Monthly Archives: March 2012

ConAgra: “Why Does Presence of Bioengineered Ingredients Matter to Class Action Plaintiffs?”

ConAgra is one of several companies accused of selling “100% Natural” products that allegedly deceived consumers because they  include “unnatural” GMO-based ingredients.   On February 24, 2012, ConAgra filed a Motion to Dismiss which attacks the class action complaint on numerous grounds, one of which  particularly caught my attention.

ConAgra states that the consumer protection laws of various states require a plaintiff to allege that the misrepresentation was material as to her, i.e., that without the misrepresentation, plaintiff would not have acted as she did.   The motion then asserts:

Plaintiffs here do not allege with particularity that the purported misrepresentation was material as to them.  ConAgra has no way of knowing why the presence of bioengineered ingredients mattered to the 21 plaintiffs, if in fact it did.  Was it because Plaintiffs had concerns about the safety of the product?  About health effects?  About sustainable agriculture?  About politics or religion?  Plaintiffs do not say.

This is a great argument.  Plainly, the anti-GMO movement (fueled in part by “hashtag” activism) brings with it an array of motivations, some of which are  based on half-truths and misinformation.  ConAgra’s argument seeks to flush out these motivations as to each of the 21 plaintiffs while setting aside the impenetrable question of whether GMO ingredients are “natural” as understood by consumers.   And regardless of how the plaintiffs respond, this argument will impress upon the court that plaintiffs’ motivations might be driven more by policy than by the feeling that they were actually duped.

See ConAgra’s Motion to Dismiss here.

Trademarks: Why “Havana Club” Rum is Okay But “Old Havana” Rum is Not.

A recent USPTO decision highlights a curious distinction between two rum brands that reference “Havana” in their names.  Both rums are made outside of Cuba but only one was allowed to have a registered trademark that includes “Havana.”

On February 9, 2011, the U.S. Court of Appeals for the Third Circuit had the final word on the lengthy dispute between Pernod Ricard USA, LLC and Bacardi U.S.A., Inc. over use of “Havana Club” to sell rum in the United States.   “Havana Club” was the name of a popular rum from Cuba produced by the Arechabala family that was exported to the U.S.   In 1960, after the Communist revolution, the Cuban government expropriated their family business without compensation.  Ultimately, the Cuban government sold certain U.S. trademark rights in the “Havana Club” name to Pernod notwithstanding the U.S. trade embargo on Cuban goods.  In 1997, however, the government agency that oversees the trade embargo retroactively revoked its permission for the transfer and the U.S. trademark registration subsequently expired.  Notably, Pernod was selling, and continues to sell, “Havana Club” rum outside the United States.

During this same time period, Bacardi purchased from the Arechabala family any remaining rights they might have had to the “Havana Club” mark and the related goodwill of the business, along with any rum business assets the family owned.   In August 2006, just days after the old trademark registration for “Havana Club” expired, Bacardi began selling rum in Florida under the “Havana Club” brand name. The rum was distilled in Puerto Rico and was made using the Arechabala family recipe.

Shortly thereafter, Pernod filed a false advertising suit under Section 43(a)(1)(B) of the Lanham Act, asserting that the labeling of Bacardi’s bottle, particularly the use of the words “Havana Club,” misleads consumers to believe that the rum is produced in Cuba.   Ultimately, the Third Circuit rejected those allegations: “[W]e conclude … that the Havana Club label, taken as a whole, could not mislead any reasonable consumer about where Bacardi’s rum is made” because “[t]he label clearly states on the front that the liquor is “Puerto Rican Rum.”   Use of the word “Havana” was thus not geographically misdescriptive according to the Third Circuit which further stressed that this “was not a trademark case, and certainly not one addressing trademark registration, no matter how much Pernod may wish it were.”   Accordingly, Bacardi continues to sell “Havana Club” rum in the U.S. that is made in Puerto Rico, although it has yet to seek federal trademark registration for that mark.   See the complete opinion here.

Given the unique facts of the “Havana Club” case and the law under which it was brought, a ruling by the Trademark Trial and Appeal Board (TTAB) on  March 3, 2012 — holding that the mark “Old Havana” for rum was geographically misdescriptive because it was not produced in Cuba — is not that surprising.  The trademark application argued that “Old Havana” was not primarily geographic in meaning, and thus qualified for registration, because (1) it suggests a certain special method for producing rum, and (2) it “possesses a certain prestige, evoking a place in time or a historical era, rather than a geographic city.”

