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Ninth Circuit Rejects Manufacturer's Preemption Arguments, Reinstates Consumer False Advertising Claim Against FDA-Regulated Margarine Substitute

When Robert Reid visited Albertsons in Oceanside, California, he spotted something different on the condiment shelf.  There was a package with a picture of a heart-shaped, buttery spread resting on a toasted English muffin.  The spread looked a lot like margarine.  This was no ordinary margarine though—it was Benecol.  The packaging left the impression that Benecol is not only tasty, but a health food.  “Proven to Reduce Cholesterol” it read.  “No Trans Fat” and “No Trans Fatty Acids.”  Reid bought the marketing and bought Benecol not once, but several other times.

Years later Reid learned his faith in Benecol was misplaced.  That “No Trans Fat” claim on the package?  False.  The truth: Bencol contains at least some trans fat.  And what about those cholesterol claims?  The trans fat in Benecol actually counteracts the spread’s cholesterol-lowering properties.

Reid brought a federal class action lawsuit against Johnson & Johnson and McNeil Nutritionals (collectively “McNeil”), the makers of Benecol.  Reid’s complaint contained claims under California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act.  McNeil asked the district court to dismiss Reid’s complaint on the basis of standing, preemption, primary jurisdiction, and abstention.

The district court dismissed Reid’s complaint on standing and preemption grounds.  In Reid v. Johnson & Johnson, No. 12-56726 (9th Cir. 2015), the Ninth Circuit reversed.  After finding Reid had standing to pursue the claims, slip op. at 9–11, the court turned to McNeil’s argument that Reid’s state law claims are preempted by the Federal Food, Drug, and Cosmetic Act (“FDCA”) and the Food and Drug Administration’s (“FDA”) related regulations.

The “No Trans Fat” Claim

The Ninth Circuit first dealt with Reid’s claim that McNeil’s “No Trans Fat” labeling violated California law.  The court first set out the framework for food regulation.  In 1990, Congress passed the Nutritional Labeling and Education Act (“NLEA”).  NLEA brought about the familiar Nutrition Facts Panel on food packages.  NLEA includes a preemption provision to ensure the Nutrition Facts Panel is uniform across the United States.  A state law that requires something in the Nutrition Facts Panel that differs from FDA regulations is preempted.  At the same time, the Ninth Circuit observed that “NLEA does not preempt state law-based causes of action that are identical to the federal labeling requirements.”  Reid, slip op. at 12.

The court determined that the fate of the “No Trans Fat” claim “turns on whether the statement is authorized by FDA regulations.”  Id. at 17.  The Ninth Circuit concluded that the “No Trans Fat” claim was not authorized by FDA for two reasons.  First, FDA sent a warning letter in which it referred to a “No Trans Fat” claim as an “unauthorized nutrient content claim.”  Id. at 18.  Second, FDA regulations forbid nutrient content claims that are “false or misleading in any respect.”  21 C.F.R. § 101.13(i)(3).  FDA promulgated a separate rule allowing “No Fat” and “No Saturated Fat” claims for food “that contains less than 0.5 grams of fat or saturated fat by serving.”  Reid, slip op. at 19.  FDA would not have “go[ne] to the trouble of promulgating” that rule if those claims were already not false or misleading under section 101.13(i)(3).  Since FDA expressly accepted “No Fat” and “No Saturated Fat” claims, the court found FDA’s refusal to do the same for “No Trans Fat” meant the claim is not authorized.  The Ninth Circuit found the claim was not preempted.  Id. at 20.

The Cholesterol-Lowering Claim

The court next turned to Reid’s claim against McNeil for its marketing Benecol as a cholesterol fighter.  McNeil conceded that its cholesterol claims “fall short” of what FDA permits in 21 C.F.R. § 101.83(c)(2).  Reid, slip op. at 20.  Regardless, McNeil maintained Reid’s claim was preempted due to a 2003 FDA letter in which the agency stated it intends to exercise enforcement discretion with respect to cholesterol claims like the ones on Benecol’s packaging.

