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On Wednesday, January 23, Knobbe Martens Partners Jeff Van Hoosear, Susan Natland, Diane Reed and Lynda Zadra-Symes participated in the Association of Corporate Counsel (ACC) - Southern California In-House Counsel Conference. This all day CLE program was just for in-house counsel and panels included: Social Media & Privacy; New Developments in California Employment Law; Lawful Interception; Millennial Engagement in the Workplace; and Helping Sales & Marketing Avoid Defamation/Unfair Competition.
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2013 ACC-SoCal In-House Counsel Conference #IHCC13
Swimming With Piranhas: Hiring Competitor’s Top Talent & Being Fiercely Competitive Without Exposing Your Company
Avoiding Trade Secret Misappropriation, False
Advertising & Unfair Competition Claims January 23, 2013
Los Angeles, California
Moderator: Harrison Perla, Esq. Panelists: Lynda Zadra-Symes, Jeff Van Hoosear,
Susan Natland and Diane Reed @KnobbeMartens at Twitter
#IHCC12 The recipient may only view this work. No other right or license is granted.
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Swimming with Piranhas: Avoiding False Advertising & Unfair
Competition Claims
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“The Set-Up” - Marketing Proposal:
– “Get tanner faster with no burn!” With picture of bikini model throwing her bottle of Hawaiian Tan into the trash)
– “Get 30% tanner with Golden Glow over the leading sunscreen!”
– “#1 recommended sunscreen by dermatologist”
– “For a healthier looking tan!”
– “Get more. Use Less.”
– “Get more. Use 50% Less.”
GOLDEN GLOW Sunscreen 2013 Marketing Campaign
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Comparison to competitors: – Direct: “Get tanner faster with no burn!”
– Implied: “Get 30% tanner with GOLDEN GLOW over the leading sunscreen!”
GOLDEN GLOW Sunscreen 2013 Marketing Campaign
GET TANNER FASTER WITH NO BURN!
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General claims about GOLDEN GLOW product:
– “#1 recommended sunscreen by dermatologist”
– “For a healthier looking tan!”
– “Get more. Use less.”
– “Get more. Use 50% less.”
GOLDEN GLOW Sunscreen 2013 Marketing Campaign
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False Advertising
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Lanham Act Section 43(a)(1)(B):
“Any person who, on or in connection with any goods or services, uses in commerce any false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualities or geographic origin or his or her or another person’s goods, services or commercial activities.”
False Advertising – Federal Statutory Basis
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Elements:
A false statement of fact by defendant in a commercial advertisement about its own or another’s product;
The statement actually deceived or has a tendency to deceive a substantial segment of the audience;
The deception is material; Defendant caused its false statement to enter interstate
commerce; and
Plaintiff has been or will likely be injured as a result.
False Advertising – Lanham Act Claim
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Under Section 43(a) of the Lanham Act, a false statement of fact occurs when the statement is either: Literally false; or Literally true but likely to mislead or confuse
*HOWEVER, “puffery” (general, vague statements of superiority understood as opinion and not facts) is NOT actionable
False Advertising – Lanham Act Claim
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Literally false statements may be: A statement that is or appears to be based on testing
(30% tanner)
A statement that is not based on testing but makes a claim as to some specific or absolute characteristic of the product (“#1 sunscreen recommended by dermatologist” or “organic”)
Visual elements in the ad can change implication
False Advertising Statement
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Proving that a statement is literally false:
If based on testing, the Plaintiff must – Attack the validity of Defendant’s testing
directly: Test not sufficiently reliable Test did not support the claim or implication made
– Show the Defendant’s tests are contradicted by other scientific tests Rely on other testing Conduct own testing
False Advertising Statement
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Proving that a statement is literally false:
If NOT based on testing –Need evidence to prove literally false –Example: Ad showing orange squeezed
directly into orange juice carton was held to be literally false
False Advertising Statement
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What does the ad imply? Is the claim true? Fact: Tests were conducted only on people with
olive skin over a 3 hour period in March: – Does the data support the claim? – Was the test appropriate? Is the testing faulty? – Was the test sufficiently reliable? – Does it help to qualify the claim?
Legal Analysis Of GOLDEN GLOW Campaign
Get tanner faster with no burn!
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Plaintiff must produce evidence (survey, survey, survey!) of the message consumers take from the ad
Issue must be material (does it pertain to an inherent quality or characteristic of the product or service?)
Commercial advertising or promotion required (this may not cover salespeople statements)
Legal Analysis Of GOLDEN GLOW Campaign
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“Get 30% tanner over the leading sunscreen!”
How do consumers interpret the advertisement? Specific and measurable claim?
Is it true?
