Advertising & Marketing

Fast food (hamburger fries and drink) illustrationFollowing upon on my earlier blog post about the Food & Drug Administration’s (“FDA”) menu labeling rule, which implements the nutrition labeling provisions of the Patient Protection and Affordable Care Act of 2010, the FDA recently released new supplemental guidance in advance of the current compliance deadline in May 2018.  This new guidance is meant to address concerns regarding implementation of the menu labeling rule and is open for public comment until early January 2018.  The FDA cautions that its guidance is not binding and is merely meant to represent the FDA’s current thinking on the issue.  For a more detailed discussion of the menu labeling rule and its impact, take a look at my colleague Alexander S. Radus’ recent post on the firm’s Franchise Law Update blog.

 

Pet products are subject to advertising, labeling, and safety-related laws and regulations just like any human product.  For an update on the Food & Drug Administration’s guidance on the compounding of animal drugs from bulk drug substances and the labeling of pet medications, see Nancy Halpern’s recent blog post on Fox Rothschild’s Animal Law blog.  For more information on the FDA’s regulation of pet and veterinary products, see the FDA’s website.

Last month, a journalism collective called the Fourth Estate Public Benefit Corp. (“Fourth Estate”) petitioned the United States Supreme Court to review a decision issued by the Eleventh Circuit involving the question of when a copyright holder can properly file a copyright infringement lawsuit.  At issue is 17 U.S.C. § 411(a), which states that “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.”  Although copyright holders obtain copyright protection immediately upon the creation of a copyrightable work, copyright holders cannot initiate a lawsuit without satisfying the “registration” requirement set forth in 17 U.S.C. § 411(a).  According to a Copyright Office circular, this means that “registration (or refusal) is necessary to enforce the exclusive right of copyright through litigation.”

34126235 - copyrightHowever, the Circuit Courts are split as to whether “registration” as used in 17 U.S.C. § 411(a) includes the mere filing of a registration application or whether it requires that the Copyright Office have actually approved or denied the registration application.  Earlier this year, the Eleventh Circuit held in Fourth Estate Public Benefit Corp. v. Wall-Street.com that “registration” requires the latter.  Because Fourth Estate had applied for copyrights that had not yet been decided upon by the Copyright Office, the Eleventh Circuit held that Fourth Estate could not properly bring its copyright infringement lawsuit against Wall-Street.com, a news website that Fourth Estate claims kept its news stories live after Fourth Estate’s membership was cancelled.  Therefore, the Eleventh Circuit affirmed the lower court’s dismissal of Fourth Estate’s complaint.

Now, Fourth Estate asks the Supreme Court to weigh in, reverse the Eleventh Circuit’s decision, and resolve the dispute amongst the Circuit Courts.  In the event the Supreme Court hears the case, copyright holders will finally obtain clarity as to whether they may file suit merely after filing an application for a copyright registration.  On the other hand, if the Supreme Court declines to hear the case, copyright holders will be forced to continue to evaluate which courts are, or may be, favorable on the issue.  If copyright holders are stuck with filing in an unfavorable court, they must evaluate the risks of waiting to file a lawsuit (and potentially paying for an expedited registration) or of jeopardizing dismissal of their complaint.

On November 1, 2017, the Supreme Court distributed the case for conference on November 21, 2017.  After that conference, we should know whether the Supreme Court has granted certiorari, and will thus hear the case, or whether the Circuit Court split will remain for the foreseeable future.

Last month, the Food & Drug Administration (“FDA”) sent a lengthy warning letter to Nashoba Brook Bakery, a bakery based in Massachusetts, identifying a number of alleged violations of food regulations and labeling regulations.  One such allegation was that the bakery’s Nashoba Granola product improperly listed “love” as an ingredient on its label.  Specifically, the FDA alleged, “Your Nashoba Granola label lists ingredient ‘Love’.  Ingredients required to be declared on the label or labeling of food must be listed by their common or usual name [21 CFR 101.4(a)(1).  ‘Love’ is not a common or usual name of an ingredient, and is considered to be intervening material because it is not part of the common or usual name of the ingredient.”

The FDA’s love-related allegation has garnered some press both locally and nationally and is a good reminder regarding labeling regulations and the FDA’s enforcement authority.  Other FDA warning letters can be found here.

 

 

The attendance of a multi-day concert/festival in the desert seems to be a right of passage for millennials with events popping up all over the country. However, are you permitted to utilize the goodwill associated with those events to create your own event? The U.S. District Court for the Central District of California (Court) held that a company could not do so in granting a preliminary injunction in Coachella Music Festival, LLC and Goldenvoice, LLC v. Robert Trevor Simms.

Robert Trevor Simms (Simms) purported to create a film festival known as FILMCHELLA. Prior to filing for the injunction, Coachella Music Festival, LLC and Goldenvoice, LLC (collectively, Coachella) sent numerous cease and desist letters to Simms demanding that Simms change its name with no success. As such, Coachella was forced to file for a preliminary injunction to prevent Simms from using the terms, “Filmchella”, “Coachella for Movies” and “Coachella Film Festival” due to alleged trademark infringement. Coachella argued that Simms’ use of these terms will cause consumer confusion, dilution of its marks and other irreparable harm.

