Havana Club Amicus Brief - FINAL

8/8/2019 Havana Club Amicus Brief - FINAL

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No. 10-2354

IN THE

United States Court of Appeals

for the Third Circuit

PERNOD RICARD USA, LLC,

Plaintiff-Appellant,

v.

BACARDI U.S.A., INC.,

Defendant-Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

BRIEF OF COUNCIL OF AMERICAN SURVEY RESEARCH

ORGANIZATIONS, INC. AND AMERICAN ASSOCIATION FOR

PUBLIC OPINION RESEARCH AS AMICI CURIAE

Duane L. BerlinLEV & BERLIN, P.C.

200 Connecticut Avenue, 5th Floor

Norwalk, CT 06854

Telephone: (203) 838-8500

Facsimile: (203) 854-1652

Of Counsel

September 21, 2010

Richard J. LeightonScott M. Abeles

KELLER AND HECKMAN LLP

1001 G Street, NW, Ste 500W

Washington, DC 20001

Telephone: (202) 434-4100

Facsimile: (202) 434-4646

Leyla Mujkic

KELLER AND HECKMAN LLP3 Embarcadero Center, Ste 450

San Francisco, CA 94111

Telephone: (415) 948-2800

Facsimile: (415) 948-2808

Attorneys for Amici Curiae


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i

TABLE OF CONTENTS

TABLE OF AUTHORITIES........................................................................ii

INDENTITIES, INTERESTS, AND SOURCE OF AUTHORITY ........... 1

INTRODUCTION AND SUMMARY OF ARGUMENT ............................ 3

ARGUMENT ................................................................................................ 7

I. Decades of Jurisprudence Have Demonstrated the Utilityand Necessity of Perception Survey Evidence.................................. 7

A. The Lanham Acts Structure and Purpose Renders

Perception Survey Evidence Uniquely Helpful to theTrier of Fact............................................................................... 9

B. Given Its Probative Nature, Consideration of

Perception Survey Evidence Has Become WovenInto the Fabric of Lanham Act Law. ..................................... 14

C. Courts Have Limited Litigants Ability to Offer

Consumer Survey Evidence Only in Cases in WhichSuch Evidence Would Not Impact Liability.......................... 16

II. The District Courts Decision Is Wrong as a Matter ofSettled Law and Public Policy. ........................................................ 21

A. The District Courts Decision Contradicts ThisCircuits Precedents and Misapplies Others. ....................... 22

B. Limitations of Proof on the Ability to Establish the

Deceptiveness of True Statements Undercut the

Lanham Acts Competition and Consumer

Protection Goals. ..................................................................... 27

CONCLUSION........................................................................................... 32

CERTIFICATIONS .................................................................................... 33


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ii

TABLE OF AUTHORITIES

Cases

Abbott Labs v. Mead Johnson & Co., 971 F.2d 6 (7th Cir. 1992) ............21

Bristol-Myers Squibb Co. v. McNeil-P.P.C., Inc., 786 F. Supp. 182

(E.D.N.Y.).......................................................................................... 14

Castrol Inc. v. Pennzoil Company and Pennzoil Products

Company, 987 F.2d 939 (3d Cir. 1993)............................................ 19

Charles Jaquin Et Cie, Inc. v. Destileria Serralles, Inc., 921 F.2d

467 (3d Cir. 1990) .............................................................................13

Clorox Co. P.R. v. Procter & Gamble Comml Co., 228 F.3d 24

(1st Cir. 2000) .................................................................21, 23, 25, 27

E.S. Originals, Inc. v. Stride Rite Corp., 656 F. Supp. 484

(S.D.N.Y 1987) .................................................................................. 15

Gillette Co. v. Wilkinson Sword, Inc. 795 F.Supp. 662 (S.D.N.Y.

1992) .................................................................................................. 30

H.N. Heusner & Son v. Federal Trade Commission, 106 F.2d 596

(3d Cir. 1939) ....................................................................................29IQ Prods. Co. v. Pennzoil Prods. Co., 305 F.3d 368 (5th Cir. 2002) ....... 23

Johnson & Johnson v. Smithkline Beecham Corp., 960 F.2d 294

(2d Cir. 1992) ....................................................................................13

Johnson & Johnson-Merck Consumer Pharm. Co. v. Rhone-

Poulenc Rorer Pharms., Inc., 19 F.3d 125

(3d Cir. 1994) ........................................................................20, 21, 23

McNeill-P.C.C., Inc. v. Bristol-Myers Squibb Co., 938 F.2d 1544

(2d Cir. 1991) ........................................................................20, 21, 23

Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 883

(7th Cir. 2000).............................................................................24, 25


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iii

Mead Johnson & Co. v. Abbott Laboratories, 209 F.3d 1032

(7th Cir. 2000).......................................................................25, 26, 27

Novartis Consumer Health v. Johnson & Johnson-Merck

Consumer Pharm., 290 F.3d 578 (3d Cir. 2002).................20, 21, 23

Pernod Ricard USA LLC v. Bacardi USA, Inc., No. 06-505-SLR,

2010 WL 1348241 (D. Del. Apr. 6, 2010) ........................4, 22, 23, 24

Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d

222 (3d Cir. 1990) .............................................................................21

Scotch Whisky Association v. Consolidated Distilled Products, 210

U.S.P.Q. (BNA) 639 (N.D. Ill. 1981)..........................................29, 30

Security Center, Ltd. v. First Nat. Secur. Centers 750 F2d 1295(5th Cir. 1985)................................................................................... 15

