The New York Times doesn’t have statistics, but its reporter thinks Lanham Act litigation (filed by companies against their competitors over allegedly misleading advertising) is on the rise these days.
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Posts tagged as:
competition through litigation
“The American Booksellers Association loves people who buy books. It loves them so much that it wants to protect them from wicked retailers who sell popular titles at affordable prices.” [Jeff Jacoby, Boston Globe] More: Mark Perry.
Related: antitrust laws mostly “used today by one group of competitors to try to hamstring another competitor in their business” [Coyote on IBM mainframe investigation]
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Ride the Ducks says it has been inviting customers to toot on kazoos for a decade as part of its water-land tours in various cities. Now it is suing competitor Bay Quackers, which pioneered the duck tour concept in San Francisco (and was more recently joined there as a competitor by Ride the Ducks) for infringing its “sound mark”, an “auditory equivalent of a trademark”. [New York Times] [Corrected 2:30 p.m. after reader Kim S. pointed out that I hadn't correctly conveyed the details of which company operated where and when.]
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Sara Lee sues Kraft over its advertising claims regarding the taste of hot dogs.
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- Yielding to pressure from state AGs, Craigslist will close “erotic services” section and replace with more highly moderated “adult services”; New York’s Cuomo is furious the site took unilateral action “in the middle of the night” rather than negotiating with him [NY Times, Hartford Courant, office of Connecticut AG (and longtime Overlawyered bete noire) Richard Blumenthal, Citizen Media Law, Above the Law] More: Ambrogi.
- Or they could absorb it and move on: “Bounty sues Brawny in paper towel tilt” [Atlanta Journal-Constitution]
- Was granting patents relating to diagnostic analysis of human genes a mistake? Should courts undo it? Via constitutional law? Three different questions there [Ars Technica, Doc Gurley/San Francisco Chronicle]
- Canadian Human Rights Commission wants new ban on discrimination based on “social condition” (with concomitant penalties for hurtful speech premised on such condition) [Ken at Popehat]
- Luxury-goods makers’ suits against eBay over sale of counterfeits may be petering out [Frankel, American Lawyer]
- Today must be exotic-dancer-litigation day at Overlawyered: Trademark Trial and Appeal Board denies trademark protection for “Cuffs and Collar Mark” of Chippendales male exotic dancers [TTA Blog via Lowering the Bar, Ron Coleman, opinion in PDF]
- Allegations fail to stick: “Judge drops class-action suit on Teflon cookware” [AP/Des Moines Register, WSJ, American Lawyer; earlier here and here]
- Asbestos litigation ramps up against Detroit automakers after bankruptcy of many earlier defendants [five years ago on Overlawyered; up-to-the-minute report from Kirk Hartley]
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- Beck and Herrmann fisk a NEJM anti-preemption editorial. [Beck/Herrmann; NEJM]
- Lessons of the Grasso case. [Hodak]
- You think BigLaw has it bad? Plaintiffs’ attorney who invented the benefit-of-the-bargain theory for pharmaceutical class actions where no one has suffered any cognizable injury, has made his firm tens of millions, but still hasn’t made partner. “Zigler said he never meets most of the people he represents in these high-profile cases.” [St.L. Post-Dispatch; related analysis from Beck/Herrmann]
- Speaking of harmless lawsuits, “an atrocity in Arkansas,” as Arkansas Supreme Court ignores basic principles of due process and civil procedure to certify an extortionate pre-CAFA class action from MIller County. [Hmm, that's Beck/Herrmann again; General Motors v. Bryant; related from Greve]
- Speedo competitor: unfair competition to say your innovative swimsuit has an advantage just because 38 out of the last 42 world records (as of June 30) were broken in the suit. [Am Law Daily]
- Background on bogus shower curtain scare story (earlier). [NYT; related AEI event]
- EMTALA-orama: don’t discuss payment in the emergency room if you don’t want to get sued. [ER Stories]
I’ve previously criticized the unrealistic notions judges have of the expense of litigation. (For example: Budget Rent A Car (7th Cir. 2005).) As I said, “[T]he mistake of thinking that legal practice is so frictionless is what encourages so many judges to deny motions to dismiss and deny motions for summary judgment and fail to restrain discovery.” The Spalding Labs v. ARBICO case, No. CV 06-1157 ODW (SHx), 2008 WL 2227501 (C.D. Cal., May 29, 2008) (via Tushnet) provides another example.
