Tuesday, March 29, 2016

Smokeless, no fire: tobacco advertising & TM claims dismissed

VMR Products, LLC v. V2H ApS, 2016 WL 1177834, No. 2:13–cv–7719 (C.D. Cal. Mar. 18, 2016)
VMR makes electronic cigarettes under the federally registered trademarks V2CIGS and V2. V2H ApS is a Danish tobacco company that makes a smokeless tobacco product called “snus” under the name V2TOBACCO, and V2 Tobacco A/S is its wholly owned distributor subsidiary. The parties have litigated cases in Denmark, Sweden, and the Southern District of Florida, and have opposed each other’s applications to register their trademarks in both the United States and Europe.
VMR alleged that defendants infringed its marks with their V2TOBACCO product through advertising on www.v2tobacco.com; there was no evidence that defendants’ snus purchased from US stores bore the mark V2TOBACCO, but US consumers could buy the snus through third-party online stores, which were accessible by clicking on links available on the website, and this snus bore the mark V2TOBACCO “[a]t the bottom of [the] tin.”  This sufficed as use in commerce.
The court dismissed likely confusion claims based on VMR’s V2CIGS mark.  VMR previously sought a declaratory judgment that its V2CIGS didn’t infringe V2 TOBACCO, alleging in its complaint that there was no likelihood of confusion; that the marks were different; and that the products were different.  VMR was therefore estopped from arguing to the contrary; the court also applied the Sleekcraft factors.
Strength: There was no evidence that V2CIGS had been registered without a showing of secondary meaning, so there was no presumption of inherent distinctiveness; there was also no evidence about inherent distinctiveness or descriptiveness either way, so strength was neutral; likewise there was no evidence about defendants’ intent.  VMR was estopped from arguing that the goods and the marks were similar; it submitted no admissible evidence of actual confusion; the parties both advertise on websites, but Network Automation says that’s not important; there was no evidence that any of the parties’ products are sold in the same or even similar stores; there was no evidence that either party had plans to expand into the other’s market; and defendants offered evidence that tobacco products are legally required to be maintained by retailers under lock and key, and argued that therefore consumers exercise a degree of care in purchasing tobacco products.  Confusion was not likely with respect to the V2CIGS mark.
VMR also argued that defendants made “illegal, literally false and/or misleading” statements that the raw material in their snus product is selected on the basis of a “low level of Nitrosamines” on their website and in their product catalog. The Tobacco Control Act precludes the introduction into interstate commerce of any modified risk tobacco product unless the FDA has issued an order that the product may be commercially marketed.  VMR contended that the “low” levels of nitrosamines claim advertised snus as a modified risk tobacco product without FDA approval.
First, the court found that V2H could be held liable for the website statements: it was the registrant and owner of www.v2tobacco.com; had previously removed content from the website; and was the “parent company” of V2 Tobacco.
Second, the court addressed standing: Under Lexmark, a plaintiff’s claim must fall within the “zone of interest” of the statute, and the plaintiff must have experienced “economic or reputational injury” that is proximately caused by the defendant’s deceptive advertising.  VMR showed that the parties were competitors in the tobacco market, but offered no evidence of injury proximately caused by the allegedly false statements. VMR argued that it would be harmed if an adult smoker, who wanted to purchase a smokeless nicotine product, relied on defendants’ alleged false advertising to buy snus instead of VMR’s electronic cigarettes.  However, there was no requirement that a plaintiff prove injury if it sought only injunctive relief.  (Something feels weird about this, but ok.)  Thus, VMR had standing to pursue its claims, but not standing to seek “additional ancillary relief that would require proof of injury” such as damages for lost sales.
VMR argued that defendants’ statements that their snus contains low levels of nitrosamines were “literally false” because (1) the statements  equated to advertising the snus as a “modified risk tobacco product” under the Act; (2) the Tobacco Control Act defines “modified risk tobacco products” as those tobacco products that are used to reduce the harm or risk of tobacco-related diseases associated with commercially marketed tobacco products; (3) the FDA has not approved the snus as a “modified risk tobacco product”; and therefore, (4) defendants’ advertisements violate the Tobacco Control Act.  (This doesn’t seem very “literal” to me, given the chain of inferences required.  It also seems like a preclusion problem, given the interpretation necessary to make this into an issue of falsity instead of a violation of the Tobacco Control Act itself.)  The court found that this was not a literally false claim given that the FDA hadn’t yet approved [hunh?] the use of “low” to describe the level of nitrosamines in the product.
Defendants offered evidence that their snus did, in fact, have low levels of nitrosamines.  VMR offered no evidence of misleadingness, or of materiality.  Nor would the court presume injury given the absence of comparative advertising here: “the alleged injury accrues equally to all competitors.”  Summary judgment for defendants.

Monday, March 28, 2016

Bar review question: is this false advertising?

Themis Bar Review, LLC v. Kaplan, Inc., 2016 WL 1162624, No. 14-cv-00208 (S.D. Cal. Mar. 24, 2016)
Themis, a relative newcomer to the bar review business, advertised its students’ bar passage rates; a 2013 ad listed passage rates for 2012.  The left column of the ad listed a jurisdiction, and the two columns to the right showed Themis’ students’ passage rates for that jurisdiction and the overall state passage rate for that jurisdiction. At the top of both of those columns was a small asterisk, corresponding to fine print language reading “Based on Themis first-time takers who completed 75% or more of their course assignments and on state bar exam first-time takers.”  Themis filed a declaratory judgment action and Kaplan counterclaimed for false advertising.
Ad as shown in Themis' declaratory judgment action

Ad as shown in Kaplan's counterclaim

The court declined to grant cross-motions for summary judgment.  Themis argued that Kaplan’s claim was moot because Kaplan sought only injunctive relief and Themis permanently ceased circulating the relevant ad. But voluntary cessation doesn’t guarantee mootness, and Themis failed to provide adequate assurances it wouldn’t run similar ads in the future.  Its CEO said that it voluntarily changed the format “to make the explanation larger and more prominent, in the hopes of eliminating any argument over the issue, and because I favor full disclosure to students choosing between bar exam providers.”  But a present intent that could later change isn’t enough.
Kaplan argued that the pass rate was literally false, even coupled with the footnote, because Themis’ data collection methods were problematic. The court rejected a literal falsity argument based only on the main text, because “the proper focus is on the advertisement as a whole rather than an isolated section. Thus, the pass rates are literally false only if they are inaccurate with respect to the population defined in the footnote: first time takers who complete 75% or more of the course.”  RT: This reasoning wrongly assumes that the ad, taken as a whole, actually conveys the message in the footnote to consumers.  If the footnote doesn’t work as a disclosure, then Themis shouldn’t get to convert a literal falsity claim into a more difficult to prove implicit falsity claim by including an element in the ad that consumers don’t actually perceive as part of the ad context.

