Advertising & Marketing

Made in the USA Banner
Copyright: lifeking / 123RF Stock Photo

In the last two months, the Federal Trade Commission (“FTC”) has reached two settlements related to complaints it initiated against companies regarding “Made in the USA” advertising claims.

First, in February, the FTC announced that it had reached a settlement with a Georgia-based water filtration systems company named iSpring Water Systems, LLC.  According to the FTC, iSpring advertised its water filtration systems on its website and through third parties as “Built in USA” (and other similar claims).  The FTC found such advertising false or misleading because the water filtration systems were either entirely imported or contained significant parts that had been imported, thus violating the FTC’s long-standing requirement that “all or virtually all” of the product be made in the USA in order to be advertised as such.  The settlement allows iSpring to make certain qualified claims, with a clear and conspicuous disclosure, but prohibits iSpring from advertising contrary to the FTC’s “all or virtually all” requirement.  More information regarding the settlement is available on the FTC’s blog.

Second, earlier this month, the FTC announced that it had reached a settlement with a Texas-based pulley company named Block Division, Inc.  According to the FTC, Block Division advertised its pulleys in various media using “Made in USA” text and graphics.  The FTC found such advertising misleading given that the pulleys had significant and essential parts that had been imported.  Further, some of the pulleys contained steel plates stamped as “Made in USA” before they were imported.  The settlement allows Block Division to make certain qualified claims, again with a clear and conspicuous disclosure, but prohibits Block Division from advertising contrary to the FTC’s “all or virtually all” requirement.  More information regarding the settlement is available on the FTC’s blog.

Both of these FTC actions and resulting settlements demonstrate that the FTC takes “Made in the USA” claims seriously and will enforce its requirements regarding such advertising.  A prior blog post outlines those requirements in more detail.

In December 2016, the Consumer Review Fairness Act became law. On February 21, 2017, the FTC published guidance for businesses in following the new law. The law protects the consumer’s right to express and share his or her honest review of a company or its products, even if the review is negative. To accomplish this, the law targets contractual provisions used by companies to stifle negative reviews. The law specifically prohibits any such provisions, whether in online terms and conditions or in some other contract.

18572446 - stylized illustration of somone with a hood gesturing symbol of silence with finger on lips

The law makes it illegal for a company to use a contract provision in a “form contract” that:

  1. Prohibits or restricts the ability of an individual who is a party to the contract to review the company’s products, services, or conduct;
  2. Imposes a penalty or a fee against an individual giving a review; or
  3. Requires individuals to give up their intellectual property rights in the content of their review.

The law provides that any such provisions in a form contract are void, barring some specific exceptions. The law also exposes companies using prohibited contractual provisions to FTC enforcement actions, including potential financial penalties.

To ensure compliance and avoid enforcement actions, the FTC recommends that businesses: (1) “review their form contracts and online terms and conditions; and (2) remove any provision that restricts people from sharing their honest reviews, penalizes those who do, or claims copyright over people’s reviews (even if you’ve never third to enforce it or have no intention of enforcing it.)”

As stated by the FTC: “The wisest policy: Let people speak honestly about your products and their experience with your company.”

In April 2016, the FTC filed a Complaint against Dr. Joseph Mercola and his companies alleging that their indoor tanning system advertisements violated section 5(a) of the FTC Act, which prohibits unfair or deceptive practices in commerce, and section 12(a) of the FTC Act, which prohibits the dissemination of false advertisements in commerce for the purpose of inducing the purchase of foods, drugs, devices, services, or cosmetics.  According to the FTC, indoor tanning systems qualify as “devices” under the FTC Act.

tanning bed
Copyright: kzenon / 123RF Stock Photo

In its Complaint, the FTC alleged that the defendants disseminated a number of false, misleading, deceptive, and unsubstantiated advertisements on the Mercola.com website, in search engine advertising, in a YouTube video of Dr. Mercola himself, and via newsletters.  Such advertisements include:

  • Tanning with Mercola brand indoor tanning systems is safe;
  • Tanning with Mercola brand indoor tanning systems will not increase the risk of skin cancer as long as consumers top using the system when their skin is only the slightest shade of pink and not burned;
  • Tanning with Mercola brand indoor tanning systems does not increase the risk of skin cancer, including melanoma skin cancer;
  • Tanning with Mercola brand indoor tanning systems reduces the risk of skin cancer;
  • The FDA has endorsed the use of indoor tanning systems as safe;
  • Research proves that indoor tanning systems do not increase the risk of melanoma skin cancer;
  • Certain Mercola brand tanning systems will pull collagen back to the surface of the skin, increase elastin and other enzymes that support the skin, fill in lines and wrinkles, and reverse the appearance of aging;
  • Tanning with Mercola brand tanning systems provides various benefits to consumers, including increasing Vitamin D and providing Vitamin D-related health benefits; and
  • The Vitamin D Council recommends Mercola brand tanning systems (without disclosing that the defendants arranged for the Vitamin D Council to be compensated for its endorsement).

