E.S.S. Entm’t 2000, Inc. v. Rock Star Videos, Inc., No. 06-56237, 2008 U.S. App. LEXIS 23294 (9th Cir. Nov. 5, 2008)

Grand Theft Auto (“GTA”) is a series of video games known for their irreverent humor, violence and seedy characters. Players have to complete missions while driving around virtual cities, interacting with (and on occasion shooting at) gang members and prostitutes. The latest in the series, GTA: San Andreas takes place in the fictional city of Los Santos, a lampoon of Los Angeles. The game features a virtual strip club called “Pig Pen” that resembles the L.A. “gentlemen club” PLAY PEN (including a similar awning and font, use of the silhouette of a woman in the stem of the first letter “P” and the words “Totally Nude”).

Play Pen sued the game developers for trademark, infringement, trade dress infringement and unfair competition.

The 9th Circuit dismissed the case, holding that the use was protected by the First Amendment and the modification of the trademark was not explicitly misleading. The First Amendment defense applies to artistic works’ use of a trademark, unless the use has no artistic relevance whatsoever (i.e., the “level of relevance merely must be above zero”); or unless it explicitly misleads as to the source or content of the work (citing the “Barbie Girl” case, Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894 (9th Cir. 2002)). The Court found that, while both the game and plaintiff’s club offer “low brow entertainment,” they have nothing in common. The public is simply not likely to believe that the game was produced by Play Pen.

The court, however, rejected defendants’ nominative fair use defense because nominative fair use occurs “when the defendant… use[s] the trademarked term to describe not its own product, but the plaintiff’s.” Here, the video game did not use the logo to describe Play Pen so nominative fair use did not apply.

Final Note: While the result of this case is not all that surprising, the opinion provides a good overview of the 9th Circuit First Amendment defense. It is also worth reading, if only for nuggets such as these:
[V]ideo games and strip clubs do not go together like horse and carriage or, perish the thought, love and marriage.
Or this one:
Fans can spend all nine innings of a baseball game at the hot dog stand; that hardly makes Dodger Stadium a butcher’s shop. In other words, the chance to attend a virtual strip club is unambiguously not the main selling point of the Game.

In a recent citable decision by the Patent and Trademark Office, the Trademark Trial and Appeal Board (“TTAB”) dismissed Opposer’s Oppositions for failure to comply with the service of process rules outlined in Trademark Rule 2.101.

In Schott A.G. v. Scott, Opposer filed its notices of Opposition by mail and did not include a proof of service Applicant moved to dismiss the Opposition on the basis of no proof of service. In its response papers, Schott admitted to its failure and sought to amend its Opposition by adding the proof of service, noting that no answer had yet been filed. The TTAB didn’t buy it.

In granting Respondent’s Motion to Dismiss, the Board wrote, “opposer cannot, by filing amended notices, cure its failure to properly serve the original notices of opposition. A notice can be amended as a right only if the original notice of opposition was proper.”

The new Trademark Rules, amended in April of 2007, state that a notice of opposition “must include proof of service on the applicant, or her attorney or domestic representative of record, at the correspondence address of record in the Office[.]”

Practice Note: Instead of filing by mail, parties should consider using the ESTTA online filing system. The ESTTA filing system does not allow an opposer to complete the filing process unless it confirms the service of the opposition on the applicant. While online filing is not a fail-safe process (opposer still has to post the opposition to the applicant), it can serve as an important reminder to serve the complaint first.

Last month, a Wisconsin district court granted Harley-Davidson’s motion for summary judgment, finding that Harley had not infringed Plaintiff’s SCARECROW trademark when it used the term to describe a paint set.

Plaintiff, a free-hand artist known as SCARECROW, paints designs on motorcycle bodies, and provides his services at various trade shows, motorcycle clubs and rallies, including the Harley Owners Group (“HOG”) events. The mark SCARECROW is used on his booth, and as his DBA. Plaintiff also generally paints a small scarecrow on each of the bikes he customizes. Plaintiff has painted over 22,000 bikes.