As to the footnote-modified claim, Kaplan submitted an expert report concluding that Themis’ practice of individually contacting students in states that do not publish pass lists is problematic. Self-reporting “may result in a systematic response bias such that students who failed the exam might be ashamed of the fact and therefore lie when asked whether they passed.” Themis argued that there wouldn’t be misreporting because (1) law students are honest, and (2) it was in students’ self-interest to report failure because they could get a free repeat course if they failed.  A reasonable jury could go either way on this.
Likewise, as for the misleadingness claim, summary judgment was inappropriate.  Law students are the relevant audience.  Kaplan’s survey gave the ad to 331 current law students, allowed them to look at it for as long as they wanted, and then took it away from them before asking various questions. The test group received the actual Themis ad. The control group received a modified version that displayed the footnote text more prominently.
Kaplan control ad with disclosure in column text
Both groups were asked whether the pass rates on the ad represented all Themis test takers or only a certain subgroup of test takers. In the test group, 15.7% of the students answered correctly and 69.3 % answered incorrectly. In the control group, 64.8% of students answered correctly and only 17.6% answered incorrectly.

Themis’ study was essentially the same, except that it didn’t use a control group and allowed respondents to keep the ad and refer to it while answering the questions.  And it tested two different ads with significantly more prominent footnotes.  (So, completely different.) About 84.5% of the 801 students tested correctly answered that the pass rates referred to a certain subgroup of Themis students, while about 12% incorrectly said that the pass rates covered the entire population of Themis students.
Ad tested by Themis

Another ad tested by Themis

Themis argued that “in high-level involvement purchasing decisions such as choosing a bar prep company, a reading test, where the subject can reference the ad while answering questions, is more appropriate than a memory test,” given that humans have bad short-term memories.  Kaplan responded that memory wasn’t the issue; if a student noticed the footnote, short-term memory issues wouldn’t prevent them from answering correctly a very short time later.  Moreover, Kaplan argued, a memory test was more realistic, because consumers look at an ad as long as they need to and form their impressions during this time period. “Thus, if a student did not notice the footnote after looking at the advertisement but before being asked about it, that suggests that the advertisement would be misleading in a real life scenario.”  Asking specific questions while the student is reviewing the ad causes them to pay more attention to the footnote than they otherwise would have.  (Repeating court’s use of singular “they” because I support it.) 
Screenshot from Themis survey

Another screenshot from Themis survey

Also, the presentation of Themis’ survey emphasized the disclaimer. As Kaplan’s expert said: “When respondents scrolled down to reach the question, they were left with a view of the ad that is heavily focused on the disclaimer. If respondents read the question and then looked back up to the ad, the disclaimer is the first thing they would see (and possibly the only part of the ad they would see).” The court found Kaplan’s arguments “highly probative” (noting in passing that it saw no reason to distinguish a trademark case accepting Kaplan’s position from a false advertising case).
Themis argued that, in any event, the ad was factually true and facially unambiguous and therefore survey evidence of misleadingness couldn’t be considered, apparently trying to invoke the Mead Johnson/Havana Club line of cases, but the court noted that there was no “binding” authority supporting Themis’ argument.  (Also, if you need a footnote to clarify your claim, your claim is not “facially” unambiguous.)  In any event, Themis failed to establish that the pass rates were literally true.
Themis’ study, however, didn’t suffice to defeat Kaplan’s motion, because it didn’t test the Themis ad at issue.  “Given this disparity in footnote prominence, it is possible that a substantial number of the students who correctly answered the question would not have answered correctly if presented with the much smaller footnote of the actual Themis Ad at issue here.”  (Which makes my point about facial ambiguity.)  Themis argued that law students were trained to read “fine print,” especially given the expense of bar prep and the importance of passing the bar.  (I routinely ask my students how many of them have read the full agreement between them and the law school, or them and their landlords.  Spoiler: always some, never a lot.)  Moreover, “[n]o Themis student has ever complained to Themis that Themis’ advertisements are misleading or deceptive.”  Those arguments were enough to reject Kaplan’s motion for summary judgment.  The court would not hold, as a matter of law, that law students were unlikely to read footnotes signaled by asterisks “when evaluating which expensive bar review course to choose to prepare for one of the most important tests of their lives, especially when there is evidence that no student has ever complained of being misled.”
Kaplan also argued that, even assuming that students read the footnote, Themis’ ads were still misleading with respect to some jurisdictions because of a lack of statistical significance.  (I think Kaplan should be arguing about practical significance, but this is a common lawyers’ problem.)  For example, Themis advertised that 100% of its students who were first time takers and completed 75% or more of the course passed the July 2013 Washington D.C. bar exam, compared to the DC-wide average of 71%. But that 100% pass rate was based a population of four students, which couldn’t realistically show any Themis advantage.  The court agreed that comparing Themis pass rates to state/district-wide averages might imply that the Themis pass rates were based on a sample size large enough to show significance (statistical or practical).  A reasonable jury could go either way.

Friday, March 25, 2016

Foreign marks may be protected in the US under 43(a), Fourth Circuit rules

Belmora LLC v. Bayer Consumer Care AG, No. 15-1335 (4th Cir. Mar. 23, 2016)
Disclosure: I worked on the brief for Belmora, the loser in this appeal. 
Bayer (BCC) registered FLANAX in Mexico for pharmaceutical products, analgesics, and anti-inflammatories, with sales of naproxen sodium under the Flanax mark in the hundreds of millions of dollars since 1976.  Some sales come near the US border, but BCC never sells Flanax in the US and importing it would be against the law.
BCC Flanax
Belmora began selling naproxen sodium tablets in the US under the Flanax mark in 2004, then registered the mark in 2005.  Belmora’s early packaging “closely mimicked” BCC’s Mexican Flanax packaging in color scheme, font size, and typeface. Though Belmora changed the packaging, the color scheme, font size, and typeface remain similar to that of BCC’s Flanax.  In addition, Belmora made statements “implying that its FLANAX brand was the same FLANAX product sold by BCC in Mexico,” such as this in a brochure to prospective distributors:
For generations, Flanax has been a brand that Latinos have turned to for various common ailments. Now you too can profit from this highly recognized topselling brand among Latinos. Flanax is now made in the U.S. and continues to show record sales growth everywhere it is sold. Flanax acts as a powerful attraction for Latinos by providing them with products they know, trust and prefer.
Early Belmora Flanax

