or purported users using an endorsement to make deceptive performance claims failing to disclose an unexpected material connection with an endorser misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience The FTC also specifically stated that “positive consumer reviews are a type of endorsement, so such reviews can be unlawful, e.g., when they are fake or when a material connection is not adequately disclosed.” While much is unknown about what will happen in 2022, it is highly likely that we will be seeing an FTC crackdown on false and misleading reviews with the steep monetary penalties.

At the end of September and beginning of October we spent some extra screen time attending the annual NAD Conference that once again was held virtually in New York. We heard from a number of great speakers, including the Hon. Rebecca Kelly Slaughter, Commissioner at the Federal Trade Commission, Mary Engel, EVP at BBB National Programs, Katherine Armstrong, the Deputy Director of NAD and in-house counsel from The Clorox Company, Campbell Soup Company and T-Mobile USA, Inc. If you could not spare the screen time, don’t worry – here’s a quick wrap-up of the highlights: Ad Claims for Political, Diversity and other Social Issues – Brands jumping in on social movements is nothing new, but in recent years and especially in the past 18 months, we’ve seen a rise in brands posting online and otherwise showing support for various social issues. In fact, a brand staying silent on certain issues can speak volumes these days. So for us advertising attorneys, the question becomes do you need to substantiate social media posts on a brand site that aren’t even selling products, but are showing support for a social movement? One example given was a simple Instagram post with the copy STOP ASIAN HATE. The panelists did a great job moving through a series of questions to assess if the brand in question actually stands with the Asian community – is it appropriate for the company to enter this conversation? What has the company done for the Asian community to date? Would a single monetary donation be enough? Should we look at the history of the company’s philanthropy? What about diversity hiring and retention practices? All great questions to ask if you are asked to review such a post for your brand. Another tip, if you are joining the conversation, make sure you prepare reactive messaging ahead of time in case questions are raised about the position taken by the company. A brand’s consumers may well put the brand to the test by asking what they have done and/or looking at the company’s history of actions or inaction. Consumer Reviews – In the past year, both the FTC and NAD have spent time and resources on ad claims related to consumer reviews. For example, in late 2020, the FTC settled with Sunday Riley, a cosmetics company, over allegations that its CEO directed employees to create fake profiles and post reviews for the company’s products on Sephora. While no monetary fines were imposed, the company agreed to twenty years of on-demand compliance monitoring. Earlier this year, NAD dealt with two consumer review cases addressing the quantification of reviews (e.g., “over 110,000 5-star product review!”) – the takeaway is to make sure you count properly and don’t double count. The panel also gave some tips about addressing unsubstantiated claims in reviews – consider responding on the review website, if that’s possible. Just make sure the response contains only substantiated statements. Influencers – This would not be an NAD conference if there wasn’t a lively discussion about influencers. In terms of new guidelines and rules, NAD released its own tips for influencer marketing earlier this year. Then, Instagram and TikTok each released branded content rules for their own platforms. Social media platforms are clearly trying to evolve past the FTC’s initial take that built-in tools are not an effective disclosure. Whether the FTC will agree in the next set of its guidelines is TBD. In any case, the guiding principles of influencer marketing remain: Truth. Substantiation. Disclosure. Health Claims – Health and safety has been a key focus for everyone since the pandemic started. The FTC and NAD are no different and in fact, both have put more resources into stopping and preventing unfair and deceptive health claims. This past year the FTC sent more than 400 warning letters for COVID-related claims. But not everything was COVID-related. We saw enforcement actions for CBD products, supplements and, last month, the FTC announced a set of cease and desist (as opposed to warning) letters that it issued along with the FDA, directed to companies making diabetic treatment claims without the necessary scientific substantiation. These letters were a bit unique in that they invoked a seldom-used authority of the FTC Act to impose civil penalties for future violations. This is an example of the FTC putting a bit more teeth behind its letters. Until next year...

