General Advertising Industry News & Updates

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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.

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.

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.

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…

An interesting case has recently been filed in the United States District Court for the Northern District of Illinois regarding the advertisement of e-cigarette liquids in flavors that seem to be directed to children under the age of 18. Here, Wm. Wrigley Jr. Company (“Wrigley”) has filed a lawsuit against Chi-Town Vapers LLC (“Chi-Town”) due to Chi-Town’s use of certain trademarks and trade dress owned by Wrigley.

little boy and dog makes a bubble from chewing gumWrigley is the producer of certain candy products, including gum and mints, and has marketed its products to consumers under certain names, including DOUBLEMINT and JUICY FRUIT. Wrigley owns several federal trademark registrations under each name for use in connection with confectionery products and certain other classes of goods. The instant lawsuit stems from Chi-Town’s sale of e-cigarette liquids under the names “Double Mint” and “Joosy Fruit”. Chi-Town has marketed its product in a way that resembles a chewing gum container. Specifically, for the “Double Mint” flavor, Chi-Town uses the same green box and double arrow design that is used in connection with DOUBLEMINT gum. For the “Joosy Fruit” flavor, Chi-Town uses the same yellow box and double arrow design that is used in connection with JUICY FRUIT gum.

Wrigley’s lawsuit first claims that Chi-Town has committed federal trademark infringement and federal trademark dilution because the acts of copying the color scheme and double arrow design are likely to cause confusion among consumers and dilute the distinctive nature of its marks. Second, Wrigley claims that Chi-Town has violated federal and common law unfair competition laws by Chi-Town’s willful acts to copy Wrigley’s trademarks and trade dress. Lastly, Wrigley claims that Chi-Town has violated the Illinois Uniform Unfair Deceptive Trade Practices Act by misleading the public as to the source or origin of its products by copying Wrigley’s trade dress.

What is most interesting is the fact that Wrigley directly references the Food and Drug Administration’s concern over the advertising of e-cigarettes in its complaint. The result of this lawsuit will be telling for the development of future advertising standards when a company shows a concerted effort to market its adult products at children using names associated with “kid-friendly” items. While it may be a marketing strategy to draw upon the nostalgia of adults in marketing products, the court may determine that there is a line that cannot be crossed.

On May 20, 2016, the Food and Drug Administration (“FDA”) announced new changes to the Nutrition Facts label required for packaged foods.  The FDA’s intent was to create a new label that would make it easier for consumer to make informed food choices and would reflect new scientific information, such as the link between a consumer’s diet and chronic diseases (e.g. obesity and heart disease).

The FDA set the original compliance deadline for the new Nutrition Facts label as July 26, 2018, with an additional year for small businesses (manufacturers with food sales of less than $10 million annually).  However, on June 13, 2017, following industry and consumer group feedback, the FDA announced that it intended to extend the original compliance deadline so that it could provide manufacturers with necessary guidance, allow manufacturers additional time to complete and print new labels for their products, and minimize the period during which consumers will see both labels in the marketplace.  The FDA has not yet indicated what the new compliance deadline will be, but industry and consumer groups will certainly be watching closely.

Detailed information regarding the new Nutrition Facts label and the FDA’s changes are available on the FDA’s website.  In addition, the FDA has developed a side-by-side comparison of the original Nutrition Facts label and the new Nutrition Facts label, making the FDA’s changes easy to spot.  For example, certain items of information–“servings per container,” “serving size,” and “calories”–will now appear in bigger and/or bolder font.  In addition, the FDA is requiring that “serving size” be updated to more realistically reflect the amount of food customarily eaten at one time, that certain changes be made for certain size packages, and that “daily values” be updated to reflect new scientific evidence.  The FDA is also requiring the addition or removal of certain items of information.  For example, in light of scientific research indicating that the type of fat is more important than the amount, the FDA has removed “calories from fat” from the label entirely.  The FDA has also removed “vitamin A” and “vitamin C” but has added “vitamin D” and “potassium” in recognition of research indicating that the lack of such nutrients is associated with increased risk of chronic disease and is requiring that manufacturers now declare the actual amount of the four required vitamins/minerals in addition to their “daily value.”  As another addition, the FDA is now requiring “added sugars” be declared directly beneath the “total sugars” listing.  The FDA has also modified the list of required nutrients that must be declared at the bottom of the Nutrition Facts label and has updated the footnote to better explain the meaning of “daily value.”

After 20 years with the current Nutrition Facts label, the FDA has determined that change is in order.  How soon that change will ultimately take effect is yet to be determined.

 

When done correctly, sweepstakes and prize contests can be an effective tool for building brand awareness and gaining customers.  However, businesses that fail to abide by applicable statutes and regulations when using these promotional devices can suffer disastrous consequences, including civil enforcement actions, government inquiries, or even criminal penalties.

For instance, earlier this month, the Federal Trade Commission (FTC) announced it had sent more than $532,000 in restitution payments to victims of a vacation prize scheme.  The scheme, conducted primarily by VGC Corp. of America between 2008 and 2011, involved a promotion offering expensive vacation packages to callers who correctly answered a simple trivia question.  All callers (regardless of whether they answered correctly) were told they had won the vacation package but had to pay an “administrative fee” before they could collect.  Callers were later informed of several limitations and restrictions to the offer, but only after they had already paid between $200 and $400 in fees.

This case serves as a reminder of the need for businesses that implement these kinds of marketing tactics to have at least a basic understanding of the statutory and regulatory framework.  A number of federal laws require that certain disclosures be “clear and conspicuous” in contest promotions, including but not limited to all rules and conditions of the promotion and the odds of winning any given prize.

Additional regulations may apply depending on the particular type of contest or giveaway at issue.  Promotions in which prizes are awarded to members of the public on the basis of skill or knowledge (“skill contests”), or where the gift or prize is available to all recipients who respond according to the companies’ instructions (“premium offers”), can typically require payment in order to participate.  However, promotions that award prizes to consumers by pure chance (“sweepstakes”) cannot require payment of any kind, as whenever a sweepstakes-style contest requires a payment, it risks crossing the line into an illegal lottery.

Any businesses considering implementing these kinds of promotional devices should take the time to understand these distinctions and abide by all disclosure requirements.  If the past is any indication, the FTC and other federal agencies will continue their strict enforcement of these rules.