Revised Belmora Flanax

Belmora received questions regarding whether it was legal for Flanax to have been imported from Mexico. And BCC allegedly “identified at least 30 [purchasers] who believed that the Flanax products . . . were the same as, or affiliated with, the Flanax products they knew from Mexico.”
BCC petitioned the TTAB for cancellation of Belmora’s registration under Article 6bis of the Paris Convention “as made applicable by Sections 44(b) and (h) of the Lanham Act” And under § 14(3) of the Lanham Act because Belmora had used the FLANAX mark “to misrepresent the source of the goods . . . [on] which the mark is used.”  The TTAB found that Article 6bis isn’t self-executing, and BCC abandoned this ground on appeal so the court of appeals didn’t reach it. The TTAB did cancel Belmora’s mark under §14(3), finding that this wasn’t a close case; the appeal of that cancellation, and BCC’s §43 claims, all ended up before a district court that dismissed all the claims on the ground that BCC lacked a protectable interest in the Flanax mark in the US.
Applying Lexmark, the court of appeals reversed, holding that “the plain language of § 43(a) does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action.”  Instead, it’s the defendant’s use in commerce of an offending “word, term, name, symbol, or device” or of a “false or misleading description [or representation] of fact” “that creates the injury under the terms of the statute.”  So BCC had to show that it was likely to be damaged by this use.  “It is important to emphasize that this is an unfair competition case, not a trademark infringement case.” [Mark McKenna will be pleased. Although I think it shouldn’t ultimately matter, I wonder if the government will pick up on this panel holding as it relates to Blackhorse; if §43(a) doesn’t require trademark rights, that implies that cancellation would not end the Washington team’s federally enforceable rights.]
Moreover, the relevant economic harm didn’t have to occur in the US, because the Lanham Act covers “commerce within the control of Congress,” and prior Fourth Circuit precedent says that includes “foreign trade.”  “Of course, any such ‘foreign trade’ must satisfy the Lexmark ‘zone of interests’ and ‘proximate cause’ requirements to be cognizable for Lanham Act purposes.”
The court of appeals saw this case as relevantly similar to cases protecting plaintiffs whose mark has become generic against a competitor who “fail[s] adequately to identify itself as distinct” such that its name causes “confusion or a likelihood of confusion.”  
Likewise, in a “reverse passing off” case, the plaintiff need not have used a mark in commerce to bring a § 43(a) action. Thus, the plaintiff in a reverse passing off case must plead and prove only that the work “originated with” him -- not that he used the work (which may or may not be associated with a mark) in U.S. commerce.
If use of a mark in US commerce were required for a §43(a) claim, the genericity and reverse passing off cases couldn’t exist. [After Dastar, the court probably shouldn’t be saying “work,” since that implies a copyrighted work, not a material object in which a work is embodied, the only remaining target of a reverse passing off claim.  So, does the Fourth Circuit now have a famous foreign marks doctrine, like the Ninth?] 
The court of appeals commented that “[a] plaintiff who relies only on foreign commercial activity may face difficulty proving a cognizable false association injury under § 43(a). A few isolated consumers who confuse a mark with one seen abroad, based only on the presence of the mark on a product in this country and not other misleading conduct by the mark holder, would rarely seem to have a viable § 43(a) claim.”  [Why?  Is it the few consumers or the lack of other misleading conduct?  What if it’s a lot of consumers but an innocent seller?] However, the court of appeals felt differently when there was alleged intentional passing off in the US “in order to influence purchases by American consumers,” since “intentional deception can go a long way toward establishing likelihood of confusion.”
Under the circumstances, BCC could bring both false association and false advertising claims.  For false association, BCC was within the relevant zone of interest, given the Lanham Act’s purpose of  “making actionable the deceptive and misleading use of marks” in “commerce within the control of Congress.” The complaint alleged that Belmora’s conduct caused BCC customers to buy Belmora Flanax in the US instead of purchasing BCC’s Flanax in Mexico. Mexican citizens or Mexican-Americans in border areas might cross into the US and buy Belmora Flanax here before returning to Mexico, or might forego purchasing BCC’s Flanax when they visited Mexico because they’d bought the US Flanax instead.  “Further, by also deceiving distributors and vendors, Belmora makes its FLANAX more available to consumers, which would exacerbate BCC’s losses.”  For similar reasons, BCC also alleged proximate cause.  “BCC may ultimately be unable to prove that Belmora’s deception ‘cause[d] [these consumers] to withhold trade from [BCC]’ in either circumstance, but at the initial pleading stage we  must draw all reasonable factual inferences in BCC’s favor.”
False advertising: Here, BCC and the US company, BHC, both brought claims under §43(a)(1)(B), which the court of appeals also reinstated.  BHC (maker of Aleve) brought a “typical” false advertising claim, as a direct competitor with Belmora in the US. “If not for Belmora’s statements that its FLANAX was the same one known and trusted in Mexico, some of its consumers could very well have instead purchased BHC’s ALEVE brand.”  BCC’s false advertising claim wasn’t as typical, but still satisfied the zone of interests test given the Lanham Act’s purpose of “making actionable the deceptive and misleading use of marks.”
Beyond false association, Belmora “parlay[ed]” the Flanax mark into misleading statements about the product’s “nature, characteristics, qualities, or geographic origin.” Because its claims regarding popularity, trust, and a history of quality were “anchored as a factual matter to the FLANAX mark’s history ‘in the Latino American market,’” they weren’t puffery.
The court of appeals cautioned that Belmora owns Flanax as a mark in the US.  “But trademark rights do not include using the mark to deceive customers as a form of unfair competition, as is alleged here.”  An appropriate remedy might allow Belmora to use the mark, but with measures to avoid confusion; “any remedy should take into account traditional trademark principles relating to Belmora’s ownership of the mark,” such as altering the font and color of the packaging, attaching the manufacturer’s name to the brand name, or using a disclaimer.
The §14(3) cancellation claim was also reinstated. The TTAB found that the preponderance of the evidence “readily establishe[d] blatant misuse of the FLANAX mark in a manner calculated to trade in the United States on the reputation and goodwill of petitioner’s mark created by its use in Mexico.”  The court of appeals noted that a cancellation petition can be filed by “any person who believes that he is or will be damaged . . . by the registration of a mark.”  This language is similar to that interpreted in Lexmark.  For §14(3), the petitioner must also establish that the “registrant deliberately sought to pass off its goods as those of petitioner.”  As with §43, §14(3) didn’t include a requirement of use in the US.
The court of appeals noted that cancellation strips an owner of “important legal rights and benefits” that accompany federal registration, but it “does not invalidate underlying common law rights in the trademark.”  [Note that In re Tam says otherwise, unless Belmora can re-register once it has purged itself of the misrepresentation, as the remedy discussion above suggests it may.]  In a footnote, the court of appeals noted the PTO’s argument that § 14(3) might require a lesser showing of causation because it sets forth an administrative remedy, whereas the Supreme Court based its Lexmark analysis on common law proximate cause requirements for judicial remedies. [Again note that In re Tam bears on this, not just B&B v. Hargis.]

Thursday, March 24, 2016

Amicus brief in Fox v. TVEyes appeal

Arguing that TVEyes' database and its functions are fair use.  Thanks to the signers, especially Chris Sprigman, & I'm also grateful for the last-minute help of Michael Leavy, for when I discovered that being an e-filer in the Second Circuit doesn't actually make you an e-filer in the Second Circuit unless you have connected your PACER account with your NextGen account, which for some reason requires human intervention.  Lesson learned!

