By Audrey Millemann

California’s unfair competition and consumer protection laws protect consumers from false representations about products or services.  These laws include the Unfair Competition Law (Business and Professions Code §17200, et seq.), the False Advertising Law (Business and Professions Code §17500, et seq.), and the Consumer Legal Remedies Act (Civil Code §1750).  Lawsuits for violation of the consumer protection laws are often brought as class actions on behalf of the general public.  Such actions are important because, in many cases, there is no other practical way for an individual to obtain redress for a wrong that affects the public.

Sometimes, however, cases are filed under the unfair competition and consumer protection laws that are intended to correct real problems, but are simply attempts to make money.  One of the best examples is a case filed against Starbucks for deceiving consumers by underfilling its iced drinks.  The underfilling is allegedly due to the presence of ice in the drink.  As ridiculous as it sounds, that was the plaintiff’s claim.  A federal district judge in the Central District of California found the case to be just that – ridiculous – and dismissed it two and a half months after it was filed.Audrey Millemann 03_web

The plaintiff, Alexander Forouzesh, filed his complaint in Los Angeles County Superior Court on June 1, 2016.  Forouzesh alleged that Starbucks advertises its cold drinks by fluid ounce: a Tall is 12 oz., a Grande is 16 oz., a Venti is 24 oz., and a Trenta is 30 oz.  The plaintiff alleged that Starbucks intentionally filled its clear plastic cold drink cups with less than the advertised amount of liquid, and then added ice to fill up the cup.  The plaintiff apparently purchased some Starbucks drinks, removed the ice, and measured the volume of liquid in the cup.  Naturally, he found that the volume of liquid was less than the size of the cup.  He found that a Venti contained 14 oz. of fluid beverage, not 24 oz. as advertised.  So, for example, if you order a Venti iced tea (as I have many times), you get about 14 oz. of tea and the rest of the 24-oz. cup is filled with ice.  The plaintiff alleged that because ice is not a liquid, Starbucks misrepresents its drink sizes.  He claimed that he and the class would not have purchased Starbucks’ drinks had they known that the actual amount of liquid in the cup was less than the volume of the cup, or, at least, would not have paid as much money as Starbucks charged for the drinks.

The complaint asserts claims for violation of the Unfair Competition Law, False Advertising Law, Consumer Legal Remedies Act, breach of express warranty, breach of implied warranty, fraud, negligent misrepresentation, and unjust enrichment.

Starbucks removed the case to the Central District of California and filed a motion to dismiss.  In its motion, Starbucks argued that all of the plaintiff’s claims failed the plausibility standard because no reasonable consumer would be misled by Starbucks’ drink sizes.  Any reasonable consumer would know that a 24-oz. cup of iced tea or iced coffee does not contain 24 oz. of liquid because consumers expect the cup to contain ice (which will take up some of the space in the cup), they can see the ice in the clear plastic cup, and they ordered an iced drink.  As Starbucks emphasized, how can consumers be deceived when they order an “iced” drink and it arrives with the named ingredient, ice, in it?

Judge Percy Anderson wasted no time in ruling for Starbucks.  Starbucks’ reply brief was filed on August 9, 2016, and the court vacated the oral agreement shortly thereafter, taking the matter under submission (perhaps the court enjoyed an iced drink while reviewing the motion!).  On August 19, 2016, the court issued its decision granting Starbucks’ motion, dismissing the case with prejudice, and entering judgment for Starbucks.

The court stated that:

“. . . [Y]oung children learn they can increase the amount of beverage they receive if they order ‘no ice.’  If children have figured out that including ice in a cold beverage decreases the amount of liquid they will receive, the Court has no difficulty concluding that a reasonable consumer would not be deceived into thinking that when the order an ice tea, that the drink they receive will include both ice and tea and that for a given size cup, some portion of the drink will be ice rather than whatever liquid beverage the consumer ordered.”

The court relied on the fact that Starbucks’ cups are clear and consumers can see the ice in the cups.  The court also found that Starbucks did not actually state that its drinks had specific amounts of liquid, but only that the drinks were of certain sizes.  According to the court, a reasonable consumer “knows the size of the cup that drink will be served in and that a portion of the drink will consist of ice.  Because no reasonable consumer could be confused by this, plaintiff fails to state viable . . . claims.”  Sounds logical.

Interestingly, Starbucks faces a similar class action lawsuit over its hot drinks.  In that case, Strumlauf v. Starbucks Corporation (N.D. California), the plaintiff alleged that Starbucks underfilled its hot drinks because of the foam and because it uses standardized fill lines in the hot drink cups that are less than the listed size of the drinks.  Recently, the court in that case granted Starbucks’ motion to dismiss in part, dismissing certain claims, but denied the motion as to the plaintiff’s claims for breach of express warranty, fraud, and violation of the Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act.  The court found that the plaintiff had stated facts sufficient to support claims that consumers were likely to be deceived with Starbucks’ hot drink sizes.  Thus, Starbucks has had more difficulty getting rid of this case at the pleading stage than the iced drink case, possibly because the hot drinks are not served in clear cups and do not contain the word “foam” in the name of the drink.

