Alerts

AD-ttorneys@law – July 17, 2018

Alerts / July 17, 2018

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Dyson Appeals NAD Air Purity Rebuke

Competitor Guardian Tech tackled explicit and implicit claims

Jousting

Dyson, the knight-led, cool-contoured, tech-focused home appliance maker, has been the subject of a lot of coverage this year for its big trial win over rival SharkNinja.

But another company is taking a tilt at the windmill. This time, it’s Guardian Technologies in the air purifier marketplace. Both companies produce compact tabletop air purifier models; Guardian took exception to a series of Dyson’s express and implied claims about its Pure Hot + Cool Link and Pure Cool Link air purifiers.

Shooting from Cover

The challenged express claims included assertions that the Dyson purifiers included HEPA air filters, projected purified air, and removed 99.97 percent of pollutants and allergens as small as .3 microns. The ads also claimed that the products sported “intelligent purification” that “automatically monitors, reacts and purifies.”

Guardian further alleged that Dyson’s advertising contained misleading implied claims, including that all the air projected from the purifier is clean, that air is purified immediately and that Dyson’s purifiers are more effective than other brands. Guardian relied, in part, on consumer surveys to challenge the implied claims.

The National Advertising Division (NAD) answered Guardian’s complaint with a mixed bag; many of the express claims survived, including the fact that Dyson’s purifiers contain HEPA filters of the specified strength. The “automatic purification” claim also survived, provided that the context of the advertising made clear that “automatic” refers to the product’s “intelligent purification” or “auto mode” feature where the appliance senses pollution and reacts by self-starting.

The Takeaway

This case underscores a basic advertising principle – context is everything. The NAD determined that, despite the weak customer survey evidence furnished by Guardian, the ads did convey the sense that all the air that made its way through the Dyson purifier had been cleaned. Specifically, the purifying claims were displayed alongside images of the unit projecting clean air into a room. Thus, the NAD suggested that Dyson modify the ads to remove this implied message. Regarding the “automatic” claims, the NAD determined that certain of these claims were presented in a context where Dyson failed to describe its auto mode feature and, as such, reasonable consumers could believe that the appliances purified the air immediately. Since the products do not purify air immediately, the NAD recommended that Dyson modify these claims to avoid communicating that unsupported message by referring to the auto mode feature. The NAD also asked the company to alter the competitive claims so that it was clear that Dyson was comparing its HEPA filter-equipped purifiers to competing models without HEPA filters.

While it politely thanked the NAD for its non-adverse rulings, Dyson expressed its intention to move the remaining decisions on to the National Advertising Review Board for further review.

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Court to Kanye Plaintiff: Imma Let You Finish

Court preserves Tidal user’s case against rap innovator

808s and Complaints

Protean and unpredictable, hip-hop legend Kanye West’s endless parade of artistic triumph and personal controversy doesn’t need to be rehashed for anyone’s benefit – he’s occupied center stage in American culture for several times longer than the average entertainer’s career.

His legal travails are less well-known, but are still spectacular in their own right: He was, for instance, once sued for copyright infringement by motorcycle stunt star “Evel” Knievel; in his “Touch the Sky” video, West dressed in a gaudy American flag throwback jumpsuit inspired by Knievel and rode a rocket over the Grand Canyon. But even his more pedestrian legal battles have flair.

Never Say Never Never Never

Consider a recent class action filed by Justin Baker-Rhett in the Northern District of California in April 2016. Baker-Rhett accused West and frequent collaborator Jay-Z’s Tidal music service of false advertising and unfair competition under California law, fraudulent inducement, and unjust enrichment. The case was moved only three months later to New York’s Southern District, where the charges were changed to violations of New York’s deceptive practices and false advertising laws and fraudulent inducement.

At the heart of the complaint was the Tidal service, which, shortly after its acquisition by Jay-Z in 2014, was hyped as a new “artist owned” streaming service featuring exclusive content from a coterie of huge names: Beyoncé, of course, and West – but also Madonna, Rihanna, Coldplay and Alicia Keys, among others. These artists all received a stake in the company in exchange for their exclusive engagement.

But Tidal didn’t catch fire and faced severe financial difficulties shortly after its launch. Enter West’s 2016 release of The Life of Pablo, eagerly anticipated by his fans (including his 22 million Twitter followers). According to the complaint, both Tidal and West promoted the album on Twitter, hoping it would revitalize the service; West even claimed that his new album would only be available on Tidal. “My album will never never never be on Apple,” he tweeted in February 2016. “And it will never be for sale …. You can only get it on Tidal.”