Wednesday, March 23, 2016

Inconclusive investigation isn't enough to give knowledge for contributory TM infringement purposes

Spy Phone Labs LLC v. Google Inc., No. 15-cv-03756-PSG, 2016 BL 86393 (N.D. Cal. Mar. 21, 2016)
SPL registered Spy Phone as a mark (for something, I presume), and submitted its Android app, SPY PHONE Phone Tracker, to Google.  It was downloaded over a million times, and Google took down a number of competing apps with similar names when SPL requested that it do so via Google’s online complaint form.  Whenever Google removed an app based on a trademark complaint, it sent the app developer a notification containing the complainant’s name and email address.
According to the complaint: The app stores information on phone locations and use on a secure server, and it periodically displays an icon to let users know the app is running; it’s free, but SPL generates revenue by running ads via Google on spyphone.com.  After one developer objected in May 2013, the relationship between Google and SPL eroded.  SPL submitted a trademark infringement complaint about another app, “Reptilicus.net Brutal Spy Phone,” and this time Google said it couldn’t determine the merits of the claim and refused to act.  Then in June, the Google Play team removed SPL’s own app, citing violations of Google's anti-spyware policy, allegedly despite the fact that SPL’s app complied with the policy.  Eventually, Google explained that although none of the functions of SPL’s app violated the anti-spyware policy, the name itself was unacceptable because it contained the word “spy.”  Though other apps used the same word, Google promised that it intended to prohibit all developers from doing so in the future.
Thus, SPL decided to drop its lawsuit and relaunch its app under the name “Phone Tracker.”  In October 2013, Google reinstated SPL’s developer account, but it deleted all the consumer reviews and records of downloads for SPL’s original app, and the new app managed only 260,000 downloads in ten months, leading to a steep reduction in SPL’s advertising revenue.29 Meanwhile, other apps continued to use “spy”  in their names with impunity.  So SPL resumed submitting complaints about other apps that used “spy” or “SPY PHONE” in their names, but instead of using the trademark infringement form—which would notify developers of SPL’s identity—SPL claimed violations of the same anti-spyware policy of which it had fallen afoul.  In July 2014, SPL made a complaint about another app from the Reptilicus.net developer, and Google again suspended SPL’s account without warning, this time for purportedly violating Google’s spam policy. SPL alleged that its app complied with that policy, but that the other developer had submitted a false complaint.  This other developer had multiple Play Store parental monitoring apps—which in itself violates Google's policies—and several of these apps contained the word “spy,” or even the phrase “Spy Phone,” in their names.  SPL allegedly received a letter from a “concerned” member of the Google Play team “confirming SPL’s suspicions.”  After this second takedown, Google searches for the phrase “spy phone” started to list competing apps before SPL’s website, and the top-listed result is now an app that allegedly infringes SPL’s trademark.
SPL sued the developer, who has not yet been served, and Google, alleging contributory trademark infringement against Google and tortious interference against all the defendants. The court first found that SPL didn’t allege facts sufficient to state a claim for contributory trademark infringement by Google. With an online marketplace, “a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods. Some contemporary knowledge of which particular listings are infringing or will infringe . . . is necessary.”  SPL didn’t allege that Google had notice for most of the apps; SPL intentionally made spyware complaints instead of trademark complaints in order to remain anonymous.  “But spyware complaints are not the same as trademark complaints, and Google could not be expected to respond to a complaint about one offense by investigating another.”
Google also didn’t ignore the initial Reptilicus.net app; it investigated and responded that it could not assess the merits of the claim.  The app might have used the words “Spy Phone” simply as a descriptor, as opposed to the distinctive prefix “Reptilicus.net Brutal,” and that fact would constitute a defense to infringement.  Uncertainty over the existence of infringement is relevant to an alleged contributory infringer’s knowledge.  That uncertainty, combined with Google’s investigation and response, made the allegations of knowledge implausible.
Nor did tortious interference work, because there was no allegation that Google committed any act wrongful apart from the interference itself.

What's in a name? A false advertising suit against a generic drug maker

Endo Pharmaceuticals, Inc. v. Actavis, Inc., 2016 WL 1090356, No. 12-cv-7591 (D.N.J. Mar. 21, 2016)
Endo sued Actavis under federal and state law for allegedly falsely marketing a generic form of oxymorphone hydrochloride extended-release tablets. The court got rid of the New Jersey consumer protection law claims because NJ’s law doesn’t protect competitors, but did allow some claims under the Lanham Act and the New Jersey Fair Trade Act.
Endo received FDA approval for an extended release oxymorphone hydrochloride pain reliever under the brand name Opana ER in 2006; Actavis received FDA approval for a generic form of that formulation in 2010.  Actavis’ generic is AB rated to Opana ER, meaning that it’s therapeutically equivalent.  “Concerned about the potential for abuse of the drug, including the possibility that persons would crush the pills and snort or inject the powder, Endo developed a crush-resistant version.”  The FDA approved this version in 2011.  Endo stopped making the old version but didn’t recall existing tablets, and began shipping the new formulation in 2012.  The new crush-resistant formulation was bioequivalent to the original formulation of Opana ER and was sold under the same brand name, distinguised as “Opana ER with Intac.”
Endo then filed a Citizen Petition with the FDA, seeking to have the FDA (1) determine that the old formulation of Opana ER was discontinued for reasons of safety, (2) refuse to approve any pending generic approvals for the old formulation, and (3) suspend and withdraw approval for generic versions of the old formulation. Endo also sued Actavis, arguing that Actavis’s marketing of “Generic Oxymorphone ER Tablets” as “AB Rated to Opana® ER”’ became misleading after May 2012, once Endo had stopped selling the old version.  The FDA denied Endo’s petition; the old formulation wasn’t withdrawn for safety or effectiveness reasons, because the data did not support the claim that Opana ER with Intac was superior.
Actavis argued that Endo was trying an end run around the FDA’s ruling that approvals of generics AB rated to old Opana ER were okay.  Under Pom Wonderful, there is some wiggle room for a false advertising claim not reliant on interference with FDA decisionmaking.  Endo’s basic argument: “the consumer could now mistakenly infer (as the consumer could not have before) that Actavis’s drug is AB rated to Opana® ER with Intac.”  Can a brand name manufacturer “render the generic manufacturer’s true advertising misleading and then sue on that basis”?
Casting some shade on Endo’s arguments, the court noted that “Endo itself simultaneously marketed the two versions of the drug for some months, but of course does not accuse itself of confusing physicians.”  Endo’s scrupulousness in distinguishing between the two versions, however, posed factual issues not suitable for a motion to dismiss.
On its face, Actavis’s ad said it was AB rated to Opana ER, which seemed unambiguous and true.  But since then, Endo argued, there was another formulation of Opana ER, with the same name, “sort of.”  Thus, Opana ER might mean two different things, though not too different; because Endo only makes Opana ER with Intac, consumers might now take Actavis’s claim to be one of equivalence to Opana ER with Intac.  A doctor might be misled into thinking there’s just one version of the drug on the market, but actually there are two. 
The court noted that Endo didn’t recall its old Opana ER and let two versions exist on the market for a while, selling off the old while it ramped up production of the new.  It took from February 2012 to after the end of May 2012 for the old inventory to clear the pipeline and for Endo to stop marketing old Opana ER.  “The FDA apparently found this highly significant in rejecting Endo’s petition. And Endo in this action will face the question of how it could keep the two drugs straight in physicians’ minds then, but can no longer do so now.”
The FDA’s rulings about safety tended to undercut the materiality of the allegedly misleading statements. “Endo’s safety concerns about Old Opana® ER (which seemed to have crested shortly after it sold off the last of its inventory) have not been borne out.” And whether doctors ought to be prescribing one version or another was not a Lanham Act issue, but an FDA issue.
Actavis also argued that it no longer advertised that its product was AB rated to Opana ER; the complaint’s ads dated from 2011.  This created a factual issue that would also need to be explored, as did whether Actavis was seeking approval for a crush-resistant version of its own.  Still, on the pleadings, this was not a claim ruled out as a matter of law: Endo pled “false statements about matters the consumer is likely to care about in making a purchasing choice.”  The court noted that targeted discovery and an early motion for summary judgment might well be appropriate.