In both cases, Starbucks has emphasized that any customer not satisfied with their drink can ask that it be remade.  That might be a better solution than the court awarding millions of dollars in damages to Starbucks’ customers!

By:  Eric Caligiuri

In In re CSB-System Int’l, Inc., No. 15-1832 (Fed. Cir. Aug. 9, 2016), the Court of Appeals for the Federal Circuit recently held that patents that expire during a pending re-examination before the Patent Trial and Appeal Board (“PTAB”) should be examined under the Phillips standard of claim  construction, and not the broadest reasonable interpretation (“BRI”) standard.  Typically, in District Court litigation claims in issued patents are construed using the framework set forth in Phillips v. AWH Corp., which considers the plain meaning of the claim terms themselves in light of the intrinsic record.  However, during re-examination proceedings for unexpired patents, the PTAB uses the BRI standard.  The reason for using the broader BRI standard in re-examinations is that a patent owner before the Patent and Trademark Office (“PTO”) with an unexpired patent may amend the claims to narrow their scope, thus negating any unfairness that may otherwise result from adopting the broader BRI standard.eric_caliguiri_web

The patent at issue in In re CSB-System Int’l is U.S. Patent No. 5,631,953 (the “’593 patent”), entitled “circuit arrangement for integration of EDP systems in the utilization of telephone systems.”  The ’953 patent generally discloses a circuit arrangement for the integration of EDP systems in the utilization of telephone systems connected to the public telephone network ISDN or Euro ISDN.  The aim is to connect telephone installations to an EDP installation in such a way that all the functions of the EDP system can be used during the use of
the telephone installation.

As to the dispute, a third-party had requested ex parte reexamination of the ’953 patent, which was granted. As part of the reexamination proceeding, the patent examiner construed several of the ’953 patent’s claim terms. Pertinent here, the examiner refused to depart from the plain meaning of the term “personal computer” by not, as CSB had argued, inserting a limitation which would exclude personal computers that emulate terminals.  The examiner also declined to adopt CSB’s construction of the claim term “LAN server,” which sought to read in that the “LAN server” must provide shared services to other components on the LAN and to respond to requests from clients.

Based in part on the claim constructions, the examiner rejected some of the claims of the ’953 patent as anticipated by the prior art, and other claims as obvious in light of the prior art.  CSB appealed to the PTAB, and during the pendency of that appeal, the ’953 patent expired. The PTAB nonetheless decided to apply the BRI standard when analyzing the claim constructions entered by the examiner.  The PTAB ultimately agreed with the claim constructions and affirmed the examiner’s rejection of all claims of the ’953 patent.  CSB appealed the PTAB’s ruling to the Federal Circuit, arguing in part that the PTAB and the examiner had applied the wrong claim construction standard.

The Federal Circuit held that when a patent expires during a reexamination proceeding, the PTO should thereafter apply the narrower Phillips standard for claim construction. The Federal Circuit held as much regardless of whether this means that the PTAB applies a different standard than the examiner.  The Federal Circuit reasoned that “the BRI standard is not a monolithic standard that the Board can use even after a patent expires.” Instead, once a patent expires, the PTO and PTAB should apply the Phillips standard for claim construction.

However, while the Federal Circuit held that the PTAB erred in using the BRI standard, the PTAB’s use of the BRI standard did not produce a different result than the result reached using the Phillips standard.  The Federal Circuit held that even under the Phillips standard, there is no basis for limiting the claims as narrowly as CSB argued.  Specifically, the Federal Circuit did not agree with the narrow constructions for “personal computer” and “LAN server” proposed by CSB, even under the Phillips standard.  Thus, in the end, the Federal Circuit affirmed the PTAB’s decision to reject all claims of the ’953 patent in view of prior art presented during reexamination.

 

transparentIf you regularly follow our publication, you may remember when I discussed the Seattle Seahawks and their use of the Texas A&M trademark “12TH MAN” over a year ago. If not, that’s okay too. In short, I discussed how the Seattle Seahawks have been utilizing the Texas A&M trademark without permission and were facing legal action for infringement when the parties entered into their first licensing agreement in 2006 for $100,000 upfront and an additional $5,000 per year. This deal was subsequently renewed in 2011. I ended my previous article by acknowledging that the agreement was coming to an end and that there was likely to be a new, more lucrative deal in place due to the mark’s popularity among Seahawks fans.

