FTC Doubles Down on Cedar Oil Bed Bug Product Marketer

In 2013, the Federal Trade Commission (“FTC”) and Chemical Free Solutions LLC (“CFS”) reached a settlement barring CFS from making scientifically unsupported claims regarding the efficacy of its cedar oil-based bed bug eradication product Cedarcide Original. CFS made various false claims about its “BEST Yet!” bed bug and head lice products, including that it was invented for the U.S. Army and that the USDA acknowledged it as the number one choice of bio-based pesticides.  The 2013 consent order settling the FTC’s dispute with CFS prohibited the company from making representations about their products unless the representation is non-misleading and substantiated by competent and reliable scientific evidence.

However, earlier this year the FTC revisited this settlement and filed a modified final order against CFS and moved to hold David Glassel, who previously controlled CFS, in contempt for violating the original 2013 order. The court overseeing the action approved the modified final order against CFS in January 2018 and the contempt order against Glassel in February.  Under the orders, CFS admits it violated the 2013 order, both CFS and Glassel are banned from advertising, marketing, promoting, selling or helping anyone else market, promote, or sell any product claiming to kill bed bugs, and will pay $185,206 in consumer refunds and $121,236 in compensatory contempt relief.

Takeaway: The FTC continues to review product claims that suggest or imply that products are endorsed or approved by the U.S. government, certain government agencies, or law enforcement.   The FTC may file a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the FTC that a proceeding is in the public interest.

Naked Juice Urges California Court to Defer to FDA on Use of “No Sugar Added”

Naked Juice, which is owned by PepsiCo (“Naked”), filed a Motion for Summary Judgment in a pair of class action lawsuits that claim its “No Sugar Added” labels on coconut water and orange juice are misleading and deceptive. Naked’s argument is that the U.S. Food and Drug Administration (“FDA”) already cleared use of the “No Sugar Added” statement and the California court should give deference to the FDA’s interpretation of its own regulation.  Naked’s support for this argument is a letter from the FDA to the nonprofit Center for Science in the Public Interest (“CSPI”), which Naked says expressly authorizes 100 percent juice products like its coconut water and orange juice to use the “No Sugar Added” statement.

In response, plaintiffs argue that the letter is neither guidance nor an advisory opinion, and therefore, it is inadmissible. They maintain that, in order to meet the criteria for a “No Sugar Added” label, the product has to resemble or substitute for a food that contains added sugar.  Since coconut water and orange juice do not normally contain added sugars, the claim is deceptive.

Back in September 2017, the court rejected Naked’s Motion to Dismiss on the basis that the plaintiff adequately alleged the label was deceptive. While the judge was interested in the FDA’s position, she refused to take judicial notice of the FDA’s letter to CSPI because the court was not provided with an authenticated copy.  Now that the letter has been authenticated, the court must address the issue head on.

Takeaway: We will continue to monitor the case and provide an update once the court issues its decision.  In the meantime, this case should serve as a reminder that advertisers face an uphill battle in obtaining early dismissal of cases involving health claims, particularly in California.

Artist Sues Lollapalooza Over Advertising and Festival Merchandise

Last month, Juan Marco filed a copyright infringement suit against Live Nation and the other promoters of the summer music festival, Lollapalooza. According to the complaint, Marco granted a limited license to the concert promoters to use Marco’s artwork for three years and only for use in the United States and Chile.  Marco alleges that the concert promoters featured artwork that was substantially similar or identical to his work in hats, shoes, marketing materials, advertisements, and installations to promote Lollapalooza beyond the scope of the license.  Specifically, Marco alleges that his artwork is being used beyond the term, outside of the United States and Chile, and is further being sublicensed to third parties without permission.  Marco is seeking injunctive relief and damages.

Takeaway: Advertisers seeking content licenses from third parties, including licenses for music, artwork, and movie clips, should develop plans to ensure that their advertising campaigns will not exceed the scope of such licenses. Advertisers should further inquire regarding the scope of these licenses when they are obtained on behalf of their ad agencies in order to ensure the licenses accurately reflect the needs of the marketing campaigns.

College Athletes Appeal to Seventh Circuit Against FanDuel’s and DraftKings’ Use of Images

A proposed class of approximately 3,000 former college athletes recently filed an appeal in the Seventh Circuit against FanDuel and DraftKings. The players are reviving their proposed class action, claiming that FanDuel’s and DraftKings’ use of the players’ images on their websites does not fall within the newsworthy or public interest exceptions to Indiana’s right of publicity statute.

