Insights

The Federal Trade Commission (“FTC”) recently approved a final consent order against Sitejabber, an artificial intelligence-enabled consumer review platform, for deceiving consumers by misrepresenting that the ratings and reviews it published came from customers who actually experienced the reviewed product or service. In reality, the reviews were collected before reviewers received the products or services, artificially inflating average star ratings and review counts. 

The Federal Circuit recently held that a claim that a product is protected by patents when it is not may constitute false advertising. Defendants in this case, Dawgs Inc., accused the makers of Crocs of using the terms “patented,” ‘proprietary,” and “exclusive” in its advertising in a manner that misled consumers about the nature, characteristics, or qualities of its own products and the products of its competitors. Specifically, Dawgs alleged that Crocs made promotional statements that a patent covers its Croslite shoe material, that Croslite has numerous tangible benefits found in all of Crocs’ shoe products and that, because Croslite is “patented,” others’ products lack these same benefits. Crocs, Inc. v. Effervescent, Inc., No. 2022-2160, 2024 U.S. App. LEXIS 25001 (Fed. Cir. Oct. 3, 2024).

On September 10, 2024, the U.S. Securities and Exchange Commission (the “SEC”) announced a settlement with Keurig Dr Pepper Inc (“Keurig”).  The SEC alleged that Keurig made incomplete and inaccurate statements in the Company’s annual reports for fiscal years 2019 and 2020 touting the recyclability of its K-Cup products. Keurig agreed to pay a $1.5 million civil penalty. 

As we’ve previously reported, FTC practitioners and businesses alike have been anxiously awaiting details about the rule that will prohibit purportedly deceptive practices in connection with reviews and testimonials. Our readers likely recall the FTC’s advance notice of proposed rulemaking from November 2022, the notice of proposed rulemaking from June 2023, and the informal hearing on the proposed rule which occurred in February 2024. The wait is finally over: just yesterday, August 14, 2024, the agency announced the “Rule on the Use of Consumer Reviews and Testimonials” (the “Rule”). The final Rule, which the Commissioners unanimously approved, is a formal step to address alleged ongoing non-compliance with Section 5 of the FTC Act and the agency’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”), particularly in the consumer review space.

With opening ceremonies set to begin, the United States Olympic & Paralympic Committee (the “USOPC”) sent a strong reminder that it strictly enforces its trademarks and protects against ambush-style marketing.  On July 19, the USOPC sued sports beverage company Prime Hydration, LLC (“Prime Hydration”), which was founded in 2022 by YouTubers KSI and Logan Paul, for allegedly infringing USOPC’s trademarks with Olympic-themed advertising. Filed in the District of Colorado,[1] the complaint alleges that Prime Hydration improperly used phrases such as “Olympic,” “Olympian,” “Team USA,” and “Going for Gold” on advertising and packaging for its beverages featuring Olympic basketball athlete Kevin Duran. An example of the alleged infringement is shown below.

The USPTO has proposed a rule rendering a patent unenforceable if it is disclaimed over another patent that is subsequently found invalid.  The FTC filed a comment letter in support of the USPTO’s proposed rule, noting that “the proposed rule would reduce the costs incurred by potential competitors challenging weak patents or defending against assertions of patent claims that are obvious variants of a single invention.”

On May 14, 2024, the Netherlands Authority for Consumers and Markets (the “ACM”) revealed that they were fining Epic Games 1,125,000 Euros for violating “professional diligence,” following ACM’s 2023 finding that the developer of Fortnite created an environment that pressured children into make purchases in its video game. In issuing the fine, the Decision declared that “ACM is making it known that unfair treatment of children in the digital world is particularly grave and will be dealt with severely.” 

On May 9, 2024, the U.S. Supreme Court issued a ruling in Warner Chappell Music Inc. et al. v. Sherman Nealy et al., Case No. 22-1078, resolving a circuit split in federal courts as to whether it is possible to recover copyright damages beyond the three-year filing statute of limitations. The court held in a 6-3 ruling that there is no time limit on monetary recovery, while leaving the three-year filing deadline intact.

The Food and Drug Administration (FDA) has published revised draft guidelines in the Federal Register on promotional labeling and advertising considerations for the biologic and biosimilar industry, updating guidance from 2020. The quick revisions emphasize the fast-changing and rapidly growing nature of this industry.

Last week, based on a referral from the Federal Trade Commission (“FTC”), the Department of Justice (“DOJ”) filed a complaint against Williams-Sonoma alleging that the company violated a previous Federal Trade Commission decision and order dated July 13, 2020 (the “2020 Order”) pursuant to which Williams-Sonoma was prohibited from making unsubstantiated U.S. origin claims. The complaint alleged that, following entry of the 2020 Order, Williams-Sonoma made “numerous false and unsubstantiated representations that their home goods or other products are ‘Made in USA’ or otherwise of U.S. origin, when, in fact, they are wholly imported or contain significant imported components.”

On April 12, 2024, the Tenth Circuit issued a decision in I DIG Texas LLC v. Kerry Creager, which analyzed country-of-origin claims in a manner that diverged from the well-established Federal Trade Commission’s “Made in USA” policy.

