Avoiding Trade Secret Misappropriation, False Advertising & Unfair Competition Claims
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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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Avoiding Trade Secret Misappropriation, False Advertising & Unfair Competition Claims
- 1. 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 The recipient may only view this work. No other right or license is granted. #IHCC12 #IHCC13 2013 ACC-SoCal In-House Counsel Conference
- 2. Insert Sponsor Logo here Swimming with Piranhas: Avoiding False Advertising & Unfair Competition Claims 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_27 27
- 3. Insert Sponsor GOLDEN GLOW Sunscreen 2013 Logo here Marketing Campaign “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.” 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_28 28
- 4. Insert Sponsor GOLDEN GLOW Sunscreen 2013 Logo here Marketing Campaign Comparison to competitors: – Direct: “Get tanner faster with no burn!” GET TANNER FASTER WITH NO BURN! – Implied: “Get 30% tanner with GOLDEN GLOW over the leading sunscreen!” 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_29 29
- 5. Insert Sponsor GOLDEN GLOW Sunscreen 2013 Logo here Marketing Campaign 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.” 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_30 30
- 6. Insert Sponsor Logo here False Advertising 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_31 31
- 7. Insert Sponsor False Advertising – Federal Logo here Statutory Basis 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.” 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_32 32
- 8. Insert Sponsor False Advertising – Lanham Act Logo here Claim 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. 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_33 33
- 9. Insert Sponsor False Advertising – Lanham Act Logo here Claim 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_34 34
- 10. Insert Sponsor Logo False Advertising Statement here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_35 35
- 11. Insert Sponsor Logo False Advertising Statement here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_36 36
- 12. Insert Sponsor Logo False Advertising Statement here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_37 37
- 13. Insert Sponsor Legal Analysis Of GOLDEN GLOW Logo here Campaign Get tanner faster with no burn! 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? 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_38 38
- 14. Insert Sponsor Legal Analysis Of GOLDEN GLOW Logo here Campaign 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) 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_39 39
- 15. Insert Sponsor Legal Analysis Of 2013 GOLDEN Logo here GLOW Campaign “Get 30% tanner over the leading sunscreen!” How do consumers interpret the advertisement? Specific and measurable claim? Is it true? 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_40 40
- 16. Insert Sponsor Logo here Puffing 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_41 41
- 17. Insert Sponsor Logo What Is Puffing? here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_42 42
- 18. Insert Sponsor Legal Analysis of GOLDEN GLOW Logo here Campaign – Puffing? “For a healthier looking tan!” Specific or absolute characteristics? Vague? Highly subjective? 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_43 43
- 19. Insert Sponsor Legal Analysis of GOLDEN GLOW Logo here Campaign – Puffing? “Get More. Use Less.” Vague? Highly subjective? Does it misdescribe specific or absolute characteristics? 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_44 44
- 20. Insert Sponsor Legal Analysis of GOLDEN GLOW Logo here Campaign – Puffing? “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? 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_45 45
- 21. Insert Sponsor Logo Real World Example here 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_46 46
- 22. Insert Sponsor Logo Legal Analysis of Real World Example here 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”? 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_47 47
- 23. Insert Sponsor Logo Legal Analysis of Real World Example here 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.” 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_48 48
- 24. Insert Sponsor Logo Claims Under State Laws here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_49 49
- 25. Other Avenues for Claims PICTURE OF PUFFER FISH 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_50 50
- 26. Insert Sponsor Logo Federal Trade Commission here 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 . . . ” 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_51 51
- 27. Insert Sponsor Logo FTC here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_52 52
- 28. Insert Sponsor Logo FTC here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_53 53
- 29. Insert Sponsor Logo FTC v. SKECHERS here 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_54 54
- 30. Insert Sponsor National Advertising Division Logo here (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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_55 55
- 31. Insert Sponsor Other Federal Regulatory Logo here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_56 56
- 32. Insert Sponsor Logo Dangers of Social Media here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_57 57
- 33. Insert Sponsor Other Mitigation Strategies: Logo here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_58 58
- 34. Insert Sponsor Logo Take-Away Points here 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 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_59 59
- 35. Insert Sponsor Logo Panelists here Moderator: – Harrison Perla, Esq. Harrison Perla, Director of Worldwide Legal Affairs at CEVA, Inc. @HarrisonEsquire on Twitter Presenters: – Susan M. Natland, Esq. – Diane M. Reed, Esq. Partner at Knobbe Martens Partner at Knobbe Martens Susan.Natland@knobbe.com Diane.Reed@knobbe.com – Lynda Zadra-Symes, Esq. – Jeff Van Hoosear, Esq. Partner at Knobbe Martens Partner at Knobbe Martens Lynda.Zadra-Symes@knobbe.com Jeff.VanHoosear@knobbe.com 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_60 60
- 36. 9th Annual In-House Counsel Conference January 23, 2013 (Los Angeles, CA) www.acc.com/chapters/socal/ #IHCC13 @KnobbeMartens 61 000000_61