FanDuel and DraftKings used the players’ images, names, and statistics on their sites to operate their fantasy sports contests. According to the players, the companies wrongfully profited off of the use of their likeness without obtaining prior consent from the players.  Specifically, they argued that the players themselves were the very subject of the companies’ gambling operations and that the sites themselves could not have operated without using their likeness.  The players even compared themselves to playing cards in the FanDuel and DraftKings “online casinos.”

The case was previously dismissed in September 2017 in federal district court, whereby the judge broadly interpreted the newsworthy exception to Indiana’s right of publicity statute. The judge found the players’ likenesses, images and statistics fall with the newsworthiness exception under a broad interpretation of the exception combined with the huge media attention given the sports. In her dismissal, the judge broadly interpreted the exception to avoid creating any conflict with free speech protection under the Constitution.  However, in the recent filing to the Seventh Circuit, the players argue that the district court cannot apply free speech protection where the defendants’ businesses are fundamentally illegal under Indiana law.

The players also cited another Seventh Circuit decision involving the use of Michael Jordan’s likeness, where a local grocery store used an advertisement that congratulated the former Chicago Bulls player. In that case, the Seventh Circuit held that the store’s use of Jordan’s likeness violated Indiana’s right of publicity statute.  According to the players, FanDuel’s and DraftKings’ actions are even more egregious, since they assigned price tags to the players and accepted actual payments from gambling customers to “purchase” the players in their fantasy contests.

In their response, defendants FanDuel and DraftKings argue that newsworthiness should be determined by the content, not the disseminator of information, and that the players’ statistics are regularly analyzed and debated by sports fans. Accordingly, the defendants argue that use of the players’ likeness is both newsworthy and of public interest.

TAKEAWAY: If the court finds FanDuel’s and DraftKings’ use to be newsworthy or of the public interest, the result could open the door for other companies to make use of such exceptions and chip away at an individual’s control over the use of their likeness.

What Marketers Need to Know to Prepare for the GDPR

ANA Magazine recently published an article discussing the upcoming regulatory changes as a result of new EU privacy regulations.  Please click here for the article.  You will need an free ANA account to access the content.  Just sign up and you will have immediate access.

District judge in the SDNY: Embedding links to third –party web content is copyright infringement

What is the legal difference between embedding an image on a website and displaying a copy of the image? News organizations and other website publications have relied on the Ninth Circuit’s opinion in Perfect 10, Inc. v. Amazon.com Inc., which established a bright-line server test for determining whether a website displayed a copy of an image, and thus potentially infringed upon the owner’s copyright in that image for the past ten years. According to the server test, a website operator displays an image if it sends a copy of the image from its server to the end user’s browser, but does not display an image if it merely embeds instructions (HTML) in its webpage that enable the end user’s browser to request the image from a third party’s server.

On February 15, 2018, District Judge Katherine B. Forrest of the Southern District of New York opened the door to new copyright infringement suits in the Second Circuit and beyond with her ruling in Goldman v. Breitbart News Network, LLC.

Click here to view the article.

FTC Refunds Victims of Tech Support Scam

The Federal Trade Commission (FTC) mailed over $668,000 in the form of 3,791 refund checks to victims of a tech support scam last month.

In July 2016, the FTC and the state of Florida alleged Big Dog Solutions LLC (doing business as Help Desk National and Help Desk Global) and related defendants operated a telemarketing scheme that deceived consumers into purchasing unnecessary computer security or technical support services for problems that did not actually exist by misrepresenting to consumers that their computers were compromised and falsely claiming they were authorized by companies such as Microsoft and Apple to service their products. Tactics included generating pop-ups that in some cases rendered web browsers unusable and instructing consumers to call a toll free number for technical assistance. Paid internet advertisements placed by affiliate marketers often drove traffic to the websites that generated these pop-ups.

The complaint alleged consumers that called the numbers were routed to call centers where supposedly “certified” technicians would run “diagnostics” and notify the consumer that resolution of the issues would cost $200-$300 and sometimes an extra $200-$500 to replace antivirus software. The FTC has taken action against such tech support operations since 2010 and launched an international effort to crack down on the scams called “Operation Tech Trap” in May 2017.  The defendants settled with the FTC and the state of Florida that month and are currently banned from offering tech support and engaging in deceptive telemarketing practices.

Takeaway: Advertisers should be aware that the FTC continues to jointly file enforcement actions with state attorneys general in an effort to protect consumers.


