AD-ttorneys@law – April 14, 2022

Alerts / April 14, 2022

In This Issue:

Trade Secret Case Unravels Unequal Fashion Partnership

Small designer Mrinalini accuses fashion giant Valentino of spying, stealing and worse

The Royal She

In high fashion, creative output is the whole game—for the individual designer as much as for an iconic fashion house.

That’s why Mrinalini’s complaint against the house of Valentino—filed last month in the Southern District of New York—represents more than your average copyright infringement and trade secret fracas. The accusations strike at the heart of Valentino’s identity—and should they prove to be unfounded or contrived, could do severe harm to Mrinalini’s reputation instead.

Some background: Mrinalini, Inc., is the brainchild of Mrinalini Kumari, its founder and leader. If it took some swagger to name her company after herself, her brief bio from her complaint against Valentino explains why. “Ms. Kumari, an Indian-American woman, started her business with hard work, and with talent and skill as fashion designer and entrepreneur,” she states. “Ms. Kumari has fought hard for most of her life to earn respect for herself and her business. Through her talents, she has worked with many of the biggest names in fashion.”

Remember that third person is the normal convention in a legal complaint. Ms. Kumari seems to have earned every inch of her self-confidence.

Funky Valentine

Her company’s accusations against storied fashion house Valentino are significant. In addition to the copyright and trade secret allegations, Mrinalini is suing for unjust enrichment, breach of contract, conversion and unfair competition under the Lanham Act and seeks monetary damages and injunctive relief.

Mrinalini claims to have worked with the house since 2006, and claims that since the “earliest days” of their relationship, “there have been many occasions where Valentino used and sold Mrinalini’s fabric designs that were wholly original to Mrinalini with no input from Valentino.” Worse yet, “Valentino has even taken complete, original dresses and other garments from Mrinalini, and has shown them publicly on fashion runways, falsely passing them off as if they were created by Valentino.”

The complaint feels personal, with a bitter edge. “Mrinalini’s work was good enough to present on a runway as if it came from an internationally-famous fashion designer, and yet Valentino gave Mrinalini no credit, no recognition, and no compensation.”

But what makes the case interesting from a legal perspective is that the suit isn’t just about the specific designs or pieces Mrinalini claims Valentino has stolen. It’s also about technique.

“Mrinalini pioneered sewing techniques like its ‘Intarsia’ technique,” the suit claims, “which is an intricate way to join several pieces of fabric into a rich and textured whole, elegant to meet the tastes of sophisticated clientele.” The new technique “resulted in materials not seen before in the industry, and it became heavily in demand in the high fashion world.”

Shortly after the company shared its results with Valentino, the house “thereafter changed many of its commercial and runway offerings to include Mrinalini’s Intarsia technique.”

The Takeaway

Here’s where the trade secret misappropriation claims kick in. Mrinalini claims that Valentino representatives “insisted on visiting a plant where authorized workers were using the technique. Valentino [sic] people insisted on videotaping the technique. Mrinalini raised concerns about this, but Valentino assured Mrinalini that it was not planning any misappropriation of the technique.”

Nonetheless, Mrinalini claims that Valentino shared the technique with others, including its competitors, and attempted to hire away Mrinalini employees who knew the technique in order to produce Intarsia-based designs without Mrinalini’s permission.

While designs and the techniques that make them possible are inseparable in the final product, they invoke different rules when it comes to liability. If you’re incorporating another company’s product into your offerings, you need to be vigilant about any attempt to reproduce the product on your own, or mimic any aspect of its manufacture, especially if the other company has been clear about the proprietary nature of the techniques. Despite the unfortunate videotaping incident, Mrinalini claims it took “reasonable measures” to protect the stitching secret—an important part of establishing its misappropriation claim.

We’ll be keeping an eye on the proceedings, but before we move on to the next subject, we would be remiss in failing to mention one remarkable accusation in the complaint.

“Over the years,” the complaint asserts, “the Valentino entities treated Mrinalini cavalierly, and often with disrespect – even contempt. So Mrinalini struggled over the years to do business with both Valentino entities and its employees. Valentino employees also had irregular and unprofessional practices including, but not limited to, demanding expensive gifts and sexual favors in exchange for business.”

While these practices don’t seem to be raised again in the complaint, they must be taken seriously.

Snack Dragon Launches Another Healthy, Tasteful Suit

Now it’s olive oil and buttery spreads, but the legal product remains the same

Heads, Never Fails

It’s like the coin flips in Tom Stoppard’s Rosencrantz and Guildenstern Are Dead: Our choice of consumer class action story always produces the same results.

