Alerts

AD-ttorneys@law – April 17, 2020

Alerts / April 17, 2020

In This Issue:

Upcoming Webinar

April 23: Marketing, Promoting and Pricing Your Products During the Pandemic

For some companies, the COVID-19 pandemic has meant trying to cope with flying-off-the-shelf demand; for others, it has meant retail shutdowns, force majeure and trying to find creative new ways to keep sales afloat. For all of us, it has been a time of tremendous challenges. Join BakerHostetler partners Linda Goldstein, Randy Shaheen and Ann O’Brien on April 23 at 1:30 p.m. ET as they discuss several trending marketing, promotion and pricing issues. Get details and register today for this hour-long CLE program by clicking here.

April 24: A CCPA Q&A with the Tag Management Vendors

To help launch its new privacy law webinar series on April 24, the Interactive Advertising Bureau has invited BakerHostetler partner Alan Friel to facilitate “A CCPA Q&A with the Tag Management Vendors,” a discussion of California Consumer Privacy Act (CCPA)-related capabilities in tag management. How are vendors helping track verifiable consent, and what role, if any, should prior consent play in the U.S.? How are they helping companies integrate “do not sell” with tag management and sync across systems to prevent sales for those consumers who have opted out? Solution features, functionalities and advantages will be explored. To register, click here.

NAD Responds SWIFTly to Coronavirus

Industry self-regulatory council institutes fast-track review for digital ad disputes

Stand Back!

Although they don’t get the same press as closing businesses and silent entertainment venues, courts across the country are suspending or expediting trials and actions in an effort to combat the ongoing pandemic.

Citing this as inspiration, the National Advertising Division (NAD), part of BBB National Programs, has instituted a fast-track challenge process that minimizes in-person contact.

Joining the ranks of clever acronym-smiths worldwide, NAD created its Fast-Track SWIFT (Single Well-defined Issue Fast Track) challenge process to address the need for quick resolution of issues that arise in digital advertising. From beginning to end, a Fast-Track SWIFT challenge – which covers digital advertising exclusively – is 20 business days from the time an advertiser initiates to NAD’s decision.

Before you jump at the opportunity to take a misbehaving competitor to task on an expedited timeline, take note: The SWIFT system is “limited to a single issue, only one substantive submission per party is permitted (and must not exceed five pages and five exhibits), all submissions are made online, and meetings with NAD are held at NAD’s discretion,” NAD says. SWIFT issues are limited to disclosure issues related to influencer and native advertising, misleading pricing and sales claims, and misleading express claims that “do not require review of complex evidence or substantiation.”

The Takeaway

To keep parties at a safe distance, “All submissions are made online, and meetings with NAD are held at NAD’s discretion.” And while SWIFT reflects a commitment to social distancing, it also recognizes a reality of the coronavirus marketing landscape: With people confined to their homes in many places, digital advertising will be more important than ever. SWIFT will help stem the flood of digital advertising complaints that is sure to come.

Brain-Trainer Preempts NAD Inquiry

HAPPYneuron, unlike Neurocore, doesn’t even let the complaint move forward

Know When to Fold ‘Em

As we noted in our last issue, we don’t have access to records of NAD’s deliberative meetings or to the initial complaints from rival companies that spark investigations and rulings.

So in a case like HAPPYneuron’s, we’re at a loss.

HAPPYneuron is a maker of cognitively stimulating games and programs. Several of its advertising claims made over social media and website platforms were recently brought before NAD by competitor Posit Science Corporation.

The claims, which included statements like “remember more,” “think sharper,” and “start improving your brain now,” were similar in tone and content to boasts made by Neurocore and other “brain-training” companies that have enjoyed a burst of popularity – and regulatory attention – over the past decade or so.

But we can’t compare, because HAPPYneuron voluntarily agreed to modify or permanently discontinue the advertising claims that were at issue before NAD reviewed the claims on their merits.

The Takeaway

For the purposes of this newsletter, NAD’s statement that “voluntarily discontinued claims will be treated, for compliance purposes, as though NAD recommended their discontinuance and the advertiser agreed to comply” is a death knell. We need something to write about!

What (might) have been wrong with the claims?