Generally, a claimant must fulfill the four-pronged test to allow a court to grant a preliminary injunction in its favor. Specifically, the moving party must establish that: (1) it has a likelihood of success on the merits of the underlying case, (2) it is likely to suffer irreparable harm if no action is taken, (3) the balance of inequities shifts in the favor of the moving party, and (4) an injunction is in the public interest. Here, the Court took a slightly different approach and used a sliding scale approach.

In granting the preliminary injunction, the Court noted that even if a moving party cannot fulfill the first prong of the test, a Court may decide that the moving party has sustained its burden if the moving party can show the balance of hardships shifts sharply in its favor of the moving party and the remaining two prongs of the test also weigh in its favor.

In examining whether Coachella had sustained its burden to obtain a preliminary injunction, the Court first examined the merits of the trademark infringement claim. Here, the Court determined that a protectable interest existed through Coachella’s trademark registrations for COACHELLA and CHELLA. Second, the Court held that the likelihood of confusion inquiry weighed in Coachella’s favor because both events are designed to be artistic, multi-day festivals; Coachella’s marks are widely known and strong; and using the suffix CHELLA is likely to confuse consumers as to the affiliation with Coachella. However, Coachella failed to demonstrate that it is likely to succeed on the merits of the underlying claim because the two events are focused on different mediums of entertainment; the marks look and sound different; no actual confusion has been demonstrated; Coachella failed to submit concrete evidence that the two events compete with one another; and Simms’ lacked the intent to confuse consumers. As such, Coachella is required to demonstrate that it fulfills the “shifts sharply” rule in its favor.

In this case, the Court held that Coachella sustained its burden. First, Simms’ event occurred prior to the issuance of this order so the potential injury to Simms is greatly decreased. Further, the issuance of this order does not prohibit Simms’ from conducting other film festivals under a different name. Additionally, Simms’ continued use of the potentially infringing mark is likely to cause serious, irreparable harm to Coachella with respect to potential damage to its reputation and dilution of its trademarks. Lastly, it is in the public interest to grant this injunction to prevent potential customer confusion. As such, the Court held that Coachella sustained its burden and granted the preliminary injunction.

What this decision demonstrates is a court’s willingness to grant a preliminary injunction despite a moving party failing to show a likelihood of success on the merits of the underlying claim. This is a big win for large companies seeking to protect their brands. It’s a hit to the little guys trying to make a name for themselves. Time will tell how far future courts will take this ruling, and what facts will support a determination that the balance of hardships “shifts sharply” in favor of the moving party.

The Federal Trade Commission (“FTC”) operates a single National Do Not Call Registry at donotcall.gov for both personal land lines and cell phones.  Although the FTC notes that the Federal Communications Commission (“FCC”) regulations prohibit telemarketers from utilizing automated dialers to call cell phone numbers without a consumer’s prior consent, the FTC allows consumers to “register” cell phone numbers (in addition to land line numbers) on the Registry in order to notify telemarketers that they don’t want to receive unsolicited telemarketing calls.  Once a consumer registers a particular number, it will stay on the Registry until the consumer cancels the registration or discontinues service for that number.

If a consumer receives an unwanted sales call after more than 31 days have passed since placing a number on the Registry, the FTC encourages reporting that call.  However, the FTC notes that the Registry only prohibit sales calls, meaning that companies may still make certain calls like political calls, charitable calls, debt collection calls, informational calls, and telephone survey calls.  In addition, companies may make a sales call to a consumer if they have recently done business with the consumer or received written permission from the consumer.

In light of developing technology, the FTC has seen an increase in the last several years of illegal sales calls, particularly calls with pre-recorded messages and fake caller ID information known as “robocalls.”  The FTC prohibits robocalls that promote the sale of any good or service.  However, the FTC notes that certain pre-recorded messages are permitted — e.g. purely informational calls, political calls, calls from certain health care providers, calls related to collecting a debt, and calls made by banks, telephone carriers, and charities.

To combat illegal sales calls and robocalls, the FTC reports that it has sued hundreds of companies/individuals and obtained over a billion dollars, is coordinating with law enforcement and industry groups, and is pursuing the development of technology-based solutions.  According to the FTC, companies that violate the Registry or conduct an illegal robocall may be fined up to $40,654 per call.  Thus, companies should always make sure to follow proper procedures when making sales calls, particularly pre-recorded sales calls, to consumers.

The U.S. Food and Drug Administration (“FDA”) regulates dietary supplements as food, not as drugs.  In general, dietary supplements are taken orally and contain a dietary ingredient such as a vitamin, mineral, amino acid, herb, botanical, or other substance used to supplement the diet.  The FDA warns consumers that dietary supplements may be harmful, may contain hidden or deceptively-labeled ingredients, and are not intended to treat, diagnose, cure, or alleviate the effects of any disease.  In fact, the FDA has recalled numerous products containing potentially harmful ingredients.