Triangle Publications, Inc. v. Rohrlich, 167 F.2d 969

(2d Cir. 1948) ....................................................................................11

Zippo Mfg. Co. v. Rogers Imports, Inc., 216 F. Supp. 670

(S.D.N.Y. 1963) ................................................................................. 14

Statutes

15 U.S.C. 1125(a) .............................................................................passim

Other Authorities

Barksdale, The Use of Survey Research Findings as Legal

Evidence 141 (Printers Ink Books 1957) ..........................................9

Diamond, Reference Guide on Survey Research, in ReferenceManual on Scientific Evidence, 869 PLI/Pat 329

(2000) ....................................................................................... 7, 11, 18

Edman, Lies, Damn Lies, and Misleading Advertising: the Role of

Consumer Surveys in the Wake of Mead Johnson v. Abbott

Labs, 43 Wm. & Mary L. Rev 417 (2001).................................. 15, 25


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iv

Jacoby, et al., Survey Evidence in Deceptive Advertising Cases

Under the Lanham Act: An Historical View of Comments

From the Bench, 1148 PLI/Corp 231 (1999) ............................. 10, 11

Keller, et al, Surveys in False Advertising Cases, 624 PLI/Pat 351

(1992) ........................................................................................... 14, 16

Kirkpatrick, Likelihood of Confusion in Trademark Law, 617

PLI/Pat 83 (2006)......................................................................... fn 13

Leighton, Using Daubert Kumho Gatekeeping to Admit and

Exclude Surveys in Lanham Act Advertising and Trademark

Cases, 92 Trademark Rep. 743 (2005) .............................................. 9

Leighton, Making Puffery Determinations in Lanham Act False

Advertising Cases: Surveys, Dictionaries, Judicial Edicts &Materiality Tests, 95 Trademark Rep. 615 (2005)..........................25

Lipton, Trademark Litigation: A New Look at the Use of Social

Science Evidence, 29 Ariz. L. Rev. 639 (1987) ................................ 16

Manta, In Search of Validity: A New Model for the Content and

Procedural Treatment ofTrademark Infringement Surveys,

24 Cardozo Arts & Ent. L. J. 1027 (2007)....................................... 16

Manual for Complex Litigation, (Fourth) 11.493 (2004) ...................... 18

McCarthy on Trademarks and Unfair Competition (2010) ............passim

Rappeport, Litigation Surveys--Social Science As Evidence, 92

Trademark Rep. 957 (2002) .................................................10, 12, 17

The Will to Believe, An Address to the Philosophical Clubs of Yale

and Brown Universities, New World (1896) ...................................18


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IDENTITIES, INTERESTS, AND SOURCE OF AUTHORITY TO

FILE OF AMICI CURIAE

The Council of American Survey Research Organizations, Inc.

(CASRO) is a not-for-profit trade association representing over three

hundred (300) United States survey research companies engaged in

professional survey research regarding a wide variety of technical,

scientific, economic, and other public and private issues. CASROs

members are in the aggregate responsible for the overwhelming

majority of the survey research conducted each year in the United

States.

The American Association for Public Opinion Research (AAPOR)

is a leading professional organization of public opinion and survey

research professionals in the United States, consisting of seven (7)

chapters, with members from academia, media, government, the non-

profit sector and private industry. AAPORs members embrace the

principle that public opinion research performs a service that is

essential to a healthy democracy, by providing information that is

crucial to informed policymaking and giving voice to the nations beliefs,

attitudes and desires.


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As leading representatives of the United States survey and public

opinion research industry, CASRO and AAPOR have direct and unique

interests in articulating the importance of survey data in false

advertising cases under the Lanham Act, 15 U.S.C. 1125(a). In

particular, members of each organization frequently are called upon to

conduct surveys to determine perceptions of challenged advertising by

the intended audience and to provide expert opinion in Lanham Act

cases. For decades, courts have welcomed, and in many cases required

(impliedly or expressly), such evidence and opinion in order to aid

judges and juries in determining whether a given advertisement

violates the law.

This memorandum is submitted by CASRO and AAPOR pursuant

to Federal Rule of Appellate Procedure 29 to describe the critical and

necessary role of survey evidence in Lanham Act cases; the manner in

which such evidence benefits competition, consumers, and decision

makers; and the reasons why the lower courts decision, if upheld,

would be injurious to competition, consumers, courts, and the positive

development of the law.


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INTRODUCTION AND SUMMARY OF ARGUMENT

For many years, litigants in Lanham Act false advertisement

cases have offered evidence, in the form of audience (usually, but not

always, consumer) perception studies, in support of their positions that

a given advertisement is (or is not) misleading. Properly constructed,

executed, and interpreted advertising perception survey evidence is

well-accepted, and almost universally embraced as helpful if not

required to show fact-finders how an advertisements audience has

perceived, or is likely to perceive, an advertising message. Such

evidence is also efficient, because it integrates a substantial amount of

information that can be presented through an expert witness (rather

than a parade of witnesses from the intended audience), with the

results and any limitations carefully explained by an expert in the

science of surveying. Such evidence then, in the main, assists courts in

arriving at correct decisions at a lower cost than other evidence.

CASRO and AAPOR appear in this litigation as amici curiae and

support appellant Pernod Ricard USA, LLCs (Pernod) position that

the lower court erred in refusing to consider survey evidence Pernod

offered in support of its deceptive advertising claim. The lower court

refused to consider evidence that use of the name Havana Club on


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defendants packaging misled, or likely would mislead, consumers into

believing that the rum originated in Cuba. The court believed that it

was appropriate to set aside this evidence because [a]n ad that is

truthful on its face cannot be proven to be misleading by surveying

consumers. Pernod Ricard USA LLC v. Bacardi USA, Inc., No. 06-505-

SLR, 2010 WL 1348241, at * 8 (D. Del. Apr. 6, 2010).