The obvious answer is that HAPPYneuron didn’t have the necessary empirical evidence to back up its claims. Or perhaps a HAPPYneuron representative is a fan of our newsletter and got a whiff from our earlier coverage of the negative attention other brain-training companies have received.

Until we’re a whole lot smarter, we’ll never know.

Kendall Jenner Sued for Posting Video of Kendall Jenner

Paparazzi lawsuits continue their long, slow, fabulous march

Jennexit

All she did was walk out of a clothing store, and bam! a lawsuit.

“She” is Kendall Jenner, of course – so walking out of a clothing store creates news. That much is a given.

But one Angela Ma, who is suing Jenner before the Central District of California, found herself in front of the very same clothing store as Jenner walked out. She filmed the exit – a vanishingly quick incident – and presumably posted it to the internet in some form (the complaint is not clear about where).

Jenner spotted the video and posted it on her Instagram account, where it racked up millions of views. Unfortunately for Jenner, Ma had registered the video with the U.S. Copyright Office and filed suit for copyright infringement. Ma is seeking “damages and Defendants’ profits, gains or advantages of any kind attributable to Defendants’ infringement of Plaintiff’s Video” or statutory damages of up to $150,000.

The Takeaway

There are two points to consider:

First, paparazzi lawsuits like this one continue to be filed. Second is a message to influencers everywhere: Step away from Instagram. Step. Away.

Put some time and distance between yourself and the posting. Better yet, put a person between you and the posting. Have someone smart and savvy manage your feeds. Or at least learn the basics of intellectual property law and make sure that you’re not posting content that could be considered infringement of another’s copyrighted work.

You’re a business, after all, and any business worth its salt has someone exercising discretion over the marketing. If you haven’t already, get someone knowledgeable to do it for you – or you’re going to open yourself up to suits like this one.

Save Us, FDA – You’re Our Only Hope

CBD oil manufacturer can’t use regulatory inaction to wriggle out of false ad class action

Not So Chill

Kathryn Potter brought a class action against Diamond CBD – “America’ most trusted CBD Oil manufacturer” – and related corporate entities in September 2019, alleging that the oil and gummies she bought from the company contained less CBD than they promised. (The complaint doesn’t specify how she reached that conclusion.)

Potter, who hails from Miami, brought the case before Florida’s Southern District, leveling unjust enrichment claims alongside violations of Florida’s Deceptive and Unfair Trade Practices Act.

Diamond and its co-defendants fired back the expected motion to dismiss, asking the court to trim the class action claims to cover only consumers who purchased the same products Potter herself bought. The court agreed, reduced the coverage accordingly and rejected further arguments that the products were subject to a safe-harbor exception under the Florida Deceptive and Unfair Trade Practices Act.

Then things got interesting.

The Takeaway

Diamond requested that “the Court exercise its discretion to stay this action pursuant to the primary jurisdiction doctrine pending federal CBD regulation and guidance.” Because the Food and Drug Administration (FDA) is still putting together a coherent regulatory approach to CBD offerings, the defendants argued, the court should put the proceedings on hold and see how new regulations impact the issues in the case.

A CBD company taking a bet on continued FDA inaction? Brilliant – but unsuccessful.

The court rejected the argument, stating that while the FDA was “eager” to determine the safety risks of, and possible standards for, CBD oil products, it “has not expressed interest in modifying the disclosure requirements for nutrients or additives, nor have the Defendants pointed to any regulation under consideration that may affect these specific food labeling requirements and thus impact this case.”

Nice try, Diamond! The case moves forward. Everyone else, take note: The FDA’s silence on CBD does not provide a false-ad-suit escape hatch. Despite the current lack of a regulatory approach to CBD offerings from the FDA, courts are still willing to consider claims regarding the food labeling requirements of CBD products.

Dog Toy Maker Wins Big in Appeal Against Jack Daniels

Puerile chew toy protected by First Amendment

Mad Dogs and Boorish Men

You know your uncle? Yes, that uncle.

He’s a nice guy, sure, but a little loud. Pushy. Inappropriate. Maybe hits the brews too often and too hard, tells off-color jokes, guffaws like a barnyard animal, and so on?

I hope your uncle has a dog, because he is going to love the Silly Squeakers product line.