Legal Analysis Of 2013 GOLDEN GLOW Campaign
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Puffing
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General or vague claims of superiority understood as opinions rather than factual representations
Exaggerated advertising
Blustering or boasting
No reasonable buyer would rely upon the claim
A subjective claim (puffery) is not actionable under Lanham Act false advertising
What Is Puffing?
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“For a healthier looking tan!”
Specific or absolute characteristics?
Vague?
Highly subjective?
Legal Analysis of GOLDEN GLOW Campaign – Puffing?
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“Get More. Use Less.”
Vague?
Highly subjective?
Does it misdescribe specific or absolute characteristics?
Legal Analysis of GOLDEN GLOW Campaign – Puffing?
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“Get more. Use 50% less.”
Specific?
Measurable claim of product superiority?
Apparently based on testing
Is there a comparison to a competitor’s product? Which competitor?
Legal Analysis of GOLDEN GLOW Campaign – Puffing?
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Real World Example
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Legal Analysis of Real World Example
Literally True: Tester: “Ready to see the results. So that is the photo on your iPhone 5.” Male Diner: “a little dark” Tester: “That’s the same photo on the Lumia 920. Big difference right?” Deceptive?
– Depends on testing methodology (was flash used for one and not the other?)
– Appropriate qualifiers in the ad as to the “test”?
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Legal Analysis of Real World Example
Puffing:
– “The thing that is most amazing about this phone is the camera.”
– “The camera on this phone is better than the camera on your phone [iPhone].”
– “The best camera phone ever built period . . . takes beautiful photos in lowlight.”
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Claims Under State Laws
Consider state laws – trademark infringement, unfair competition and dilution – Generally, the same analysis applies as that of
federal claims – But may have additional requirements
Trade Libel (CA): the publication of a false statement of fact that is an intentional disparagement of the quality of the plaintiff’s services or products, and the publication results in pecuniary damages
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PICTURE OF PUFFER FISH
Other Avenues for Claims
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Federal Trade Commission
16 C.F.R. Section 14.15(b)-(c): “Commission policy in the area of comparative advertising encourages the name of, or reference to competitors, but requires clarity, and, if necessary, disclosure, to avoid deception of the consumer . . . ”
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FTC
Prohibits false, unfair or deceptive advertising
Advertisement does not have to be literally false
An ad is considered deceptive if it contains a misrepresentation or omission that is likely to mislead consumers, and this deception is material to the consumer’s choice
Competitor or consumers may notify FTC to induce agency to take action
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FTC
49 Fed. Reg. 30999 (Aug. 2, 1984): – “As a matter of law, firms lacking a reasonable
basis before an ad is disseminated violate section 5 of the FTC Act and are subject to prosecution.”
Substantiation required for express and implied claims
Pre-existing data necessary
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FTC v. SKECHERS
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National Advertising Division (NAD)
Set up by the Council of Better Business Bureaus Private, self-regulation of advertising industry There can be no pending lawsuit or issued judicial order in
order to use this forum Resolved in a matter of weeks, rather than months or years Cheaper than litigation “Appeal” process available to the advertiser If the “infringing” advertiser does not comply with the NAD
recommendation, the NAD can submit to the FTC for review
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Other Federal Regulatory Agencies
Food and Drug Administration (FDA) – food product labeling, prescription drugs and cigarettes
Securities and Exchange Commission (SEC) – stocks, bonds and financial instruments
Department of Transportation (DOT) – air carriers and travel agencies
Treasury Department (Bureau of Alcohol, Tobacco and Firearms) – alcoholic beverages
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Dangers of Social Media
Statements made on Facebook, Twitter and other social media forums could be considered false advertising in certain situations
Adopt a specific and expansive Social Media Policy
Educate your employees again and again
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Other Mitigation Strategies: Insurance
General business liability
Advertising injury coverage – May cover defense of trademark infringement,
false advertising, product disparagement claims
Advertising nexus
Beware of exclusions!
Tender immediately
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Take-Away Points
Understand all claims made by your advertisement, both express and implied Establish the veracity of all claims Ensure substantiation of all claims is reliable
and appropriate Plan ahead and have a “Plan B,” including
alternative ads if risk is unacceptable
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Moderator: – Harrison Perla, Esq.
Harrison Perla, Director of Worldwide Legal Affairs at CEVA, Inc. @HarrisonEsquire on Twitter
Panelists
Presenters: – Susan M. Natland, Esq.
Partner at Knobbe Martens [email protected]
– Lynda Zadra-Symes, Esq.
Partner at Knobbe Martens [email protected]
– Diane M. Reed, Esq.
Partner at Knobbe Martens [email protected]
– Jeff Van Hoosear, Esq.
Partner at Knobbe Martens [email protected]
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9th Annual In-House Counsel Conference January 23, 2013 (Los Angeles, CA)
#IHCC13
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www.acc.com/chapters/socal/
@KnobbeMartens