The lower court was mistaken. As set forth below, the text and

purpose of the Lanham Acts false advertising provisions make audience

perception studies uniquely helpful in shedding light on an

advertisements impact. See Section I.A. Given its benefits, the use and

consideration of such evidence has become woven into the fabric of

Lanham Act jurisprudence, so much so that the failure to offer survey

evidence has frequently been held to be a fatal flaw. See Section I.B. In

the course of more than 50 years of experience with Lanham Act claims,

courts have made clear that only when an advertisement is judged

literally false or, in some courts, false by necessary implication, is

such survey evidence not appropriate, and then only because it is not

necessary to prove a violation. See Section I.C. At the same time,

courts have made clear that literally true statements may be


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challenged through survey evidence, as such statements, in context,

may still mislead. See id.

Application of these background principles to this case

demonstrates that the lower court erred by refusing to consider survey

evidence of consumer deception. This Court, and sister circuits, have

repeatedly held that an advertising statement that is truthful on its

face can be challenged under the Lanham Act as misleading, often by

use of a survey demonstrating how target audience members interpret

the advertisement. The lower court erred by ignoring this precedent.

See Section II.A.

The lower court compounded its error by extending a questionable

decision of the Seventh Circuit to the facts of this case, while ignoring

that Circuits amendment of the decision, which omitted language the

court below relied upon. The unamended Seventh Circuit decision

purports to hold that perception survey evidence may not be used to

determine the meaning of words in challenged advertising; a dictionary

should instead be used by the court for this purpose. The amended

decision walks away from that strict position. As we explain below,


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that Seventh Circuit pre-amendment decision, regardless of any

intrinsic worth, is inapplicable to the facts here. See Section II.B.

More significantly, extension of that Seventh Circuit pre-

amendment decision to the facts here would mark an unfortunate sea-

change in the law, preventing the offer of survey evidence of deception

when challenging advertising claims that may be true in an intellectual

vacuum, but misleading in the real world. See id. The decision below

should be reversed.1

1 Use of the term advertising here is meant to include commercial

advertising and promotions in interstate commerce. In most Lanham

Act false advertising cases, potential purchasers of the product or

service at retail are the intended audience for the challenged

advertisement. Hence, courts often denominate perception surveys

offered in such cases as consumer perception surveys or, simplyconsumer surveys. In some false advertising cases, the intended

audience may be purchase influencers (e.g.. physicians who recommend

drugs), commercial purchasers (e.g.. those who buy at retail), or other

non-retail consumers.

Generally, the terms perception survey evidence, and perception

studies are used here to mean the process of systematically obtaining

responses from a representative sample of a defined universe of people

who are the intended audience of a challenged advertisement (e.g.,

potential purchasers of an advertised product or service) to a stimulus(e.g., the challenged advertisement) about those respondents mental or

sensory observations, beliefs, thoughts, motivations or actions,

including influences on any of those, for the purpose of obtaining data

about the stimulus that may be extrapolated to the whole universe.


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ARGUMENT

I. Decades of Jurisprudence Have Demonstrated the Utility

and Necessity of Perception Survey Evidence.

Whether they measure policy preferences of the body politic, taste

preferences of would-be shoppers, talent of would-be idols, or

something else, surveys are ubiquitous in modern American society. As

the survey method provides an economical and systematic way to

gather information about a large number of individuals or social units,

surveys have a particularly important role to play in civil litigation and

a rational economy. Diamond, Reference Guide on Survey Research, in

Reference Manual on Scientific Evidence, 869 PLI/Pat 329, 335 (2000).

Surveys have served as evidence in cases for decades, and continue to

be offered in support of, among other areas, legal theories spanning

antitrust, employment law, mass torts, civil and criminal procedure,

and damage calculations.

No area of the law has proven more fertile for the use of survey

evidence than challenges brought under the trademark infringement

and false advertising provisions of the Lanham Act. Because such

challenges concern whether potential purchasers of a given product or

service, purchase influencers, or other material target audience


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members are likely to be confused or misled, perception studies are

more effective than any feasible substitute in answering the core

question such cases pose: at the time the intended audience member

perceived the message in question, how did she understand it?

Given its probative nature, courts typically have welcomed,

encouraged, and even required perception survey evidence in Lanham

Act cases. At the same time, courts have been careful not to restrict

narrowly the admission and use of such evidence. This is as it should

be. The science of surveying has developed along with the Lanham Act

surveying experts have become better at explaining their surveys and

results, and courts have become better at understanding and applying

those results. Denying litigants the right to offer such facially valid

evidence of deception as a matter of law where a challenged claim is

found to be literally true undermines the consumer competition

protection goals that the law seeks to foster. 2

2 Amici recognize that, as with other forms of evidence, perception

survey evidence can be flawed in its construction, execution, or

interpretation. How courts treat such evidence, when flawed, is not at

issue here. This brief addresses the instances in which courts should

and should not consider such evidence in the first case, not the role of

such evidence if considered and found wanting.


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A. The Lanham Acts Structure and Purpose Renders

Perception Survey Evidence Uniquely Helpful to the

Trier of Fact.