The ironically named VIP Products took classic tequila, beer and hard liquor brand designs and created parody chew toys for dogs, whose illiteracy at least holds them innocent of the ensuing groan-worthy humor.

Jose Cuervo becomes “Jose the Perro.” Mountain Dew is “Mountain Drool.” Jack Daniel’s is labeled “Bad Spaniels.” There are more than a dozen of these gems, but believe it or not, those are the cream of the crop.

The designs themselves are reasonably well-executed facsimiles of the original brands, with – ahem – subtle changes to the labeling that sell the joke. The Jack Daniel’s knock-off, for instance, changes the “Old No. 7 Black Label Tennessee Whiskey” tag to “the Old No. 2, on your Tennessee Carpet.” The alcohol content description was changed to “43% POO BY VOL.” and “100% SMELLY.”

Genius.

Gag Reflex

In any case, we bet you know what came next: a cease-and-desist letter sent by Jack Daniel’s Properties, the maker of the iconic whiskey.

With the fearlessness of a scrappy terrier, VIP Products responded with a complaint against Jack Daniel’s in September 2014. VIP Products sought a declaration from the District of Arizona that its No. 7 knockoff did not infringe Jack Daniel’s trademarks, that Jack Daniel’s designs weren’t entitled to trademark protection and that the company’s registration for the original bottle’s design should be cancelled.

Jack Daniel’s countersued, and the parties were off to the races (remember – this has been going on for six years).

The dispute culminated in a bench trial where Jack Daniel’s won big: The court held that VIP’s toy violated the defendant’s trademarks. This victory was in turn appealed to the Ninth Circuit, which ruled in late March in favor of VIP.

The Takeaway

The six-year battle between an iconic American company and the gag chew-toy maker ended with VIP as the top dog.

While the appeals court affirmed the district court’s decision that Jack Daniel’s “trade dress and bottle design were distinctive and aesthetically nonfunctional, and thus entitled to trademark protection,” the Ninth Circuit parted ways for the rest of the opinion.

“The panel concluded that the Bad Spaniels dog toy was an expressive work entitled to First Amendment protection,” the opinion stated, vacating the lower court decision. Finally, the appeals court held that VIP was innocent of trademark dilution by tarnishment: “Although VIP used Jack Daniel’s trade dress and bottle design to sell Bad Spaniels, they were also used to convey a humorous message, which was protected by the First Amendment,” the opinion stated. And, in a classic bit of legal understatement: “The Bad Spaniels dog toy, although surely not the equivalent of the Mona Lisa, is an expressive work.”

And so this long dogfight ended. For Jack Daniel’s, it was a fight of its own choosing; like a military quagmire, it kept sucking the company deeper every time the company objected to what is, in essence, a gag gift. It is an object lesson in what can happen when you take your brand too seriously. Although less common than in the copyright context, the First Amendment has proven to provide protection against claims of trademark and trade dress infringement where such use is transformative enough to be considered an independent expressive work. Keep in mind, however, that fair use and the First Amendment are affirmative defenses, and as illustrated here, prevailing on such a defense can be a long and expensive undertaking.

Check Out Our Latest Blog Posts

Commissioner Wilson Weighs In on FTC Priorities

In a recent partial concurrence and partial dissent, Commissioner Wilson laid out her views on when it is appropriate for the Commission to utilize its enforcement authority. The case involved a TENS device – a device that electrically stimulates the nerves and provides relief from pain. While the device had received Food and Drug Administration (FDA) clearance for some pain relief claims, the FTC alleged that the company’s claims deceptively exceeded the scope of its FDA clearance by, among other things, claiming that the device provided pain relief far away from the point at which the device was applied. Learn more here.

Focus on Children’s Privacy Intensifies as Daily Life Moves Online

With physical schools closed indefinitely, classrooms have moved online, either introducing or significantly expanding children’s use of virtual education technology and highlighting certain privacy concerns. Responding to this evolving environment, on April 9 the Federal Trade Commission (FTC) issued COPPA Guidance for Ed Tech Companies and Schools during the Coronavirus to address some common compliance issues relevant to entities that process children’s personal information. Read more and subscribe here.

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