The Federal Trade Commission (“FTC”) recently filed a Complaint in the Southern District of California against six entities and four individuals, accusing them of deceiving customers with their use of “free” and “risk-free” trial period advertising related to cooking products, golf-related products, and online subscription services on their websites, in TV infomercials, and via email.

risk-free trial offer
Copyright: kchung / 123RF Stock Photo

The FTC’s Complaint alleges that the defendants violated section 5(a) of the FTC Act, which prohibits unfair or deceptive acts, by misrepresenting the trial offers applicable to their products.  Specifically, the FTC accuses the defendants of advertising their products as having a “risk-free” trial period when, in reality, the consumers are required to return the product at their expense before the trial period ends in order to avoid being charged additional amounts for the product.  The FTC also accuses the defendants of failing to adequately disclose the material terms and conditions of the trial offer, of their continuity/subscription plan offers, and of their refund and cancellation policy.  For example, the FTC takes issue with the defendants’ failure to clearly disclose that they would start charging the consumer if he/she did not cancel the trial period or return the product.

In addition to violations of the FTC Act, the FTC’s Complaint also alleges violations of the Restore Online Shoppers’ Confidence Act (“ROSCA”).  The FTC describes ROSCA as an act that “prohibits any post-transaction third party seller (a seller who markets goods or services online through an initial merchant after a consumer has initiated a transaction with that merchant) from charging any financial account in an Internet transaction unless it has disclosed clearly all material terms of the transaction and obtained the consumer’s express informed consent to the charge.”  The FTC’s Complaint against the defendants focuses on section 4 of ROSCA, which prohibits the sale of products through an improper “negative option” feature.  A “negative option” feature is a provision in an offer to sell goods or services under which the consumer’s silence is taken as an acceptance of the offer.  It is improper to utilize a “negative option” feature unless the seller satisfies the following requirements: (1) clearly and conspicuously disclose all material terms of the transaction before obtaining the consumer’s billing information, (2) obtain the consumer’s express written consent before charging the consumer, and (3) provide a simple mechanism for the consumer to stop recurring charges.  The FTC’s Complaint alleges that, in violation of section 4 of ROSCA, the defendants did not meet any of those three requirements with respect to their cooking and golf-related goods and services.

The FTC seeks an injunction preventing future violations of the FTC Act and ROSCA as well as other relief necessary to redress injury to consumers.  It is clear that the FTC looks closely at advertisements claiming to offer “free” and “risk-free” trial periods and that companies should make sure to adhere to the FTC’s and ROSCA’s requirements.

 

What does “natural” mean in the context of product advertising?  Consumers see phrases like “natural,” “all natural,” and “100% natural” over and over again in modern marketing.  The trouble is that “natural” may not mean what consumers expect it to mean, thereby opening companies up to claims of false or misleading advertising.

Two recent lawsuits against Pret A Manger, the sandwich company, provide a cogent illustration.  One complaint was filed by two consumers as a class action.  The other was filed by three non-profit organizations (including the Organic Consumers Association) on behalf of their members and the general public.  Both complaints assert that Pret A Manger has deceptively labeled, marketed, and sold certain bread and other baked goods as “Natural Food” when the products contain trace amounts of a chemical biocide.  According to the non-profit plaintiffs, consumers are willing to pay more for “natural” products and consumers expect such products to be free of pesticides.

This isn’t the first time the Organic Consumers Association, the Federal Trade Commission, or others have gone after companies advertising their products as “natural.”  Companies should be mindful when marketing their products using that term, and should be prepared to defend the claim with substantiation if necessary.

 

Trademark professionals often warn our clients to be skeptical when they receive official seeming bills or notices offering pricey and unneeded trademark related services. These scams have been around for as long as I have been practicing trademark law. There are periodic attempts to combat the practice by our community with warnings (we blogged about the issue here), information (the USPTO maintains a blacklist and encourages trademark owners to email a copy of the notice and the envelope it came in to TMFeedback@uspto.gov in order to keep the list up-to-date) and lawsuits.

Whack-a-Mole Game at a CarnivalThis summer has seen another flurry of activity against the moles.

A few weeks ago the United States Patent and Trademark Office held a roundtable on fraudulent solicitations:

Numerous owners of U.S. trademark registrations, as well as applicants for such registrations, have been targeted by unscrupulous parties who extract their names from … USPTO databases and offer them services, often holding themselves out to be acting on behalf of the USPTO. In many instances, the services are never performed, or are performed in an incorrect manner that puts the registration at risk of cancellation. In addition, inflated fees may be charged for the alleged services.

