Celebrity Chef Sued By Certification Organization Over “Gluten-Free” Labelling

Last month, gluten intolerance advocacy group Gluten Intolerance Group (“GIG”) sued celebrity chef Jamie Oliver for trademark infringement and unfair business practices under the Lanham Act and state consumer protection laws in the U.S. District Court for the Western District of Washington. According to the complaint, GIG is an independent organization that certifies food producers as gluten free, and owns a family of U.S. and international trademarks that it uses to demark qualifying products as gluten free within the group’s standards.

GIG claims that the British chef, his company Jamie Oliver Enterprises Ltd., and his advocacy group, the Jamie Oliver Food Foundation Inc. are infringing one of these trademarks—namely, the letters “GF” surrounded by a circle and the words “Certified Gluten Free.” By affixing the mark to certain Jamie Oliver products, GIG alleges Oliver has confused consumers as to whether GIG has certified those foods as gluten free and has harmed the group’s reputation as an independent gluten free certifier.  Oliver has yet to respond to the suit.

Takeaway: Many popular food labels, such as “Certified Gluten Free,” “Paleo,” and “Certified Vegan” are in fact federally registered trademarks owned by food advocacy groups.  Advertisers should investigate any certification requirements by the owners of such labelling trademarks to avoid potential infringement or false association suits.

Chipped Away: Frito-Lay Removes “All Natural” Label from Products Containing GMOs

The plaintiffs in a five year old consumer class action against Frito-Lay North America and its parent company PepsiCo, Inc. got their wish earlier this month when Frito-Lay agreed to remove the “All Natural” label from its products containing genetically modified organisms (“GMOs”). In July 2012, a proposed class of consumers who purchased Tostitos tortilla chips, SunChips, and Fritos Bean Dip filed the suit against Frito-Lay under a variety of false labelling and consumer protection statutes. They claimed that because GMOs contain genetic material that has been “altered in a way that does not occur naturally, allowing the organism to exhibit traits that would not appear in nature,” Frito-Lay’s marketing of products containing GMOs as “All Natural” misleads consumers.

Frito-Lay recently agreed to remove “All Natural” labels from its products that contain GMO ingredients, and will not claim its products are “non-GMO” unless certified by an independent organization. It also agreed to pay up to $2.1 million in attorneys’ fees and costs, $215,000 to inform consumers about the settlement, and up to $5,000 to each of the named plaintiffs.  Two unnamed plaintiffs have filed objections to this settlement offer, and a final decision remains pending.

Takeaway: Although this settlement does not create enforceable law regarding GMOs and “all natural” labels, advertisers should be wary of false labelling suits arising from marketing products containing GMO ingredients as “all natural.”  Independent certification of non-GMO products may mitigate this risk.

New York Ballot Selfie Ban Upheld… For Now

In the first iteration of what is expected to be a hot constitutional issue, a Federal court in New York upheld New York’s ban on ballot-box selfies. The court found the law triggered strict scrutiny as the result of its suppression of voters’ political expression, but that it was sufficiently narrowly tailored to further compelling government interests in accordance with First Amendment precedent.

The plaintiffs argued that the ballot photo ban chills their freedom of political expression, and that ballot-box selfies promote the validity, execution, and conviction behind their votes. The government countered with concerns of voter intimidation and vote buying arising from voter social media photos, presenting documented examples of threats of eviction, loss of employment, and violence, as well as subtle social pressures from friends and family to vote in particular ways.  The court agreed with the government, and also noted that allowing ballot-box selfies would materially increase wait times at certain New York City polling sites and stifle voter turnout in those areas.  This latest First Amendment battle is not over, however; counsel for the plaintiffs stated they “fully expect to appeal” the decision to the Second Circuit.

Takeaway: Although New York’s ballot-box selfie ban was deemed constitutional, the law is far from settled across the United States.  Currently, nineteen states have similar laws banning ballot photography and thirty-one states either allow it or have ambiguous laws.  The expected New York appeal could drastically narrow or expand allowable voter expression under the First Amendment.

 

SCOTUS Denies Review of Indiana Anti-Robocall Law

The U.S. Supreme Court denied nonprofit Patriotic Veterans, Inc.’s petition for review of Indiana’s ban on the use of technology that automatically dials residential phone numbers and plays prerecorded messages. Patriotic Veterans, based in Illinois, uses this “robocall” technology to disseminate pre-recorded messages about political candidates’ positions on issues affecting veterans.  In 2010, however, the group was prohibited from placing calls to Indiana telephone numbers, igniting Patriotic Veterans’ first challenge to the law.