Use of survey evidence to prove trademark violations predates the

Lanham Act by many years. See Leighton, Using Daubert Kumho

Gatekeeping to Admit and Exclude Surveys in Lanham Act Advertising

and Trademark Cases, 92 Trademark Rep. 743, 756-57 (2005)

([a]pplication of the rudiments of surveying in trademark disputes

was discussed as early as 1910 by one of the noted trademark

attorneys of the time) (citing Hiram C. Barksdale, The Use of Survey

Research Findings as Legal Evidence 141 (Printers Ink Books 1957)).

In 1911, the United States Trademark Association (now the

International Trademark Association) published a speech by its

Secretary in which he looked to experimental psychology to supply the

knowledge needed to address significant proof of fact issues in

trademark infringement cases. Id. Rough versions of the types of

surveys being proffered to courts in advertising and trademark cases

today began to appear in the 1920s. Id. (citing cases).

Enacted in 1946 and significantly revised in 1988, the Lanham

Acts structure and substance impliedly recognizes the need for, and

benefits deriving from, perception survey evidence in litigation arising


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under it. The Act today authorizes a party to sue a competitor that, in

connection with the sale of goods or services, uses a false or misleading

description of fact, or false or misleading representation of fact which

in commercial advertising or promotion, misrepresents the nature,

characteristics, qualities, or geographic origin of his or her or another

persons goods, services, or commercial activities. See 15 U.S.C.

1125(a) (Section 43(a)). Because these provisions raise key questions

regarding the consumers state of mind, see Jacoby, et al., Survey

Evidence in Deceptive Advertising Cases Under the Lanham Act: An

Historical View of Comments From the Bench, 1148 PLI/Corp 231, 233

(1999), a key piece of required evidence in most Lanham Act litigation

is data on the perceptions of a cross-section of appropriate people.

Rappeport, Litigation Surveys--Social Science As Evidence, 92

Trademark Rep. 957, 959 (2002) (emphasis removed).

An early test of the law spawned one of the classic statements on

the utility of survey evidence in Lanham Act actions. Given the identity

of the owner of the allegedly infringed trademark (the girls magazine

Seventeen), and the allegedly infringing product (girdles labeled Miss

Seventeen), Judge Jerome Frank explained that, in the absence of


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survey evidence providing the reactions of numerous girls and women,

the trial courts analysis was no better than a guess, as neither the

trial judge nor any member of this court is (or resembles) a teen-age girl

or the mother or sister of such a girl. Triangle Publications, Inc. v.

Rohrlich, 167 F.2d 969, 974, 976-77 (2d Cir. 1948) (Frank, J.,

dissenting) (cited in Diamond, supra, and Jacoby, supra).

To be sure, Judges frequently are called upon to render opinions

in cases involving matters with which they lack familiarity. But

perception studies serve interests beyond mere exposure to audience

members assessments of a given product or service. Courts conceivably

could receive directly such evidence of the implications made by a

challenged advertisement from individual members of that ads

audience. Obtaining a statistically significant number of representative

individual witnesses, however, would be hopelessly impracticable.

Moreover, the Lanham Act is concerned with whether a

significant portion of the entire universe of potential buyers of a given

product or service (or other intended audience) is likely to be misled. As

a commentator and survey expert has explained in the context of a

disputed trademark:
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[T]he Lanham Act does not look to whether one individual

is confused or misled, but rather to whether there is a

likelihood that a significant fraction of the (an) appropriate

public will be confused. The essential issue of whether or

not there is a likelihood of confusion in Lanham Act cases is:How will a cross-section of people perceive competing

trademarks and/or advertising?

Rappeport, Litigation Surveys, supra, at 958 (citation omitted).

Survey evidence also has the benefit of measuring consumer

perceptions under conditions intended to mimic those faced by a

consumer at the time the Lanham Act is intended to protect them ; that

is, at the time purchase decisions can be formed. Once again,

[A] typical false advertising claim states that a cross-

section of prospective consumers is or will be misled when

they initially encounter the advertising in the real world.

This need demands that the witnesses must be nave in

the sense that they react as they would at first contact in

real life. The basic value of a survey is that it scientificallyapproximates the mental associations and reactions of

prospective purchasers with the goal of clarifying how the

target population will perceive the advertisements.

There is no other way of developing this kind of evidence.

Id. at 958 (emphasis in original, citations omitted).

Thus, even were it feasible to persuade an adequate subsection of

a challenged advertisements intended audience to appear and testify

live in court, the testimony gleaned would be less probative than that

obtained via a valid perception survey. It also would be less direct.


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That is, survey evidence, while circumstantial in one sense, is direct in

the sense that matters most: how the potentially affected public

perceives a given advertisement in the setting in which the public is

intended to view it. See e.g., Johnson & Johnson v. Smithkline

Beecham Corp., 960 F.2d 294, 297-98 (2d Cir. 1992). As the leading

treatise author on Lanham Act false advertising and trademark law put

it, surveys are the most direct method of demonstrating secondary

meaning and likelihood of confusion. 5 McCarthy on Trademarks and

Unfair Competition 32:195 (citing Charles Jaquin Et Cie, Inc. v.

Destileria Serralles, Inc., 921 F.2d 467, 476 (3d Cir. 1990)). 3

Perhaps most significantly, given the nature of the offenses

targeted by the law, perception studies enable effective enforcement of

the Lanham Act, and thereby advance its goals. As one court noted,

proof of actual confusion (e.g., identifying enough individual

consumers who were misled into purchasing) in Lanham Act cases, is

3

See also Kirkpatrick, Likelihood of Confusion in Trademark Law,617 PLI/Pat 83, 87 (2006) (The court is not concerned with mere

theoretical possibilities of deception but with the practicalities of

the commercial world... The realities of the marketplace control

because that is where confusion of prospective purchasers would or

would not occur. The publics perspective controls, not the courts.).