For years, Harley has sold custom paint sets that allow individuals to create customized designs on their motorcycles. Each paint set contains a set of colors, selected by the Harley staff, and the Harley staff paints a corresponding design to show how the colors may be used. The paint sets are given names that describe the proposed design, like “venom” (which has an image of a snake), or “gambler” (for a gold-black dice combination). Included in the sets released in 2006 was “Scarecrow” for a black and blue paint set illustrated with a scarecrow and barbed wire. Subsequent to discovering the use of the term “scarecrow” along with a scarecrow image, Plaintiff sued.

In finding that Harley’s use of the image and the term did not infringe Plaintiff’s SCARECROW trademark, the court noted that the catalog scarecrow image looked nothing like Plaintiff’s trademark image. It also pointed out the Harley scarecrow was surrounded – indeed dwarfed – by Harley’s familiar HARLEY DAVIDSON trademark. The use of the term “scarecrow” in association with the particular paint set was merely descriptive use because it described the painted image. The court also noted that while Plaintiff may have legitimate trademark rights in the mark SCARECROW, he cannot appropriate the term to himself and thereby prevent others from using the term in a descriptive sense.

Practice Note: This might have been more of a close call had Harley not had an existing pattern and practice of using fanciful terms to describe its paint colors, making the “scarecrow” term just one of many descriptive uses.

Juicy Couture, a division of Liz Claiborne, has filed a trade dress infringement lawsuit against Victoria’s Secret, alleging the lingerie giant copied Juicy’s protectible trade dress, namely its pervasive use of the color pink as a brand identifier and it’s practice of putting a brand name on the seat of sweat pants (in this case, Victoria’s Secret actually uses the word “pink”). Juicy also claims that Victoria’s use of LOVE PINK is an attempt to capitalize on Juicy’s use of its LOVE G&P mark.

In addition, the suit alleges Victoria’s Secret copied Juicy’s “Sweet Shoppe” packaging for its own clothing. The packaging makes clothing appear to be in the shape of candies, bon bons, and lollipops. Juicy claims it has been using the candy-wrap trade dress since 2005.

The complaint, filed April 28, 2008, makes numerous comparisons between the designs put out by Juicy and Victoria, including a comparison of the Juicy Couture logo, which looks like a university crest, and the logo created by Victoria’s secret, also a university crest. Although Juicy has roughly 75 trademark applications and registrations, primarily for word or design marks, it relies on its common law rights for its trade dress claims.

A case against Victoria’s Secret may be difficult to establish, given what Juicy is trying to prove: namely that the grouping of the entire line, viewed in its entirety, amounts to the infringement even if the individual parts may not alone be protectible. For instance the placement of words on the seat sweat pants has been done by universities for years. Indeed, the JUICY brand capitalizes on the university crest. The practice of wrapping clothes to look like candies has been done by street vendors in New York to sell their wares. The color ‘pink’ has been associated with women’s clothing (and brands), too. While it seems obvious that Victoria’s Secret has copied the overall concept of the line, a judge may find it difficult to hold that Juicy owns the color PINK for women’s clothing, except as a brand color.

Practice Note: This author’s legal opinion may not be as valuable as that of her receptionist’s, who when told about the case said, “but why is Juicy Couture suing Victoria’s Secret? They carry Juicy’s stuff in their stores!”

Design companies frequently test new designs and logos by making certain the logos or colors used don’t give rise to foreign translation problems or color combinations that are offensive in other cultures. Looks like they’ll have to add the “racy logo” test to the checklist.

Last week, the Office of Government Commerce in England unveiled its new £14,000 logo. And while cultural comparisons may have been done, evidently no one bothered to turn the logo 90 degrees to the right. Within days after unveiling the new logo, the world was in hysterics over the new logo, which, true to its goal, was designed to “drive up standards and capability in procurement.

The office souvenir shop has been completely stripped of all products, and are expected to be appearing on online auction sites. There are no plans to change the logo.

Practice Pointer: The author would like to point out the extraordinary restraint she used in reporting this story.