Another poster child for a national anti-SLAPP law: dilution claims against a critic

Doctor’s Data, Inc. v. Barrett, 2016 WL 1086510, No. 10 C 03795 (N.D. Ill. Mar. 21, 2016)
Plaintiff DDI sued Dr. Stephen J. Barrett, M.D., the National Council Against Health Fraud, and Quackwatch for violating §43, as well as state law claims for defamation and related torts.  Here, the defendants get rid of a number of claims on summary judgment. DDI is a clinical lab that analyzes urine, blood, and other samples for health care practitioners; one of its tests is designed to assess the levels of heavy metals present in a patient’s urine.  Samples are either “provoked” or “non-provoked”; a provoked sample is one the physician collects after administering a “chelating agent,” which temporarily increases the patient’s excretion of heavy metals. DDI uses the same form to report the test results for both provoked and non-provoked samples. The form reports the heavy metal levels in the patient’s urine, lists “reference ranges” of typical heavy metal levels in non-provoked samples, and graphically classifies each of the patient’s levels as “within reference range,” “elevated,” or “very elevated” based on those non-provoked reference ranges.
Barrett, a retired psychiatrist and consumer advocate, criticized heavy metal urine testing and DDI’s report form on his websites and related email listservs. NCAHF and Quackwatch were not-for-profit corporations that focused on health care consumer advocacy, though they were dissolved by the time of this opinion.
Previously, the court dismissed the Lanham Act claim to the extent it covered false advertising because DDI lacked standing, but allowed a claim under §43(c) dilution (!) to proceed.  (After Lexmark, the standing argument is probably wrong, but given the context I doubt the defendants’ statements count as commercial speech/commercial advertising or promotion.)  DDI, however, continued to press §43(a) false advertising claims, despite the court’s clear earlier statements; the court construed it as abandoning a federal dilution claim and the §43 claim was dismissed in its entirety with prejudice.
DDI did continue with its claim for trademark dilution under ITRPA, which provides that the owner of a mark which is famous in Illinois is entitled to relief “against another person’s commercial use of a mark or tradename, if the use...causes dilution of the distinctive quality of the mark.”  This law requires actual dilution, not merely likely dilution.  DDI argued that Barrett’s websites were commercial and that defendants caused dilution by referencing “Doctor’s Data” in the challenged publications and including DDI’s logo on the first page of one of the publications. But there was no evidence of dilution of distinctiveness of DDI’s marks. DDI provided evidence that defendants used its marks, and possibly that DDI’s reputation was damaged by defendants’ statements using its marks.  “But causing consumers to think less highly of a trademarked product or service—even if accomplished through false or misleading statements—is not equivalent to diluting the distinctiveness of that product or service. Allegations solely of the former nature point not to trademark dilution but to defamation and other similar claims.”  (Something we all knew should be true, but it’s nice to have such a clear statement in a case.)  Summary judgment for defendants.
Then there is a long, long slog through 85 allegedly defamatory statements, which I will not inflict on readers who aren’t, like the court, required to wade through them.  Basically, Barrett said that “referring patients who have provided provoked samples to standards applicable to non-provoked tests is highly misleading and permits unscrupulous physicians and other purported health care practitioners to convince patients to undergo expensive, but unnecessary, detoxification treatments,” and the disputes in the case “center primarily on the extent to which the defendants’ statements assert that Doctor’s Data is a witting participant in these schemes.”  The court concluded that, for the most part, the statements that were most likely to cause reputational harm were about the allegedly scummy doctors rather than DDI, or appeared in reports protected by the fair report privilege (e.g., reports of lawsuits filed against DDI and others). Most of the remaining statements were either true descriptions of the report form or expressions of opinion about the form. Thus, most of the statements weren’t actionable, though the court denied summary judgment on a few that might have implicated DDI.
For example, Barrett’s description of the DDI report classifications as misleading (that is, the fact that the form reported the patient’s provoked levels but only provided unprovoked reference levels for comparison, and those lower than other labs’) was nonactionable opinion.  The description of the report classification as misleading was immediately followed by the factual basis for that evaluation, and Barrett even reproduced a report.  “Misleading” was clearly his opinion.  There is qualifying language at the bottom of the DDI report that says “[r]eference ranges are representative of a healthy population under non-challenge or non-provoked conditions.”  While a reasonable jury could find that this put patients adequately on notice that the reference ranges shown next to the test results “should be given less weight, or possibly even no weight, if the urine sample at issue was provoked,” no reasonable jury could find that the report didn’t make a comparison between provoked results and non-provoked reference ranges, which was the practice Barrett criticized.
Also, here’s a fun discussion:
[T]he statement “The provoked urine toxic metals test is a fraud” does not have a precise and readily apparent meaning. As an initial matter, the term “fraud” has a broad scope; to speak of something as a “fraud” may mean it is criminally deceptive, but it may also mean simply that it is not what it purports to be. When H. L. Mencken famously opined that “All men are frauds,” he did not incur universal liability for defamation.  As well, “fraud” is a term often used as hyperbole, trotted out in even the most inconsequential contexts …. That the term expressly refers here not to a person, or a knock-off designer purse, but to a test does nothing to make its meaning more clear; what does it mean for a test to be a fraud? … [I]f anything, the context here points not to DDI as the party responsible for “fraud” but to those who use DDI’s test to deceive the public—that is to say, the physicians who buy DDI’s testing services.
Also, while “shady” is not a factual claim capable of verification or disproof, describing DDI as a “nonstandard” laboratory might be defamatory, and the court denied summary judgment on the following statement, since given more context it might contain some factual claims:  
The sample report on DDI’s Web site includes three pages of measurements and three pages of clinically useless biochemical tidbits, diagnostic speculations, pseudoscientific blather, and recommendations for further testing. Unfortunately for patients, amino acid analysis of urine does not provide basic information about the individual’s general health, metabolism, nutrient status, or dietary adequacy, and the supplement recommendations lack a rational basis. It is not possible, for example, to figure out what people eat by looking at what they excrete. And finding a substance does not mean that it came from a single source or metabolic pathway.
Tortious interference with prospective economic advantage claims failed because DDI couldn’t prove a specific enough expectancy of future business that was disrupted by Barrett’s claims. And tortious interference with existing contractual relations failed because DDI couldn’t show that a breached contract resulted from Barrett’s claims, much less that defendants intentionally induced the breach.  DDI believed that the relevant doctor’s business collapsed because of Barrett’s complaints to the Texas medical board and to insurance companies, rendering her incapable of paying DDI’s bills.  But DDI didn’t show that Barrett’s complaint caused the doctor’s financial problems or her failure to pay DDI, or that Barrett complained with the intent to cause a breach of contract.

