Insights

On October 11, the Federal Trade Commission announced a proposed rule designed to increase transparency in pricing practices. The proposed Rule on Unfair or Deceptive Fees would prohibit businesses from misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and mispresenting the nature and purpose of fees. If the rule goes into effect, which we anticipate will happen following the comment period, businesses will be required to disclose all mandatory fees and do so at the start of the purchasing process, rather than waiting to disclose such fees after consumers have invested time in navigating purchase flows (or failing to disclose them altogether). Once the rule publishes in the Federal Register, there will be a sixty-day comment period, after which the FTC will consider a final rule.

On August 30, 2023, the Copyright Office announced it would be seeking public comment on the use of copyrighted works to train Artificial Intelligence (“AI”), the copyrightability of AI outputs, whether AI-generated works infringe existing copyrights, and how to treat generative AI.

On June 29, 2023, the Supreme Court vacated the 10thCircuit’s decision in Abitron Austria GmbH et al. v. Hetronic International Inc. (“Hetronic”). The Supreme Court principally held that the Lanham Act does not have extraterritorial application. As Crowell previously discussed, the Supreme Court sought briefing on Hetronic from the U.S. Solicitor General, signaling an interest in addressing the Tenth Circuit’s decision, the extraterritoriality of the Lanham Act, and the complex circuit split that has at least three distinct tests. Although the Court agreed 9-0 that the lower court’s decision should be vacated, Justice Alito’s majority opinion and Justice Sotomayor’s concurring opinion disagreed on the second step of the extraterritoriality test, specifically regarding whether foreign conduct can have domestic implications. The majority disagreed with both the Tenth Circuit and the Solicitor General, concluding that the Lanham Act cannot apply to foreign defendants’ foreign conduct.

In March 2023, the White House published its National Strategy to Advance Privacy-Preserving Data Sharing and Analytics.  Buried in the report was a quiet, but notable, concern related to the possibility of deanonymizing a consumer due to “insufficient disassociability”.  See Report, pg. 6.  A new wave of class action lawsuits in California—already over three dozen at the time of writing—now seeks to turn a spotlight on these practices, claiming that companies are using “grey market” data to match user patterns with personal identifiable information (PII).

New considerations have emerged for advertisers who publish reviews or endorsements. On June 29, 2023, the FTC finalized its updated Endorsement Guides, which provide insights to businesses on how the use of reviews and endorsements might be considered unfair or deceptive in violation of Section 5 of the FTC Act. Over the past several months, the FTC sought public comments on proposed updates to the Endorsement Guides to accurately reflect the modern landscape of advertising, which includes reliance on social media and content creators.

Navigating copyright-based legal disputes through traditional federal court options can be a costly and time-consuming process. Historically, federal court was the only venue for copyright lawsuits of all sizes, big and small. The Copyright Claims Board (“CCB”), however, now offers a streamlined and cost-effective alternative for smaller copyright disputes in the United States. This client alert expands on previous news about the CCB, explores the usefulness of the Copyright Claims Board after its first year in existence, and explains why the CCB could be the right forum for copyright litigants.

On Tuesday, June 20, 2023, the Federal Trade Commission sent letters to 50 online marketplaces notifying them of their responsibility to fully comply with the new Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act – or the INFORM Consumers Act – as soon as the law takes effect on June 27, 2023.

On 28 November 2022, the European Commission adopted proposals for a revision of Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs (“Community Design Regulation”) and Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs (“Design Directive”). Together, these two legal instruments form the main pillars of legal protection of designs in the EU. By revising these laws, the Commission aims to modernize a legal framework which has remained in effect for more than 20 years and make the protection of industrial designs in the EU quicker, cheaper and more predictable.

In a decision to be applauded by brand owners throughout the country, the Supreme Court clarified the balance between trademark rights and First Amendment interests in its decision in the Jack Daniel’s case, Jack Daniel’s Props., Inc. v. VIP Prods. LLC, No. 22-148 (June 8, 2023).  Vacating the judgment of the U.S. Court of Appeals for the Ninth Circuit, the Court held that an accused infringer does not receive special First Amendment protection when it has used a trademark to designate the source of its own goods.  Such use is subject to the traditional test for likelihood of confusion, the Court held, not a threshold test derived from the First Amendment such as that contained in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989).[1]

On December 20, 2022, the FTC originally noticed its solicitation for public comments regarding potential updates and changes to the Green Guides (Guides for the Use of Environmental Marketing Claims) on the Federal Register. While the original deadline to submit comments was February 21, 2023, the Federal Trade Commission (“FTC”) extended the public comment period to April 24, 2023.