According to the complaint, The Life of Pablo streamed 250 million times in the first 10 days after its launch. Tidal subscriptions grew from 1 million to 3 million.

But within a month and a half of its release, Baker-Rhett alleged, West offered the album on his own website and on streaming services Spotify and – wait for it – Apple’s iTunes. This arrangement, he contended, was an intentionally fraudulent inducement for new subscriptions, the value of which he estimated to total between $60 billion and $84 billion. West and Tidal moved to dismiss the case in July 2017.

In June 2018, the district court threw a lifeline to Baker-Rhett’s class action by disposing of, in part, a motion to dismiss by West and Tidal. The court determined that Baker-Rhett did not have standing to sue under New York state law because “the alleged deceptive transaction involving [him] did not have a sufficient nexus” to the state. The result of this was that some New York state consumer law claims would be dismissed.

The fraudulent inducement charge remained standing, however. The judge found that the tweet in question, at least at the pleadings stage, showed sufficiently that West’s promise that the album would never be available off Tidal was incorrect. West argued in the motion that the tweet in question was “true when it was made.” The court had little patience for this argument. “The Life of Pablo was released on Apple Music just a month and a half later. How, then, was the statement true?” The court brushed aside West’s insistence that new mixes or versions of the album were exempt from the original “never never never” promise.

The Takeaway

The case is another example of how a personality and the company they represent are liable for statements on personal social media accounts. The court here allowed Tidal to be part of the suit because the plaintiff sufficiently alleged that West is Tidal’s agent and acting on its behalf.

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Are All Bets Off on Free-to-Play?

Washington state class action takes aim at online casino

Gamble Stack

“Free to play” games are all the rage in online gaming.

It’s a relatively recent development perfectly suited to our “always on” media and entertainment environment. Game developers realized that there were great profits to be made through selling small items or extra benefits within the context of a game – extra lives for the player’s avatar, access to new levels of play or special items that enhance the gaming experience – charging for the extra benefits but without ever charging for the game itself. Hence the term free-to-play, even if the quality of the play is enhanced by the additional expenses.

In a new class action complaint filed in the Western District of Washington, plaintiff Sean Wilson speculates that this model is profitable because, while games are often addictive in and of themselves, the add-on items present their own separate brand of addictive allure. Free-to-play games offer two addictive experiences for the price of one.

Wilson is suing Huuuge Inc., an online gaming company founded in 2014, over its … dare we say it … hugely successful Huuuge Casino gaming app, which he claims is built on this two-for-one-addiction model (although in Huuuge’s defense, it claims to want only “to give maximum joy and fun to players all across the globe”).

Wilson’s central complaint is that Huuuge offers “free chips” to its new players to play on the casino’s slot games. These chips, Wilson claims, are “inevitably” lost by the players, who are then offered deals to purchase more chips – $4.99 for 100 million is one package deal offered to first-time purchasers. Since the player is encouraged to purchase more chips to continue playing, and because the winners are selected randomly, Wilson maintains that Huuuge’s online slots are a gambling enterprise under Washington state law – and therefore illegal. He alleges that the chips, though worthless on their own, represent “something of value” since they are needed to play the game.

Huuuge is accused of violations of Washington state law, including its consumer protection act, and unjust enrichment. The suit seeks damages on behalf of the class and an injunction from the court to end the alleged illegal conduct.

The Takeaway

A lot of popular online games today use in-app purchases as a revenue driver, and many are starting to see pushback against this practice. Three other online gaming companies saw similar class actions (although all three were led by the same law firm) in the state of Washington. These cases could have major implications for the casual games market and we will continue to monitor their progress.

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Instagram Celeb Alleges Link Theft!

Don’t get between an influencer and her affiliate

Profit Chain

Nita Batra, who goes by Nita Mann (@nextwithnita), is an influencer par excellence. Her Instagram feed runs hot with more than 200,000 followers and sports almost 1,500 carefully crafted photos stretching back to 2012. Her style is aimed dead at the heart of the millennial demo, with fashion-forward outfits and accessories and a slew of links to products she endorses.

One of Batra’s favored social media partners is liketoknow.it, an affiliate service. Following a liketoknow.it tag off one of Batra’s photos leads you to her liketoknow.it feed, where the photos appear again, linked in turn to the retailers of the product she’s wearing or using in the original post. When a user purchases a product through the liketoknow.it feed, Batra gets a percentage of the sale.