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Antitrust law trips up pillar-of-counterculture-journalism Village Voice Media, cont’d: “San Francisco Superior Court Judge Marla Miller raised the amount the Weekly [SF Weekly] must pay in damages to the Bay Guardian — from $6.3 million to $15.9 million — for undercutting its rival with below-cost ads.” (Meredith May, “Judge raises damages in case against SF Weekly”, San Francisco Chronicle, May 21; earlier; sample SF Weekly business-bashing piece, channeling plaintiff’s lawyers’ contentions in Parmalat case). “Predatory pricing — selling ads below cost with the goal of putting your competition out of business — is typically something alt weeklies cover, not something they get caught and fined for.” (Josh Feit, TheStranger.com (which competes with VVM’s Seattle Weekly), Mar. 5).
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- UK: Paramedic twists ankle on steps responding to emergency call, plans to sue elderly couple [Daily Mail]
- Critics say litigiousness is part of the business plan for rental outfit Leasecomm, which has sued its customers more than 92,000 times [Boston Globe, Daily News Transcript]
- Great big predators of the alternative press? Jury awards $15 million against SF Weekly to its main competitor, Bay Guardian [SF Chronicle]
- Tacoma public schools sued after mentally ill student brings gun to school and kills classmate [KOMO]
- How the parties traded positions with each other on trade [Gordon, Commentary]
- Now Canada has its own “human rights” complaint against plastic surgeon who declines to undertake transgender-related surgery [Steyn, Macleans; earlier Catholic hospital case from California]
- Florida Supreme Court hears appeal of Joe Anderson $18 million “false light” defamation verdict against Gannett’s Pensacola News-Journal [WSJ law blog; earlier]
- Ottawa lawyer Richard Warman keeps suing bloggers and dragging websites before those Canadian hate-speech tribunals, so no criticizing him please [Levant, Five Feet of Fury (& more), Steyn]
- Discontent continues over judges’ standardless discretion in granting alimony awards [NLJ]
- Death of widow Alice Lawrence isn’t expected to end her litigation with law firm Graubard Miller over contingency fee [NYLJ; earlier]
- Labor arbitrator tells Florida school to rehire employee who reported to work with cocaine in his system [six years ago on Overlawyered]
U. S District Court Judge Robert Matsch recently got so infuriated by the conduct of McDermott, Will and Emery attorneys Terrance McMahon and Vera Elson that he overturned a jury’s $51 million verdict, then ordered the lawyers to pay the fees and costs of the opposing lawyers, a sum that could total several million dollars. (Denver Post, Feb. 25)
From the decision (Medtronic Navigation, Inc. v. BrainLAB Medizinische, 2008 WL 410413):
In essence, the response from the plaintiff and MWE, through new counsel, is that the Court had the obligation to stop any trial conduct that stepped over the line of zealous advocacy. In short, they argue that they should not be held responsible for what they were able to get away with during the trial presentation. The adamant denial that there was any abuse of advocacy in this case is in disregard of what this Court has already concluded and displays the same arrogance that has colored this case almost from its inception. Throughout these proceedings Medtronic and the MWE lawyers have demonstrated that when they are faced with adverse court rulings, they proceed undeterred, with only superficial observance of the court’s determinations. Such conduct supports the conclusion that after the Markman rulings, Medtronic’s primary objective in pursuing this litigation was to put economic pressure on its competitor in the market.
Medtronic’s counsel proceeded cavalierly, with reckless indifference to the merits of Medtronic’s infringement claims. The continued prosecution of a claim after its lack of merit has become apparent warrants sanctions under § 1927. At trial, MWE’s conduct was in disregard for the duty of candor, reflecting an attitude of “what can I get away with?” Throughout the trial, the MWE lawyers artfully avoided the limitations of the patent claims and created an illusion of infringement. They did so with full awareness that their case was without merit.