Survey evidence in Lanham Act cases can often times be pretty revealing. If you develop it correctly, survey evidence can be a key ingredient to a successful outcome. But if you develop it incorrectly it will show flaws that you and your expert wont want the world to see. This blog post tells the tale of the latter type of survey evidence that contained improper stimuli, a lack of control, and misguided questions. Read on as we discuss the problems that were laid bare in a recent Daubert order issued by the U.S. District Court for the District of Colorado. It all started when a Denver-based strip club, Dandy Dan’s, allegedly used pictures of several women in social media posts to advertise its “gentlemen’s club” establishment. There was only one, small problem with this advertising blitz: none of the women pictured were employed by or otherwise associated with Dandy Dan’s. Oh Dan. These women were models, actresses, and social media stars in their own right, and they did not think what Dan did was all that dandy. In fact, they sued for false endorsement and false advertising under Section 43(a) of the Lanham Act. In order to prove up their claims, Plaintiffs hired an expert to establish that Dandy Dan’s use of the photos “caused or is likely to cause consumer confusion” that the Plaintiffs endorse, sponsor, or are otherwise affiliated with Dandy Dan’s. In doing so, Plaintiffs’ expert went on a bit of a frolic in a number of respects. First, the survey stimuli he used were wholly improper. He started by showing respondents a collection of the ads at issue. Inexplicably, some of the photographs of the women used were not even plaintiffs in the case and included the likes of Carmen Electra, Claudia Sampedro, and Megan Iglesias. He then tried to draw a number of conclusions from the data he gathered from irrelevant stimuli. Injecting irrelevant stimuli into a survey is not going to give any court warm and fuzzy feelings about the proffered evidence. Strike One. Second, the expert did not use a control. The expert’s stated rationale for not doing so was that his research was not testing a “causal proposition.” Practice pointer: In any Lanham Act matter where you are attempting to show the ads in question cause deception, you are testing a causal proposition. In those circumstances, the expert must use a control. The expert’s loosey-goosey approach was not going to cut it. Strike Two. Third, the expert engaged in rather promiscuous use of irrelevant questions. Respondents were asked things such as whether the use of the photos made respondents “more interested in defendant’s club.” Their degree of interest (or non-interest) in Dandy Dan’s is irrelevant as to whether respondents believed the plaintiffs endorsed it. The expert also asked such things as how the ads made respondents “feel” and “what is the first thing that comes to mind” when respondents saw the ads. These touchy feely questions did not get the job done as they were simply irrelevant to the issue at hand. Strike Three. Not surprisingly, the court found these flaws “serious enough and pervasive enough” to warrant the exclusion of the expert’s proffered testimony. The takeaway here is that if your expert provides extra-judicial stimuli, lacks control, and gets too touchy feely, things aren’t headed in the right direction. It may be time to make a course correction lest you find yourself on the receiving end of a Daubert Dandy.

Consumer surveys. Love ’em or hate ’em, they are an evidentiary staple in many Lanham Act disputes. A well designed and executed survey can bolster your case, or can act as a powerful antidote to counteract your opponent’s. Survey evidence is not, legally speaking, strictly necessary. That said, courts routinely—indeed, almost reflexively—treat the absence of a survey as outcome determinative, especially in cases where a party claims an ambiguous advertisement “deceives” consumers. Sometimes litigants want to avoid the time and expense of conducting a consumer survey and instead opt to have an expert fill in that evidentiary hole with an opinion on how he or she “believes” consumers would perceive an advertisement. That is often a bitter pill. A case in point: In re C2r Global Mfg. issued by the United States Bankruptcy Court for the Eastern District of Wisconsin. There, a competitor pursued a Lanham Act claim against a debtor for falsely advertising the effectiveness of its pharmaceutical drug disposal product. According to the Plaintiff, consumers were deceived by the ads in question and, as a result, purchased the debtor’s product instead of Plaintiff’s product. There is a well-developed playbook for proving up these types of garden variety false advertising claims. The proof often includes marketplace research gathered through a consumer survey.  But here, instead of proffering survey evidence to establish how consumers perceived the debtor’s “drug destroyer” ads, the Plaintiff designated an expert to provide his personal opinion on the effect the ads would have on consumers. He opined that, “because consumers read [debtor’s] capacity advertisements to indicate that RX Destroyer products deactivate medication at a lower price-per-pill than the [plaintiff’s] system, consumers choose to purchase [debtor’s products] rather than [plaintiff’s product].” The court correctly excluded this and similar opinions. The problem with this sort of opinion testimony is at least two-fold. First, this expert attempted to opine on how consumers perceived or interpreted the ads in question. That sort of opinion is not within the province of an expert unless he or she has survey data to support it, and Plaintiff had none. Second, the expert purported to opine on how consumers would react after viewing the ad in that they would be more inclined to purchase the debtor’s product than Plaintiff’s. This sort of opinion is something that should be supported by gathering data from actual consumers and testing whether the ads at issue would be “material” to the consumers’ purchasing decisions. This case tells a cautionary tale about the perils of proxy evidence. If you are trying to establish how consumers perceive an advertisement or how they will react to it, counsel and their experts should resist the urge to “go it alone.” Consider designing and implementing a consumer survey to help bridge the evidentiary gap. Otherwise, going rogue when it comes to survey evidence can have costly implications.