The Federal Trade Commission yesterday announced that it has ordered Membership Services Direct, Inc. (also known by other names) to pay $28.2 million to the FTC. The amount represents the net profits made by the company after engaging in a telemarketing scheme designed to bilk consumers of their money. Dubbed the Wal-Mart Shopping Spree Scam, the order also bars several of the company’s principles from engaging in deceptive practices in the future.

The original complaint, filed in federal court by the FTC in 2007, alleged that MSD made cold calls to consumers, falsely promising them shopping sprees at retail department stores like Wal-Mart and Macy’s. They also promised discount coupons, gas vouchers, and free movie tickets, if consumers joined a discount club. The ruse was designed to get unsuspecting customers to reveal their private bank account information, which MSD later used to directly debit the consumers accounts.

Practice Note: Consumers should be advised never to release their social security number or their bank account information over the phone. No reputable organization will ever ask for that information from a consumer. The FTC has a special mailing address for consumers to use if they have had money debited from their account by MSD or any of the other defendants in this Wal-Mart case. Consumers can send a letter to Faye Chen Barnouw or Jennifer Brennan, 10677 Wilshire Boulevard, Suite 700, Los Angeles, CA 90024. Consumers should identify which entity took the money, and supply supporting documentation.

A court in El Paso, Texas recently applied the test of “willful blindness,” normally reserved for fraud cases, to a Lanham Act claim. In determining that the defendant in a trademark infringement case was not liable for willful infringement, the court looked at whether the defendant had intentionally ignored signs of possible infringement.

The case involved a Canadian importer of cigarettes bearing the MARLBORO trademark. The cigarettes in question were actually counterfeit, which the importer might have known given the price he was being charged. Suspicious, the importer/defendant inspected cigarettes to confirm their authenticity, and upon a visual review, determined they were authentic. They weren’t: when U.S. Customs reported the find, Phillip Morris sued, alleging willful trademark infringement, and requesting statutory damages of $1 Million for each trademark infringed. 15 U.S.C. §1117(C)(2).

Finding that the defendant’s conduct could fit no traditional measure of willfulness, the court applied the “willful blindness” test used generally in fraud cases. Under a willful blindness theory, a defendant is liable if he is subjectively aware of a high probability of the illegal conduct, but purposely avoids learning of the conduct. After looking at the defendant’s conduct, the court determined that defendant had not engaged in willful infringement. While defendant’s behavior showed a lack of diligence, and the cost of the cigarettes should have tipped off the defendant that the cigarettes were counterfeit, the court determined that defendant’s attempts to authenticate the cigarettes were sufficient to find that he had not willfully turned a blind eye to indicators that the cigarettes he was importing were counterfeit.

Blockbuster may not be able to rely on the what I learned in Kindergarten defense when it answers charges it illegally shared a plaintiff’s movie preferences with third parties. In a suit filed in Texas earlier this month, Cathryn Harris sued Blockbuster for sharing her rental history on Facebook.

The suit, which is currently seeking class action status, claims Blockbuster’s actions of feeding renters video choices to a news feed violate the Videotape Privacy Protection Act, (“VPPA”) which states in relevant part that a video tape service provider is liable under the VPPA if that provider knowingly discloses personally identifiable information without the renter’s “informed, written consent.” Harris contends the online “opt out” options she was given did not constitute her informed written consent as intended by the VPPA.

The sharing comes as a result of Blockbuster’s participation in the Beacon advertising program, which has received considerable attention and criticism from consumer activist groups and corporations over the past 18 months. Beacon is a form of “social advertising” that allows Facebook friends to see your purchases (as well as other transactions you make) through news feeds. After considerable controversy, Facebook changed the “opt out” provision to an “opt in” provision, so that users would not inadvertently share their personal information simply by accepting the use agreement. Even so, last year, Coca-Cola announced it would not be participating in the program, as did Overstock.com and several other companies, citing privacy concerns. For instance, research showed that participating companies were sending information to Facebook even for buyers who were not Facebook members. Although Facebook claims it deletes such information if and when it is received, many partner sites determined the program contained too many privacy problems for them to feel comfortable participating.