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Suits by businesses over their competitors’ advertising are a staple for us, but this one has a somewhat new wrinkle:
Quiznos, the toasted-sandwich chain, [invited] the public to submit homemade commercials in a contest intended to attack a top rival, Subway. The contest rules made it clear that the videos should depict Quiznos sandwiches as “superior” to Subway’s.Subway promptly sued Quiznos and iFilm, the Web site owned by Viacom that ran the contest, saying that many of the homemade videos made false claims and depicted its brand in a derogatory way. Subway is also objecting to ads that Quiznos itself created, showing people on the street choosing Quiznos over Subway.
The dispute over an ad is fairly standard — companies often sue one another over advertising claims — but the video contest raises a novel legal question: Quiznos did not make the insulting submissions, so should it be held liable for user-generated content created at its behest? …
If Subway wins, advertisers and media companies may find themselves liable for false advertising claims made by consumers who participate in their contests.
(Louise Story, “Can a Sandwich Be Slandered?”, New York Times, Jan. 29).
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No matter how absurd a lawsuit is, the plaintiff usually has an elaborate, ingenuous theory to explain why he deserves to be compensated for injuries caused in some convoluted, indirect way by the nefarious defendant, and the obligatory disclaimer about the case “not being about the money” is usually tacked on. Usually. And then there’s James Schlimpert, president of Oklahoma-based Garage Storage Cabinets LLC.
When asked why he brought a suit against a competitor (Don Mitchell/MGCS) for misappropriation of trade secrets and tortious interference with his company’s dealer contracts, he explained, forthrightly:
When deposed, GSC President John Schlimpert testified that his company held no trade secrets, had no exclusive dealer contracts, and had filed the lawsuit for the sole purpose of putting MGCS out of business.
“I am amazed in some respects that the plaintiff said that, and he said it more than once, said his purpose was to put them out of business,” reads the court record issued by the District Court of Payne County, Honorable Larry Brooks, judge. “I think, under the plaintiff’s stated purpose, he was bringing it just to be vexatious to the defendants. I think it’s vexatious litigation.”
Wow. Still, for anybody who wasn’t already convinced by the Roy Pearson case, the history of the suit illustrates the difficulty courts have in protecting defendants from frivolous suits.
Because the complaint, on its face, seemingly stated legitimate causes of action, the only way for Mitchell to establish that the suit was frivolous was to conduct discovery and take the deposition of the plaintiff. Then Mitchell had to get lucky; if Schlimpert hadn’t foolishly admitted the fraudulent nature of his suit, the court would almost certainly treated the suit as legitimate. (Mitchell could still have won, but wouldn’t have gotten sanctions.) Once Mitchell got lucky, he had to make a motion to the court to have the case thrown out.
Then, after having the case thrown out, Mitchell had to make a separate application to the court for sanctions — he actually botched this procedure, but the court let the issue slide — and then had to participate in a hearing to try to establish how much those sanctions should be. All of that cost more money, more attorneys fees, with no guarantee that these costs would be recouped. Indeed, in this case Mitchell asked for $49,300, and the judge awarded only $31,500, because Schlimpert was successful in finding an expert witness to convince the judge that the lower number should have been sufficient to beat his frivolous case.
Moreover, the judge refused to penalize the plaintiff’s lawyer, finding that just because Schlimpert was acting in bad faith didn’t mean his lawyer was.
And then, after all that, Schlimpert appealed. Finally, this month, the appeals court upheld the trial court’s decision. And now Mitchell has to go back to the trial court, after having spent another $8,000 on the appeal, and has to hope the judge will make him whole.