Since then, the group has argued before the Seventh Circuit twice in attempts to have the law overturned. They claimed that in addition to being preempted by the Telephone Consumer Protection Act, the law violates the First Amendment by discriminating against political speech.  The Seventh Circuit disagreed both times, holding that the statute is content-neutral, disfavoring all robocalls with limited exceptions and without targeting political expression.  In Patriotic Veterans’ petition for writ of certiorari, the group argued that the Seventh Circuit’s decision creates a split with the Fourth Circuit, which recently struck down a similar restriction on automated calls.  However, the high Court rejected that argument and Indiana’s ban on robocalls remains standing, for now.

Takeaway: Although the Supreme Court denied certiorari in this case, challenges to state anti-robocall laws remain active throughout the nation.  Companies that use automated telephone call technologies should remain vigilant on changes to the robocall laws of the states in which they conduct business.

Ka-pow! 9th Circuit Finds Social Media Gag Order Unconstitutional in COMIC CON Trademark Dispute

In a previous post, we analyzed the battle over the trademark COMIC CON, which is owned by the San Diego Comic Convention (SDCC) but has been used by over 100 other comic book convention organizers.  SDCC brought suit against one of these alleged infringers, Dan Farr Productions, in 2014, but failed to secure summary judgment earlier this year.

Dan Farr himself has been discussing the case on social media, to SDCC’s ire. According to SDCC, Farr boasts of over 200,000 media articles reporting on the case and has tainted the jury pool in the Southern District of California.  This sparked SDCC to seek a gag order preventing Farr from discussing the litigation on social media and requiring him to post a disclaimer on his social media pages.  The district court granted SDCC’s request, but the Ninth Circuit reversed it shortly thereafter on constitutional grounds.  The Ninth Circuit held that because civil trademark actions “involve issues that are far more banal than the subject matters of the criminal trials in which pretrial publicity has presented serious constitutional problems,” “pretrial publicity is less likely to threaten the fairness of trial in a large metropolitan area,” and because the disclaimer mandate “incriminates and disparages [Farr’s] previously expressed opinions” the gag order failed constitutional muster.

Takeaway: Companies that wish to limit chatter about ongoing litigation may find an uphill battle in curbing social media discourse after this case.

Florida Supreme Court Denies Copyright Protection for Sound Recordings Predating Coverage Under the Federal Copyright Act

In a major victory for media and broadcast entities, the Supreme Court of Florida recently established that Florida law does not recognize exclusive copyright protections for sound recordings that were “fixed” before February 15, 1972. Sound recordings fixed after this date are governed by federal copyright law.

This decision arose out of a copyright infringement suit brought by Flo & Eddie, Inc., an entity that owns the rights to certain pre-1972 music recordings by famed rock band The Turtles, against a major satellite and internet radio broadcasting organization. In this suit, Flo & Eddie alleged that the organization improperly broadcasted and stored (i.e. recorded) back-up and buffer copies of a number of pre-1972 Turtles songs, including the band’s 1967 megahit, Happy Together.

This suit was brought before the Supreme Court of Florida to resolve four certified questions from the Eleventh Circuit, which the Supreme Court reduced to the key question of whether Florida recognizes “the exclusive right of public performance in pre-1972 sound recordings?” After conducting a thorough review of federal copyright law and Florida law, the court determined that “Florida common law has never previously recognized an exclusive right of public performance for sound recordings. To recognize such a right for the first time today would be an inherently legislative task.”

In holding that Florida does not recognize a common law public performance protection for pre-1972 sound recordings, the court reasoned that the protection being sought by Flo & Eddie as the owner of the sound recordings was contrary to the historic evolution of copyright law – i.e. Congress would not have deliberately made defined protections for post-1972 sound recording owners that have evolved over time if the broad level of public performance protection sought by Flo & Eddie for pre-1972 recordings existed at common law. The court also noted that Flo & Eddie has similar pending suits against the broadcaster in New York and California. As here, the New York Court of Appeals declined to recognize a common law public performance protection for pre-1972 sound recordings. However, Flo & Eddie was granted summary judgment on its public performance claim before a California court because California has statutory provisions addressing pre-1972 sound recordings. In discussing the California case, the Supreme Court of Florida noted that a suit brought by Flo & Eddie against a different broadcaster is pending before the Supreme Court of California on issues similar to those raised here, presumably limiting the impact of the prior decision.