A strain was placed on this relationship, Batra claims, when popsugar.com, a subsidiary of PopSugar Inc., allegedly started scooping up her photos and posting them to ShopStyle, one of its former shopping platforms. To make matters worse, Batra claims, PopSugar removed the affiliate links to liketoknow.it and replaced them with links to ShopStyle.

PopSugar is a substantial global media and technology company whose various platforms overlap quite well with Batra’s fan base – with more than 27 million audience members, the company claims to reach half of the female millennials in the United States. In her complaint against the company, filed in the Northern District of California in June 2018, Batra claims that the company has been infringing her images since 2017, hoping to generate affiliate revenue for itself and using the images to conduct market research at the same time.

Batra, who has a law degree from Southern Methodist University, is hitting PopSugar with a slew of charges, including removal of copyright management information in violation of the Digital Millennium Copyright Act, copyright infringement, violations of her right of publicity, violation of the Lanham Act and violation of California’s unfair competition law. She seeks profits or statutory damages up to $150,000 per photo.

The Takeaway

Batra is asking the court to approve her proposed class action lawsuit, which would enable any other influencers impacted by PopSugar’s acts to join in. If successful, various other influencers may assert similar claims that the company infringed their personal social media content.

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Third Circuit Weighs In on Autodialer Taxonomy

D.C. Circuit Court decision has an impact

Squeezebox

The definition of what constitutes an autodialer under the Telephone Consumer Protection Act (TCPA) has expanded and contracted over the past few years. One case, Dominguez v. Yahoo, Inc., has been thoroughly kneaded by those changes since 2013.

The original case concerned texts – 50 or 60 a day, according to plaintiff Bill Dominguez – that were sent to a phone he purchased in late 2011 with a reassigned number that had belonged to someone who had subscribed to the service. When he called Yahoo to ask that the texts stop, the company advised that the original owner of the telephone would need to access his or her Yahoo account to unsubscribe from the texts. Dominguez claims that he told Yahoo representatives that he did not know the whereabouts of the original owner. “So sue me,” one Yahoo employee allegedly said.

Be careful what you wish for …

Summaries

Dominguez sued Yahoo for violations of the TCPA in April 2013 before the Eastern District of Pennsylvania. A year later, the court granted summary judgment to Yahoo, agreeing with the company that the text service to which the original phone owner had subscribed was not an autodialer under statute because it did not “use a random or sequential number generator to store or produce telephone numbers and then send a text message to those numbers.”

Dominguez appealed, and in October 2015 the U.S. Court of Appeals for the 3rd Circuit overturned the ruling and sent the case back to the district court. The rationale? A recent ruling from the Federal Communications Commission (FCC) had widened the autodialer definition under the TCPA, defining equipment that is “part of a ‘system’ that has the latent ‘capacity’ to place autodialed calls” as an autodialer.

On remand, the court granted Yahoo’s renewed request for summary judgment, holding that under a standard of “present capacity” (which governed communications law when the suit was filed), the Yahoo system did not qualify as an autodialer under the TCPA. Relying on FCC commissioner dissents, the court maintained that the 2015 FCC ruling defined capacity in such a broad manner that it was unclear whether a line could be drawn between an autodialer and many other technologies; for instance, smartphones or email SMS services, even without loaded autodialer software, would qualify under the new definition.

Dominguez appealed again in January 2017. But in the interim, a separate D.C. Circuit Court ruling limited the FCC’s 2015 ruling, pinching the definition of an autodialer by excluding systems with a mere theoretical capacity to place autodialed calls.

The Takeaway

In a precedential decision, the 3rd Circuit affirmed the second motion for summary judgment, maintaining that the D.C. Circuit ruling “narrowed the scope of the appeal” and that Dominguez had failed to prove that Yahoo’s system was an autodialer under the new, narrowed definition. The 3rd Circuit panel found that Dominguez had again fallen short of his burden to prove that Yahoo had used an autodialer. The court stated that “notably absent” from the expert reports provided by Dominguez was “any explanation of how the email SMS service actually did or could generate random telephone numbers to dial.” The record indicated that “those messages were sent precisely because the prior owner of Dominguez’s telephone number had affirmatively opted to receive them, not because of random number generation.” By silencing this long-running dispute, the 3rd Circuit’s decision demonstrates the impact of the D.C. Circuit’s trim of the FCC’s 2015 ruling.

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