Monday, March 21, 2016

One Haas impersonating another is TM infringement, false advertising

Haas Door Co. v. Haas Garage Door Co., No. 3:13 CV 2507, 2016 WL 1047242 (N.D. Ohio Mar. 16, 2016)
A family-owned business split, and split a trademark, and then things went bad.
Founded in 1953, Haas Door Sales eventually became Haas Door Company and Haas Garage Door Company. Haas Door Sales focused exclusively on retail sales and installation of garage doors; Haas Door Company was incorporated for the purpose of manufacturing garage doors.  Haas Garage Door Company took over retail sales; both Haas Door (manufacturing) and Haas Garage Door (retail sales, installation, and repair) used the HAAS mark.  In 1989, the owners sold Haas Door, leaving them with no right to make garage doors, under the HAAS mark or otherwise, pursuant to a noncompete agreement—though those owners subsequently retired.  Haas Garage Door was an authorized dealer of Haas Door, but a dispute arose between the companies and Haas Door terminated Haas Garage Door’s authorized dealership.  Haas Door has a registration for HAAS for garage doors and hardware.
The court found that the parties each had separate and distinct rights in the HAAS mark. “The HAAS mark is connected to two distinctively different goods and services.”  (That strikes me as a bit of an overstatement, from a consumer perspective—it was not the greatest idea to split them like that.)
While not resolving the core trademark infringement claims based on HAAS, the court granted partial summary judgment to Haas Door based on Haas Garage Door’s use of the AMERICAN TRADITIONS SERIES mark, which Haas Door had used for high end garage doors since 2005.  Haas Garage Door assembled doors and sold them under the name AMERICAN TRADITIONS SERIES, using the HAAS mark.  The court found likely confusion, as well as actual confusion.  An architect was deceived into buying from Haas Garage Door, “[d]espite doing due diligence and meeting with [Haas Garage Door] on multiple occasions.”  He was misled into believing that both Haas Door and Haas Garage Door produced the same product, but at different locations, and then noticed quality differences in the door he bought.  Likewise, the owner of a retail garage door sales, installation, and repair business mistakenly contacted Haas Garage Door and “was misled into believing he was engaging in a business relationship where he was obtaining doors directly from the manufacturer, i.e. Haas Door.”  When he found out the truth, he ended his relationship with Haas Garage Door.  These events showed likely confusion even among sophisticated purchasers.
In addition, the court found Haas Garage Door liable for false advertising for using a label on the garage doors that said HAAS GARAGE DOOR COMPANY [contact info] MANUFACTURERS OF: RESIDENTIAL, COMMERCIAL & INDUSTRIAL OVERHEAD DOORS & ELECTRIC OPENERS.  Haas Garage Door isn’t a manufacturer, but it used the label on every door it installed or serviced for years. This was a literally false claim, so the court presumed actual deception and materiality.  There was also a causal link to harm to Haas Door. “This misrepresentation harms Haas Door by depriving the company of the opportunity to offer customers its products, made to its standards, policies, and warranties.”

Porn site's use of TMs in metatags not confusing

Multifab, Inc. v. ArlanaGreen.com, 122 F. Supp. 3d 1055 (E.D. Wash. 2015)
Plaintiff made commercial industrial components and equipment, and used the name “Multifab” for at least 25 years.  It has the multifabinc.com domain name. ArlanaGreen.com features pornographic images and videos, and allegedly caused confusion by using Multifab’s name to promote its services.  Defendants defaulted.  Nonetheless, the court concluded that Multifab failed to show trademark infringement or false advertising under the Lanham Act, cyberpiracy under the Anti–Cybersquatting Consumer Protection Act, or a violation of Washington’s Consumer Protection Act.
Infringement: lack of proximity of the goods weighed heavily against a finding of confusion, as did the degree of consumer care and the unlikelihood of any expansion into competing territory. “Sales of pornography and industrial equipment do not target the same class of purchasers in any discernable way, the products are not similar in use or function, nor are they complementary in any sense.”  (Insert your own dirty joke.)  Internet shoppers are accustomed to trial and error, and Multifab’s goods would be bought by buyers likely to be familiar with the commercial industrial equipment market, using a high degree of care. See M2 Software, Inc. v. Madacy Entm’t, 421 F.3d 1073, 1084 (9th Cir. 2005) (because purchasers of music management databases are highly sophisticated members of the music industry, the possibility that they could be confused about music management products and services “is almost nil” regardless of any trademark).  So the strength of Multifab’s mark (suggestive), the similarity of the parties’ marks (identical), and defendants’ apparent bad intent favored Multifab, but that just wasn’t enough given the factors making confusion unlikely.  There was no evidence of actual confusion.
False advertising claims failed for the same reasons, as did state consumer protection law claims.
ACPA claims failed because the conduct here didn’t involve use of a domain name, whether at the top or second level.  Instead, defendants were using metatags and website content.

Thursday, March 17, 2016

A generic post about trademark overclaiming

Miller’s Ale House, Inc. v. DCCM Restaurant Group, LLC, 2016 WL 1040005, No: 6:15-cv-1109-Orl-22TBS (M.D. Fla. Mar. 16, 2016)
Miller sued DCCM for false designation of origin/unfair competition under state and federal law. Miller’s operates approximately seventy sports bar restaurants throughout Florida and the United States, using a similar, but not always identical, sign on each. “Sometimes the sign appears with the name Miller’s in italics preceding a geographical prefix and followed by the phrase ‘ale house;’ and other times the sign omits “Miller’s” and contains only a geographical prefix and ‘ale house.’” Thus: “Miller’s ORLANDO ALE HOUSE,” or “ORLANDO ALE HOUSE,” generally but not always in red letters and not always in italics.
Brandon Ale House (from Miller)

Miller's Orlando Ale House

Miller's Atlanta Ale House

Orlando Ale House (from Miller)
DCCM’s sports bar restaurant, located in Davenport, Florida, is called Davenport’s Ale House, with a sign comprised of Davenport’s in italics preceding the phrase “ale house.”
Davenport's Ale House

