Living in a Fantasy World? Judge Admonishes Plaintiff’s Counsel for Filing Emergency Motion Over Unicorns

Last week, a federal judge admonished a plaintiff’s lawyer for filing a second emergency motion in its trademark infringement suit to halt the sale of counterfeit unicorn drawings amidst the COVID-19 global pandemic.

On March 9, 2020, the plaintiff, Art Ask Agency, filed a complaint in the U.S. District Court for the Northern District of Illinois, alleging that multiple internet sites based in China sold counterfeit items depicting unicorns, dragons and elves designed by British artist, Anne Stokes. Examples of the allegedly infringing products can be found below:

The complaint requested a temporary restraining order. However, on March 16, the U.S. District Court issued an order putting all civil litigation on hold in light of the “coronavirus COVID-19 public emergency.” U.S. District Judge Steven Seeger accordingly rescheduled the temporary restraining motion hearing for April 13. In response, the plaintiff filed a motion for reconsideration, arguing that while it recognized that the community was in the midst of a “coronavirus pandemic” it would suffer an “irreparable injury” if the court did not hold a hearing that week and immediately put a stop to the infringing unicorns and the knock-off elves.

Two days later, the motion was followed by a second emergency motion, which prompted Seeger to swiftly deny the plaintiff’s motion to reconsider. Seeger’s scathing order noted that while the court can still hear emergency motions, “resources are stretched and time is at a premium. Therefore, “if there’s ever a time when emergency motions should be limited to genuine emergencies, now’s the time . . . the world is facing a real emergency, Plaintiff is not.”

Seeger’s order also quoted lawyer Elihu Root, the Secretary of War under Theodore Roosevelt: “About half of the practice of a decent lawyer is telling would-be clients that they are damned fools and should stop.”

Takeaway:   While real emergencies continue to exist in civil litigation during the COVID-19 crisis, prior to filing any request for emergency injunctive relief, attorneys should ensure that the matter truly is urgent and will likely be viewed as such by the court.

 

 

Chicago Blackhawks Hit with Illinois BIPA Class Action Over Use of Facial Recognition Technology at Home Games

This month, an Illinois resident filed a proposed class action lawsuit in Illinois state court against the Chicago Blackhawks (the “Blackhawks”) alleging that the NHL team utilizes facial recognition technology at its home games in violation of the Illinois Biometric Information Privacy Act (“BIPA”).

According to the complaint, plaintiff Keith Allen attended a Blackhawks home game in December 2018, where he had his facial geometry scanned via facial recognition cameras used by the Blackhawks at their home rink, the United Center. The complaint further alleges that the Blackhawks failed to inform Allen (i) in writing that it was collecting his biometric identifiers or information; (ii) the purpose and length of term for such collection; and (iii) failed to obtain his written consent before the Blackhawks collected his facial geometry scan.

Because facial geometry is a unique and personal identifier, Allen alleges that the Blackhawks ran afoul of BIPA, which sets forth stringent disclosure rules for the collection, storage, use, sharing and destruction of a consumer’s fingerprints, facial scans and any other biometric identifier. As a result, Allen argues that he, and others similarly situated, “lost the right to control their biometric identifiers and information.”

The complaint points out that in enacting BIPA in 2008, the Illinois legislature recognized biologically unique identifiers, such as facial geometry, cannot be changed when compromised, and thus, amongst other things, individuals are at a heightened risk to be a victim of identity theft and other related cybercrimes.

Allen seeks to represent a class of all individuals who had their facial geometry scans collected or possessed by the Blackhawks in Illinois from October 2014 to present. Allen and the proposed class seek an award of liquidated or actual monetary damages for each violation of BIPA, an injunction barring the Blackhawks from committing further violations of BIPA, as well as reasonable attorneys’ fees and costs incurred, and any other such relief deemed appropriate and just under BIPA.