A recent Federal Trade Commission (“FTC”) settlement reinforces the need for companies to substantiate MADE IN THE USA product claims in advertisements. Gennex Media LLC and its owner, Akil Kurji, recently found themselves the subject of an FTC investigation regarding claims made on their Brandnex website, social media sites, and in a YouTube video that their customizable promotional products (including items such as wristbands, lanyards, temporary tattoos, and buttons) were “Made in USA,” “USA MADE,” and “Manufactured Right Here in America!” As it turns out, many of these products were not made in the United States and were actually wholly imported from China. As a result of these violations, which date back 2012, Gennex and Kurji were collectively ordered to pay the Commission a monetary judgment of $146,249. The proposed order prohibits Gennex and Kurji from making unqualified U.S.-origin claims for any product, unless (1) the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States; or (2) a clear and conspicuous qualification appears immediately adjacent to the representation that accurately conveys the extent to which the product contains foreign parts, ingredients or components, and/or processing; or (3) for a claim that a product is assembled in the United States, the product is last substantially transformed in the United States, the product’s principal assembly takes place in the United States, and United States assembly operations are substantial. The order defines “Made in the United States” as any representation, express or implied, that a product or service, or a specified component thereof, is of U.S.-origin, including, but not limited to, a representation that such product or service is “made,” “manufactured,” “built,” “produced,” or “crafted” in the United States or in America, or any other U.S.- origin claim. This case is an important reminder for companies to ensure compliance with FTC guidelines regarding U.S. origin claims. Here are some best practices to keep in mind when making US origin claims, based on the FTC’s Made in the USA Policy: U.S. content must be disclosed on automobiles and textile, wool, and fur products. Disclosure is not required on most other products sold in the United States. The FTC’s Made in the USA policy applies to all products advertised or sold in the United States, except for those specifically subject to country-of-origin labeling by other laws. The FTC’s Made in the USA policy applies to all origin claims that appear on products and labeling, advertising, and other promotional materials, and also to all other forms of marketing, including digital or electronic mechanisms, such as internet or e-mail. Made in the USA claims can be express or implied, but the policy applies to both. Preapproval of Made in the USA claims is not required. Any manufacturer or market may make the claim, so long as it is truthful and substantiated. The standard for a product to be called Made in the USA without qualification is that the product must be “all or virtually all” made in the United States. The elusive phrase “all or virtually all” means that all significant parts and processing that go into the product must be of U.S. origin and should contain no (or negligible) foreign content. To substantiate a Made in the USA claim, a manufacturer or marketer needs competent and reliable evidence to back up the claim that its product is “all or virtually all” made in the United States. To determine whether a product is “all or virtually all” made in the United States, the product’s final assembly or processing must take place in the United States. Other factors, such as how much of the product’s total manufacturing costs can be assigned to U.S. parts and processing, and how far removed any foreign content is from the finished product, are also considered. A qualified Made in USA claim describes the extent, amount, or type of a product’s domestic content or processing but also indicates that the product is not entirely of domestic origin. Qualified Made in the USA claims are appropriate for products that include U.S. content or processing but do not meet the criteria for making an unqualified Made in USA claim. Because these claims can be misleading in terms of the amount of domestic content that exists, manufacturers and marketers should avoid qualified claims, unless the product has a significant amount of U.S. content or U.S. processing. Terms such as “produced,” “created” or “manufactured” in the United States should be avoided when referencing that a particular manufacturing or other process was performed in the United States, as these terms suggest a broader application than just a specific process and may be misleading. The FTC’s Enforcement Policy Statement can be found here: Enforcement Policy Statement on U.S. Origin Claims | Federal Trade Commission (ftc.gov).