Miller’s argued that the relevant public, central Florida, associated an italicized word followed by ALE HOUSE with Miller’s restaurants, regardless of the nature of the italicized word.
In  Ale House Mgmt, Inc. v. Raleigh Ale House, Inc., 205 F.3d 137 (4th Cir. 2000), the Fourth Circuit concluded that Miller’s predecessor had no protectable interest in the phrase “ale house” because they are generic words. In Miller’s Ale House, Inc. v. Boynton Carolina Ale House, LLC, 745 F. Supp. 2d 1359 (S.D. Fla. 2010), the court found that issue preclusion barred Miller’s claim based on “[geographic prefix] ALE HOUSE” because the Fourth Circuit had already determined that “ale house” is generic, and Miller’s had failed to present evidence showing that it had “recaptured” the generic term “ale house.” The Eleventh Circuit affirmed, emphasizing that “Miller’s still has no protectable interest in the words ‘ale house,’ ” nor any protectable trade dress in red letters on an outside sign.  Miller’s Ale House, Inc. v. Boynton Carolina Ale House, LLC, 702 F.3d 1312 (11th Cir. 2012).
Here, Miller argued that it wasn’t relitigating its trademark claims, but rather seeking protection against misuse of a generic term under the head of unfair competition.  (Now-Justice Ginsburg said this kind of claim was ok in Blinded American Veterans, but the judge here pointed out that Eleventh Circuit precedent controls.)  DCCM pointed out that this looked a lot like the prior litigation, and noted that Miller’s does not use italics consistently on its buildings, nor do any of its signs italicize the geographical prefix.
Font style wasn’t raised in previous litigation and wasn’t directly precluded, but summary judgment was warranted because of a lack of a genuine issue of material fact. The magistrate judge reasoned that Miller’s evidence, at most, could show confusion among consumers in central Florida, but didn’t show that the general public, outside of just central Florida, associated the font and style of the sign with Miller’s.
Adopting the magistrate’s recommendation, the district judge reasoned that courts in the Eleventh Circuit treat trademark infringement and false designation of origin identically, other than the presumptions afforded by registration.  Knights Armament Co. v. Optical Sys. Tech. Inc., 654 F.3d 1179 (11th Cir. 2011) (declining to consider claims for unfair competition and false designation of origin under §43(a)(1)(A) because the defendant did not have enforceable rights in a mark). Miller failed to distinguish its claims from trademark infringement claims; the only difference here from the previous Miller case was DCCM’s use of italics, but Miller conceded that it only occasionally used italics in its signage and didn’t do so for the geographical prefix. Thus, the false designation of origin claim was premised on nearly identical allegations as the trademark infringement claim, and Miller’s didn’t have enforceable rights in the relevant symbol.
Miller objected to the magistrate’s recommendation, arguing that the appropriate geographical area for the likelihood of consumer confusion element was central Florida, not nationwide. But without a mark in which there were rights, that issue was irrelevant.  The state law claims suffered the same fate.
Comment: I hope the court awards defendant its fees.  “Ale house” was born generic and there’s no good reason to allow claims over it to persist, even if there is some policy reason for holding out hope for formerly non-generic terms like SINGER for sewing machines.  Right now, Miller seems to believe that it’s worth harassing competing ale houses in the hope that it can deter enough of them to make a better case for having claimed the term.  The next suit will presumably be over the size and shape of the outside sign, also not previously litigated.  Miller would be better served by focusing on building up a brand in MILLER’S ALE HOUSE, if it can.

Wednesday, March 16, 2016

Checkered result for Uber: some false advertising claims survive

Checker CAB Philadelphia, Inc. v. Uber Technologies, Inc., 2016 WL 950934, NO. 14-7265 (E.D. Pa. Mar. 7, 2016)
Checker sued Uber and Google for Lanham Act and RICO violations.  Unsurprisingly, this opinion kicks out Google and RICO, leaving Uber to face some but not all of the remaining false advertising claims.  (Google was sued in its role as an investor in Uber.)
In October 2014, Uber, through Jon Feldman, posted an ad on Uber’s website and sent a blast email to its account holders in the Philadelphia Metropolitan Area about the launch of UberX service in Philadelphia. The ad included the claim: “This week the largest taxi insurer went bankrupt, which means that as of 5:00 p.m. today, there is no guarantee that your taxicab will be insured.” Uber and Feldman “tweeted” a similar ad on social media with a link to a post on its blog that said: “In October the largest taxi insurer in Pennsylvania went bankrupt. Many uninsured taxis are still on the road; though some may have new policies, there’s no guarantee that your taxi ride will be insured.”
The reference was to First Keyston, which provided insurance to many of the taxi plaintiffs and was going through bankruptcy.  Pursuant to an order of the bankruptcy court, all existing insurance policies issued by First Keystone were cancelled as of November 20, 2014.  The taxi authority told First Keystone policyholders whose proof of insurance was on file with the authority to get replacement coverage within two days, or risk being put out of service.  According to plaintiffs, by that time “almost all” of the First Keystone policyholders contacted by the authority had obtained replacement insurance coverage, and “the rest were awaiting underwriting approval.” The authority then extended its deadline three days, leaving “only a handful” without replacement insurance.  Plaintiffs alleged that no First Keystone policyholders was ever placed out-of-service and no medallion taxicabs operating in Philadelphia were ever uninsured, because the First Keystone policies remained effective until November 20, 2014, or an earlier date when replacement coverage was secured.
The ads also claimed that Uber’s UberX fares were 20% cheaper than a taxi’s fare, using three sample comparisons of Uber’s fares with those of a non-Uber affiliated taxi.
The court first dismissed claims based on Uber’s alleged provision of taxicab services in violation of local and state regulations, which themselves didn’t provide for private causes of action. in Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222 (3d Cir. 1990), the Third Circuit held that “what the FD&C Act and the FTC Act did not create directly, the Lanham Act does not create indirectly, at least not in cases requiring original interpretation of these Acts or their accompanying regulations,” and affirmed the district court’s denial of a preliminary injunction. The same was true here. “For example, in Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484 (D.C. Cir. 1996), the D.C. Circuit Court of Appeals relied on Sandoz to hold that private parties may not invoke the Lanham Act to create a private cause of action for enforcement of local taxi regulations.”
Statements based on fare comparisons: Plaintiffs alleged that the 20% cheaper claim was literally false, but the fare samples used in the blog posts “show the literal truth of the challenged statement, i.e., the sample UberX rates are at least 20% lower than the sample non-Uber taxicab fares.”  Plaintiffs didn’t allege that any of these samples were false.
Statements based on claims about plaintiffs’ insured status: Here Uber fell down.  Uber argued that, in light of the facts, Uber’s statement that there was “no guarantee” that a consumer’s cab was insured was literally true since, when Uber disseminated the ads, some Philadelphia taxicab drivers had not obtained replacement insurance coverage.  Uber failed to grapple with the allegation that the Keystone insurance policies were in fact valid until November 20, more than three weeks after the “no guarantee” statements.  The express claim that the insurance policies were terminated/cancelled in October was literally false.
Proximate cause under Lexmark: Plaintiffs alleged that Uber was “willfully, knowingly and intentionally making false claims and descriptions in their advertising and, unless immediately enjoined by this Court, will continue to deceive, mislead, and confuse the riding public into believing that, among other things, Plaintiffs’ taxicab service is inferior, less safe, risky, more expensive, and unsuitable for its intended purpose.”  That was enough, in conjunction with the other factual allegations in the complaint.  (I understand that Lexmark could in theory be used to contract standing.  But not when the ads at issue are comparative ads targeting the plaintiff/s!)
Relation of false advertising to RICO: the false advertising allegations couldn’t support a RICO claim “because the three alleged instances of false advertising (even if deemed to be racketeering activity) do not form the requisite continuous pattern of racketeering activity. The advertisements occurred within a three-day period in October 2014.”  Also, no facts were alleged that could establish that these misrepresentations were part of Uber’s “regular way of doing business.”