The VPPA was enacted in 1987. It is rarely cited and was clearly not created with the sort of digital transmission of private information in mind that happens today. In fact, the VPPA was enacted after Robert Bork’s video rental history was published during his Supreme Court nomination hearings.

Practice Note: Privacy policies are tricky things. Clients should be advised to create policies that they can follow. Any updates to a privacy policy, particularly ones that will change the way a user’s information is shared, should be highlighted in bold.

In a recent non-citable decision from the TTAB, the Board found that Applicant’s specimen for URBAN RENEWAL did in fact match the drawing page in its application, notwithstanding the mark’s use of URBAN RENEWAL in conjunction with the terms “at home.”

While making clear that each case involving specimens and drawing pages is highly individualized, the Board did provide some clues to how it navigates this area of the law. The Board first noted that a proper initial test involves looking at whether the mark as used on the specimen created a separate impression from the remaining terms featured. In this case, the Board found that even though the terms were contiguous in size and typeface, the existence of the term “at” created a sufficient division to create a distinct commercial impression. Moreover, although the Board did not expressly so state, it suggested that the generic nature of the second portion of the mark makes it less likely to be viewed as functioning as part of the trademark; rather consumers will see the “at home” component of the mark as a suggestion of where Applicant’s goods can be used. The Board also seemed to suggest that other terms might be substituted in place of the “at home” words, without changing the meaning of the mark as applied for, all of which favor Applicant’s registration of the mark. For instance, the words “at home” could be replaced with “at play,” without changing the mark’s meaning.

Practice Note: This firm notes wildly different applications of Trademark Rule 2.51 by different examining attorneys. That said, clients can increase their chances of registration by differentiating the mark component by using distinct and more prominent fonts for the mark components, and adding a TM just after the mark component to distinguish it from the common and usual noun that follows.

Last week, a district court in Maryland ruled that Tyson was not immune from false advertising liability based upon a United States Department of Agriculture (“USDA”) label ruling.

The flap over advertising came when Plaintiff competitors Perdue Farms and Sanderson Farms, alleged that Tyson had been running a series of consumer ads that contained the message “Raised without Antibiotics,” what Plaintiffs called an unqualified Raised without Antibiotics claim (“RWA” claim). Plaintiffs further alleged defendant was running ads with a similar, but qualified RWA claim, namely, “aised Without Antibiotics that Impact Antibiotic Resistance in Humans.” Plaintiffs complaint alleged the unqualified RWA claim was literally false on its face, and the qualified RWA claim was misleading and therefore false by implication. In fact, Plaintiffs claimed, the defendant’s chicken feed contained inophores which are in fact, antibiotics.

By way of background, the Food Safety and Inspection Service (“FSIS”) of the USDA originally approved the unqualified RWA claim, but quickly revoked the approval and informed defendant it could no longer use the unqualified RWA claim on its label. It was silent as to advertising, since the FSIS has no jurisdiction outside of labeling. It later approved defendants qualified RWA claim. In its moving papers, defendant crowed that because the statements were approved for use on defendant’s chicken labels, the pecking order had already been established: plaintiffs Lanham Act claims must be dismissed on the ground that the labels’ language was already approved by the USDA.

In denying defendant’s motion to dismiss on the unqualified RWA claim, the court held that defendant could not rely on a former position held by the USDA “to defend itself against allegations that it continues to run false and misleading advertisements carrying the ‘Raised Without Antibiotics’ language.” Regarding the qualified RWA claim, the court noted that both sides were winging it on cited case law, because it could find no cases that involved “whether a USDA-approved label insulates a company from allegedly false non-label advertising under the Lanham Act.” The court noted that while the USDA may have jurisdiction over chicken labels, it does not have congressional authority to regulate advertising. Accordingly, “a label approved by the USDA may nonetheless be false or misleading in other contexts.” Looks like defendant doesn’t have a leg (or thigh) to stand on.