The FTC recently reached deals with six CBD companies after it issued formal complaints against them in December 2020 over concerns about deceptive practices. The initial complaints (found here: In re Bionatrol Health, LLC, In re Epichouse, LLC, In re CBD Meds, Inc., In re Easybutter, LLC, In re Reef Industries, Inc., and In re Steves Distributing, LLC) brought various counts against the companies, including allegedly making a wide range of claims about their ability to treat serious health conditions, including cancer, heart disease, hypertension, Alzheimer’s disease, and other diseases. Some complaints also include deceptive pricing allegations. The FTC approved final consent orders resolving all the complaints. Those orders (found here: In re Bionatrol Health, LLC, In re Epichouse, LLC, In re CBD Meds, Inc., In re Easybutter, LLC, In re Reef Industries, Inc., In re Steves Distributing, LLC) obligate the companies to take and avoid various actions, including refraining from making misleading statements about the health benefits of CBD (including that such products prevent Alzheimer’s disease, autoimmune diseases, arthritis, cancer, diabetes, heart disease, seizures, skin cancer or other diseases), refraining from deceptive pricing tactics, notifying customers of the FTC’s lawsuit, and paying fines ranging from $20,000 to $85,000. These orders come on the heels of two years of relatively aggressive enforcement efforts against CBD companies by both the FDA (which we wrote about here) and the FTC. The FDA has already written two more warning letters to CBD companies in 2021, which you can find here. As shown on that same page, the FDA sent 21 letters to CBD companies in 2020 and, in 2019, sent another 22 letters. Sometimes these letters were jointly signed by the FTC, and the FTC has sent other letters to CBD companies over the past years (such as those discussed here). While the FDA continues to consider further regulations governing more widespread use of CBD products, these orders and letters will continue to act as de facto guidance for CBD companies. Dorsey will continue to monitor the FTC's and FDA’s actions in this area.

Jägermeister: it’s no longer for “pukey frat guys.” Or, at least according to Jägermeister’s recent adversary, that was the sordid reputation Jägermeister wanted to shed in a PR blitz launched in 2016. Instead of being associated with “Jägerbombs” and spring break ragers, Jäger sought a more sophisticated, hip, and “KÜHL” vibe. Billboards, commercials, and digital media were suddenly soaked with ads featuring phrases like “DRINK IT ICE KÜHL,” “ICE KÜHL,” and “RUN TO A KÜHL PLACE.” All was going well until Jäger got popped for alleged trademark infringement and dilution by Alfwear, a Utah-based rugged clothing manufacturer who claimed Jäger was piggy-backing on its wholesome reputation. Alfwear owns a federal registration for “KÜHL” and uses it in connection with a variety of products and on its website. The case proceeded through discovery, and the court ultimately awarded Jägermeister summary judgment due to a number of evidentiary shortcomings with Alfwear’s case. We focus here on the problems with Aflwear’s consumer survey evidence. Survey evidence needs to replicate marketplace conditions to be probative of a consumer’s state of mind. Alfwear’s proffered survey deviated from this principle. The expert’s report was filed under seal, so we don’t have access to the questionnaire and the stimuli. But we can glean what the problems were from the court’s opinion. To show confusion, Alfwear’s expert first showed respondents a screenshot of an Alfwear KÜHL ad on Facebook. The expert then showed respondents one of two Jäger KÜHL ads on Instagram “as each appeared individually side-by-side with the KÜHL Facebook ad.” Based on the data gathered, Alfwear’s expert concluded that Jäger’s ads created “net confusion” rates of over 30%. It appears the court correctly observed that this study design “does not prove actual confusion in the marketplace.” Just because two ads appear on social media platforms does not mean that consumers will view