On April 10, 2024, the U.S. House of Representatives, Judiciary Committee Subcommittee on Intellectual Property convened Part III to an ongoing discussion and exploration of artificial intelligence (AI) and intellectual property (IP) rights. The session, “Artificial Intelligence and Intellectual Property: Part III - IP Protection for AI-Assisted Inventions and Creative Works,” delved into the nuanced debate over what IP protections should exist for AI-generated or AI-assisted works.

Last week, New York Attorney General Letitia James filed a lawsuit against JBS USA Food Company and JBS USA Food Company Holdings (JBS USA), which together make up the American subsidiary of the world’s largest beef product producer, JBS S.A. The suit alleges that JBS USA engaged in “greenwashing,” misleading consumers about its environmental impact goals. The suit is one amongst many state attorney general lawsuits related to greenwashing or ESG claims, which have spanned across the aisle and been initiated by both Democratic and Republican attorneys general.

Europe’s biggest online fashion retailer, Zalando, recently agreed to dramatically and rapidly overhaul its sustainability marketing in the face of pressure by the European Commission. This is yet another example of why companies need to be extremely careful when making environmental claims in their advertising. Such claims are facing increasing regulatory scrutiny and activist litigation in the European Union, the United Kingdom, the United States and elsewhere around the globe.

On February 17, 2024, The Digital Services Act (DSA) will become applicable, introducing a new regulatory framework for providers of intermediary services. The DSA will apply to those offering their services to users located in the EU, regardless of the providers' place of establishment. We have discussed the new obligations in our previous client alert, when the DSA was adopted. In this alert, we will focus on the notice and action mechanisms, the positions of the users, intermediaries and the general public.

Since the Federal Trade Commission (“FTC”) published its updated 2023 Guides Concerning the Use of Endorsements and Testimonials in Advertising earlier this year, consumer reviews have been front of mind. This guidance covers, in part, the treatment of consumer reviews, and companies have been (or should be) preparing for an uptick in FTC enforcement. But it’s not just the FTC to watch out for. A recent wave of class actions arising under California Civil Code § 1670.8 related to a customer’s right to make statements about their experience with a seller has raised the bar for retailers to another level.

The Federal Trade Commission (“FTC”) will host a virtual hearing on January 16, 2024 to discuss the proposed amendments to the Rule Concerning the Use of Prenotification Negative Options Plans. One such amendment will retitle the rule to the Rule Concerning Subscriptions and Other Negative Option Plans, often called the Negative Option Rule. One likely focus of the virtual hearing is the “Click to Cancel” update. The virtual hearing will include six nongovernmental organizations, each of which will provide oral statements addressing issues raised in their comment submissions regarding the notice of proposed rulemaking. The virtual hearing is open to the public and Crowell & Moring attorneys will attend.

Although one wouldn’t typically look to the Federal Election Commission as a leader in setting regulations about intellectual property, the threat of deep fakes generated by artificial intelligence spurred recent action to prohibit the use of such images in the 2024 elections.[1] The urgency is obvious: peoples’ ability to use AI to create fake images has evolved much faster than the technology to detect it or the ability of regulators to manage it.[2] These concerns are not limited to politics: players in the music industry have been negotiating around the use of generative AI to create music that mimics established recording artists,[3] and lawsuits have already surfaced over deep-fake technology across the entertainment industry.[4] While there is no consensus on how this will affect these industries, or brands in general, Congress has recently taken more urgent actions as well, including the Senate subcommittee on Intellectual Property holding its second hearing in two months on the intersection of AI and the right of publicity.[5]

On November 7, 2023, the Federal Trade Commission (“FTC”) announced it is challenging over 100 patents as improperly listed in the Food and Drug Administration’s (“FDA”) publication titled “Approved Drug Products with Therapeutic Equivalence Evaluations,” which is commonly known as the Orange Book. The FTC sent warning letters to ten drug and medical device manufacturers identifying patents for inhalers, autoinjectors and anti-inflammatory multi-dose bottles that the FTC believes are improperly listed. In the letters, the FTC indicated it is using the FDA’s regulatory dispute process to challenge the listing of these patents in the Orange Book because improperly listing patents may violate antitrust laws and impede competition. The FTC’s actions appear to be consistent with its recent and increased scrutiny of the healthcare and pharmaceutical industries.

Judge William Orrick in the Northern District of California has dismissed some claims in a lawsuit brought by visual artists Sarah Andersen, Kelly McKernan, and Karla Ortiz against Stability AI, Midjourney, and DeviantArt. The artists allege that the companies misused the artist’s copyrighted works in connection with the companies’ generative artificial intelligence systems and products. Judge Orrick dismissed all allegations against Midjourney and DeviantArt, but gave Plaintiffs leave to amend their complaint. Judge Orrick also dismissed copyright infringement claims brought by McKernan, Ortiz, and others in the artists’ class who had not obtained copyright registrations, a prerequisite to filing a copyright claim, but is allowing Andersen to pursue her claim that Stability AI's use of her work to train Stable Diffusion infringed her copyrights.