The TTAB rejected those arguments, noting that “Havana is the focal point of Cuban commerce, with rum distilleries among its principal industries” and the “addition of ‘OLD’ to ‘HAVANA’ does not diminish the primary geographic significance when the mark OLD HAVANA is considered as a whole.”

Applicant also argued that its labeling (above) included the word “brand” after “Old Havana” to indicate that this term is a trademark and not a geographic indicator, along with the phrases “Cuban style rum” and “Product of USA.”  The Board was not swayed, however, because it was solely concerned with the “Old Havana” mark in isolation.  See complete ruling here.

These cases highlight two key points.  First, that using a geographic term in a brand name for a product produced outside that region creates a signficant risk that the product will be attacked as being “geographically deceptively misdescriptive.”  Second, that there is a significant distinction between the mark-specific and less robust proceedings of the USPTO and fact intensive litigation that focuses on consumers’ overall perception of a product.

Jamba Juice Latest Target for “All Natural” Class Actions

The Jamba Juice Company is the latest company defending itself against charges that it making allegedly deceptive “all natural” claims.  In a class action complaint filed in the Northern District of California on March 12, 2012, plaintiffs contend that Jamba Juice’s at-home smoothie kits are “prominently labeled as ‘All Natural'” but include “unnaturally processed,  synthetic and/or non-natural ingredients” including ascorbic acid, citric acid, xanthan gum and steviol glycosides.”  The complaint asserts that these ingredients do not meet the dictionary definition of natural — “existing in or produced by nature: not artificial.”   It thus asserts that these products are deceptive and misleading to consumers who are willing to pay a premium for food products they perceive to be “healthy, organic and/or natural.”

The Complaint can be found here.

FTC v. POM Wonderful: Decision Day Approaches

A decision is expected by April 17, 2012 — at the latest — in the closely watched matter of the FTC v. POM Wonderful, Doc. No. 9344.

The FTC’s administrative complaint charges “the makers of POM Wonderful 100% Pomegranate Juice and POMx supplements with making false and unsubstantiated claims that their products will prevent or treat heart disease, prostate cancer, and erectile dysfunction.”   The targeted advertisements include statements such as:

  • “SUPER HEALTH POWERS! … 100% PURE POMEGRANATE JUICE. … Backed by $25 million in medical research.  Proven to fight for cardiovascular, prostate and erectile health.”
  • Clinical studies prove that POM Juice and POMx prevent, reduce the risk of, and treat heart disease, including by decreasing arterial plaque, lowering blood pressure, and improving blood flow to the heart;

Unlike other companies, however, POM is determined to fight these allegations to the end.  Its primary argument is that the FTC has improperly changed its standard for how advertisers substantiate the truth of their claims.  Specifically, “(1) the FTC now requires advertisers to obtain prior FDA approval before making certain types of health related claims about food, beverages, and dietary supplements, … and the FTC is requiring prior FDA approval regardless of whether or not the claims are true or supported by competent, reliable scientific evidence; and (2) the FTC is also requiring two ‘well controlled’ clinical studies for non-disease claims, which also represents a dramatic change in the level of substantition required to establish the truth of these types of claims.”   According to POM, this new standard is improper because it did not go through the the formal rulemaking process and, more significantly, it “constitutes a ban on both deceptive and non-deceptive speech, the latter of which is protected by the First Amendment.”   

In effect, POM is arguing that for an undisputedly healthy product, the FTC is seeking to bar properly supported, qualified health claims that are protected under the First Amendment.  For its part, the FTC maintains that the advertisements were still “deceptive.”

This matter has been fully tried before an FTC Administrative Law Judge and all post-trial briefs have been filed.  A decision expected by April 17, 2012 at the latest.  Needless to say, it is likely that the FTC’s own court will find in favor of the FTC so expect this one to be appealed.