After determining that there was no common law protection against public performances of pre-1972 sound recordings, the court addressed the remaining issues in the case. It first determined that the broadcaster’s practice of storing buffered and back-up copies of the Turtles pre-1972 recordings did not violate any common law right to exclusive reproduction (to the extent such right existed) held by Flo & Eddie. The court then rejected out of hand Flo & Eddie’s claims for unfair competition, misappropriation, common law conversion and/or theft because Flo & Eddie could not establish that it had common law rights that existed with regard to these recordings or that such rights, to the extent they existed, were violated.

Takeaway: Media and broadcast platforms that operate in Florida or provide services to Florida-based customers may broadcast sound recordings from before February 15, 1972 without concern for legal repercussions from the owner of the master sound recordings. However, media and broadcast platforms should take steps to ensure compliance with state and federal copyright statutes and ensure that the musical composition’s copyright owner (who may be different than the owner of the sound recording) has provided proper permissions or licensing for broadcasting the composition.

 

Prize-Linked Savings Laws Spread Across States

With Americans’ saving habits in the news as the federal government considers caps on retirement contributions, financial institutions should be aware that many states are passing laws making it easier to incentivize saving.

To date, 26 states have enacted legislation that liberalizes their approaches to games of chance in support of good consumer saving practices. Prize-linked savings (PLS) accounts allow consumers that invest in savings accounts or certificates of deposit to be entered into drawings that can augment their original deposits, with the prizes funded by the interest generated. By passing laws that permit PLS accounts, states are allowing financial institutions to run lotteries in ways not traditionally permitted in order to persuade more Americans to save for a rainy day.

Traditionally, requiring a consumer to open a savings account and make a deposit in order to receive a chance to win a prize could be viewed as consideration, which, combined with the elements of chance and a prize, would constitute a lottery. All 50 states and the federal government prohibit lotteries with the exception of those run by the state and, in some states, by nonprofit organizations. State laws legalizing PLS accounts open the door for financial institutions to conduct these games of chance with prizes even though they are requiring the consideration of opening an account and making a deposit.

State laws permitting PLS accounts vary widely, with differing applications to types of financial institutions, amendments to different state laws (including gambling law and banking law), and varying requirements. For example, certain laws apply only to credit unions, while others apply to community banks, state banks, savings and loan associations, all financial institutions, or combinations thereof.

Ten states include basic savings promotion requirements. Eligible participants must have an account with the savings institution; the promotion must give entrants an equal chance of winning, and the sole consideration that may be required is a deposit in the savings account. Sixteen states impose additional savings promotion requirements, including age, prize, and disclosure requirements.

The 26 states that have enacted legislation authorizing PLS accounts in some form are: Arizona, Arkansas, Connecticut, Delaware, Illinois, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New York, North Carolina, Oregon, Rhode Island, South Carolina, Texas, Virginia, and Washington. Additional legislation is currently pending in other states.

If you would like to learn more about how your financial institution can take advantage of PLS savings accounts to encourage consumer saving, please contact John Feldman at jfeldman@reedsmith.com.

Quaker Oats Succeeds in Maple Syrup Suit

The Central District of California granted Quaker Oats Company’s Motion to Dismiss a Consolidated Class Action Complaint on October 10. Plaintiffs alleged Quaker Oats Company was liable for labeling its “Maple & Brown Sugar”-flavored instant oatmeal as “Quaker Instant Oatmeal, Maple & Brown Sugar” alongside an image of a pitcher of maple syrup.  The plaintiffs alleged fraud, false advertising, and breach of contract, claiming that the packaging creates an impression that the product contains real maple syrup.