them in close succession or juxtaposed for any extended period of time. Having respondents focus on two ads that both contain the prominent use of “KÜHL” could bias them to draw connections and conclusions that they would not necessarily draw in a real-world context. When designing consumer surveys in Lanham Act cases, experts and their counsel need to avoid creating their own special concoctions. A survey will only be useful if it approximates marketplace conditions. This principle does not call for exactness down to the last detail of recreating the marketplace, but it does require careful attention and consideration. If products are not sold side-by-side in the marketplace, they should not be presented that way in a consumer survey. While a survey design with loose connections to the marketplace may gin up a more “favorable” result, that high will most certainly recede. In this regard, one should think of designing an improper survey as akin to having one too many Jägerbombs: they both may be pleasing in the moment, but may lead to foggy, hazy, and, ultimately, painful results.

Graham Crackers—the ubiquitous, rectangular-shaped snack crackers with air holes and perforations—occupy a unique niche in American snack food lore. In the 1830s, the Rev. Sylvester Graham, a Presbyterian minister from Connecticut, became a ferocious advocate of healthy living. Among other things, he invented his “Graham Bread” made from coarsely ground unsifted wheat flour. Apparently, a staple diet of Graham Bread—coupled with vegetarianism and abstention from spirits and tobacco—would do wonders to suppress human carnal desires. Several decades later, NABISCO introduced its “Graham Crackers” to widespread acclaim. The morsel really took off in 1925 when NABISCO added a touch of honey and launched its “Honey Made” line. Today, multiple companies make their own versions of “graham cracker” and consumers are still clamoring for them. According to one estimate, in 2020 alone, more than $450 million dollars’ worth of graham crackers were sold by a handful of the top vendors in the United States. That’s a hell of a cracker. With such a long, storied history, graham crackers couldn’t possibly be the subject of a class action suit for false advertising in 2021, could they? Meet Chandra Campbell, who recently purchased a box of “Honey Graham Crackers” at Whole Foods. Despite the ingredient listed on the packaging, Ms. Campbell was allegedly shocked—shocked!—that her graham crackers were not made from healthy whole wheat “graham” flour. She also thought her crackers were sweetened with actual honey as opposed to some other sweetening agent. Channeling her inner Rev. Graham, she brought hellfire and brimstone. She sued Whole Foods in the U.S. District Court for the Southern District of New York for false advertising on her behalf and on behalf of all other similarly-situated aggrieved consumers. Whole Foods’ response? Pshaw! Whole Foods moved to dismiss the complaint arguing that no reasonable consumer could be deceived by its use of “Honey Graham Crackers.” Judge Gregory Woods denied the motion. He believed that Ms. Campbell had plausibly stated a claim that she and others were deceived. Importantly, he noted that whether a product package misleads consumers is generally not divined by judges. Instead, “[e]vidence such as a consumer survey, not merely judicial introspection, is needed to determine what consumers understand the phrase to mean in the context of this particular product and its packaging.” The important takeaway is that even when a food product has been around for many, many decades, that does not necessarily insulate it from false advertising claims—even if those claims seem implausible based upon the product’s success and longevity in the marketplace. Judge Woods’ decision underscores the importance of consumer surveys to separate the wheat from the chaff in these types of cases. Is Ms. Campbell’s claim legit or will it be a mere graham cracker caper? Consumer survey evidence may ultimately be the path to salvation for Ms. Campbell and the rest of her class action flock.