Today, the FTC announced that, as a result of a settlement agreement reached with Dr. Mercola and its companies, the FTC is mailing $2.59 million in refunds to more than 1,300 purchasers of Mercola indoor tanning systems. According to the FTC, the average refund check is $1,897.  Additionally, under the settlement agreement, the defendants are banned from selling indoor tanning systems in the future.

More information regarding the FTC’s views on indoor tanning advertising can be found on the FTC’s website and blog.  According to the FTC, no government agency recommends indoor tanning and the FDA requires indoor tanning equipment to contain signs warning users of the risk of cancer.  In addition, the FTC actively investigates false, misleading, and deceptive advertisements related to indoor tanning.

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.

What comes to mind when you hear the term “LifeProof”? Does it immediately make you think of something that protects from all of life’s hazards or does it merely suggest that something can withstand various accidents? That is what the Ninth Circuit in California is deciding in Seal Shield LLC v. Otter Products LLC, et. al. after hearing oral arguments on the topic in January. The issues central to the case hammer home the importance of using your trademarks in the right way—as a trademark identifying a brand—or a source—and not as term that merely describes the product.

In this case, Seal Shield and Otter Products both claim rights to the same term—LIFEPROOF. Seal Shield argues that it was the first to use it, so it should have the rights. Otter Products counters and argues that Seal Shield did not use it in the right way—that Seal Shield only used it to describe the product and not as a trademark.

Copyright: 91foto / 123RF Stock Photo
Copyright: 91foto / 123RF Stock Photo

Seal Shield sued Otter Products and TreeFrog Developments (which was acquired by Otter Products) after TreeFrog Developments obtained a federal trademark for LIFEPROOF in 2010. Seal Shield brought a suit in 2013 and argued that it had senior rights to the name LIFEPROOF and requested that the court cancel Otter Products’ trademark as a matter of law. In ruling in favor of Otter Products, the district court held that as a matter of law Seal Shield did not have proprietary rights to the LIFEPROOF name because the way Seal Shield used the name (as a tagline or slogan with its Klear Kase protective cases) was merely descriptive.

Seal Shield appealed the district court decision arguing that its use of LIFEPROOF is not merely descriptive but is suggestive. Specifically, Seal Shield argued that LIFEPROOF falls short of explicitly describing the various features that are included under the mark LIFEPROOF and it takes a mental leap to associate the word LIFEPROOF with a protective case that protects from all of the elements and human error, meaning the mark is suggestive. Seal Shield also argued the mere fact that the USPTO granted TreeFrog Developments federal registration of LIFEPROOF demonstrates that such mark is protectable.

For its part, in addition to a myriad of other arguments, Otter Products contends that Seal Shield’s use of the LIFEPROOF mark is merely descriptive and that it failed to show any consumer evidence of secondary meaning—such as a survey showing that consumers associate their use of LIFEPROOF with the goods of one maker rather than merely describing the product. And to address the seeming inconsistency, Otter Products contends that Seal Shield cannot rely on Otter Products’ federal registration as evidence that the mark LIFEPROOF is distinctive because, as Otter Products argues, it uses the mark as a trademark and not merely to describe the goods.

The court will rule on this appeal later this year. You may think it’s counter-intuitive for Otter Products to argue that Seal Shield’s use of the LIFEPROOF mark is merely descriptive while at the same time maintaining a federal registration for that same mark that is inherently distinctive and suggestive; however, this demonstrates that the way you use mark is a key component on whether a mark will obtain trademark protection.

The FTC recently cracked down on Breathometer, Inc., the maker of an app-supported smartphone breathalyzer, for false and deceptive advertising.

The advertised purpose of the product is to keep people safe—to let someone know when he/she has had too many to drive, and provide an estimate on when sobriety will return.  The device, which connects to an app on a smartphone, allows the user to blow into it and receive a blood-alcohol content reading on their phone.  The accuracy of the reading, however, is in dispute – and it appears the advertisements may have overstated the accuracy of the BAC reading.