Takeaway:  Due to the global impact of the COVID-19 outbreak, the current NHL season has been paused, with fans no longer attending games and potentially being subject to facial recognition scanning. However, this case is one of many such actions brought under the Illinois BIPA law in recent years. As we previously wrote about, Facebook was the subject of a class action suit over its use of “photo tags” on photographs posted by users on its platform, which it ultimately agreed to pay $550 million to settle. Further, as we recently discussed, the U.S. Supreme Court has declined to weigh in on whether plaintiffs bringing BIPA claims in federal court have Article III standing. Given the Supreme Court’s denial of certiorari and BIPA’s broad scope, companies doing business in Illinois or with Illinois residents should ensure that their collection and use of biometric identifiers fully comply with the law or they may similarly risk large privacy settlements.

 

 

The Tokyo 2020 Olympics will still go forward… in 2021

This week, the International Olympic Committee announced that the upcoming Tokyo Games would be postponed until next summer due to the novel coronavirus, COVID-19.  Even though the event will take place in the summer of 2021, the IOC announced that the event will still retain the name “Olympic and Paralympic Games Tokyo 2020”.  By retaining the Tokyo 2020 brand, the USOC will not need to re-apply for trademarks or rebrand its materials, which are ordinarily planned years in advance (the US Olympic Committee already owns trademarks for LOS ANGELES 2028).  While the ways in which the USOC will use the Tokyo 2020 brand in 2021 remain to be seen, the decision to recycle the event name fits squarely with the Tokyo 2020 sustainability initiative.  In an effort to curb the Olympics’ impact on the environment, Tokyo 2020 was set to include an award ceremony podium made out of recycled household plastic waste, an Athlete’s Village built from timber donated by Japanese municipalities, and a hydrogen-fueled 2020 Tokyo Olympic and Paralympic Cauldron and Torch.

Takeaway: Brands that are official sponsors of Tokyo 2020 will be able to continue to use the Tokyo 2020 trademarks and any composite logos pursuant to their sponsorship agreements.  Importantly, the USOC may require additional review of composite logos in 2021.  Those who are not sponsors of the Tokyo 2020 Olympics should be mindful that the USOC and the IOC are heavy enforcers of their intellectual property.

COVID-19 Legal Impact on Brand Advertising and Marketing

The unprecedented disruption caused by the novel Coronavirus (COVID-19) pandemic has created challenges for brands. Temporary and perhaps permanent changes to advertising and marketing strategies and executions have occurred and will continue to impact brands.

On Tuesday, March 31, 2020, Douglas Wood and Keri Bruce, partners at Reed Smith LLP, the ANA’s General Counsel and Strategic Law Partner, will present a webinar on the legal impact the COVID-19 pandemic has on the advertising and marketing plans of brands.

Topics will include contracts, media, production, sponsorship and events, advertising content, intellectual property, and more. Reed Smith is also releasing a comprehensive ANA legal guide for brands the same week as this webinar.

There is no cost to register. However, you must be an ANA member to attend. Please contact Alex Russo at arusso@reedsmith.com if you are not a member but you are interested in attending.

Trademark applications for COVID-19 and CORONAVIRUS surge at the USPTO

The U.S. Patent and Trademark Office is no stranger to receiving a flood of trademark applications following a news or pop culture event: from President Trump’s accidental tweet of “Covfefe” to the creation of the slogan “Boston Strong” following the 2013 Boston Marathon bombings, trademark applicants often try and capitalize on these events in order to claim exclusive rights to popular terms. COVID-19, the novel coronavirus that has reached pandemic status around the world, is no different. Nearly 45 trademark applications relating to coronavirus and COVID-19 have been filed since February 2020 and remain pending, including “CORONAVIRUS SURVIVAL GUIDE” for “Magazines in the field of survival, protection, medicine and pandemics”, “I SURVIVED COVID-19” for “clothing” and “COVID-19 VAX” for “vaccines”.