Quaker Oats Company asserted the plaintiffs’ claims were preempted by the Federal Food, Drug, and Cosmetic Act (“FDCA”) and the Nutritional Labeling and Education Act (“NLEA”). Food and Drug Administration (“FDA”) regulations elaborate on FDCA flavoring requirements by specifically allowing labels to both describe and depict the product’s “characterizing flavor.” 21 C.F.R. § 101.22(i).  A September 2016 FDA Consumer Update confirmed terms like “maple” can be used on the label of a product that does not contain maple syrup as long as the product contains maple flavoring.  The update additionally encouraged consumers to look for “maple syrup” in the ingredient list if they desire it.  Because Quaker Oats Company can describe the primary recognizable flavor by word and image as long as the label signifies it is “Naturally and Artificially Flavored,” federal law preempted the plaintiffs’ desired application of novel label requirements to the Maple & Brown Sugar instant oatmeal.

Takeaway: Advertisers that adhere to FDCA requirements and FDA guidelines regarding flavor labeling and refrain from indicating the product the flavor is derived from is an actual ingredient may be permitted to advertise such flavors on product packaging.

 

U.S. District Court Sanctions Weight-Loss Supplement Marketers for Violating Past Court Order

A judge in the Northern District of Georgia has found a number of defendants, comprising a larger company named Hi-Tech Pharmaceuticals, Inc. (“Hi-Tech”), in contempt for repeated violations of court orders prohibiting the defendants from making deceptive marketing claims about weight-loss supplements and erectile dysfunction products. As a result of the order, Hi-Tech is required to pay more than $40 million to the Federal Trade Commission (“FTC”).

The contempt charge was made in response to a 2011 action by the FTC that sought sanctions for Hi-Tech’s alleged violation of a final 2008 court order that charged the company $15.8 million and permanently barred it from selling products that Hi-Tech claimed assisted in rapid weight or fat loss, unless it could prove that the claims were true and scientifically proven. The FTC alleged that, in 2009, the defendants were violating the 2008 order by marketing four new dietary supplements with weight-loss claims that lacked the scientific support and substantiation required by the 2008 order.

Takeaway: Regulators continue to review weight-loss health claims, which must be substantiated by reliable scientific evidence.

FTC Issues New but Narrow COPPA Guidance on Voice Recordings

Last week, the Federal Trade Commission (“FTC”) released a policy enforcement statement to provide additional guidance under the Children’s Online Privacy Protection Act (“COPPA”) for organizations that use audio voice recordings of children. This additional guidance builds on the FTC’s 2013 updates to COPPA that brought additional data types, such as photographs, videos and audio files containing images of children or their voices, under COPPA’s regulatory authority.

This “non-enforcement policy” confirms for the industry and the public what the FTC has been telling individual companies in response to individual inquires: namely, that the FTC is not interested in enforcing COPPA where an application or internet-enabled device allows children to make voice commands in place of written inputs to perform a search or fulfill a verbal instruction or request, so long as the operator maintains the data file for a very brief time period necessary for that purpose and none other.

This policy does NOT change most of the regulatory requirements associated with such devices that collect voice commands. In particular:

  • it does not turn the application or internet-enabled device into a general audience site, app, or service. If the internet service at issue is “directed to children”, as that phrase is interpreted under COPPA, then all of the other requirements associated with COPPA compliance apply;
  • the operator must continue to provide a COPPA-compliant notice, including clear notice of its collection and use of audio files and its deletion policy, in its privacy policy;
  • the policy does not apply if the operator is asking for a name and other personal information. Thus, the policy would not apply if an operator were asking for the verbal input of contact information for a sweepstakes entry. (There is another exception for a one-time collection of online contact information that can be used in the sweepstakes entry context);
  • the policy also does not apply if the operator makes any other use of the audio file other than merely to effectuate the requested function. For example, if the operator engages in behind-the-scenes analytics of the audio file, or any sort of behavioral targeting or profiling based on the audio file, the policy would not apply;
  • if the operator uses the voice to identify a child or posts, sells, or shares the audio file, the policy will not apply;
  • if the operator goes beyond collecting the child’s voice for the narrow purpose of enabling the child to give a command or effectuate a search request, all verifiable parental consent requirements will apply.

Takeaway: In an age in which the use of digital assistants is becoming more prevalent and voice-command devices are becoming more commonplace, it makes sense for the FTC to acknowledge that children will naturally assume that they can talk to devices to make them work and obtain desired information. From a practical standpoint, it would be wise to consider this announcement to be a very narrow exception designed to enable innovation in the voice-recognizing device industry and to expand that industry, especially in the context of applications, like toys, that are targeted to children.

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