Last week we quickly pivoted from watching the 24/7 "Map Show" to spending our screen time learning at the ANA 2020 Marketing Law Conference. It was a great three days in Chicago in our pajamas of educational seminars. If you didn’t make it this year, don’t worry – here’s a quick wrap-up of the highlights: Influencers – This has been a hot topic at the law conference for many years now. So you may be asking, haven’t we already covered influencers from every possible angle? You might think so, but there are still lessons to be learned in influencer advertising and things in this area are always changing. But some things never change - the keywords for influencers and the advertisers who hire them are transparency and flexibility. Influencer contracts are highly recommended, the more specific the better, so that influencers understand very clearly what’s expected of them. Also, did you hear that #ad is back? It is transparent, simple and works in almost any situation, but influencers and brands have long shunned it, while lawyers loved it. Are we finally all going to agree on something? Consumer Reviews – With access to brick and mortar stores limited in 2020, online shopping and consumer reviews became increasingly important. For that reason we are often fielding questions from clients about using consumer reviews in advertising. The quick take from the conference is that advertisers should be careful about filtering or reordering reviews on their own sites. Original Content – How are media companies creating and promoting original content during the pandemic? In-house counsel from new and old media discussed. Production of film and television has mostly resumed, but with strict testing and physical distancing protocols. In many cases, studios are also using remote recording or asking talent to step into the role of videographer at home. To promote content, COVID-friendly solutions included sending influencer boxes (with proper posting guidelines, of course), creating virtual concert and art experiences, and drive-in viewings. Bottom line: creative people are finding creative solutions to the pandemic’s challenges. Promotions – Most promotions, sweepstakes, contests, and games have gone virtual, and yes, state laws around promotions still apply in addition to platform rules, so remember to check both to ensure compliance with all applicable laws. Remember the basic tenets of promotion law, which is to remove at least one of the following elements to avoid an illegal lottery: prize, chance, and consideration. Beware that even a giveaway or gift with purchase can potentially create the element of chance if supplies are limited. Product Claims and Labeling – Claim substantiation was a focal point this year, particularly concerning food, beverage, and nutritional supplement labeling, as many warning letters have been sent and lawsuits filed against companies that produce products with claims of mitigating the novel coronavirus and promoting additional health benefits or immunity from a number of ailments. Remember that implied claims are scrutinized along with express claims, so look to the context as well as the wording to make sure that you aren’t communicating anything about the product that is unsubstantiated. CBD and Alcohol Marketing – While the FDA continues to work on regulations governing CBD, uncertainty surrounding the marketing of CBD products remains. FDA has been taking enforcement action against sellers of products containing CBD making health, drug and/or false claims. However, it is generally tolerating sales of CBD products, such as tinctures, gummies and dietary supplements, where no such claims are being made, even if the products are technically unlawful under the Food, Drug and Cosmetic Act. In actions involving CBD product claims, courts are making inconsistent rulings on whether to stay those actions until the FDA’s regulations are issued. On the alcohol side, the impact of the pandemic on longstanding ways of doing business may end up having a beneficial effect in causing a reconsideration of the archaic U.S. regulatory structure for the sale and marketing of alcoholic beverages (i.e., the current three tier system of producers/distributors/retailers) as well as standards for the advertisement and marketing of alcoholic beverages. Looking Ahead to 2021 – Aren’t we all?! In 2021, we can expect that the FTC will be releasing an updated version of its Endorsement Guides to address the changes (especially in social media) since the last version released in 2009. Will we see aggressive enforcement following the release of the updated guides? Maybe, but it is clear that the FTC and other regulators are expanding their enforcement focus beyond just advertisers to others in the chain, such as influencers, ad agencies, PR agencies, publishers and even retailers. The NAD is also looking ahead to 2021 and we can likely expect to see NAD-initiated actions in new industries – potentially consumer electronics or appliances and other areas that we don’t often see in competitor challenges at the NAD. We hope to see everyone in person on November 15, 2021 in San Diego!