While some of these applications may result in a Federal trademark registration, many won’t for at least three reasons: First, an applicant must demonstrate that the owner has a bona fide intent to use the trademark in commerce or is using the mark in commerce; simply being the first to file the application does not confer trademark rights.  Second, a phrase or words receiving a Federal trademark registration must identify to consumers that the owner of the trademark is the source of the goods or services offered (i.e. the trademark must be distinctive).  Third, the trademark cannot merely describe the good or service (otherwise, no one would be able to describe the coronavirus or COVID-19 using these terms).  Trademark applicants that seek to capitalize on a global pandemic will likely have difficulty meeting all three of these requirements.

Takeaway: Brands who wish to file trademark applications involving COVID-19 or similar words or phrases may find themselves unable to obtain a registration.  Additionally, these brands should be mindful of regulators who are enforcing their authority against brands that are claiming cures or remedies for COVID-19, when none currently exist.

 

 

 

1-800 Contacts Eyes Reversal of Judgment for Anticompetitive Advertising Agreements

On March 5, 2020, the U.S. Court of Appeals for the Second Circuit heard argument on an appeal seeking to overturn judgment against contact lens distributor 1-800 Contacts (“1-800”) for antitrust violations relating to agreements with competitors on advertising keywords.  This post follows our prior coverage of this matter, and is designed to highlight the increasingly common interaction between advertising, trademark, and competition law.

Background

As we previously reported here, the Federal Trade Commission (“FTC”) alleged that 1-800 engaged in unlawful restraints of trade, in violation of Section 5 of the FTC Act, by resolving trademark infringement allegations against competitors with settlement agreements that generally (1) prohibited the competitors from using certain advertising keywords, including 1-800’s name; and (2) required the competitors to use negative keywords to prevent the competitors’ ads from appearing in response to searches for 1-800’s name.  After a trial at the administrative level, the Administrative Law Judge found 1-800 was liable for anticompetitive conduct in violation of Section 5 of the FTC Act.  In 2018, the FTC Commissioners issued a 3-1 ruling (reported on here) upholding the ALJ’s decision, which held that 1-800’s settlement agreements with competitors were anticompetitive and that (1) the FTC was not required to undertake an elaborate analysis to demonstrate anticompetitive effects, as the agreements’ restrictions on advertising were “inherently suspect,” and (2) the settlement agreements generally resulted in direct evidence of consumer harm, in the form of higher prices and a restriction of truthful advertising.

Arguments Presented to the Second Circuit

In briefing before the Second Circuit, 1-800 raised three primary arguments: (1) “commonplace” proceedings, like trademark settlements, are not subject to antitrust scrutiny, citing FTC v. Actavis, 570 U.S. 136 (2013) (finding that so-called “reverse” settlement agreements between pharmaceutical manufacturers may be subject to antitrust scrutiny when certain conditions are satisfied); (2) even if such settlements are subject to antitrust scrutiny, it is improper to apply an “inherently suspect” or “quick look” competitive analysis, rather than a full rule-of-reason analysis to assess anticompetitive effects; and (3) the Commissioners failed to account for 1-800’s pro-competitive justifications for the settlement terms governing advertising keywords, e.g. trademark protection and preference for settlement of claims, as well as the plausibility that consumers’ brand preference for 1-800 products resulted in higher prices, rather than the keyword advertising restrictions.

In response, the FTC argued that: (1) the Supreme Court’s Actavis decision does not immunize trademark settlements from antitrust scrutiny, but instead confirms that agreements settling intellectual property disputes are in fact subject to antitrust review; (2) the Supreme Court and the Second Circuit repeatedly have approved and applied the “quick look” standard, particularly where the plaintiff can show an adverse effect on competition—in this case, the FTC asserts higher prices and reduced consumer access to advertising; and (3) 1-800’s trademark rights (i.e., in precluding competitors from using the 1-800 trade name in advertising) do not trump antitrust scrutiny, particularly because the settlement terms governing use of keywords encompassed terms that did not raise trademark concerns and required competitors to withhold their advertising even when the competitor did not use 1-800’s trademarks.

