Category Archives: False Advertising

Lagunitas “IPA” Lawsuit and Lessons in Social Media

Lagunitas-IPA???????????????????

When determining whether to file a lawsuit, the cost-benefit analysis must always include public reaction, which these days plays out almost instantly on social media.  But predicting public reaction is quite imprecise.  Case in point is Lagunitas Brewing Co.’s recent lawsuit against Sierra Nevada Brewing Co., which was filed on Monday, January 12th and then voluntarily dismissed on Thursday, January 15th.

In the lawsuit, Lagunitas claimed that Sierra Nevada infringed numerous trademarks registered with the U.S. Patent and Trademark Office for several design-plus-word marks pertaining to its India Pale Ale, all of which feature  the words “Lagunitas IPA” that are variations on the above.   None of the registrations, however, are for the word mark “IPA” standing alone and many other brewers have trademark registrations for names of beer that include “IPA.” Recognizing this fact, Lagunitas further alleged that, “[w]hile other brewers have adopted the shorthand parlance of “IPA” to market their India Pale Ales, only Lagunitas is identified with the large, bold, black, centralized “IPA” lettering ….”

Claims for trademark infringement, unfair trade practices and unjust enrichment were alleged against Sierra Nevada premised on the following allegations:

[Sierra Nevada’s] proposed design uses all capital, large, bold, black “IPA” lettering in a font selection that is remarkably similar to the iconic Lagunitas design and, indeed, is the central and most prominent feature of the new Sierra Nevada design, emulating the iconic Lagunitas Family  of IPA Trademarks.  This proposed design even uses the kerning between the “P” and the “A” characters that is distinctive to the Lagunitas Family of IPA Trademarks….  Significantly, Sierra Nevada now appears to be making a radical departure from its traditional label designs which feature “IPA” lettering in much smaller text, usually preceded by another term (i.e., “Fresh Hop,” “Extra,” “Rye”, “Red,” etc.) of the same text size and which feature outdoor/nature scenes. Instead, … the proposed Hop Hunter IPA design is strikingly different from its prior imagery used with its India Pale Ales.

Lagunitas further alleged that the likelihood of confusion as to origin increases when the product is viewed at some distance and, moreover, that there’s a high likelihood of confusion as to “sponsorship or approval” between the companies because “Sierra Nevada is well-known in the craft brew industry for its collaboration with other brewers.”

But when the filing the lawsuit became publicized, Lagunitas was harshly criticized because it seemed focused on protecting the acronym “IPA”, which describes a type of beer.  As noted by CNBC:

The beer battle fell flat on social media.

“Really – Is this necessary?” tweeted @FW_Brewmaster.

“This is ridiculous, @lagunitasbeer should be ashamed,” added @mattmaceachem.

As for the logos creating confusion among consumers, @BeerMagazine tweeted, “The only thing confusing is this,” referring to the lawsuit.

“It was stunning actually, and by 10 o’clock in the morning I was reeling,” [the founder and CEO of Lagunitas, Tony] Magee said about the backlash online. ”  I went home at the end of the day feeling as if I’d run a marathon or been beaten up.”

Indeed, on February 13th, Magee sent the following tweets which began by defending the lawsuit and ended with the statement that the lawsuit would be withdrawn.

This is just a course of action we did not want to take. I attempted to work it out privately w/ SNB but not successful. Deeply saddened…

Today, January 13th 2015, has been the worst day ever in 23 years of growing my brewery. Worst. Growing a biz involves defending a biz…

Defending a biz requires answers to Hard Questions. Q’s like: Are our Foundations Strong? Are our Flavors right? Are our Labels Defensible?

There r many Courts in the world. For me, over the last month, one Court was a series of rebuffed phone calls. Another was a court of law…

Today was in the hands of the ultimate court; The Court of Public Opinion and in it I got an answer to my Question; Our IPA’s TM has limits.

I don’t know every answer beforehand, so I feel around for the edges and try to learn. Today I was seriously schooled & I heard you well…

Tomorrow mornin we’ll Drop the Infringement Suit & get back to answering other Questions. I don’t think I was wrong for wanting to know cuz…

I had to know the Answer, but the Answer came much sooner than I thought and in a different Court than I thought it would. Can I say thanks?