The Ninth Circuit rejected McNeil’s argument.  The court held that “the 2003 letter lacks preemptive effect.”  Id. at 23.  The court declined to apply deference to the agency’s statement under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), since such actions “do not carry the force of law.”  Reid, slip op. at 23.  Even so, the court found that the 2003 statement’s own terms did “not authorize any health claims that conflict with the FDA’s existing . . . rule.”  Id.  Further, FDA “did not intend to foreclose state law challenges to health claims that do not comply with existing [FDA] rules.”  Id. at 24.

Implications

The Supreme Court’s decision in POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228 (2014), provided a lesson for FDA-regulated industries.  Mere compliance with a FDA regulatory standard does not insulate a party from false advertising liability under the Lanham Act.  Reid is not the same as POM Wonderful.  Reid’s claims were based on state, not federal law.  Further, Reid alleged that McNeil’s labeling did not facially comply with FDA regulations.  

Reid illustrates the risk of noncompliance.  Reid opens the door for consumers to sanction companies for noncompliance with the FDCA through state law claims.  A company making questionable marketing claims under the FDCA might not raise FDA’s ire, but could face a consumer class action suit instead.

Query whether claims like those in Reid represent an end run around FDA's exclusive authority to enforce the FDCA.  21 U.S.C. § 337(a).  A petition pending at the Supreme Court could shed light on this question.  Athena Cosmetics, Inc. v. Allergan, Inc., presents the question whether a state unfair competition claim premised on a party's alleged failure to obtain FDA approval for a product is preempted.  The Court is currently waiting for the Solicitor General to provide his views on the petition.

Episode of CNBC's "The Profit" Illustrates a Trademark Pitfall to Avoid

Marcus Lemonis is the star of CNBC’s reality show “The Profit.”  “The Profit” chronicles Lemonis’ relationships with ailing businesses.  At the beginning of each episode, Lemonis offers cash-strapped business owners much-needed funds in exchange for an equity stake in their companies.  The rest of the show depicts Lemonis’ efforts to turnaround these businesses' fortunes.

Trademark law issues figured prominently into a recent episode.  Lemonis made an investment in a small restaurant franchise called My Big Fat Greek Gyro.  Less than ten minutes into the episode, questions about the restaurant’s name arose.

“Who came up with the name?” Lemonis asked.

“We have issues with the name,” one of the co-owners said.  Co-owner Mike Ference explained “there was a company in California that actually trademarked MY BIG FAT GREEK.”  Ference said the companies exchanged e-mails, but nothing more.

The situation bothered Lemonis.  “Normally when there is a trademark dispute in a name it’s something you can work through especially if it’s a single location,” Lemonis observed.  “But in this case, we’ve sold the rights in the name to franchisees and now we’re finding out we can’t actually use the name—you’ve got a problem.”

Later on in the episode, the show reveals how the owners solved the problem.  They chose to rebrand to THE SIMPLE GREEK.

If the owners had conducted a trademark clearance, they would have likely avoided having to rebrand.  Such an analysis would have included clearing MY BIG FAT GREEK GYRO against other previously registered marks.  A fairly thorough search would have likely cost the owners of MY BIG FAT GREEK GYRO less than $2,000.

Instead, the owners had to incur the cost of hiring a rebranding specialist to develop new advertising material and other collateral.  In the process, they also lost the goodwill and consumer association they had built up in MY BIG FAT GREEK GYRO.  To paraphrase Lemonis from another episode, that sounds a lot like “stepping over dollars to save pennies.”

Unilever Drops False Advertising Lawsuit Against Vegan Just Mayo, Concerns Remain for Hampton Creek

Unilever’s lawsuit against Hampton Creek started with a bang: a motion for a preliminary injunction claiming Hampton Creek engaged in false advertising by promoting its eggless Just Mayo sandwich spread as real mayonnaise.  Last Thursday it appears to have ended with a whimper: a three-paragraph press release and a one-page dismissal of the lawsuit.