Increasingly, teenage celebrities are being used by marketing companies to gain a competitive edge in the increasingly growing teen market share. USA Today Online reported today that several large retailers and merchandisers have signed teenage singers and actors to hawk their wares, including Fergie, who was recently retained to give the MAC Cosmetics “Viva Glam” line a boost, the 15 year old Sprouse twins from The Suite Life with Zach and Cody, and basketball’s Stephon Marbury.

Clearly, using these Hollywood “role models” is a strategy that works. The Zandi Group, a marketing research firm, indicates that teenage spokespersons are perfect for clothing and product lines directed at teens because teens already try to emulate celebrity style. Legally, however, using underage spokespersons to target minors can be tricky. While going after teenage dollars is relatively fair game, many young stars attract even younger consumers, including ‘tweens (those under 13), which can lead to problems with the major television networks, with self-regulatory agencies, such as CARU, and in some cases, with the FTC with parents. Many major networks have guidelines consistent with those at CARU that do not allow certain celebrity advertising during times when children under 13 are likely to be looking at television. The practice of Host Selling (airing commercials featuring a teen celebrity at the same time as the teen’s program is scheduled) is not allowed by most networks, and CARU’s self-regulatory guidelines also proscribe the message that buying a certain product will make a kid more popular among his friends or smarter in class.

Practice Pointer: Attorneys should remind their clients that while many teens have their own money, in many cases, that money comes from their parents, who frown upon hard-sell tactics. In particular, parents do not like to be nagged about the purchase of a product they feel is too expensive, compromises their child’s integrity, or is sexually provocative. Generally speaking, clients should use common sense about the type of promotion they engage teenagers to endorse.

Electrolux turned the tables on former distributor-turned-competitor Imig, Inc., which filed a complaint against the famous vacuum and home appliance company, for interfering with relationships with perspective customers. Electrolux filed several counterclaims, alleging that Imig copied Electrolux’s protected trade dress, copyright protected user manuals, and that Imig made false claims in its advertising.

The district court dismissed all of Imig’s claims on summary judgment, and found for Electrolux on copyright infringement and false advertising. The court found that Imig had copied the user manuals in violation of U.S. Copyright law. From a false advertising perspective, the court found that specific numerically based claims about the Imig vacuum’s superiority were false on their face, because the products did not actually meet those objective standards. The remaining counterclaims proceeded to trial. On March 31, 2008, the court issued its finding that Electrolux had not met its burden of establishing a protectable trade dress in its vacuum and therefore, did not find Imig liable.

The facts show that Imig, afraid that it would lose its distributorship of the Electrolux SANITAIRE brand, developed its PERFECT brand vacuum as a replacement. Discovery produced evidence of copying: in creating the PERFECT design, Imig referred its Chinese manufacturer to the specifications of the SANITAIRE line. It was also revealed that Imig’s patent attorney sent a letter to a patent research company noting his clients’ desire “to make a private label vacuum cleaner that is virtually identical in appearance” to defendant’s vacuum. The court also noted numerous visual similarities between the SANITAIRE vacuum and the PERFECT vacuum.

Notwithstanding Imid’s clear intent to copy, the court did not find liability. The court noted that Electrolux had not met its burden of establishing trade dress infringement. In order to establish trade dress infringement, the court wrote, a company must show that the product design is distinctive and that consumers are likely to be confused by seeing the distinctive trade dress on another product. The court held that the elements claimed by Electrolux were functional in nature, and that the company had not proved otherwise, despite Electrolux’s survey evidence showing consumers recognized the various elements of the vacuum as being uniquely from the SANITAIRE brand. The court also determined that secondary meaning had not been established, even though the product had been in use for several years. Addressing the issue of confusion, the court, citing Cadbury Beverages, Inc. v. Cott Corp. determined that Eletrolux had to show a “probability – not merely a ‘possibility’ – of confusion,” a burden that it also did not meet. Even with the victory on the copyright and false advertising claims, we’re guessing Electrolux thinks the decision, well, sucks.