We never choose cases to cover a dispute based on the counsel involved, but we keep picking cases featuring the Snack Dragon. You remember Snack Dragon—the incredibly hyperactive plaintiff’s counsel that brings an endless procession of class actions against consumer products companies?

Its cases aren’t all identical, but there’s a rough pattern to the whole: Claims that consumers paid a premium to purchase a product with the expectation of experiencing a taste that only natural ingredients could produce, and that the consumer was then disappointed to learn that the product’s taste deficiencies were the result of artificial, inferior or underrepresented ingredients.

The current case, Ledezma v. Upfield US Inc., adds health benefits to the mix, but it’s the same old story.

I Can’t Believe It’s Not Different

The defendant, Upfield, manufactures the most awkwardly phrased, yet enduring, brand name in spreads: I Can’t Believe It’s Not Butter! (Exclamation point included.) Seriously—can you imagine the reaction of Upfield’s legal department after marketing approved this name?

The product label contains numerous representations that are like chum in the water for counsel of Snack Dragon’s ilk. Everything from the name of the product itself to “‘Good Fats From Plant-Based Oils,’ ‘Contains Omega-3 ALA*,’ ‘Simple Ingredients,’ ‘45% Vegetable Oil Spread,’ the statement the Product is made ‘With Olive Oil,’ and a picture of two ripe olives with olive leaves and stems, across yellow and green packaging, representing the colors of butter and olives.”

From this packaging, the complaint alleges, consumers expect more than a negligible amount of olive oil to appear in the product. Nonetheless, “the ingredient list reveals the Product contains a de minimis amount of olive oil in relative and absolute amounts to all oils used,” the complaint continues. “Olive oil is the fifth most predominant ingredient…the amount of olive oil is less than all other vegetable oils used – soybean oil, palm kernel oil and palm oil….The amount of olive oil is insufficient to confer any of the health benefits associated with olive oil or deliver the taste of olive oil.”

The Takeaway

The trouble here for Snack Dragon—if that firm does, in fact, experience any doubt about its choices at all—is the “with Olive Oil” tag. The “with” carries a heavy load for packaging claims and will likely provide the escape hatch for Upfield, providing the case doesn’t collapse for some other reason.

But again, quantity is the game here, not quality—throw enough of these class actions out there and one of them is likely to stick. For instance, the case of Blue Diamond Growers, in which Snack Dragon’s client received a cool $2 million settlement. Make sure to ask your attorney how to minimize the risk of such a suit before the fact.

Nothing much stops Snack Dragon from launching class actions, but there are plenty of ways to tank them.

FTC Wins Judgment in a One-in-a-Million Marketing Case

Commission shuts down oral strip company, but still can’t grab any dough

The Whole Nine Yards

You could say that the Federal Trade Commission threw the book at oral film strip maker Redwood Scientific, its related corporate entities scattered across the United States, and Jason and Eunjung Cardiff—individuals who served as directors and officers of the whole group.

But to be strictly accurate, you’d have to say that the Commission threw the book, the kitchen sink, the kit and kaboodle, and the whole shebang at the Redwood gang, because the assortment of charges was copious, to say the least.

Back in 2018, the FTC hit the Redwood gang with violations of the Federal Trade Commission Act, the Restore Online Shoppers’ Confidence Act, the Electronic Fund Transfer Act, and the Telemarketing and Consumer Fraud and Abuse Prevention Act in California’s Central District. It requested a temporary restraining order and an asset freeze, and filed for a permanent injunction against the group, which it successfully achieved toward the end of the year. The Cardiffs themselves lost on summary judgment for all 16 counts brought by the Commission.

What did they (allegedly) do to provoke this barrage?

Pretty Much Everything

The Redwood gang put together an enterprise that seemed designed expressly to make the Commission go bananas. In its own words:

The FTC contends that the products did not live up to the claims Redwood Scientific made, that consumers who bought Redwood Scientific’s oral film strips often were enrolled in auto-ship continuity plans without their consent, and that consumers were stymied in returning them for the “guaranteed” refund promised. The complaint also alleges that the Redwood Scientific defendants engaged in illegal telemarketing and misstated earnings claims for a multi-level marketing program.

The products they were hawking sounded great—a product line of oral film strips that, together, claimed an 88 percent success rate in helping people quit smoking, substantial (up to 100 pounds) weight loss without effort, and increased sexual performance for 97 percent of men.

We all have a friend or relative who could use all three, right?

To sell the strips, the gang allegedly hired actors to play satisfied users in fake testimonials and made unsupported claims while citing publications like the New England Journal of Medicine. Moreover, the FTC claims the Redwoods “made illegal robocalls to pitch their products, and launched a multi-level marketing scheme for which they have made deceptive earnings claims.”