In its press release, Unilever said it “decided to withdraw its lawsuit against Hampton Creek so that Hampton Creek can address its label directly with industry groups and appropriate regulatory authorities.”  Unilever then lauded Hampton Creek’s “commitment to innovation and its inspired corporate purpose” and stated it “believe[s] Hampton Creek will take the appropriate steps in labelling its products going forward.”

Unilever's suit proved to be a public relations headache from the outset, serving as fodder for late-night comedians.  Since Unilever announced its decision to withdraw the suit, popular media is piling on.  CNNMoney reports “Unilever lays an egg.”  Meanwhile a headline on Slate blares that “The Maker of Hellmann’s Just Dropped an Absurd Lawsuit Over the Definition of Mayonnaise.”

It would be fair to say the lawsuit backfired on Unilever.  The Associated Press reported “the lawsuit has been a boon to Hampton Creek, boosting sales of Just Mayo.”  That is not a surprise.  The suit handed Hampton Creek invaluable free publicity—“the opportunity to tell our story to millions of people” as Hampton Creek CEO Josh Tetrick put it.  The result: a David-versus-Goliath narrative depicting Unilever as an out-of-touch, well-heeled bully.  An underdog story Americans could believe in and buy into at their local retailer.

Understandbly, most of the reporting on Unilever’s decision to withdraw the suit suggest this dispute is over.  However, the case could resurface.  The AmLaw Litigation Daily correctly notes “Unilever’s notice . . . was filed under a procedural rule that would allow the company to refile its claims one more time, so the lawsuit could return.”  The “procedural rule” Unilever used to dismiss its case is Federal Rule of Civil Procedure 41(a)(1)(A)(i).  A party is allowed to voluntarily dismiss its case once “without prejudice” under that rule, meaning it can refile.  

Even if Hampton Creek’s battle with Unilever is over, its labeling and advertising will continue getting legal scrutiny.  The Food and Drug Administration regulates food labeling under the Federal Food, Drug, and Cosmetic Act.  States also have their own food and drug laws.  At some level, Hampton Creek will have to comply with both.

There is also a threat from the plaintiff’s bar.  Unilever gave plaintiff’s attorneys a blueprint for a class-action lawsuit against Hampton Creek under state consumer protection laws.  With class-action litigation over "all natural" foods and "homemade" vodka, it might be a matter of time before Hampton Creek finds itself in court defending against these claims again, this time from mayonnaise purchasers allegedly duped into buying a vegan substitute.

Unilever Raising Hell(mann's) in False Advertising Lawsuit Against Vegan Just Mayo

To settle litigation, General Mills has agreed to ditch the phrase “100% Natural” for granola bars.  Meanwhile, the maker of Tito’s Handmade Vodka is defending itself against allegations from class-action plaintiffs that its vodka is not actually “handmade.”  Now the food and beverage wars have reached the condiment aisle.

Unilever sells mayonnaise under its Hellmann’s and Best Foods brands.  San Francisco-based Hampton Creek makes a vegan sandwich spread called Just Mayo.  Unilever’s products contains eggs.  Since it is a vegan product, Just Mayo does not contain eggs.

On October 31, Unilever filed a false advertising lawsuit against Hampton Creek in the United States District Court for the District of New Jersey.  In its complaint, Unilever alleges that “Hampton Creek falsely communicates to consumers that Just Mayo is mayonnaise, when it in fact, is not.”  The reason: “Under federal regulations, common dictionary definitions and as consumers understand it, ‘mayonnaise’ or ‘mayo’ is a product that contains eggs.  That ingredient does not exist in Just Mayo.”  By advertising its vegan product as “mayo,” Unilever claims that Hampton Creek “is stealing market share from Hellman’s” in violation of section 43(a) of the Lanham Act and state unfair competition law.