Sure enough, the deal that the Seahawks and Texas A&M reached is more lucrative than the previous deal. The Seahawks have agreed to pay $140,000 to Texas A&M upfront, plus $18,000 per year as a royalty fee for using the mark in the Pacific Northwest, an additional $10,000 per year to assist Texas A&M with its efforts to protect its trademark from would be infringers, and an undisclosed yearly fee, through 2021. Moreover, Texas A&M has also narrowed the scope of the license that it is granting to the Seattle Seahawks. Although the Seahawks have never utilized “12th Man” on their merchandise, they will no longer use the mark on the Ring of Honor or the team’s social media handles. Overall, this is favorable deal for Texas A&M, which will receive more money for a more restrictive license to the Seahawks.

Interestingly, I suspect the Seahawks do not have an issue with the narrowly tailored license in light of their recent conduct. Over the past few seasons, the Seahawks have shifted away from their use of “12TH MAN” in favor of “12” and “12s,” both of which the Seahawks have registered with the United States Patent and Trademark Office. The Seahawks own several “12” related trademarks, including without limitation, “WE ARE 12s,” “THE 12s,” “THE SPIRIT OF 12,” and “12.” So, it seems that although the Seahawks still obviously value their use of the “12TH MAN” mark, they are slowly distancing themselves from the mark and creating their own set of 12 marks, which I would not be surprised to see displace their use of the “12TH MAN” entirely by 2021. Of course, only time will tell.

By: Scott Hervey

Chipotle’s entry into the burger business has a Boston based small burger chain up in arms.  The Boston burger spot, which has been in operation since 2010 and goes by the name Tasty Burger, has a beef with the brand Chipotle has chosen for its restaurants, Tasty Made.SHervey

Tasty Burger claims that Chipotle brand infringes on its trademark,  Despite a cease and desist letter and public threats of a lawsuit, Chipotle has publicly stated that it “fully intend(s) to move forward with the name Tasty Made for our burger restaurant and strongly believe that we are on solid footing in doing so.”

Why might Chipotle feel – or claim to feel – so secure in its brand choice.  Tasty Burger has superior common law rights; it has been using its mark since July 2010.  Additionally, Tasty Burger applied for a Federal trademark registration in December 2010 and was granted federal registration for its trademark in 2012.  On first blush, it seems that Tasty Burger has a strong case.  However, things may not be as they seem.

During the registration process for Tasty Burger’s trademark, the United States Patent and Trademark Office refused to register the trademark for Tasty Burger on the Principal Register because it is merely descriptive.  A mark is merely descriptive if it describes an ingredient, quality, characteristic, function, feature, purpose or use of the specified goods and/or services.  The trademark examiner assigned to the Tasty Burger application argued as follows:

In the present case, applicant is using the mark TASTY BURGER, stylized, and design, in connection with “Restaurant services.”   As indicated in the initial Office action, the wording TASTY BURGER describes good tasting hamburgers, an item presumably offered in applicant’s restaurants.  See the definitions enclosed with the initial Office action.

In addition, the applied-for mark shows the wording in stylized lettering.  However, the degree of stylization in this case is not sufficiently striking, unique or distinctive so as to create a commercial impression separate and apart from the unregistrable components of the mark.  See In re Sambado & Son Inc., 45 USPQ2d 1312 (TTAB 1997); In re Bonni Keller Collections Ltd., 6 USPQ2d 1224 (TTAB 1987). Furthermore, the design consists of a common geometric shape and merely functions as a background carrier for the word portion of the proposed mark.  Accordingly, the entire mark must be deemed to be merely descriptive.

In response to the refusal to register, Tasty Burger abandoned its request for registration on the Principal Register and sought registration on the USPTO’s Supplemental Register.  Marks that do not meet the Principal Register’s requirement of being inherently distinctive but that otherwise meet the technical requirements for registration are registrable on the Supplemental Register.  The benefits and protections for marks registered on the Supplemental Register do not compare to those granted to marks registered on the Principal Register.  Registration on the Principal Register is prima facie evidence of the mark owner’s exclusive right to use the mark nationwide in connection with the goods or services set forth in the registration.  The Supplemental Registration provides no such benefits; the owner of a mark registered on the Supplemental Register must rely on common law rights and must also prove that their mark actually functions as a trademark.

So is Tasty Burger’s claim cooked?  Maybe not.  Merely descriptive trademarks may become protectable through “acquired distinctiveness” or “secondary meaning.”  These are legal concepts by which a term that is descriptive may, through use, has become distinctive of the owner’s goods or services.  One of the ways a mark owner may establish secondary meaning is by showing exclusive and continuous use in commerce for the five years.

Tasty Burger has been using its mark since 2010.  As such, it will be able to establish a prima facie case that its mark is distinctive.  This in and of itself does not mean that Tasty Burger will be able to establish likelihood of confusion; a mark can be distinctive and still be highly suggestive and entitled to little protection.  In order to establish greater protection, Tasty Burger must introduce other evidence of acquired distinctiveness such as declarations from its customers, its advertising and promotional activities and market research and consumer reaction studies.