P.S. In case you were wondering: this suit was filed in May 2003. It took 17 months from the time the suit was filed until the time the judge ruled in favor of Mitchell. It took another 17 months for the judge to award sanctions to Mitchell. After Schlimpert appealed, it took yet another 17 months for the appeals court to rule. In other words, more than four years elapsed. But — as mentioned — it’s still not over, because now Mitchell has to return to the trial court, to be awarded fees because of Schlimpert’s appeal.
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Sun General Counsel Mike Dillon, writing about litigation, repeats something I’ve long said:
Litigation is costly. Incredibly costly. But it is not the expense that is the real issue, it’s the diversion of resources. Time employees spend reviewing e-mails and documents, educating lawyers and preparing for depositions is time away from the business. That’s the real cost of litigation.
Note that these costs are not included even in PRI’s $865-billion/year estimate of the expense of jackpot justice, much less the trial-lawyer critiques of the PRI study, which is why that number, even with its problems, may well be an underestimate of the true expense.
While Sun’s strategy of keeping quiet while litigation was pending may have made sense in this particular competitor-to-competitor litigation, I think it is a very large mistake in the context of trial lawyers and activists targeting companies.
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Updating a few earlier stories we’ve discussed here…
- Two weeks ago we noted that a new online attorney rating site, Avvo.com, was being threatened with a lawsuit by John Henry Browne, a disgruntled Seattle criminal defense attorney. (Jun. 10). Well, whatever the merits or weaknesses of Browne as an attorney, one thing you can say about him is that he doesn’t make idle threats; last week, he filed suit against Avvo. The suit, designated a class action, contends that Avvo’s ratings are flawed. From all accounts, that’s almost certainly true, but as I mentioned in my previous post, it’s not clear that this presents a valid cause of action; Avvo is entitled to rank lawyers differently than John Henry Browne wants them to. In an attempt to get around this problem, the complaint trots out various “consumer protection” arguments using notoriously vague and broad statutes that don’t require that the plaintiffs identify any consumers who have been harmed. (Illustrating perfectly the phenomenon Ted discussed on Jun. 18).
Oh yes, and Browne also claims in the complaint that “at least two clients” of his fired him (in less than a week!) because of his “average” rating on Avvo. Let’s just say I’m rather skeptical of Mr. Browne’s ability to prove such a claim.
The law firm handling this class action case? Overlawyered multiple repeat offender Hagens Berman. (Many links.)
- Remember that lawsuit where Illinois Chief Justice Robert Thomas sued the Kane County Chronicle for defamation? (Apr. 2, Nov. 2006) Well, when last we heard, the libel award — originally an absurd $7 million — had been reduced to $4 million by the trial judge. Not surprisingly, the Chronicle still is unsatisfied, and does not feel it can get a fair shake from the very Illinois court system headed by Thomas; it has now filed a federal lawsuit claiming its constitutional rights have been violated. Named in the suit are Thomas, the trial judge who heard the case, and the rest of Thomas’s colleagues on the state Supreme Court.
- Kellogg’s bows to threats of frivolous litigation coming from the Center for “Science” in the “Public Interest”; agrees to limit advertising of its cereals to children.
Of course, this is portrayed as an issue of advertising, but as Michael Jacobson of CSPI admits, this litigation strategy is simply an attempt to drive products he disapproves of from the market. And now that Kellogg’s has capitulated, certain politicians are trying to force other companies to do the same.
Originally: Jan. 2006.
- We had previously reported (May 17) that the unfair competition lawsuit between Equal and Splenda had settled. Turns out that the two sides are still fighting, with each side accusing the other of reneging on the deal. (LI)
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Updating a few of the earlier stories covered around here:
- Maybe it’s not so gay after all: Rebekah Rice, the California high school student who sued her school after they disciplined her for saying “That’s so gay,” has lost her lawsuit.
“All of us have probably felt at some time that we were unfairly punished by a callous teacher, or picked on and teased by boorish and uncaring bullies. Unfortunately, this is part of what teenagers endure in becoming adults,” the judge wrote in a 20-page ruling. “The law, with all its majesty and might, is simply too crude and imprecise an instrument to satisfactorily soothe deeply hurt feelings.”