Practice Note: One method of distinguishing trade dress elements is to use “look for” advertising tactics in marketing the products. If a product contains non-functional elements that truly distinguish the product, a company can generate recognition around those features by directing clients to look for them when they make a purchase. Such use may be more persuasive than survey evidence in making clear to both customers and competitors what elements of a design are trade dress.

If u cn rd ths, then you’re either over 50 and remember the old shorthand print ads, or you use your phone to text messages. Amazon continues to push the digital envelope, recently launching its Text-To-Buy program. Adding to its existing mobile phone program (launched last Fall), consumers can set up an account online and then text the UPC, ISBN number, or even a keyword to AMAZON” (262966), and make purchases.

Text-to-buy is likely to pick up speed over the next year, with online and brick-and-mortar companies expanding their clientele and extending their shopping hours by allowing consumers to text purchases, either for pick-up or delivery.

Practice Note: Clients who want to add mobile interaction to their online sites should update their privacy and terms of use policies. The federal CAN-SPAM Act applies to all mobile devices.

Question: When can you decide a trademark case based on a single factor? Answer: when the two marks share not a single common term.

Applicant, PAC Trading Group sought to register the mark PAC BOOSTER THE PERFECT SOUND for audio equipment. The mark was opposed by Ava Enterprises, Inc. on the grounds that it believed the mark to be confusingly similar to its registered trademark, BOSS AUDIOSYSTEMS. Applicant moved for judgment on the pleadings on the ground that Opposer could not even claim a “threshold of similarity” between its mark and Applicant’s mark. Opposer responded that the term BOSS and BOOSTER are “nearly identical because they both start with the letters “BO” and contains an “S;” and moreover, the goods are identical. Acknowledging the similarity between the goods, the Board nevertheless granted the motion.

The Board wasn’t buying the notion that BOSS and BOOSTER are nearly identical, pointing out the obvious: they don’t look alike or mean the same thing. The Board concluded that “notwithstanding the overlap of the respective goods, a likelihood of confusion cannot exist as a matter of law and that this case should be decided on the first du Pont factor as being dispositive.”

Practice Note: OK, I give up. Why exactly did Opposer file this action? As a threshold matter, a potential opposer should find at least one similar word (or similar sounding or meaning word) before bringing an opposition on the grounds of likelihood of confusion. That two parties sell the same goods is insufficient.

In an promotion that sounded more like a Wacky Packages spoof, Nestle promoted its new Butterfinger Comedy Network by making fun of its own brand. Claiming on April Fool’s Day that it was shirking the “clumsiness of the Butterfinger brand” and renaming its brand ‘The Finger,’ the promotion was designed to promote Yahoo’s YouTube alternative. The promotion includes links to local 7-Eleven stores where consumers can actually purchase the candy bar with the fake packaging.

Practice Note: Offering a rare product is a very good way to create stickiness on a website. In this case, in order to find out which stores are carrying the specially branded product, consumers must register with the site. Better than a sweepstakes, which only rewards a few winners, Butterfinger drives consumers to its website, and if consumers want the candy bar, they have to pay for it.

Appellants will get their day in court after all, and St. Paul Fire & Marine Insurance Company many have to pony up in the end. The case arises out of defense of two underlying lawsuits related to false advertising and trademark infringement. Raymond Manzarek, a founding member of the epic rock group The Doors began using the mark DOORS TOURING COMPANY in conjunction with music tours, as well as with various merchandise being sold on its website and at the concerts with the DOORS logo on it. Parents of the former band’s singer Jim Morrison, and Morrison’s widow sued the company for trademark infringement and trade dress infringement. Another suit, brought by former drummer John Densmore, alleged, inter alia, breach of contract, economic damage, and damage to Densmore’s reputation by either express or implied claims that Densmore was at best, The Unknown Solider, and at worst, not an integral part of The Doors legendary band.