As he wisely notes, there are various “courts” in which business disputes are considered and judged.  Because trademark rights represent the goodwill of a company, sometimes efforts to defend trademarks can, ironically, do more than good to that goodwill.

Unilever: “Just Mayo” Misleads Consumers Because It’s Not “Mayo”

Unilever owns the Hellmann’s® and Best Food’s® brands of mayonnaise.  On October 31, 2014, Unilever filed suit in the U.S. District Court in New Jersey against Hampton Creek, Inc. for false advertising and unfair competition for selling an egg-free spread under the brand name “Just Mayo.” According to Unilever, the lack of any eggs in the product precludes it from being labeled as “mayonnaise” under federal regulations and consumers are further misled in this regard by the egg on the product label.  As alleged in the Complaint:

“Mayo” is defined in the dictionary and in common usage as “mayonnaise.”  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 calling its vegan sandwich spread Just Mayo, Hampton Creek falsely communicates to consumers that Just Mayo is mayonnaise, when it in fact, it is not.  The literally false product name is highlighted on the label, which also features a giant image of an egg … and in advertising for Just Mayo.

Finally, Unilever complains that comparisons made by Hampton Creek claiming that JUST MAYO tastes better and is superior to “real” mayonnaise, including Hellmann’s, are unsubstantiated and part of its “larger campaign and pattern of unfair competition.”

The JUST MAYO brand is a rising newcomer in this market segment.  As noted by the Wall Street Journal, “Hampton Creek, founded three years ago, has raised $30 million from investors including Microsoft co-founder Bill Gates for its vision of making plant-based substitutes for common egg-based products that it says are healthier and more environmentally friendly.”  The lawsuit has inspired a petition on Change.org asking Unilever to “stop bullying sustainable food companies” which has more than 16,000 supporters as of November 11th.

Although certain blogs have labeled the lawsuit frivolous, it is highly doubtful that Hampton Creek can have the claims dismissed as a matter of law.  Rather, the case will likely move forward and hinge on the ultimate question of whether the “Just Mayo” label and associated marketing  includes one or more false or misleading statements of fact that actual deceived or has the tendency to deceive a substantial segment of consumers and influence the purchasing decisions of consumers.

Significantly, this case underscores the dangers of creating and investing in an attractive but risky brand name.  It is undisputed that the FDS’s standard of identity defines mayonnaise as “the emulsified semi-solid food prepared from vegetable oil(s),” an “acidifying” ingredient of either (1) vinegar or (2) lemon juice or lime juice, or both, and an “egg yolk-containing” ingredient.  21 C.F.R. § 169.140.   Thus, by naming an egg-free product “Just Mayo,” there was always a risk that it would be accused of deceiving consumers.

UPDATE:  I was just quoted in connection with this lawsuit on FoodNavigator-USA — see here.

Crown Royal TM Suit Survives Summary Judgment Against “Crown Club”

Crown-Royal

Crown-Texas

In March 2013, Diageo North America, Inc., which owns the Canadian Whiskey brand “Crown Royal,” filed various trademark and unfair competition claims against Mexcor, Inc. and EJMV Investments, LLC.  Diageo alleged that Defendants have been selling “directly-competing Canadian whisky products” under various brands “dominated by the term ‘CROWN,’ including Texas CROWN Club, Florida CROWN Club … and South Carolina CROWN Club.” Diageo alleged that this issue was compounded by Defendants’ packaging of the products in “imitative bags … violate Diageo’s rights in [its] Purple Bag mark” and “unfairly imitate the overall look and feel of Diageo’s CROWN ROYAL® product line.”  In sum, Diageo claimed that consumers will mistakenly believe that [Defendants’] whiskeys are “affiliated with, sponsored by, approved by, or associated with Crown Royal” and/or that they “are regional variations or novelty line extensions of Crown Royal.”

Fast forward 20 months to the present and the case is now set to go to trial on December 3, 2014.  Both parties had filed motions for summary judgment that were all rejected by the court in an October 27th Order that did not elaborate as to the reasons for the denials.

Specifically Defendants’ motions sought summary judgment (1) as to trademark dilution on the grounds that the Crown Royal trademarks were not “famous” (2) on all claims based on laches and limitations, and (3) on the trademark infringement and unfair competition claim.   For its part, Diageo sought summary judgment on its trademark infringement, unfair competition, and false designation of origin claims.