Moreover, the judge picked up on the same irony we noted when we first covered the story:
“If the Rice family had not told everyone that Rebekah had been given a referral for saying ‘That’s so gay’ then no one else would have know it either, and she would not have been referred to as the ‘That’s so gay girl,’” the judge wrote.
(Update to the update: Matthew Heller has the opinion.)
- Contrary to what we had speculated, it appears that Pants Judge Roy Pearson still has a job and may continue to do so. According to an unnamed D.C. official, and exemplifying the attitude with which the tort reform movement is fighting, “I don’t think it’s appropriate not to reappoint someone just because they file a lawsuit. You can’t retaliate against someone for exercising their constitutional, First Amendment right to file a lawsuit to vindicate their rights.” (No, but you can retaliate against someone for filing a frivolous lawsuit.) Meanwhile, as a face-saving publicity stunt, the American Trial Lawyers Association filed an ethics complaint against Pearson; really, Pearson isn’t doing anything that ATLA doesn’t endorse in other situations.
- Remember Ted and Mary Roberts, the husband-and-wife team of San Antonio lawyers who hatched a blackmail scheme in which the wife had sex with married men and the husband threatened to sue them unless they paid him to keep quiet? (Ted’s been convicted; Mary is awaiting trial.) The bankruptcy trustee, acting on behalf of their estate, had sued the local San Antonio Express News for violating their privacy by reporting on their scheme; Howard Bashman reports that the Fifth Circuit affirmed dismissal of the lawsuit by a lower court. So the newspaper won a complete legal victory — but truthfully reporting on a criminal scheme by prominent lawyers nevertheless must have cost them six figures’ worth of legal expenses.
- O.J. Simpson will not be suing the Kentucky steakhouse that wouldn’t serve him. His lawyer — the one who rushed to announce that O.J. was a victim and that the steakhouse “screwed with the wrong guy” — now tries to blame the owner for “using the episode for publicity.” (Originally, May 10.)
- The bogus Equal vs. Splenda unfair competition lawsuit (Mar. 8) over Splenda’s “Made From Sugar, So It Tastes Like Sugar” slogan settled on undisclosed terms, moments before a jury announced its verdict. Although we don’t know the terms of the settlement, it shouldn’t be too hard to figure out the non-monetary part: just check whether Splenda changes its advertising.
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New burdens are being heaped on them by state legislators who appear intent on protecting the interests of the original music providers:
In Florida, the new legislation requires all stores buying second-hand merchandise for resale to apply for a permit and file security in the form of a $10,000 bond with the Department of Agriculture and Consumer Services. In addition, stores would be required to thumb-print customers selling used CDs, and acquire a copy of state-issued identity documents such as a driver’s license. Furthermore, stores could issue only store credit — not cash — in exchange for traded CDs, and would be required to hold discs for 30 days before reselling them.
(Ed Christman, “New laws create second-hand woes for CD retailers”, Reuters/Billboard, May 4; Ars Technica, May 7). According to HardOCP, used game CDs are affected by the rules as well. (May 8).
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Swiss confectioner Lindt has filed for an injunction against the Austrian company Hauswirth, claiming that chocolate bunnies in gold foil are a Lindt trademark. Hauswirth says it has been producing such bunnies in Austria since 1962, and that Lindt previously lost a similar lawsuit against German rival Riegelein. (AFP, Apr. 8).
The giant chemical and agribusiness company is suing the Oakhurst Dairy in Maine “for promoting its products as containing milk from cows who are not treated with artificial growth hormones. Monsanto, which makes the leading artificial hormone for cows, said the marketing implies that there’s something wrong with milk from treated cows, even though studies show the milk is no different than milk from untreated cows.” (Edward D. Murphy, “On the front lines of free speech”, Portland Press Herald, Aug. 31; Kristen Philipkosky, “Sour Grapes over Milk Labeling”, Wired News, Sept. 16). As the Press-Herald’s Murphy suggests, this kind of suit can work very similarly to one like Nike v. Kasky in chilling controversial business speech, the difference being that in this case one business is doing it to another.
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