Throwing Shade: Upscale Manhattan Bar Calls Out “Basic” Would-be Infringer

Not since Mariah Carey claimed “I don’t know her” about Jennifer Lopez has such supreme shade been thrown on public record.

Filo Promotions owns a self-described “premier, well-appointed bar/lounge with a posh upscale atmosphere and a focus on high quality drinks, creative new sounds and a small plates menu with exceptional tapas” named Bathtub Gin in Manhattan’s Chelsea neighborhood. It brought suit under the Lanham Act against a Mooresville, North Carolina bar of the same name for two counts of trademark infringement.  Filo owns an incontestable trademark for “BATHTUB GIN” and seeks damages and injunctive relief.

Interestingly, the complaint delivers premium farm-to-table shade: “FILO employs first rate cocktail mixers and servers so that the customers’ experience is nothing less than amazing.  Defendant’s ‘The Bathtub Gin’ is a basic bar with none of the same attention to quality and décor attended to by Plaintiff.” Oh, Filo went there. Filo Promotions doubled down last week, filing a certificate of default when Bathtub Gin’s motion to appear pro hac vice was deemed deficient.  We will have to wait to see if Bathtub Gin resubmits its motion before Filo Promotions moves for default judgment later this month.

Takeaway: Although this action represents a relatively standard trademark infringement lawsuit, it offers a masterclass in the art of throwing shade.  The case is Filo Promotions Inc. v. Bathtub Gins Inc., case number 1:17-cv-10246, in the U.S. District Court for the Southern District of New York.  Get your hands on a copy of Filo Promotions’ complaint and enjoy.

Telemarketing Giant to Pay $250,000 Penalty to FTC

InfoCision, Inc., an Akron, Ohio-based company, agreed last month to pay a $250,000 civil penalty and implement recordkeeping and monitoring practices to settle Federal Trade Commission (“FTC”) charges brought by the Department of Justice on the FTC’s behalf. The FTC alleged that since at least 2013 InfoCision conducted hundreds of telemarketing campaigns on behalf of charitable organizations that violated the FTC’s Telemarketing Sales Rule (“TSR”).  The TSR requires telemarketers calling on behalf of a charity to promptly inform the call recipients of the solicited charity and that the purpose of the call is to seek a donation.

According to the FTC, InfoCision’s telemarketers told some recipients at the start of the call that they were not calling to ask for a donation, but then asked the recipients to deliver materials requesting donations to family members, friends, or neighbors. The FTC further alleged that InfoCision’s telemarketers then did ask some recipients to donate money.  The proposed order settling the FTC’s charges bars InfoCision from making any false or misleading statements in connection with its telemarketing activities designed to induce anyone to pay for goods or services or make a charitable contribution.

Takeaway: Advertisers who have charitable partners as part of corporate giving or commercial co-ventures should ensure that their partners who use telemarketing campaigns to solicit charitable donations inform recipients promptly that the purpose of the call is to seek donations for the charity.

Don’t Have a Cow! Court Dismisses GMO Labelling Suit Against Dannon

Last month, a New York federal judge dismissed a proposed class action that alleged Dannon Company, Inc. unlawfully labelled its yogurt products as “natural” when in fact the cows that produced the milk that produced the yogurt may have eaten feed made from corn that was genetically modified or were raised using hormones or antibiotics. The plaintiff, Polly Podpeskar, sued Dannon under four Minnesota state consumer protection statutes, New York common law fraud, breach of express warranty, and a consolidated claim for violations of 40 other states’ consumer protection statutes.

The Court, however, noted numerous holes in Podpeskar’s complaint. Most glaring was that she “alleges very little about Dannon’s specific practices; she does not allege that a single ingredient in the yogurt is not natural.”  Dannon also pointed out that the thrust of the complaint was based on unsupported conjectures and “[Podpeskar’s] own speculation that if the cows that produced the milk that Dannon used to make its yogurt ate food with GMOs or were fed antibiotics, that their milk is necessarily not natural, nor is the yogurt that is made from it.”  Such speculation was insufficient to survive Twombly’s plausibility pleading standard.  Finally, the Court noted that the FDA is currently reviewing the proper regulation of the term “natural” and that the current policy is informal and defines “natural” as “nothing artificial or synthetic . . . is included in, or has been added to, the product that would not normally be expected to be there.”

Takeaway: Current federal law does not require that, in cases where animals have been fed with GMO feed, their end product should be labeled as “GMO.”  Such allegations, without more, are also insufficient to qualify those products as “unnatural” for purposes of labelling.