The lack of any elaboration by the Court in its order likely means that it views issues of fact as precluding summary judgment on any of the motions.

With respect to the laches and limitations motion, Defendants claimed that they had been using the “CROWN” word mark on bottles in conjunction with velvet bags since 2008.  Diageo’s Response disputed those facts and also focused on the doctrine of progressive encroachment, which “allows a trademark owner to tolerate de minimis or low-level infringements and still have the right to act promptly when a junior user either gradually edges into causing serious harm or suddenly expands or changes its mark.”  This is an important principle to keep in mind for any brand owner.   A brand owner might be at risk of a trademark infringement suit by expanding its product lines or its geographic scope.  Thus, even if such a suit seems like a remote possibility when a trademark is adopted, strong consideration should be given to future events, especially if the brand might potentially be expanded or sold.

Tito’s Vodka Faces Two Class Action Lawsuits Claiming That it is Not “Handmade”

Titos-from-ComplaintLast week, I wrote about the putative class action lawsuit filed in Illinois against Templeton Rye alleging that its advertising was false and deceptive with respect to the claims that it is “Made in Iowa” and uses a unique, Prohibition-era recipe.

A similar lawsuit was filed at approximately the same time in California state court against Fifth Generation, Inc., parent company of Tito’s Handmade Vodka.   Now, another lawsuit has been filed against Tito’s in the U.S. District Court for the Northern District of Florida.   See the new complaint here.

The allegations in the new federal lawsuit echo the same complaints from the state court action.  Specifically, plaintiffs allege that Tito’s labels claim that the product is “Handmade” and “Crafted in an Old Fashioned Pot Still by America’s Original Microdistillery” but:

[o]n information and belief, the vodka was made, manufactured and/or produced in “massive buildings containing then floor-to-ceiling stills and bottling 500 cases an hour” using automated machinery that is the antithesis of “handmade” that is in direct contradiction to both the “Handmade” representation and the “Crafted in an Old Fashioned Pot Still” representation on the product.

As a basis for establishing damages, plaintiffs further allege that “[c]onsumers generally believe that ‘handmade’ products are of higher quality than their non-handmade counterparts, and are produced in small batches by hand” and that this caused “members of the general public” to purchase the vodka “at inflated prices.”  Plaintiffs assert claims under Florida’s consumer protection and false advertising statutes as well as claims for breach of warranty, negligence and unjust enrichment.

In response to the same allegations in the California lawsuit, Tito’s issued a statement which stated, among other things:

We distill at the same distillery in Austin, Texas where I, Tito, started the business in 1995, distilling in batches in pot stills that are customized and hand-built on-site to our proprietary specifications.

We hand-connect the hoses and pumps as we taste and qualify the next steps with the distillate. We taste our product to ensure head and tail cuts, all of which are done at our distillery in Austin, are made to our exacting standards to deliver the highest quality.

The artistry involved in knowing when it’s time to make those cuts is something that cannot be duplicated by even the most sophisticated machines.

Tito’s has also noted that the US Alcohol and Tobacco Tax and Trade Bureau (TTB) approved the brand’s label and that Tito’s “small-batch distillation process” differentiates it from other vodka brands.

For the plaintiffs, it will be difficult to establish what constitutes “handmade” and, similarly, show that this term isn’t tantamount to mere “puffery” such as “premium” or “best” that cannot, as a matter of law, be reasonably relied upon by consumers.  As for Tito’s, it likely cannot rely on TTB approval of its label as a defense since the TTB approval process does not focus on the truth or falsity of such terms.

Templeton Rye Whiskey Accused of Deceptive Advertising Because It’s Allegedly Not “Made In Iowa” and Not a Prohibition-Era Recipe

Templeton Rye Spirits, LLC  from Templeton, Iowa has been accused of consumer fraud, false and/or deceptive advertising and unjust enrichment in a putative class action lawsuit filed in Cook County Circuit Court in Chicago, Illinois.

The Complaint, filed on September 9, 2014, highlights Templeton Rye’s marketing which, among other things, touts that its namesake rye whiskey is  “Made in Iowa” using small-scale production methods and produced pursuant to “a prohibition-era whiskey recipe that was the favorite drink of Chicago mobster Al Capone.”