Although federal law requires that dietary supplements be labeled as such (either as a “dietary supplement” or with “[ingredient description] supplement”) and that products be labeled correctly and advertised fairly, the FDA does not pre-approve dietary supplements or require that they be proven safe before they are marketed and sold.  Nor does the Federal Trade Commission (“FTC”) pre-approve any advertising related to dietary supplements.  As a result, there is no requirement that manufacturers/sellers prove that their products are safe or that all advertising claims are accurate before they market or sell the products.  Instead, it is the company’s responsibility to ensure product safety and truthful advertising, and the FDA and FTC only get involved after such products have already entered the market—with the FDA regulating safety issues and the FTC regulating advertising issues.

To bolster its ability to regulate such safety issues, the FDA requires that sellers of dietary supplements report any serious adverse events reported by consumers or health care professionals within 15 days of receipt and that the FDA monitor and investigate those reports.  Likewise, the FDA monitors and investigates any adverse event voluntarily reported by consumers or health care professionals and encourages such voluntary reports to be made directly to the FDA as soon as possible.

As always, manufacturers/sellers of dietary supplements should make sure that their products are safe, properly labeled, and advertised truthfully.  In addition, companies should make sure to report any serious adverse events to the FDA within the required time frame.

Moonlight Slumber, LLC, an Illinois company that advertised its baby mattresses as “organic,” has agreed to settle FTC charges that it misrepresented or could not support these and other claims to consumers.

The FTC’s administrative complaint alleged that in marketing and advertising its baby mattresses, Moonlight Slumber misrepresented a range of claims on its website and in its packaging.  For example, the complaint charged the company represented that two of its lines of its mattresses are “organic.”  According to the FTC, however, very little of the mattresses were made from organic material.

The proposed settlement order prohibits Moonlight Slumber from making misleading misleading representations regarding whether any mattress, blanket, pillow, pad, foam-containing product, or sleep-related product is “organic,” “natural,” or “plant-based,” among other things.  The order also requires the company to have competent and reliable evidence, including scientific evidence when appropriate, to support any claims in these areas.

This is the FTC’s first case challenging “organic” product claims, and could be a signal that more are to come.  Companies using this language to market or promote their products should take note and ensure that they can support any such claims.

Fast food (hamburger fries and drink) illustrationAdvertising comes in many forms. Although menu labeling requirements may not seem like a traditional form of advertising, menus are consumer-facing and undoubtedly contain information that affect consumer purchasing decisions. Thus, it’s important for affected companies and their advertising departments to be aware of menu labeling rules and requirements and to ensure timely compliance.

For a recent discussion on the Food & Drug Administration’s menu labeling rule, which implements the nutrition labeling provisions of the Patient Protection and Affordable Care Act of 2010, and its extension of the date for restaurants and similar retail food establishments to comply, take a look at my colleague Alexander S. Radus’ recent post on the firm’s Franchise Law Update blog.

Also, for a related discussion on the FDA’s changes to the Nutrition Facts label required for packaged foods, see my earlier post on this blog.

Customer feedback is a two-way street.  On the one hand, positive customers reviews can inspire trust in potential new customers who might otherwise be apprehensive about purchasing products or services from an unfamiliar company.  Negative reviews, on the other hand, typically have the opposite effect.  As such, businesses may be tempted to stifle or “bury” negative customer feedback in order to preserve their reputation.  Businesses that engage in such complaint suppression tactics, however, run the risk attracting the ire of federal enforcement agencies.

For example, just last week, a federal court ruled that the Federal Trade Commission (“FTC”) is likely to prevail in its case against World Patent Marketing, Inc. (“WPM”), a business that has marketed and sold research, patenting, and invention-promotion services to consumers since 2014.  According to the FTC, WPM intimidated and threatened customers to prevent them from complaining and to compel them to retract complaints, often through cease and desist letters from WPM’s lawyers frivolously insisting that such conduct constitutes unlawful defamation or even criminal extortion.

The court agreed with the FTC that WPM’s tactics likely violate Section 5(a) of the FTC Act, which proscribes any unfair act or practice that “is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.”  The court explained that complaint-suppression tactics like those employed by WPM cause substantial consumer injury “because they serve to limit the flow of truthful information” about the quality of a business’s services to prospective consumers, making it “nearly impossible for consumers to make informed decisions.”

The court also found that there are no countervailing benefits to such tactics, as “existing customers do not benefit from having their complaints suppressed and prospective consumers do not benefit from being denied access to material information.”  To the contrary, suppressing customer complaints in this manner permitted WPM  “to hinder competition and harm legitimate competitors in the marketplace.”

This case highlights a need for businesses to take special care when responding to customer complaints and negative online reviews.  However damaging a bad Yelp review may be for your business, getting sued by the federal government is certainly worse.