Unilever asked the district court to enter a preliminary injunction that would forbid Hampton Creek from selling and marketing Just Mayo.  In its motion, Unilever asserts it is likely to prevail on the merits for two separate reasons: (1) the Just Mayo label is literally false and (2) survey evidence shows the Just Mayo brand actually deceives consumers.

Unilever’s argument that Just Mayo is literally false runs as follows.  The term “mayo” is synonymous with “mayonnaise.”  By definition, “mayo” or “mayonnaise” contains eggs.  Just Mayo does not contain eggs.  Therefore, according to Unilever, Hampton Creek engages in false advertising when it markets its vegan sandwich spread as Just Mayo.

Unilever also offers evidence from a consumer survey as a second basis for a preliminary injunction.  Unilever’s survey found 53.7% of consumers shown Just Mayo concluded it was mayonnaise.  Unilever concludes “[t]his level of confusion is well above the minimum confusion levels required to support findings of implied falsity under the Lanham Act.”

So far, Hampton Creek is standing its ground.  “We think we’re on the right side of how we build a food system that makes it easy for regular people to eat,” Hampton Creek CEO Josh Tetrick told Bloomberg Television.  “We never started this damn thing to be an alternative or a substitute; we started it to be right there in the condiment aisle . . . when we do that with everyone else.”

Tetrick suggested Unilever will withdraw the lawsuit “because of the incredible amount of support from the public we have received [and] from retailers.”  If Unilever refuses to back down, Tetrick said Hampton Creek will file a countersuit attacking Unilever’s advertising related to its sustainability practices.

Hampton Creek’s response to Unilever’s motion for a preliminary injunction is not due until January.  Until then, the lawsuit has become grist for the late-night comedy mill.  CBS’ Late Show with David Letterman lampooned the litigation with a mock advertisement for a fictitious mayonnaise plaintiff’s law firm called Cellino & Barnes.  Stay tuned for who gets the last laugh in this case.

What to consider when putting together a martial arts demo...from an IP perspective

            Taekwondo demonstrations are impressive displays of athleticism and artistry.  Although the average person may think of a “demonstration” as a form of teaching or a presentation of basic skill sets, in martial arts, the terms “demo” and “demonstration” encompass a wide range of choreographed performances.  Some demos are competition events, where competitors are judged on their artistry, originality, technique, power, accuracy, and cohesiveness as a group while performing skills such as traditional forms and patterns (called “poomsae”), choreographed self-defense sequences, and board breaking.  In other settings, demos may be performances whose goal is to promote an aesthetically pleasing form of entertainment.[1]

            When putting together a demo performance, it is vital to take steps to ensure that the demonstration does not land the team in legal trouble.  While most teams are good at mitigating the risk of personal injury and the legal issues related thereto, they are less likely to consider the possible intellectual property ramifications of a demonstration.  There are two areas in demo where intellectual property issues may want to be considered: the choreography and the musical accompaniment.

“They’re Doin’ Choreography”[2]

In some cases, the choreography of a demo itself may be a work of copyrightable art.  The United States Copyright Act protects “original works of authorship, fixed in any tangible medium of expression…from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.”  Among the categories of works of authorship Congress chose to protect are “pantomimes and choreographic works.”[3]

            To date, there are no court cases addressing whether taekwondo demonstration is protectable under the Copyright Act.  To determine whether demonstration choreography could ever be considered protectable, it is important to start with how Congress viewed choreographic works under the Copyright Act.  A review of the Congressional comments to the Act shows that choreography must be more than “an arrangement of functional physical movements such as sports movements [or] exercises” in order to be protected.[4]  Instead, “[c]horeographic authorship is considered, for copyright purposes, to be the composition and arrangement of a related series of dance movements and patterns organized into an integrated, coherent, and expressive whole.”[5] 