Tasty Burger will have a strong position to argue that the Chipotle Tasty Made burger chain will infringe its common law rights in its Boston and Washington, DC locations.  Tasty Burger can take certain immediate actions that may increase its strength and leverage but whether Tasty Burger will prevent Chipotle from opening Tasty Made throughout the rest of the US remains to be seen.

 

When fashion fuses with high tech, we see our friends show up with trendy wearables, such as smart watches, fitness bands, and even high-tech, designer purses.  But, trendiness aside, wearables raise numerous questions for designers, manufacturers and consumers relating to intellectual property, data privacy and data security.  For example, how does a company protect the technology for its latest smart watch?  Should they rely on patents, trademarks, copyrights or something else?  Who owns the rights to a designer tote with an embedded charging station—the fashion designer or the circuit designer?  Is your employer allowed to collect location and health data via sensor-infused fabric in your work uniform to improve productivity and wellness?  What happens when your fitness band is hacked, revealing personal health data that makes its way to your insurance company?  Can they raise your rates upon learning you have high blood pressure and have stopped working out?Jo-Dale-Carothers-015_web

The questions are unending and some answers are still unclear because laws, courts and contracts have not necessarily caught up with advances in this technology.  Further, the fashion and high tech industries have traditionally approached IP protection differently due to the different nature of their products.  Meanwhile, we have seen high-tech industry leaders (e.g., Apple, Fitbit, and Google’s parent, Alphabet), as well as non-practicing entities, actively amassing patents relating to wearables.  This indicates that licensing and litigation will soon escalate as new wearable products arrive in the marketplace.  We have already seen patent litigation related to products such as Ralph Lauren’s Ricky bag, which has an illuminable interior and charger for electronic devices, and Adidas and Textronic’s shirt with special fibers for sensing vital signs and communicating them to a smartphone.  But merely taking off-the-shelf electronics and making them “wearable,” may not be patentable.  Therefore, companies should consider combining patents on novel innovations that make the electronics wearable with other forms of IP protection for appearance, branding and expression to effectively protect their wearable technology.

Despite its recently soaring growth, wearable technology is not new.  For example, the first electronic hearing aid was constructed well over a hundred years ago.  By the 1980s, we saw digital watches with built-in calculators.  But constraints on size, power, weight, etc., limited the development and adoption of early wearable products.  Now, advances in technology have broadened current applications to include fitness, communication, medical monitoring and more.  In addition, tech companies have learned that widespread adoption of wearables requires that these high-tech accessories fit with current fashion trends.  No one wants to wear something that is clunky and doesn’t match their fashion sense or personality, right?  As a result, tech companies have teamed up with designer brands and hired experts from the fashion industry to co-develop and market wearables.

Today, wearables offer convenience and the potential to monitor and/or increase wellness, safety, productivity, sleep, etc.  But the wearer is often not the only one with access to the data collected, which raises privacy concerns and issues regarding data security.  For example, companies often make a wearer sign up for an account or load an app on a phone to use the wearable.  Then these companies collect, process, and perhaps back up the data along with the wearer’s account information.  These companies could share this information with advertisers who then target the wearer with ads for specific products based on current or past location, health statistics, exercise habits, etc.  We see this user-specific advertising on our phones and computers every day.  For example, since I recently searched for information on a particular car, ads for that car and similar cars are showing up when I use Facebook, browsers and other apps.  This example is rather benign, albeit a little annoying given that I already purchased the car I wanted.

But not all examples are so benign.  Now advertisers and others not only have information on your recent Google searches, but may also be able to gain real-time statistics and other information about your stress level, heart rate, blood pressure, location, etc.  The risks associated with dissemination of your health, location, and financial data are much higher than the mere sharing of information about a car you are interested in purchasing.  These risks also raise additional liability concerns for companies if the data is stolen or misused.  Therefore, it is crucial that companies safeguard against data breaches and understand the privacy rights of their employees and customers.  Some companies are even purchasing cyber insurance as protection against data breaches.  But merely having an insurance policy is not enough.  If your company doesn’t have the proper safeguards in place, such as updated security patches and practices, then the insurance company may not have to pay.

To advise clients in this area, attorneys must be knowledgeable about the technology and the integration of technology with fashion, as well as the legal issues surrounding IP, data privacy and data security.  For a particular client and product, it is critical to develop an integrated approach that effectively provides protection via a combination of utility and design patents, trade secrets, copyrights, trademarks and where appropriate, the lesser-used trade dress protection.  The goal is to use the appropriate IP mechanisms to protect all facets of wearable technology, including the electronics, software, functionality, packaging, marketing materials, appearance and the branding associated with it, while avoiding liability from breaches of data privacy or security.