In its advertising, Breathometer touted “FDA registered, Law enforcement grade accuracy” and “‘police grade’ precision.”  The advertising went on to claim that the accuracy was proven by “government-lab grade testing.”  According to the FTC’s complaint, these claims were not supported, or outright false.  The FTC alleged that the product was not adequately tested for accuracy and that the company was aware that the device regularly understated users’ BAC – in other words, informing drunk people that they were sober to drive.

Now a settlement with the FTC has imposed strict restrictions on the conduct of the company and its founder going forward.  The company and its founder are prohibited from making claims regarding the accuracy of the product without the support of specifically outlined testing demonstrating it “meets the accuracy specifications set for evidential breath alcohol testers that have been approved by the Department of Transportation.”  In fact, without such testing support, the company cannot advertise that the product detects BAC at all, and is prohibited from “re-enabling the Breathometer app’s breathalyzer functions” which were previously shut down.

In addition, the company must give a full refund to everyone who bought the product – wiping out approximately $5.1 million in revenues.  The company is required to specifically notify its customers by email of their right to a refund, and post refund information on its website.

Registering your brand name as a trademark domestically or internationally can be a long, confusing process involving obscure governmental agencies requiring various fees at seemingly random intervals. Some of these demands are legitimate (International Bureau of the World Intellectual Property Organization notification that payment of a 2nd part fee is due in Swiss francs): but many others are NOT (WPAT s.r.o. invoice for 2738$ “on or before”, 2798$ “after”).

These solicitations arrive because the process of registering a trademark creates a public record. This means that anyone who infringes a registered trademark is not allowed to complain they did not know about the trademark but it also lets potential scam artists know that you have a trademark you care enough about to spend money registering.

But be careful not to be misled by the flurry of official looking invoices! Like this one:

Don't pay this invoice!
Don’t pay this invoice!

The United States Patent and Trademark Office warns against such scams, listing a number of examples (the above image was taken from their website).

If you have hired a trademark attorney to register your brand name for you, you need never pay any of the invoices yourself. Trademark attorneys will pay the legitimate ones on your behalf. In the United States and in most other countries, legitimate communications will be directed only to the trademark attorney and not to the trademark owner. When in doubt, just forward the communication to your trademark attorney.

If you are trying to negotiate the process yourself or just want to be able to spot wrongdoers, here is our list of red flags:

  1. Who dd it come from? Scammers like to use slight deviations from the correct names of the legitimate agencies. For example instead of “The United States Patent and Trademark Office”, the notice will come from entities such as the “Trademark and Patent Office” or the “United States Trademark Registration Office”.
  2. Where dd it come from? The real United States Patent and Trademark Office is located in Alexandria, Virginia. Beware of solicitations directing funds be sent to an address in New York or Philadelphia Pennsylvania. And, especially not Slovakia!
  3. Read the fine print. Some of the communications helpfully state that they are not legitimate (in a tiny difficult-to-read font, embedded in the middle of a long paragraph with otherwise unalarming factual information): “THIS PUBLICATION IS AN ELECTIVE SERVICE WHICH NEITHER SUBSTITUTE THE REGISTRATION NOR PROLONGS THE VALIDITY OF THIS TRADEMARK OR PATENT WITH U.S.P.T.O.”
  4. Watch the grammar! Typos, grammar and spelling errors are common in these types of scams. See the example in our red flag number 3…
  5. Check the website address. The real United States Patent and Trademark Office operates from the address USPTO.gov. Addresses such as patenttrademarkoffice.org, on the other hand, take you to a website that explains, in the “About Us” tab: “Headquartered in New York City, the Patent Trademark Office is the nation’s premier Trademark and Patent renewal service.” (ha!). Likewise, World Intellectual Property Organization (WIPO) operates from the address WIPO.int. Be suspicious of any address ending in a .com, .org or .us.
 Don’t fall prey to these confusing communications!

 

 

Sunscreen
Copyright: farakos / 123RF Stock Photo

Earlier this month, the Federal Trade Commission (“FTC”) issued a decision against California Naturel, Inc. related to its advertising of “all natural” sunscreen on both its website and the product packaging itself. On its website, California Naturel was not only advertising its sunscreen as “all natural” but was describing the sunscreen as containing “only the purest, most luxurious and effective ingredients found in nature.” The FTC found that this advertising conveyed that California Naturel’s sunscreen contains only ingredients that are found in nature.  But because California Naturel admitted that eight percent of its sunscreen formula consists of a synthetic ingredient, the FTC determined that California Naturel’s advertising constituted false and misleading advertising and that such advertising is likely to materially impact consumers’ purchasing decisions.