Following argument, both the FTC and 1-800 submitted supplemental letter briefs to provide additional responses to the panel’s inquiries into whether any of the counterparties to the 1-800 settlement agreements tried to negotiate for permission to run paid search ads against 1-800’s trademarks, e.g., with a disclaimer of affiliation with 1-800.  The FTC filed a letter brief on March 6, 2020, and argued that some competitors use “the very type of less restrictive, comparative advertisements about which the Court inquired — but 1-800 challenged those ads anyway,” and cited the example of a competitor that “used less restrictive, comparative advertisements.”  In response, 1-800 filed a reply letter brief on March 9, 2020 contending that the FTC’s supplemental letter brief’s reference to the competitor in the FTC letter brief was not responsive to the Court’s inquiry because that competitor never entered one of the settlement agreements with 1-800 and otherwise disputed the FTC supplemental brief’s characterizations.  The case now awaits a decision by the Second Circuit panel.

Takeaways

The potential for antitrust scrutiny, as triggered by agreements among competitors relating to advertising keywords, remains very real—with or without the existence of underlying intellectual property claims.  Reed Smith is continuing to follow this matter closely and will report on the further developments.  In the interim, please be sure to consult with experienced advertising and antitrust counsel before entering agreements with competitors concerning advertising and keywords.

FTC Settles With Tea Maker for Inadequate Disclosures and Unsubstantiated Claims

The FTC recently settled with Teami, LLC (“Teami”), an indication that the Agency is still actively reviewing health claims and monitoring social media influencers for proper disclosures.  Teami allegedly brought in over $15 million through its deceptive marketing tactics, but given the company’s financial condition, the FTC agreed to partially suspend its $15.2 million judgment once Teami pays $1 million.

Teami sells teas and tea-based products and markets these products with certain health-related claims, including claims that the teas can cause substantial weight loss, fight cancerous cells, decrease migraines, and prevent colds and flu.  Not only did the FTC take issue with the deceptive nature of these claims, the FTC’s complaint also alleges that Teami’s endorsers failed to adequately disclose their connection to Teami in their Instagram posts.  These endorsers include several household names with voluminous followings, including recording artists Jordin Sparks and Cardi B.  Below are examples of such posts cited by the FTC:

For most Instagram users of a certain demographic, it was nearly impossible not to come across a promotional post about Teami.  It is therefore no surprise that the FTC came across these posts.  The Agency even sent Teami a letter back in April 2018 about the adequacy of disclosures made by influencers endorsing Teami’s products on Instagram.

Following the letter, Teami implemented its own social media policy that covered disclosure requirements, including the need to make disclosures above the “more” button.  Despite Teami’s new social media policy, the FTC found that the endorsers still failed to clearly and conspicuously disclose their material connection.  According to the FTC, most disclosures were too far down the endorser’s caption and required users to click the “more” button to see it.

The FTC even sent individual warning letters to ten of Teami’s endorsers, putting them on notice of their insufficient disclosures.  In these warning letters, the FTC gave the individual endorsers a deadline of March 30, 2020 to respond to the FTC and describe the remedial action they have taken to clearly disclose their connection to the brand.

Takeaway:  This latest action by the FTC reinforces the fact that simply including a contractual requirement that influencer properly disclose their material connection the brand is not enough.  Brands must ensure – either directly or through their agencies – that influencers are, in fact, following these requirements.

 

 

Pain Relief Device Marketers Settle with FTC for $4 Million

The Federal Trade Commission (“FTC”) announced its settlement with NeuroMetrix, Inc. over allegations that the company made deceptive claims that its nerve stimulation device called Quell, which is to be worn just below the knee, treats pain throughout the body and is clinically proven and cleared by the Food and Drug Administration (“FDA”) to do so.

According to the FTC’s complaint, NeuroMetrix claimed that Quell was “clinically proven” and “FDA cleared” to provide “widespread relief of chronic and severe pain throughout the body” from the device’s fixed site application below the knee.