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almost impossible to obtain See Bristol-Myers Squibb Co. v. McNeil-

P.P.C., Inc., 786 F. Supp. 182, 201 (E.D.N.Y.). Consumers actually

deceived by an advertisement do not usually contact the advertisers

competition to complain. See Keller, et al, Surveys in False Advertising

Cases, 624 PLI/Pat 351, 359 (1992). As a practical matter, the offering

of a survey measuring potential deception, with a request to enjoin the

offending advertisement, is often the only way to demonstrate

likelihood of harm, and prevent further harm. See id. Moreover, the

resources of the judiciary and of litigants are far better preserved

through the use of a perception survey than through any other

approach. See Zippo Mfg. Co. v. Rogers Imports, Inc., 216 F. Supp. 670,

683-84 (S.D.N.Y. 1963) (with the state of mind of 115,000,000 smokers

at issue, the practical alternatives to a scientific survey calling all

smokers as witnesses, calling a subset, or having experts testify as to

the state of the public mind do not produce equally probative

evidence).

B. Given Its Probative Nature, Consideration of

Perception Survey Evidence Has Become Woven Into

the Fabric of Lanham Act Law.

No provision of the Lanham Act expressly requires that a plaintiff

support its case-in-chief with survey evidence, or that a defendant meet
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such evidence with a survey of its own. Nonetheless, consistent with

Congresss directive to courts to guide the Lanham Acts development in

furtherance of its goals, and with the fact that survey evidence aids in

such furtherance, courts strongly have encouraged, if not required, the

introduction of survey evidence. See e.g., Security Center, Ltd. v. First

Nat. Secur. Centers 750 F2d 1295 (5th Cir. 1985) (lack of survey

evidence was an insurmountable hindrance to meeting the requisite

standard of proof); see also E.S. Originals, Inc. v. Stride Rite Corp., 656

F. Supp. 484 (S.D.N.Y 1987).

As commentators have observed, in a false advertising case proof

of consumer deception almost always comes in the form of consumer

surveys. Edman, Lies, Damn Lies, and Misleading Advertising: the

Role of Consumer Surveys in the Wake of Mead Johnson v. Abbott Labs,

43 Wm. & Mary L. Rev 417, 428, (2001) (citing cases); McCarthy,

supra, 32:195 at 32-332.2 (while there is no flat rule that a survey

must be introduced in Lanham Act cases, an increasing number of

opinions expressly rely upon survey evidence to substantiate the

decision.). Surveys are virtually required in false advertising cases.

Keller, Surveys, supra, at 357. In general, Lanham Act courts have


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come to expect that a survey will be introduced to aid the court in

determining customers state of mind, and the absence of survey

evidence may suggest a litigant is less than deadly serious about its

case. McCarthy, supra, at 32:195 (cited in Manta, In Search of

Validity: A New Model for the Content and Procedural Treatment of

Trademark Infringement Surveys, 24 Cardozo Arts & Ent. L. J. 1027,

1037 (2007)).

Any judicial rule prohibiting litigants from using the main tool

[available] to measure the mental state of some segment of the

consuming public should therefore be narrow and well-considered. See

Manta, In Search of Validity, supra, at 1032 (quoting Lipton,

Trademark Litigation: A New Look at the Use of Social Science

Evidence, 29 Ariz. L. Rev. 639, 642 (1987)). Were it otherwise,

competitors could be foreclosed from supporting otherwise rightful

claims of misleading advertising, increasing the number of deceptive

advertisements and concomitant harm.

C. Courts Have Limited Litigants Ability to Offer

Consumer Survey Evidence Only in Cases in Which

Such Evidence Would Not Impact Liability.

Surveyors and surveying organizations acknowledge that there

are limitations to surveys as evidence. Lanham Act surveys, like other


22/3817

surveys, are, at best, imperfect instruments for measuring human

perceptions. Rappeport, Litigation Surveys, supra, at 961; see also id.

(setting forth typical constraints on surveys that may render them

imperfect). As McCarthy explains, [s]urvey results cannot be reduced

to a figure of unimpeachable accuracy, but at best are an

approximation. McCarthy, supra, at 32:186.

Human errors, too, can sometimes mar a surveys results. To

reduce such instances, survey organizations, including the amici, have

crafted and improved standards over many years to guide survey

proponents, increase survey reliability, and reduce the potential for

error. For example, CASRO has published a Code of Standards and

Ethics for Survey Research available at

www.casro.org/codeofstandards.cfm. AAPOR maintains Best Practices

for Survey and Public Opinion Research and a Code of Professional

Ethics and Practices, available at www.aapor.org/ethics/best.

Likewise, to help guard against errors in judicial review of

surveys, the Manual for Complex Litigation has contained factors for

courts to review when assessing the reliability of survey evidence. See

Manual for Complex Litigation, (Fourth) 11.493 (2004) (setting forth


23/3818

seven factors to consider regarding survey evidence). There also is a

detailed chapter in the Federal Judicial Centers peer-reviewed

Reference Manual on Scientific Evidence. See Diamond, Reference

Guide, supra, at 229, et seq.