Leason Ellis, a 25-attorney IP boutique firm based outside New York City, filed a lawsuit in 2012 against a scammer called USA Trademark Enterprises, which was eventually resolved by a consent decree. The firm sued again in 2013, this time against a renewal scam called Patent and Trademark Agency LLC. Last month the firm reportedly filed a new lawsuit against the similarly-named Patent and Trademark Association Inc.

If you are victimized by one of these con artists, we encourage you to take action both for yourself and for the good of the community. If you have incurred actual damages, talk to a lawyer about how to obtain reimbursement and whether you might be a good candidate for a class action lawsuit on behalf of other victims. Although your losses may not be enough to justify incurring legal fees, a successful class action lawsuit reimburses class representatives for their reasonable costs and covers the attorney fees as well. Think about it…

Several large retailers likely thought that they were finally clear of legal problems relating to advertising sale prices for products that were not truly on sale.  With a post on September 28, 2016, https://advertisinglaw.foxrothschild.com/?s=class+action, Dennis Hansen discussed these class action lawsuits, several which have settled for millions of dollars.  For example, JC Penny paid $50 million to settle a class action suit against it alleging that its advertised and listed sale prices were not actually sale prices, but were more akin to regular prices.  However, the bad news for these retailers continues as local government enforcement actions have now been brought.

The Los Angeles city attorney brought claims against Kohl’s, JC Penny, Macy’s and Sears based upon the same alleged conduct.  These lawsuits could subject these retailers to additional substantial penalties, on top of the money already spent on the consumer class actions.  Additionally, the Alameda County Attorney’s office recently brought claims against My Pillow for making health claims in its advertising that are allegedly not supported by any scientific research or studies.  My Pillow settled with Alameda County, agreeing to pay over $1 million in fines.

These actions brought by local governments are unique in that false advertising claims are usually left to the Federal Trade Commission (FTC”), consumer class actions, or lawsuits brought by competitors.   The FTC, however, does not have the resources to bring claims against all improper advertising, even focusing on just advertising relating to health claims.  However, these local government enforcement actions can somewhat fill that gap and give more effect to state statutes regulating advertising, such as California’s statute regarding what is a sale price.  As a result, it is important to make sure that you are aware of the advertising statutes in each state in which you are advertising, particularly if you are frequently listing a product as being on sale.  For example, in California, a sale price cannot be compared to a previous price (such as 50% off) unless that previous price was the actual market price of the product within the previous three months.  And, as always, all advertising claims, especially health claims, should be substantiated so that if a competitor, the government, or a consumer class action lawyer brings a claim, you are able to quickly show that the advertising is accurate.

It says “sale,” but is it a bargain?  According to a number of class action lawsuits filed in recent years, the answer is no.

The situation is this:  You go to the store.  You see a nifty looking widget and HOLY BUCKETS it is 50% off!  But are you really getting a deal?  If the store is following the law, you are…but a recent series of putative class action lawsuits have alleged that the deal might be no deal at all.

The past few years (and 2015 in particular) have seen a significant number of class action lawsuits filed against retailers across the country for allegedly false and misleading price advertisements.  The lawsuits generally claim that the retailer advertised products as on “sale” or “discounted” from higher, “original” or “former” prices when in reality the product was always on sale.  The lawsuits allege that the phantom or sham markdowns are part of the retailers’ scheme of giving the false and misleading illusion of a discount to entice sales.

Copyright: petrnutil / 123RF Stock Photo
Copyright: petrnutil / 123RF Stock Photo

So what is the rule? How do you accurately advertise a sale?  The standards can vary from state to state, but intentionally creating a misleading or false illusion of a discount is likely a problem.  The Federal Trade Commission’s guidelines are a good starting point and guidepost for advertisers.  With respect to advertisements comparing a former price to the current price, the regulations promulgated by the FTC provide:

“One of the most commonly used forms of bargain advertising is to offer a reduction from the advertiser’s own former price for an article. If the former price is the actual, bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time, it provides a legitimate basis for the advertising of a price comparison. Where the former price is genuine, the bargain being advertised is a true one. If, on the other hand, the former price being advertised is not bona fide but fictitious — for example, where an artificial, inflated price was established for the purpose of enabling the subsequent offer of a large reduction — the ‘bargain” being advertised is a false one; the purchaser is not receiving the unusual value he expects. In such a case, the ‘reduced’ price is, in reality, probably just the seller’s regular price.