At first blush, a demo may appear to never be eligible for copyright protection, as it is an arrangement of sports movements.  Taekwondo is a sport and some practitioners choose to pursue taekwondo for the exercise component.  That alone, however, should not preclude taekwondo demos from ever being able to obtain copyright protection.  These same statements describing taekwondo could easily be made about various forms of dance, such as ballet.  Like taekwondo, ballet is a display of athletic ability and grace.  Dancers may elect to compete in dance competitions that resemble sporting events, while some practitioners take up ballet purely for its exercise benefits.  There is no question, however, that certain ballet choreography is protectable under copyright law.[6]

The question, then, becomes when a performance rises to the level of protectability.  It is generally accepted that ballet movements themselves – individually or in combination – are not copyrightable.[7]  Instead, to be protectable, the compilation of ballet movements must be “an integrated and coherent compositional whole.”  In other words, simple sequences of ballet movements performed across the floor are not protectable.  When those movements are integrated into a complete composition, such as Swan Lake, that complete, integrated composition becomes protectable.

            The same should apply to martial arts demonstration performances.  Basic martial arts movements, alone, should not possess sufficient originality to be copyrightable.[8]  For example, training exercises designed to teach develop muscle memory for sequences of defenses and attacks useful in hand to hand combat are likely outside the bounds of copyright.  A demo that creatively combines taekwondo movements into an integrated, coherent composition, however, should qualify for protection. 

Taekwondo demos can and do engage in the dramatic, performance-based storytelling one would find in a classical dance performance, albeit with some different physical movements.  One such example of taekwondo demonstration presenting an integrated and coherent compositional whole is The Dream Of The Bluebird, a historical performance that tells the story of the Japanese occupation of Korea.  Although a historical performance, The Dream Of The Blue Bird is also a taekwondo demo, and is performed by Woosuk University’s demo team.[9]  Another example of a work that may rise to the level of protectability is the Vegas production Panda!, which combines dance, acrobatics, and martial arts demonstrations to tell the story of a panda who trains in martial arts and journeys to rescue the love of his life.  In situations where martial arts demo provides an integrated and coherent composition, its choreography should be given equal footing as choreography for other art forms.

            Even if a demo performance meets the requirements of an original work of authorship, it does not become protectable unless it is fixed in tangible form, i.e., recorded in some manner.[10]  Typically, this is done by creating a video recording of the choreographic performance.[11]  There is no requirement that the recording be professional in quality.  Demonstration teams and/or their masters/instructors/coaches can easily record video with most smart phones.  So long as the recording is sufficient to allow a third party to perceive, reproduce, or otherwise communicate the performance, the recording will qualify as fixing the performance in tangible form.

            What does it mean if demo choreography can be copyrightable?  If demo may, in some instances, be copyrightable, it is important to consider what is and is not subject to copyright protection.  In the copyright realm, ideas are not copyrightable.  Ideas are free for anyone to use.  In contrast, the expression of ideas is subject to copyright protection.  Therefore, the question becomes what is the level of ideas and what is at the level of expression.

Individual movements and basic sequences are considered to be ideas.  Therefore, no one can claim exclusive rights in any given kicking, striking, or blocking technique.  Combinations of movements that are naturally performed together are also unprotectable ideas.  Similarly, a newly invented original movement or skill, while unique, would not be likely to rise to the level of copyright protection. 

Two demos merely including the same elements, albeit in a different order, would be insufficient to find one infringes the other.  Realistically, there are a finite number of movements in martial arts.  Every demonstration will likely include round house kicks, jumping side kicks, and punches.  The original arrangement of those elements is considered expression and may, in some cases, rise to the level of protection.[12]  In other words, while having round house kicks, jumping side kicks, and punches is not protectable, a specific arrangement of those elements along with many others to make an integrated, cohesive work of art may be.

Given the requirement of a work of choreography be an integrated and cohesive whole, an infringing demo would need to capture a substantial amount of the original demo’s movements and perform them in a substantially similar order and fashion before infringement could occur.  It naturally follows, then, that a faithful recreation of demo routines developed by others carries a high risk of infringement.  Recreating a demo routine by another and changing parts of it may also risk a copyright claim if the new routine is substantially similar to the original.  Watching a demonstration and deciding that jumping snap kicks are impressive and should be included in an upcoming original demonstration, however, would not be sufficient to give rise to infringement.  Ultimately, while it may be useful to pull inspiration from existing choreography, teams should be careful not to copy that choreography. 