In response to California Naturel’s arguments, the FTC decided that the product’s ingredient list and the disclaimer on California Naturel’s website were insufficient to cure the deceptive advertising. With respect to the ingredient list, the FTC noted that the synthetic ingredient was buried within a list of over 30 ingredients and that nothing identified the ingredient at issue as synthetic. With respect to the website disclaimer, the FTC found that it was not prevalent enough given its location at the bottom of the website—particularly in contrast to the prevalence of the “all natural” advertising elsewhere on the website and on the product packaging itself.

Under its authority to issue a remedy for false and misleading advertising, the FTC issued an order prohibiting California Naturel from advertising its products as “all natural” or making other similar representations. More information about the FTC’s decision against California Naturel can be found here.

Ever been skeptical of symptom relief claims made by medicine made of things like crushed bees or poison ivy?  It seems you are not alone–the FTC is skeptical too, and a recent FTC announcement may leave marketers scrambling to change the claims made on homeopathic drugs.

Homeopathy, dating to the 1700s, is based on the theory that disease symptoms can be treated by minute doses of substances that produce similar symptoms when provided in larger doses to healthy people.  While many people believe in these remedies, the efficacy claims for these products are generally not supported by modern scientific methods and are generally not accepted by modern medical experts.

Last week, the FTC released an Enforcement Policy Statement on Marketing Claims for OTC Homeopathic Drugs.  In the statement, the FTC provided specific guidelines for marketing the efficacy of homeopathic remedies.  The FTC acknowledged it has historically not pursued many enforcement actions against homeopathic marketers, but stressed that the same rules apply to marketing homeopathic drugs as other health-related products, and indicated its lax enforcement may be a thing of the past.

Copyright: <a href='//www.123rf.com/profile_kerdkanno'>kerdkanno / 123RF Stock Photo</a>Generally, an advertiser is required to have adequate substantiation for any claim, but the substantiation that qualifies as “adequate” is more demanding for health-related claims.  For health-related claims, an advertiser must have “competent and reliable scientific evidence” to support the claim.  And for claims that a product can treat or prevent a disease or its symptoms, the FTC has required support in the form of well-designed human clinical testing.  This is a real problem for homeopathic drugs—most have absolutely no scientific support for their treatment claims (let alone the human clinical testing required).

So what is a marketer to do – how can you identify what the homeopathic drug supposedly treats without saying (expressly or implicitly) that it is effective at doing so?  After all, for the vast majority of homeopathic drugs, the case for efficacy is based solely on traditional homeopathic theories and there are no valid studies using current scientific methods showing the product’s efficacy.  So just making a treatment claim could violate the regulations.  The answer according to the FTC: disclaimer, disclaimer, disclaimer.

The FTC is recommending that homeopathic drug marketing include disclaimers that consist of at least two components: (1) a statement that there is no scientific evidence that the product works and (2) a statement that the treatment claims are based only on theories of homeopathy from the 1700s that are not accepted by most modern medical experts.  And it is not enough to put these disclaimers in the fine print.  As stated by the FTC any disclaimer “should stand out and be in close proximity to the efficacy message; to be effective, it may actually need to be incorporated into the efficacy message.”  The FTC also warns against marketers attempting to spin this into a positive; says the FTC: “Marketers should not undercut such qualifications with additional positive statements or consumer endorsements reinforcing a product’s efficacy.”

The FTC’s new guidance helps define clear rules and puts marketers on notice of the pitfalls of marketing homeopathic products.  If in doubt about whether a advertising message is misleading, consider consulting an attorney and obtaining consumer surveys to ensure the advertisement is clear and not misleading.

This week eight of the nine states voting on the issue said yes to cannabis decriminalization but the USPTO continues to say no.

Trademarkland takes a hard line against drugs, refusing to register any trademarks linked to cannabis. If anything, it has gotten even stricter on this issue over time. The law animating the USPTO, the federal Lanham Act, bars the registration of trademarks that are connected to “unlawful” uses.

While the USPTO seemed to invite companies to apply to register these types of trademarks in 2010 when it created a new trademark category: “processed plant matter for medicinal purposes, namely medical marijuana”, it quickly reversed course. Trademarks for marijuana, which is still illegal on the federal level (under the Controlled Substances Act), can’t be federally registered.

This summer the board overseeing the USPTO decided it could conclude from photographs submitted by a Washington dispensary that its “Herbal Access” trademark was being used for illegal services despite the fact that the owner never mentioned pot in his application. Then, a few weeks ago, the board issued another ruling refusing to register “JuJu Joints” as a trademark for marijuana vaporizers.

Trademarkland has jurisdiction over the entire United States but obeys its own set of rules.