Acknowledging the limitations of this evidence, however, does not

lead logically to a conclusion that it should be excluded as a class. The

universal truism was articulated by William James many years ago:

[o]bjective evidence and certitude are doubtless very fine ideals to play

with, but where on this moonlit and dream-visited planet are they

found? The Will to Believe, An Address to the Philosophical Clubs of

Yale and Brown Universities, New World (1896). The question is not

whether survey evidence is perfect, but whether it is helpful. Taken as

such, there should be, and there are, very few instances in which a

court should decline to consider such clarifying evidence as a class. 4

4

Daubert motions, cross-examination, and the fact-finders weighingprocess may be used when considering particular surveys with

questionable methodology or conclusions. But we are concerned here

with the circumstances in which survey evidence ought not be

considered at all, not with whether any particular survey constitutes

reliable evidence.


24/3819

Those instances derive from the text of the Lanham Act itself,

which precludes false representations on the one hand, and

misleading ones on the other. See 15 U.S.C. 1125(a)(1). Given this

dichotomy, a plaintiff can meet its burden by showing either that an

advertisement is (1) false on its face (or false by necessary implication

in some courts); or (2) literally true, but ... likely to mislead and

confuse consumers. See Castrol Inc. v. Pennzoil Company and Pennzoil

Products Company, 987 F.2d 939 (3d Cir. 1993). Thus, a Lanham Act

plaintiff claiming false advertising must prove either literal falsity or

consumer confusion, but not both. Id. at 943 (original emphasis).

If a plaintiff establishes that a challenged claim is false, courts

may grant relief without considering whether the buying public is

actually misled. See Johnson & Johnson-Merck Consumer Pharm. Co.

v. Rhone-Poulenc Rorer Pharms., Inc., 19 F.3d 125, 129 (3d Cir. 1994);

Novartis Consumer Health v. Johnson & Johnson-Merck Consumer

Pharm., 290 F.3d 578, 586-87 (3d Cir. 2002). Courts reason that, when

an advertiser makes an objective claim (e.g., that a given product is

sugar free), and a competitor offers verifiable evidence to the contrary

(e.g., the product contains sugar), there is no need for a consumer


25/3820

perception study to support a conclusion that the advertiser has made a

false representation of fact. That aspect of a Lanham Act violation

functions instead as a per se prohibition; evidence of whether consumers

fell for the false representation is not necessary to form the judicial

conclusion. See McNeill-P.C.C., Inc. v. Bristol-Myers Squibb Co., 938

F.2d 1544, 1549 (2d Cir. 1991) (where an advertisement is shown to be

literally false, the court may enjoin it without reference to consumer

deception).

On the other hand, where the advertisements are not literally

false, plaintiff bears the burden of proving actual deception by a

preponderance of the evidence. Hence, it cannot obtain relief by

arguing how consumers could react; it must show how consumers

actually do react. Sandoz Pharmaceuticals Corp. v. Richardson-Vicks,

Inc., 902 F.2d 222, 228-229 (3d Cir. 1990) (original emphasis). Such

evidence is typically adduced through the offer of a consumer survey.

See, e.g., Novartis, 290 F.3d at 590-91; Rhone-Poulenc Rorer, 19 F.3d at

129-30. Other circuits agree with the standard applied by this Court.

See, e.g., Clorox Co. P.R. v. Procter & Gamble Comml Co., 228 F.3d 24,


26/3821

33 (1st Cir. 2000); Abbott Labs v. Mead Johnson & Co., 971 F.2d 6, 13

(7th Cir. 1992); McNeil, 938 F.2d at 1548-49.

Here, Pernod sought to demonstrate through a perception survey

how potential purchasers actually do react when they see a bottle of

Havana Club rum. The lower court refused to consider the survey. The

questions for this Court are whether the lower court adequately

distinguished this case from those that consider settled the

understanding that literally true advertisements can be shown to be

misleading through survey evidence, and if not, whether that

understanding should be revisited. As set forth in the following

sections, the answer to both questions should be No.

II. The District Courts Decision Is Wrong as a Matter ofSettled Law and Public Policy.

The lower courts decision strays from well-established precedent

and upsets policy considerations at the heart of Lanham Act

jurisprudence. The court went astray by failing to apply this Courts

settled understanding that consumer survey evidence is appropriately

offered to establish that a literally true message can deceive, and by

misapplying an errant decision from the Seventh Circuit purporting to

hold otherwise. In doing so, the lower courts decision, if not reversed,


27/3822

risks undermining the competition and consumer protection goals the

Act seeks to advance.

A. The District Courts Decision Contradicts ThisCircuits Precedents and Misapplies Others.

Plaintiff Pernod alleged that Bacardi U.S.A., Inc. (defendant or

Bacardi) made false and misleading representations concerning the

geographic origin of its Havana Club-branded rum in violation of the

Lanham Act. See Pernod Ricard, 2010 WL 1348241, at *1. In an effort

to meet its burden of proof, Pernod offered expert testimony regarding a

survey conducted by that expert. See id. at *5. That survey tested,

basically, whether the name Havana Club misleads potential

purchasers into believing that the product was manufactured in Cuba, a

country with a reputation for producing quality rum. See id.

Offering such a survey was consistent with a long line of cases in

this Circuit and others permitting and generally encouraging the

offer of such evidence. See, e.g., Novartis, 290 F.3d at 590-91; Rhone-

Poulenc Rorer, 19 F.3d at 129-30; Clorox, 228 F.3d at 33; McNeil-

P.C.C., 938 F.2d 1544, 1548-49; IQ Prods. Co. v. Pennzoil Prods. Co.,

305 F.3d 368, 375 (5th Cir. 2002).


28/3823

Pernods survey purported to show that Bacardis use of the

name Havana Club misled more than 20% of rum consumers into

believing that the product was made in Cuba, or confused the same

consumers as to whether the rum is made in Cuba or elsewhere.