Tuesday, March 15, 2016

I don’t go into yours, you don’t go into mine: copyright preempts Dirty Dancing trademark claim

I don’t go into yours, you don’t go into mine: copyright preempts Dirty Dancing trademark claim
Lions Gate Ent. Inc. v. TD Ameritrade Servs. Co., No. cv 15-05024  (C.D. Cal. Mar. 14, 2016)
Lions Gate sued TD for infringing its rights in Dirty Dancing, specifically the well-known line “Nobody puts Baby in a corner,” which Lions Gate claimed as a mark for various goods and services and alleged that it had licensed for “a variety of merchandise.”  TD ran a series of ads, including video, online, and print versions with the theme “Nobody puts your old 401k in a corner,” with an encouragement to enroll in the TD IRA plans. The ads often included images to conjure up Dirty Dancing, such as “a still and/or moving image of a man lifting a piggy bank over his head after the piggy bank ran into the man’s arms.”
Some versions of the ads “invoked” the song, “(I’ve Had) the Time of My Life,” which played during the final dance scene in the movie, with lines like “[b]ecause retirement should be the time of your life.”
Start of TV ad
Middle of TV ad
Big finish of TV ad
After finding specific personal jurisdiction in California, the court turned to Dastar.  For underexplained reasons, the court decided to apply §301 preemption doctrine to see whether the trademark claims were precluded, when it probably ought to be conflict preemption.  (1) Were the claims within the subject matter of copyright? Yes, they were based on the motion picture Dirty Dancing and associated literary/musical works.

(2) Was there an extra element?  This is important because Dastar said that federal trademark law can’t be used to extend copyright or patent rights. “Origin of goods” refers “to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.” TD argued that the claims were Dastar-barred, and that, to the extent the elements claimed were famous, they weren’t famous as marks but rather as part of a copyrighted film.
Lions Gate responded that it made separate copyright infringement claims, and that “a single work may be protected as an original work of authorship under copyright law and as a trademark.”

The court found that the complaint bled together its copyright, trademark, and unfair competition claims “making it challenging for the Court, much less Defendants, to determine the allegedly separate theories underlying the different rights.”  Lions Gate was using copyright “either as a bolster for its trademark and unfair competition claims, or as the real basis of the claims — the latter of which is certainly not permissible.”  It was even unclear what NOBODY PUTS BABY IN A CORNER was used for—Lions Gate said at oral argument that it was on goods such as posters, journals, and clothing (which sound awfully ornamental/expressive to me). 
The court found the claim barred by Dastar.  Unfair competition and trademark infringement claims also failed as preempted.  “These causes of action are based on Defendants essentially copying Plaintiff’s intellectual property and slightly changing the words — creating a derivative work, perhaps — and using the changed sentence in advertising its own products.”  (A little worrisome that a sentence fragment might be enough for copyright infringement, but I hope substantial similarity analysis will ultimately be sensible.  The fact that there might be a gap between copyright and trademark rights isn’t a problem; it’s a function of the system!)  State and common-law claims were also preempted by copyright law “because the same rights are asserted in these causes of action as are asserted in the copyright infringement cause of action, namely reproduction and distribution of the copyrighted work and preparation of a derivative work.”
The court distinguished Dastar-barred claims from acceptable passing off claims:
[I]f the TD Defendants were to sell posters, journals, and clothing with NOBODY PUTS BABY IN A CORNER on them, or take the goods Lions Gate alleges it produces or licenses and put TD’s own mark on it, then there would be a solid origin claim under the Lanham Act, and surely any state and common-law equivalent. Dastar explicitly provided for that — the distinction it drew for origin claims was between “the producer of the tangible goods that are offered for sale” (allowable) and “the author of any idea, concept, or communication embodied in those goods” (preempted). The problem is that nothing like that has occurred here.
Instead, Lions Gate argued that TD’s use of “a slightly altered version” of its marks would cause consumer confusion as to Lions Gate’s endorsement or association with those services, “even though the advertisements clearly promote TD’s financial services and do not mention Lions Gate or Dirty Dancing, or attempt to pass off products of TD as from Lions Gate or vice versa.”  Lions Gate argued that this confusion flowed from the use of NOBODY PUTS BABY IN A CORNER, but the court couldn’t see how that differed from a copyright infringement claim, “or a claim that Defendants have failed to obtain the permission of the author of the ‘idea, concept, or communication embodied in those goods.’”  TD made a new tag line, “Nobody puts your old 401k in a corner”; it “played on the famous concluding dance scene”; and it “referenced” the famous song playing during that dance with another tag line, “Because retirement should be the time of your life.” That might be copyright infringement, but not trademark infringement.
A communicative good can be protected under both copyright and trademark, but not here.  The alleged wrongful conduct is just unauthorized use of the protected elements of Dirty Dancing; though Lions Gate added the allegation that consumers would be confused about association, the right alleged was exactly the same: “the right to be the exclusive licensor and user of the sentence ‘Nobody puts Baby in a corner.’”
The court then discussed Lions Gate’s strongest cases, Bach v. Forever Living Products U.S., Inc., 473 F. Supp. 2d 1110 (W.D. Wash. 2007), and Butler v. Target Corp., 323 F. Supp. 2d 1052 (C.D. Cal. 2004). Bach involved the defendants’ use of the title, character, name, text, and photographs from the book Jonathan Livingston Seagull. “The defendants not only used the intellectual property associated with the book in their own materials, but they also stated in advertising their products that the brand ‘is the Jonathan brand’ and that ‘Jonathan is really the basis of what Forever is about.’” The court found that the name, title, and trade dress of the book cover were protected under trademark, not copyright, because those were source-identifying marks.  By contrast, NOBODY PUTS BABY IN A CORNER was part of the text of the copyrighted work Dirty Dancing, especially given that Lions Gate relied on other elements from the film to bolster its claim.
Butler involved the defendant’s use of plaintiffs’ copyrighted musical work and sound recording, Rebirth of Slick (Cool like Dat). The defendant played the sound recording as the soundtrack to its national advertising campaign, and also had ads and signs at stores stating, “Jeans Like That,” “Denim Like That,” “Shoes Like That,” and so on. The plaintiffs sued for infringement of the right to publicity, unfair business practices, and Lanham Act claims. The court found claims based on the use of the sound recording to be preempted, but not right of publicity/unfair business practices based on the use of the plaintiffs’ identity/false endorsement claims. Butler never mentioned Dastar; the plaintiffs weren’t claiming solely that a modified use of a famous line violated their trademark rights.  Instead, they claimed that “the use of something so closely associated to their famous persona was a misappropriation of their publicity and a false endorsement where the ‘mark’ for Lanham Act purposes is their celebrity identity.”  This wasn’t similar to Lions Gate’s theory, and it wasn’t necessarily covered by Dastar.  (Ugh.  See also: why we need the Supreme Court to fix the right of publicity.)
Dilution claims led to a beautiful ruling on “use as a mark,” even in the possible absence of preemption:
Plaintiff claims that Defendants have used the mark in Defendants’ ads, but that is not the same as alleging that Defendants use Plaintiff’s mark, or a mark nearly identical to it, as the mark for Defendants’ own goods — which would be an allegation that appears clearly contradicted by the facts of this case. Thus, it does not appear that as pled, Defendants have used the mark in commerce in the sense that the law requires. There does not appear to be any dispute or contrary facts that Plaintiff could plead to show that Defendants used the allegedly famous mark as Defendants’ own mark or to identify Defendants’ services.
Last comment: The best way to understand this result may be plaintiffs are actually attempting to use the whole film as the trademark/the film as a trademark for itself, which is what a pure licensing model means in this context, and that can’t work without conflicting with Dastar.