The FTC alleged that the company lacked scientific evidence to support its widespread chronic pain relief claims. Further, while the product was FDA-cleared to provide localized pain relief, it was not cleared for providing widespread relief of chronic or severe pain that is experienced beyond the site of application or that is due to specific health conditions, such as osteoarthritis, nerve damage, sciatica, shingles, and fibromyalgia.

In addition to barring the company’s deceptive claims, the FTC’s order imposes a $4 million judgment, which must be paid to the FTC within thirty days, and requires them to turn over up to an additional $4.5 million in future foreign licensing payments.

Takeaway: Advertisers of FDA-regulated products should be aware that there is joint-jurisdiction regarding advertising claims by both the FDA and the FTC.  As seen here, the FTC will assert its jurisdiction and impose fines against companies that claim their products perform beyond the scope of what is approved by the FDA.

 

FDA and FTC Send Warning Letter to Companies Selling Fraudulent Products that Claim to Treat or Prevent the Coronavirus

The U.S. Food and Drug Administration (“FDA”) and the Federal Trade Commission (“FTC”) issued warning letters to seven companies allegedly selling unapproved products that may violate federal law by making deceptive or scientifically unsupported claims about their ability to treat coronavirus (COVID-19).

The companies advertise products including essential oils, teas, colloidal silver, and tinctures, which the FDA determined as “intended to mitigate, prevent, treat, cure or diagnose COVID-19 in people.”  According to the FDA, there are no approved vaccines, drugs or investigational products currently available to treat or prevent the virus. The FDA expressed particular concern that products making such claims may cause consumers to delay or stop appropriate medical treatment, leading to serious and life-threatening harm.

In addition to the warnings from the FDA, the FTC stated that because there are currently no vaccines or products available to treat or cure COVID-19, one or more of the efficacy claims made by the marketers are not supported by competent and reliable scientific evidence and therefore may violate the FTC Act.

The FDA and FTC requested the companies respond within forty-eight hours describing the specific steps they have taken to correct the violations.

Takeaway:  These warning letters are the first issued by the FDA and FTC alleging unapproved and/or unsupported claims that products can treat or prevent coronavirus. Regulators will take an aggressive stance in monitoring claims and bring enforcement actions against companies looking to scam consumers and profit off of the COVID-19 public health emergency.

Advertising Watchdog Refers CBD Health Claims to the FTC

The National Advertising Division of the Better Business Bureau (“NAD”), the investigative unit of the advertising industry’s system of self-regulation, recently referred to the Federal Trade Commission (“FTC”) advertising claims made by Grade A Nutraceuticals for its CannaPure CBD Oil dietary supplement, after the company failed to respond to NAD’s requests to provide substantiation for its claims.

Council for Responsible Nutrition (“CRN”) brought an NAD action and challenged Grade A Nutraceuticals’ advertising claims about its CannaPure CBD Oil dietary supplement, such as, “Clinically Validated: Experience the medically proven therapeutic benefits of hemp”; “CannaPure CBD Oil helps with relieving all forms of chronic pain by inhibiting neural transmissions in pain pathways”; “67% Increase in Cognitive Performance & Health”; and “Fighting cancer cells.”

According to NAD, the company also advertised a testimonial by actor Morgan Freeman, who in a late-night television program interview, allegedly stated that CannaPure CBD is a “special oil” that has helped him “live a normal healthy life” after a near-fatal car crash in 2008 left him with extensive nerve damage in his hand.

In light of the company’s “failure to provide a response to NAD’s request for substantiation for the challenged claims or participate in any way in the self-regulatory process,” NAD referred the matter to the FTC for possible enforcement action.

Takeaway: As we have previously blogged here and here, advertisers should be aware that their failure to participate in an NAD action or comply with a self-regulatory decision by NAD may lead the case to be referred to the FTC for enforcement action. In particular, CBD companies making unsubstantiated health or therapeutic benefit claims about their products should make all efforts to meaningfully comply, as they have been subject to a string of recent warning letters and enforcement actions by the FTC and FDA.

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