In-N-Out Burger Fights Copycat in China

Excellent article in QSR Magazine about In-N-Out Burger being drawn into a battle over its identity in China even though it has no presence in China and, indeed, has been reluctant to expand beyond the West Coast.  In short, a start-up restaurant in Shanghai called CaliBurger, whose founders include former Californians, trademarked numerous items from In-N-Out Burger’s menu (including its “secret” menu) in Asia and portions of Europe, such as the Double-Double, Animal Style, and Protein Style burgers.   Those menu items, however, were subject to U.S. trademark registrations by In-N-Out Burger.  According to QSR:

In-N-Out Burger responded swiftly by filing a complaint in a U.S. District Court against CaliBurger [and two of its founders] in September for trademark infringement, a legal move enabled by one major detail: CaliBurger was an American company, registered to an address in Diamond Bar, California.

In-N-Out Burger’s claims included Trademark Infringement, Trademark Counterfeiting,  and Trade Dress Infringement.   A copy of the First Amended Complaint is here.   The lawsuit, filed on September 14, 2011, ultimately resolved in January 2012 pursuant to a confidential settlement agreement and the copycat menu names were changed.   See QSR Magazine’s complete article here.

The experience of In-N-Out Burger demonstrates that food and restaurant companies must remain vigilante in protecting their intellectual property rights overseas even if they have no intent to expand beyond the United States.

Sara Lee and Tyson Foods Reach Settlement In Trade Secret Case

According to Law360, Sara Lee Corp. and Tyson Foods, Inc. resolved their dispute near the closing of a bench trial on Sara Lee’s claim that one of its former plant manager who defected to Tyson Foods would disclose trade secrets on sliced lunch meat production processes.  Central to this claim was the allegation that, after being offered the job by Tyson, the plant manager downloaded proprietary information from Sara Lee’s computer network onto four thumb drives.   The defense, however, argued that the alleged trade secrets were too diffuse to be carried away by one person and that the plan manager did not have the level of responsibility that Sara Lee alleged. 

Details of the settlement were not disclosed.  The case is Sara Lee Corp. v. Vincent W. Burns II et al., case no. 1:11-cv-07577, pending in the U.S. District Court for the Northern District of Illinois.   See full article here.

Lawsuit Over General Mills’ Fruit Snacks Highlights Tension With FOP Labeling

In a proposed class action lawsuit filed in (no surprise) California on October 14, 2011, General Mills  is accused, under various state law causes of action, of “misleading consumers about the nutritional and health qualities of its fruit snacks, namely Fruit Roll-Ups® and Fruit by the Foot® as well as other similar products.”  Notably, plaintiff is represented, in part, by counsel from the Center for Science in the Public Interest.  According to the Complaint:

[General Mills] made misleading statements that its Products were nutritious, healthful to consume, and better than similar fruit snacks.
In fact, Defendant’s Fruit Snacks contained trans fat, added sugars, and artificial food dyes; lacked significant amounts of real, natural fruit; and had no dietary fiber. Thus, although the Products were marketed as being healthful and nutritious for children and adults alike, selling these Fruit Snacks was little better than giving candy to children.

The alleged “deception” of “conveying positive health benefits” all related to Front-of-Package (“FOP”) claims – specifically: (1) FRUIT FLAVORED SNACKS; (2) NATURALLY FLAVORED; (3) GOOD SOURCE OF  VITAMIN C; (4) [LOW NUMBER] of CALORIES; (5) LOW FAT; and (6) GLUTEN FREE.

On February 17, 2012, General Mills fought back by filing a motion to dismiss the complaint as a matter of law that made the following arguments.  First, “nearly all of the statements [plaintiff] attacks are truthful and accurate labeling claims that General Mills is authorized to make under the Federal Food, Drug & Cosmetic Act … and accompanying regulations.   As a result, [plaintiff’s] claims that these statements are deceptive are preempted by the NLEA, 21 U.S.C. § 343-1(a), an express preemption provision that prohibits any attempt to impose state-based labeling requirements that are ‘not identical’ to the requirements of federal law.”  Second, “the isolated statements Plaintiff complains of that are not subject to express NLEA preemption (“Made With Real Fruit” and “Gluten Free”) are nonetheless non-actionable because they are not likely to deceive a reasonable consumer.”

This case highlights the growing tension between factually accurate nutrient content claims that comply with FDA regulations and the concern of groups like CSPI that such claims may nonetheless mislead consumers by suggesting that a product is, as a whole, “healthy.”

Any ruling in favor of these arguments at this stage would be very significant and a blow to similar class action suits.  See General Mills’ motion to dismiss here.