Perond Ricard, 2010 WL 1348241, at *5; see also Appellants Statement

Of The Case (describing structure of survey and its results in detail).

This Court previously has found that perception study results at similar

levels can support a claim for false or misleading advertising. See

Novartis, 290 F.2d at 594. Thus, the findings of the expert here could

have, if accepted, supported Pernods contention that use of the

Havana Club name was misleading.

The district court, however, disregarded the survey in its entirety.

Observing that the Havana Club bottle contained a truthful

disclosure that the product was Puerto Rican Rum and crafted in

Puerto Rico, the district court foreclosed consideration of Pernods

survey as a matter of law. Pernod Ricard, 2010 WL 1348241, at *8. It

stated instead that an ad that is truthful on its face cannot be proven

to be misleading by surveying consumers. Id. at *8. Because [t]he

Havana Club label clearly and truthfully provides the origin of


29/3824

defendants rum, the court explained, it was not deceptive, regardless

of the results of Pernods survey. See id.

The lower court purported to derive this standard from the

Seventh Circuits decision in Mead Johnson & Co. v. Abbott

Laboratories, 201 F.3d 883, 886 (7th Cir. 2000), and from discussion of

that case in Professor McCarthys treatise. Mead Johnson addressed

whether a label was misleading in claiming its product was the 1st

Choice of Doctors. See id. at 883. The plaintiff sought to offer survey

evidence indicating that a significant percentage of consumers

perceived 1st choice to mean a majority, rather than a plurality, of

doctors recommended defendants formula. Declining to entertain this

evidence, the Seventh Circuit, in the pre-amendment decision relied on

below, noted that the claim was, with respect to the definitions in one of

its dictionaries, direct, clear and true, thus not misleading: [w]hen the

absolute level of preference for the leading product is high, and the

difference in support from the medical profession substantial, it is all

but impossible to call the claim of first choice misleading. Id. at 884.

Notably, that Mead Johnson decision has been subject to

controversy since its release. Several months after its issuance, the


30/3825

Seventh Circuit, per curiam, amended the decision in important ways.

See 209 F.3d 1032 (7th Cir. 2000) (amending opinion). Other courts

have distinguished or declined to follow it numerous times, e.g., Clorox,

228 F.3d at 37 (distinguishing opinion), and it has been the subject of

substantial scholarly commentary, pro and con. Compare Leighton,

Making Puffery Determinations in Lanham Act False Advertising Cases:

Surveys, Dictionaries, Judicial Edicts & Materiality Tests, 95

Trademark Rep. 615, 626-31 (2005) with Edman, Lies, supra, at 433-37.

More significantly, the amended decision which the court below

did not cite sheds significant light on the limits of the original one.

The Seventh Circuit modified precisely the paragraph on which the

district court relied, affirming years of precedent that [a] statement is

misleading when, although literally true, it implies something that is

false. See Mead Johnson, 209 F.3d at 1034. The amended decision

deleted a line a misunderstood statement is not the same as one

designed to mislead that the lower court here cited favorably. That

deleted statement, as discussed further below, poses significant risks to

Lanham Act enforcement if not rightly cabined. The amended decision

further explained that:


31/3826

Our fundamental conclusion is that a producer cannot make

a factual issue just by conducting surveys about how science

is done (or, worse, about how surveys should be conducted).

The sort of survey evidence Mead Johnson gathered would

not support a conclusion by a reasonable person thatAbbotts claim either was false or implied a falsehood.

Id. at 1034.

Taken together, the revisions do not suggest, as the court below

inferred, that survey evidence may not be offered to refute a literally

true, verifiable statement. Rather, a statement, although literally

true, can be proven to be misleading, so long as the sort of survey

evidence offered is pegged to that question, and not to the question of

how science is done or how surveys should be conducted. Id.

Likewise, the McCarthy treatise cites Mead Johnson for the

proposition that [a]n advertising claim which is truthful and is clear on

its face cannot be proven to be misleading by surveying consumers to

probe for their possible misunderstandings of factual claims.

McCarthy, supra, at 27:53 (emphasis added). It bears emphasis that

one claim 1st Choice of Doctors standing alone, was the focus of the

Mead Johnson decisions. In light of this distinction, the First Circuit,

construing Mead Johnson, declined to apply it to a case involving a tag


32/3827

line that was an integral part of a television commercial with

substantial text and images. Clorox, 228 F.3d at 38.

This case involves neither a stand-alone claim nor, based on the

record, a survey that fails to meaningfully measure the deceptiveness of

that claim. Pernod apparently sought to establish, through consumer

survey evidence, that the presence of the unclear words Havana Club

rendered the advertisement as a whole deceptive despite the presence of

the literally true phrase Puerto Rican Rum. Unlike First Choice,

Havana Club, as applied to Bacardis Rum, does not have a clear and

unambiguous meaning. Thus, whatever Mead Johnsons status in light

of this Courts precedents, it does not apply here, and should not have

been invoked to bar Pernods consumer survey evidence.

B. Limitations of Proof on the Ability to Establish the

Deceptiveness of True Statements Undercut the

Lanham Acts Competition and Consumer Protection

Goals.

The problems with the district courts opinion do not end with its

holding or methodology. Instead, the decision invites false advertising

under the rubric of truth and cuts at the core of the Lanham Act.

Put another way, the decision of the district court disregards the

fact that surveys have become a necessary aspect of Lanham Act cases


33/3828

precisely because disputed claims that are literally true can be, and

often are, misleading. The classic example is from P.T. Barnum.