Appellants tendered the lawsuit to their insurance company, which contained advertising injury liability. Tendering to the company, however, turned out not to be an Easy Ride to coverage: the insurance company promptly denied coverage and Appellants, determined to Break On Through the wall of denial, sued. The district court granted the insurance company’s motions to dismiss and appellants appealed.

Inching along in The Soft Parade toward reversing the lower court’s decision, the 9th Circuit stated that dismissal of the claim was premature, since the insurance company did not know exactly what items were being sold under the DOORS infringement, and by its own contract language, certain types of merchandise were expressly covered. The allegations by the former drummer relating to damage to his reputation, the 9th Circuit held, were sufficient to “raise the potential of an award of mental anguish or emotional distress damages.” No Back Door Man he, Densmore’s claims, if proved, could be covered under the policy.

Practice Note: With apologies to readers that this blogger will post anything up that references Jim Morrison, clients really should carefully read their media policies and other insurance coverage paperwork to make sure they are getting the coverage they believe they are paying for.

For years, health crisis centers for pregnant women have fought against rogue elements providing false information about abortion services. Using the Internet and phonebook advertising, anti-abortion groups pose as counseling centers and pretend to offer counseling and information services about abortion to pregnant women. In actuality, these groups direct viewers to fake sites that provide false information about abortion options, and provide counseling designed to persuade women to keep their unwanted babies, even when keeping the baby represents a significant risk to the mother’s health.

This month, women’s health centers are asking women to contact their congressperson about a bill recently introduced to “direct the Federal Trade Commission to prescribe rules to prevent deceptive advertising of abortion services.” The ”Stop Deceptive Advertising for Women’s Services Act” would provide special guidelines specifically related to how crisis centers would be able to advertise what they offer.

Practice Note: The bill seeks to tie the act to the already existing powers held by the FTC under Section 5 of The FTC Act, which regulates false and deceptive advertising. Even if the bill does not pass, under the current power, the FTC could independently go after these agencies for their deceptive ads.

The National Advertising Division of the Better Business Bureau has found that Wal-Mart’s claim that it saves Wal-Mart shoppers $2500.00 a year is misleading, and the self-regulatory organization has requested Wal-Mart discontinue the advertising campaign.

The Wal-Mart ad campaign claim is not based on the actual savings of Wal-Mart shoppers, but rather on a calculated number derived from a study it commissioned in 2005. The study in 2005 found that Wal-Mart’s advertising focus on low prices, had resulted in an actual overall price drop in consumer products of 3%. A 3% drop is roughly equal to $287 Billion, which means roughly $2500.00 per household. The statistic, therefore, represents the cost savings to every household, whether the consumer shops at Wal-Mart.

Practice Note: In any advertisement where a measurable statistic is used, the ad sponsor should be able to point to evidence supporting that statistic. Even when a statistic is numerically accurate, as it is here, if the implication is false, then the ad may be deemed false, too. The test for misleading advertising is not merely what is said, but what is implied by the statement.

Engadget came out swinging when it received a trademark infringement demand letter from Deutsche Telekom (which owns T-Mobile). The demand letter suggests that Engadget’s use of the magenta color for its “imobile” section is a violation of Deutsche Telekom’s trademark rights in the color magenta for T-mobile and requests the company stop using the color.

Engadget regularly receives mail from disgruntled companies, primarily pertaining to Engadget’s reviews of certain electronic products, but this letter made Engadget see, uh, magenta, and it responded by posting the letter on the website, and inviting its readers to comment. Moreover, the letter appears to have enraged the company sufficiently that now it is using its trademark in a way that actually could be confusing.

Practice Note: Posting of demand letters by their recipients is nothing new; indeed, this blog has made several references to the practice in the past. Nevertheless, it is a reminder to attorneys to advise clients that demands can be made public. The mere fact that a demand letter might be posted should not deter a client with strong rights, but it may color the tone of the communication. In addition, attorneys want to guide their clients through the legal elements of the claims asserted in a demand, as well as the ramifications of those claims in the court of public opinion. In some cases, if the rights held are thin and the potential backlash is significant, perhaps a well-placed phone call is warranted.