“A former price is not necessarily fictitious merely because no sales at the advertised price were made. The advertiser should be especially careful, however, in such a case, that the price is one at which the product was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of his business, honestly and in good faith — and, of course, not for the purpose of establishing a fictitious higher price on which a deceptive comparison might be based. And the advertiser should scrupulously avoid any implication that a former price is a selling, not an asking price (for example, by use of such language as, ‘Formerly sold at $XXX’), unless substantial sales at that price were actually made.”  16 CFR §233.1(a) and (b).

The FTC has similar regulations and guidelines for comparisons to prices charged by competitors ( 16 CFR §233.2), advertising against an MSRP (16 CFR §233.3), bargain sales—e.g. two for the price of one—(16 CFR §233.4), and “miscellaneous” price comparisons (16 CFR §233.5). 

While the FTC regulations are a good start, and advertiser should consult the laws in the state(s) in which they will advertise.  For example, advertisers in California should be particularly aware of California Business and Professions Code Section 17501, which sets out a specific rule for when and how a discounted price may be advertised:

“No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price as above defined within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.”

Failing to comply with these advertising laws can translate into a risk to the bottom line, and advertisers should take steps to make sure they do not become the target of a lawsuit or FTC enforcement action. When in doubt regarding whether a promotion complies with the applicable rules, consult with a qualified attorney.

Whether the United States Patent and Trademark Office (USPTO) possessed trademark registrations for its own trademarks was honestly not something I had ever thought about before.  But then I received a link to the Director’s Forum blog earlier this month telling me that the Department of Commerce had recently filed for federal registration of the USPTO’s marks with the USPTO.  It appears the reason for doing so after so many years is based on the increase in misleading solicitations and trademark filing scams.  Simply put, the USPTO wants to be able to take legal action against scammers who impersonate it.

trademark brandind advertising copyright conceptIngesting humor into the blog, the USPTO said, “We recognize the intrigue and irony of filing for federal registration of the USPTO marks…with the USPTO. It’s a big reason why the Department of Commerce is filing the application on our behalf, just as it has for its other bureaus.”  Federal agencies that own federal trademark registrations apparently include the Internal Revenue Service, the Environmental Protection Agency, the Food and Drug Administration, the Federal Aviation Administration, the National Aeronautics and Space Administration, the National Oceanic and Atmospheric Administration, the Department of Homeland Security, the National Park Service, and branches of the U.S. military.

As the blog summarizes, “We firmly believe that it’s never too late to do the right thing, and doing everything within our power to protect our trademark customers is the right thing.”

In a recent precedential decision, the TTAB confronted the issue of timeliness of discovery requests served in opposition and cancellation proceedings—namely, whether Eastern Standard Time (EST) controls the timeliness of service of such discovery requests, regardless of the geographic location of the serving party.  While not a particularly exciting legal issue, it is no doubt one having ramifications for all TTAB practitioners.

In Island, LLC v. JBX Pty. Ltd., Defendant JBX argued Plaintiff Island’s discovery requests were untimely because Island served the requests after midnight EST on the last day for written discovery.  Island disputed JBX’s claim, arguing it timely served the discovery requests from California before midnight Pacific Standard Time (PST).

Under applicable Board Rules, parties must serve discovery requests in sufficient time to require responses before the close of discovery.  37 CFR § 2.120(a)(3).  In this case, discovery closed on January 2, 2021.  Because the answering party receives 30 days to respond to discovery requests, Island needed to serve its discovery requests on or before December 3, 2020.

Island served its discovery requests from California via email on December 3rd, at 11:43 PM PST, or 2:43 AM EST on December 4th JBX’s time.  JBX objected to the timeliness of the discovery requests and Island filed a motion to compel.

Eastern Time governs documents filed with the USPTO.  See 37 CFR § 2.195(a).  See also TBMP § 109.  The TTAB, however, noted that neither Rule § 2.195(a) nor TBMP § 109 reference an Eastern Time deadline, or any other time zone issue in the context of documents that are served between or among the parties, but that are not filed with the TTAB.  [Opinion, at p. 4].  For discovery, timeliness is determined on when a document is served, not when it is received.  37 CFR § 2.120(a)(3).

Trademark Rule 2.119, which governs the requirements for service, does not state whether a specific time zone controls the timeliness of service or whether timeliness is based on the serving party or the receiving party.  37 CFR § 2.119.  The TTAB, however, concluded that a review of its practice demonstrates that the date of service is determined in terms of when the document is transmitted for service.  [Opinion, at p. 5].  “In particular, ‘[w]henever a party to an inter partes proceeding before the [TTAB] is required to take some action within a prescribed period of time after the service of a submission upon that party by another party to the proceeding, and the submission is served by first-class mail, Priority Mail Express®, or overnight courier, the date of mailing or of delivery to the overnight courier will be considered the date of service.’”  TBMP § 113.05.