Barnums American Museum was so popular that visitors would spend

their entire days there, cutting into Barnums profits. In an effort to

bring in more money, customers were shown a prominent and

philologically correct sign This Way to the Egress soon after

entering Barnums museum of freaks and curiosities. The sign misled

those unaware that egress was a fancy word for exit, causing many

to go through a self-locking door and end up out on the street. They had

to pay another quarter to reenter and finish their tour. See, e.g., the

Ringling Brothers and Barnum & Bailey website:

http://www.ringling.com/explore/history/ptbarnum_1.aspx.

The cases reveal no end of clever uses of truthful, but still

misleading, claims by advertisers. For example, this Court found that,

even coupled with an appropriate qualification, i.e., legend: Notice.

These Cigars are made in the United States and only of United States

tobacco, the use of the name Havana Smokers by a U.S. tobacco

company was improper. See H.N. Heusner & Son v. Federal Trade

Commission, 106 F.2d 596, 597 (3d Cir. 1939) (the implication of the


34/3829

word Havana is totally false. The purchaser can be guided by either

label or legend, but not by both.). In Scotch Whisky Association v.

Consolidated Distilled Products, 210 U.S.P.Q. (BNA) 639 (N.D. Ill.

1981), the court allowed the plaintiff to present survey evidence

showing that the name Loch-A-Moor, for an after-dinner liqueur,

deceived 32.7% of consumers into thinking that the product was made

in Scotland. Id. at 641-42. Though the label expressly stated that the

product was made in the United States, the court enjoined the use of

the name based on survey results showing that a substantial number of

consumers were deceived. Id.

Likewise, in Gillette Co. v. Wilkinson Sword, Inc. 795 F.Supp. 662

(S.D.N.Y. 1992) (vacated on issue of damages only by Gillette Company

v. Wilkinson Sword, Inc. No. 89 Civ. 3586(KMW), 1992 WL 120000396

(S.D.N.Y. Oct. 28, 1992)), the defendant advertised that the

moisturizing strip on its shaving razor was six times smoother than

its competitors strips, while showing a man rubbing his hand down his

face. While this may have been literally true, the court rejected

defendants argument that six times smoother implied only the

moisturizing strip on the razors head was smoother. Instead, the court


35/3830

found that the claim falsely implied that the consumer would receive a

smoother shave from defendants razor as a whole.

Decisions such as the one below, and arguably the unamended

opinion in Mead Johnson, if not arrested, risk undermining the effective

regulation of deceptive advertisements through the actions of

competitors, leaving such activities to regulatory agencies or consumers

under other statutes. These entities often do not have the resources or

inclination to prosecute actions involving such claims.

Finally, special pause is warranted in light of the lower courts

resurrection of Mead Johnsons deleted and dead notation that a

misunderstood statement is not the same as one designed to mislead.

It is true that the Lanham Act will not protect against claims to the

general public that are misunderstood by only a few individuals. But it

does indeed protect against claims that deceive a substantial portion of

their audience into misunderstanding the nature of the advertisers

product or service or those of the advertisers competitors.

In fact, a primary purpose of the Act is to protect consumers when

they misunderstand statements, where such confusion is caused by a

misleading claim. As the Second Circuit has explained, [w]ere it


36/3831

otherwise, clever use of innuendo, indirect intimations, and ambiguous

suggestions could shield the advertisement from scrutiny precisely

when protection against such sophisticated deception is most needed.

American Home Prods., 577 F.2d at 165. It cannot be the case that

consumers and competitors will be better off if literally true but

allegedly materially misleading statements are sanctioned by the courts

through the suppression of evidence that does not support a judges

personal inference.

CONCLUSION

Because the decision below poses significant risks to consumers

and competition and to the proper development of the law, amici

respectfully urge this Court to reverse it.


37/3832

Respectfully submitted,

/s/ Richard J. Leighton

Duane L. Berlin

LEV & BERLIN, P.C.

200 Connecticut Avenue

5th Floor

Norwalk, CT 06854

Telephone: (203) 838-8500

Facsimile: (203) 854-1652

Of Counsel

September 21, 2010

Richard J. Leighton

Scott M. Abeles

KELLER AND HECKMAN LLP

1001 G Street, NW, Suite 500W

Washington, DC 20001

Telephone: (202) 434-4100

Facsimile: (202) 434-4646

Leyla MujkicKELLER AND HECKMAN LLP

3 Embarcadero Center, Suite

450

San Francisco, CA 94111

Telephone: (415) 948-2800

Facsimile: (415) 948-2808

Attorneys for Amici Curiae


38/38

CERTIFICATIONS

The undersigned, a member of the Bar of this Court, hereby

certifies as follows:

1. Richard J. Leighton and Scott M. Abeles are members of the Bar

of this Court.

2. This brief complies with the type-volume limitations of Fed. R.

App. P. 32(a)(7)(B) and 29(d) because this brief contains 6,126 words,

excluding the parts of the brief exempted by Fed. R. App. P.

32(a)(7)(B)(iii).

3. Service on opposing counsel is being made electronically through

CM/ECF. Ten paper copies of the brief have been sent by FedEx to the

Clerks office on the same day as this brief is being filed electronically.

4. The text of the electronic brief and the paper copies is identical.

5. A virus-detection program was run on the electronic brief, and no

virus was detected. The program used was ESET NOD32 Antivirus 4,

program version 4.2.58.3, scan engine version 1285, virus definitions

file version 5458.

Dated: September 21, 2010

/ / Ri h d J L i ht

Documents

Havana Club Amicus Brief - FINAL