On May 18, 2023, the US Supreme Court issued a long-anticipated decision in Andy Warhol Foundation for Visual Arts, Inc. v. Goldsmith, which alters the Courts’ interpretation of the copyright fair use doctrine. Specifically, the Court, in a majority opinion written by Justice Sotomayor, affirmed an earlier Second Circuit decision and held that the “purpose and character” factor of the fair use test does not focus on whether the new work is “transformative.” “[I]nstead, the analysis focuses on whether an allegedly infringing use has a further purpose or different character, which is a matter of degree, and the degree of difference must be weighed against other considerations, like commercialism.”

The Federal Trade Commission (“FTC”) sued three operators, Sean Austin, John Steven Huffman, John Preston Thompson, and their affiliated companies last year for falsely promising to eliminate or substantially reduce credit card debt for consumers.  These companies operated under several names, including ACRO Services, American Consumer Rights Organization, Consumer Protection Resources, Reliance Solutions, Thacker & Associates, and Tri Star Consumer Group.

On April 13, 2023, the Federal Trade Commission (“FTC”) announced that it has notified approximately 670 companies of potential FTC advertising regulation violations, triggering FTC authority to pursue steep civil penalties if companies fail to substantiate their product claims.  The target of this crusade is companies primarily advertising over-the-counter drugs, homeopathic products, dietary supplements, and functional foods.  Once on notice, companies could be subject to civil penalties of up to $50,120 per violation for unsubstantiated product claims.

Following its recent grant of a registration for Zarya of the Dawn, a comic book incorporating certain images generated by artificial intelligence, the U.S. Copyright Office (“Copyright Office) has issued new Guidance regarding its examination of works containing material that has been generated by artificial intelligence (“AI”), effective as of March 16, 2023.[1] In sum, works that incorporate material generated by AI may be eligible for copyright protection and registration under certain circumstances, provided that the work contains sufficient human authorship. Applicants seeking to register their works with the Copyright Office now have a duty to disclose any AI-generated material in copyright applications, as well as in existing registrations. Any AI-generated content that is more than de minimis must be excluded from the filing.

Trademark infringement lawsuits are often resolved early on in the litigation lifecycle.  Many defendants will simply change the mark they are using to limit damages and disincentivize a plaintiff from pushing forward with a claim.  Further, many trademark lawsuits are resolved at the preliminary injunction stage.  However, there are recent cases that suggest a growing trend of substantial verdicts being awarded to plaintiffs in trademark infringement lawsuits. These cases should serve as an opportunity for companies to think more strategically when it comes to allegations of trademark infringement.

The Food and Drug Administration (“FDA”) recently issued guidance recommending that the term “milk” extend beyond dairy (cow) milk products to plant-based alternatives. Although not legally binding, the guidance indicates that nondairy milk alternatives can be labeled “milk” and need not be restricted as nondairy “beverages” or “drinks.” These plant-based alternatives should, however, include a statement on their product label describing how they are nutritionally different from milk (e.g., “contains a lower amount of potassium than milk”).

#ICYMI—The Federal Trade Commission (“FTC”) extended the public comment period on its solicitation for public comments regarding potential updates and changes to the Green Guides (Guides for the Use of Environmental Marketing Claims) by 60 days.  On December 14, the FTC held an open meeting and voted to notice the public comment period. On December 20, the FTC noticed the public comment period on the Federal Register, which would have originally expired on February 21, 2023. All public comments must now be filed by April 24, 2023.

Is there a legal, cognizable claim for a consumer who was misled by a movie trailer? Perhaps. In June 2022, two Plaintiffs filed a lawsuit against Universal concerning a movie they streamed titled Yesterday which is owned by Universal.  Woulfe et al v. Universal City Studios LLC et al., 22-cv-00459, ECF No. 83 (C.D. Cal. Dec. 20, 2022).  Prior to streaming, the Plaintiffs watched the movie trailer, which featured actress Ana De Armas.  In the complaint, Plaintiffs alleged they were persuaded by the trailer, and De Armas’ role in particular to stream the movie.  However, De Armas’ character was cut from the final version of Yesterday, so she was not featured in the film whatsoever.  The Plaintiffs alleged they would not have rented the movie had they known De Armas would not appear in the movie. The Plaintiffs then sued Universal under a host of consumer protection violations, including a violation of the California Unfair Competition Law, California Consumer Legal Remedies Act, and California False Advertising Law. 

The Federal Trade Commission (“FTC” or “Commission”) recently announced that it has adjusted the maximum civil penalty dollar amounts for violations of 16 provisions that the Commission enforces. The increase is required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, and is intended to account for inflation. The act directs agencies to implement annual inflation adjustments based on a prescribed formula. Given the uptick in FTC enforcement actions, companies are likely to begin feeling the impact of the increased penalties in the coming year.