“I Can Hear Music”[13]

            Because demos incorporate music, copyright considerations also arise with regard to musical recordings.  Musical recordings are protected under the Copyright Act.[14] Therefore, permission to use a recording should be obtained prior to including it in a demonstration. 

Some artists choose to make their recordings free for anyone to use.  For teams looking for music that is not widely known or music that is cost efficient, searching for royalty-free recordings may be a useful avenue to pursue. 

Normally, artists looking to provide their recordings royalty free utilize open source licenses.  These licenses allow anyone to use the work, so long as they abide by certain rules set forth in the license.  Examples of these rules may include limitations on how the music may be used (e.g., whether the music may be used in a commercial manner) or limitations on whether and how the music may be altered.  The most famous form of open source license is the Creative Commons license.[15] The Creative Commons organization provides a number of license templates to copyright owners who wish to provide their works to others in a royalty free environment.  The rights owners can use the various Creative Commons templates to easily select the scenarios under which their works may be used for free. 

While Creative Commons is popular, open source licenses may come in all shapes and sizes.  If a demo team decides to utilize open source music, it should carefully read the rules set out in the license to ensure compliance with those rules.  Failure to comply with the rules in a license is considered use without permission (and copyright infringement).

The vast majority of musicians do not provide their compositions and recordings free of charge.  A demo team desiring to use a song that is not an open source recording should make sure it obtains the proper license.  If a team is unsure where it can obtain a license for a given song, a good starting point would be to check with the major licensing organizations to see if those organizations represent the owner of the rights in question.  For example, major licensing agents ASCAP and BMI maintain searchable catalogues of the songs and artists they represent.  It is also common for musical artists to include their contacts for licensing on their websites.  Typically, obtaining a license involves communicating with the licensing agent, determining the appropriate license, and paying the necessary fees.  Upon doing so, permission is granted and the team may use the song.

It is extremely important to get the proper license.  Not only is using a recording without permission considered copyright infringement, the music industry fiercely polices its rights.  There is a strong likelihood that utilizing music without the proper licenses will result in the licensing agent discovering the use and claiming copyright infringement.  Given the cost of pre-litigation legal work (e.g., resolving cease and desist issues) and federal copyright litigation, it is better financially to obtain a license, rather than “risk it” and use music without permission.

Conclusion

            In addition to considering safety and entertainment issues in designing a demonstration, demo teams should also give some thought to intellectual property.  In doing so, they can insulate themselves against possible legal action that detracts from their art and proceed with peace of mind.



[1] An example of demonstration featuring the world famous Korean Tigers may be found at https://www.youtube.com/watch?v=ENKh-1qUvJA

[2] From “White Christmas” by Irving Berlin.

[3] 17 U.S.C. § 102.

[4] 77 Fed. Reg. 37605-01 (2012).

[5] 77 Fed. Reg. 37605-01 (2012).

[6]Horgan v. MacMillan, Inc., 789 F.2d 157 (2d Cir. 1986).

[7] 77 Fed. Reg. 37605-01 (2012) (“[T]he selection, coordination or arrangement of dance steps does not transform a compilation of dance steps into a choreographic work.”). 

[8] Patry on Copyrights, § 3:96.

[9] Information on this performance art may from its American tour be found here - http://mommypoppins.com/event/dream-of-blue-bird-taekwondo-art-performance

[10] 17 U.S.C. § 102.

[11]See, e.g, Baltimore Orioles, Inc. v. Major League Baseball Players Ass’n,805 F.2d 663, 675 (7th Cir. 1986).

[12] See above.

[13] Title of a song written by Jeff Berry, Ellie Greenwich, and Phil Spector and covered by The Beach Boys.

[14] 17 U.S.C. § 102.

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