And did we mention the false “made in the USA” claims? They did that, too.

The Takeaway

It’s likely that this Platonic ideal of a Federal Trade Commission case triggered its staff into an ecstatic fugue state, so it’s a good thing that it finally wrapped up in late March with a final judgment from the court.

It sounds like the Redwood gang will have to find another line of work—they are banned from selling oral film strips directly to consumers, making robocalls, and engaging in negative option schemes and multilevel marketing.

But there was a fly in the ointment for the Commission. “We’re pleased the court ruled in our favor as to every count in the complaint and entered such a strong injunction, including bans on several types of marketing,” the Commission states in its press release. “Unfortunately, the FTC still hasn’t been given back its full authority to return money to fraud victims, meaning the people hurt by this scheme – which brought in over $18 million – get nothing.”

For now the prospect of enjoining future criminal behavior, along with the pure joy of the hunt, keeps the FTC on the job. But sooner or later Congress will likely address, with legislation, the Supreme Court decision that removed at least one of the Commission’s fangs.

FCC Robocall Dragnet Expands to 22 States

Communication and resource sharing have already produced record fines

Insane Phone Posse

Some news from the folks at the Federal Communications Commission, people who are probably not comfortable with being called “folks”: The Commission is ever-so-slowly drawing the net around criminal robocallers.

Back in February, the FCC announced a series of memoranda of understanding with state attorneys general. More than a dozen signed on for increased cooperation with the Commission in anti-robocall activities.

Which activities, you ask? Well, certainly more than waiting around the Grand Union parking lot for the robocallers to show up and start a rumble.

Here’s what the Commish has planned:

During investigations, both the FCC’s Enforcement Bureau and state investigators seek records, talk to witnesses, interview targets, examine consumer complaints, and take other critical steps to build a record against possible bad actors. Formal Memoranda of Understanding between the FCC’s Enforcement Bureau and Attorney General offices can be a critical resource for building cases and preventing duplicative efforts in protecting consumers and businesses nationwide.

The FCC’s stated aim: to bring as many states and territories into the anti-robocall fold as possible.

The Takeaway

The recruitment drive took a step forward in March when the Commission announced that an additional seven state AGs (and the AG from the District of Columbia) had hopped on the bandwagon.

Okay, okay, but what is the practical outcome of these partnerships? Similar efforts are announced regularly by any number of jurisdictions, but why are they important in this context?

The Commission offers just one example, and it’s satisfying: the largest fine in FCC history. A year ago the Commission and eight state AGs shared information regarding Rising Eagle and JSquared Telecom, two robocallers that unleashed a billion calls on unsuspecting consumers, a good portion of which were illegally spoofed. When the smoke cleared, the companies were fined $225 million. “The states provided crucial evidence about the robocalling operations,” the Commission claimed.

How long before all the states and territories get on board?

Check Out Our Latest Blog Posts

Bamboozling Part II: The FTC Brings Back Retro Penalty Offense Letters like Bell Bottoms and Big Hair

What do bamboo fabric and green claims have to do with toys, weight loss, car rentals and fur coats? Sounds like the start of a Dad joke, but unfortunately this is no laughing matter. It is the FTC reaching back to bygone eras for help in getting money in its enforcement cases.

Bamboozling – Part I: Do Green Claims Require a Life Cycle Analysis?

The title of this series is an homage to the great Lesley Fair, who launched and authors many of the best of the FTC’s business blogs and who coined this term in her blog reviewing 2013 cases on the same topic. But we are here today to talk about the most recent settlements involving textiles labeled “made from bamboo.”

The Rubber Hits the Road to the Tune of $10 Million – FTC and Illinois Sue an Auto Dealership

Not many people enjoy sitting in a car dealership spending hours evaluating or making a costly purchase, but it’s far more frustrating when the dealership allegedly engages in practices that face the ire of law enforcement.

The Future’s So Bright, I Gotta Wear BluBlockers – A Walk Through Advertising History

The other day, we noticed an article announcing that legendary direct marketer Joe Sugarman had passed away. He had quite a career in the industry but was probably best known for the omnipresent BluBlocker sunglasses that were on heavy rotation in the 1980s and early ’90s.

What Is a PFAS, and Why Should I Care? Part II – The Threat to the Restaurant and Food Packaging Industries, and Potential Personal Injury Classes

In our initial blog post, we introduced readers to per- and polyfluoroalkyl substances (PFAS), known as “forever chemicals,” and predicted the rise of PFAS consumer class actions and increased regulatory activity barring the use of PFAS in consumer products in state and federal legislatures.

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