Plaintiff alleges that, contrary to these representations, Defendant’s rye whiskey is actually mass produced in Indiana where it is “distilled and aged at the Indiana factory of MGP Ingredients, Inc.” and “the only activity that occurs in Iowa is the emptying of the barrels and the filling of the bottles….”

Plaintiff further contends that Templeton Rye has admitted that the rye whiskey it obtains from MGP is a “stock” recipe from MGP and “not one tied to Templeton’s Prohibition era” and that “reproducing the [prohibition-era] recipe is impossible due to federal rules regulating the proof and production of rye whiskey.”

Based on the foregoing, Plaintiff filed claims under Iowa and Illinois consumer fraud and deceptive business practices statutes and common law claims for “consumer fraud”, “fraud by omission” and “restitution / unjust enrichment.”  All of these claims contend that consumers have been damaged because they reasonably believed the “premium” price they allegedly paid for the product was based on it being a small-batch, “Iowa whiskey, made in Iowa, distilled just like the prohibition-era  ‘good stuff’, and [made] with Iowa ingredients (e.g , Iowa water).”

As is common for these cases, it may ultimately prove difficult for plaintiffs to show that the alleged deception actually caused them any damage, i.e., payment of a premium price because of the alleged misstatements.  After all, they paid for a good rye whiskey and received a good rye whiskey and the associated marketing may simply be “typical advertising fluff” not be tied to any economic harm.

Ghirardelli Settles “White Chocolate” Labeling Suit for $5.25 Million

White-Chips

Ghirardelli Chocolate Co. has agreed to pay approximately $5.25 million to resolve a putative class action that accused the company of improperly advertising certain products as containing “white chocolate” when they failed to contain cocoa butter, which is required for “white chocolate” or “white chocolate flavor” under FDA regulations.  A motion for preliminary approval of the proposed class settlement was filed on August 20th, with the settlement also providing that Ghirardelli make certain changes to its labeling.

Notably, the front labels for all of the targeted products, listed below, include the company name, Ghirardelli Chocolate, as shown in the above image:

a. Ghirardelli® Chocolate – Premium Baking Chips- Classic White,
b. Ghirardelli® Chocolate – White Chocolate Flavored Confectionary Coating Wafers,
c. Ghirardelli® Chocolate – Sweet Ground White Chocolate Flavor,
d. Ghirardelli® Chocolate – Premium Hot Beverage- White Mocha, and
e. Ghirardelli® Chocolate – Frappe Classico – Classic White

However, none of these products are specifically identified as “white chocolate,” in contrast to many other Ghirardelli products that include real coca butter.  Plaintiffs nevertheless argued that, for a variety of reasons, the labels were inconsistent with FDA regulations and that labels are misleading because consumers would reasonably believe that the products include “white chocolate.”

For example, the packaging of the [Classic White Baking Chips] prominently uses the term”chocolate” in the company name “Ghirardelli® Chocolate.”  It refers to the product as “Classic White” to deceptively mislead consumers into believing that it is classic white chocolate.  It states that the product is “Premium” leading consumers to incorrectly believe that, unlike its competitors, the product is a premium white chocolate chip product.  It then goes on to deceptively state [on the reverse]: “The luxuriously deep flavor and smooth texture of Ghirardelli Premium Baking Chocolate delivers the ultimate chocolate indulgence.”  But because there is no chocolate or white chocolate in Defendants’ chips, the product cannot deliver a “deep chocolate flavor or texture” or the “ultimate chocolate indulgence.”  The label further says [on the reverse] that the product contains the “Finest grind for smoothest texture and easiest melting” but in fact, unlike real white chocolate, the product is not “ground” from cocoa beans.

Per Law360, Ghirardelli stands behind the accuracy of its labeling and marketing but “opted to settle the suit to avoid the ‘expense and distractions’ of litigating what it believes to be ‘nuisance allegations.'”

This case highlights the dangers of including regulated terms in a company name/trademark and the need to scrutinize marketing language across product lines.  In this regard, in evaluating the risk of a lawsuit, the question is not whether you believe that reasonable consumers are misled by a label, but whether a colorable argument exists that consumers might be misled (thus creating the risk of a colorable lawsuit).  

The Supreme Court’s Lesson on Labeling – My Article for Food Processing Magazine

I have written an article for Food Processing magazine regarding the Supreme Court’s decision in POM Wonderful v. Coca-Cola.  It is available on-line here.