The TTAB further noted that it also permits a party who, because of a technical problem or extraordinary circumstances cannot serve discovery by email, to serve its discovery by a manner described in Trademark Rules 2.119(b)(1)-(b)(4).  37 CFR § 2.119(b)(1)-(b)(4).  See also TBMP § 403.02.  Thus, a party who meets the requirements to serve discovery requests by, for example, overnight courier will have timely served its discovery requests if it delivers them to the overnight courier thirty-one days before the close of discovery. [Opinion, at p. 6]. “And this is so even though the responding party would receive the discovery requests thirty (rather than thirty-one) days before the close of discovery.”  [Id.].  The answering party’s responses are still due based on the date of service, even though it does not receive the benefit of additional time to respond due to the manner of service.

Based on this analysis, the TTAB concluded that the date of service is to be based on when the document in question is submitted for transmission of service.  [Id.].  Island served its discovery requests by email from California.  Thus, the time zone in California applied to determine the timeliness of service of the discovery requests.  Because Island served the requests on December 3rd before midnight PST, the TTAB concluded Island timely served the discovery requests.  [Id.].

The case is Island, LLC v. JBX Pty. Ltd., 2021 USPQ2d 779 (TTAB 2021) (precedential).

Throughout this summer, the United States Patent and Trademark Office (USPTO) is offering its series of virtual webinars dubbed “Trademark Basics Boot Camp.”  The series appears to be tailored to small business owners and entrepreneurs and is broken up into eight modules focused on discrete topics.  Registration for the upcoming modules listed below, as well as access to other past and future modules, is available here.

The USPTO is also offering a separate upcoming event geared toward the restaurant industry.  The free two-hour virtual event, titled “Don’t burn your brand: intellectual property for restaurants,” is set for July 19.  It will include an overview of trademarks, patents, copyrights, and trade secrets in the food-service industry and will cover topics ranging from trademark basics to choosing, filing, and registering trademarks.  Registration for the event is available here.

Don’t miss these opportunities for free information and advice on trademarks and other intellectual property – valuable ways to protect and promote your brand – from the USPTO itself.

For the first time in nearly three years, the USPTO will be adjusting its fees for Trademark Registrations and for filing fees related to proceedings involving the Trademark Trial and Appeal Board (TTAB). Some fee increases are minimal (e.g., only about 10% increase to file an ex parte appeal). However, other fee increases are substantial, at least one fee increasing by 250%. In addition, the USPTO has added a variety of new fees for various actions.

Notable increases or new fees include:

  • The TEAS Standard Filing Option (used to file an initial application for a trademark) will increase from $275 to $350.
  • The filing a section 8 or 71 declaration (post registration) will increase from $125 per class to $225 per class.
  • A new fee for deleting goods, services, and/or classes from a registration will be added and cost $250 per class.
  • Petitions to the Director will increase from $100 to $250.
  • A new fee for letters of protest to the Director will be added and cost $50.
  • Petitions to the TTAB to cancel a mark as well as Notices of Opposition will increase from $400 per class to $600 per class.
  • A new fee to file appeal briefs in an ex parte appeal will be added and now cost $200 per class.
  • A new fee to request an oral hearing with the TTAB will be added and now cost $500 per proceeding.

These fee changes and others become effective January 2, 2021. Thus, to save some on your legal fees it is best to address your trademark issues sooner than later. Remember, Hindsight is 2020.

Our colleague, Melissa Scott, recently wrote an alert on an opinion from the Ninth Circuit Court of Appeals about access to attorneys’ fees in copyright infringement cases.  The underlying copyright dispute in Doc’s Dream, LLC, v. Dolores Press, Inc., et al. related to the video recordings of a deceased minister’s sermons, but the significant holding relates to the fee-shifting provision in the Copyright Act.

34126235 - copyrightThe district court held that attorneys’ fees were not available to the accused infringer for the declaratory judgment claim on which it was granted summary judgment because the claim did not require construction of the Copyright Act.  The Ninth Circuit reversed, holding that the Copyright Act expressly allows for a discretionary award of attorney’s fees in “any civil action under this title” and that the request for declaratory relief raised multiple aspects of, and invoked, the Copyright Act.  Melissa notes two takeaways from the Ninth Circuit’s holdings:

  • The fee-shifting provision of Section 505 applies to “any civil action under” the Copyright Act.
  • Any action that “turns on the existence of a valid copyright and whether that copyright has been infringed” sufficiently invokes the Copyright Act as to allow for the discretionary award of attorneys’ fees.

For a full summary of the case and holdings, read Melissa’s alert here.