Bryan Cave Leighton Paisner Retail Blog

Main Content

Unicorn-Themed Drinks Spawn Trademark Dispute Between Coffee Retailers

While the mythical unicorn is a rare creature, it has recently become a marketing phenomenon, with the unicorn’s rainbow-laden powers being harnessed to sell unicorn-themed products that can cover you from literally head to toe, i.e., from makeup (such as “Unicorn Snot®”, a glitter gel) to slippers and even a toilet spray made with “unicorn farts” (Squatty Potty’s “Unicorn Gold®”). Perhaps inevitably, brand owners have begun to battle over who can lay claim to a unicorn trademark. And this includes drinks that sound like coffee (but largely are not).

In April, caffeine aficionados found it was nearly impossible to avoid Starbucks’ limited-time promotion of its Unicorn Frappuccino. Purple and turquoise, and made of créme frappuccino syrup, milk, ice, mango syrup and “whipped cream-sprinkled pink and blue fairy powders,” the reportedly coffee-less drink was heavily promoted. One Brooklyn-based coffee and juice bar, however, was not enchanted by Starbucks’ frappe.

The End and its owner, Montauk Juice Factory, Inc., filed a trademark-infringement suit against Starbucks on May 3, 2017. According to the complaint, The End started selling a “Unicorn Latte™” in December 2016, before Starbucks launched its Unicorn Frappuccino. According to its complaint, The End’s “Unicorn Latte™” spawned its own social media following due to its colorful appearance and “magical” qualities of its super-food ingredients. Montauk Juice’s federal trademark application pre-dated Starbucks’ Unicorn Frappuccino launch by several months.

The complaint further alleges that once Starbucks launched its Unicorn Frappuccino in April, confused customers both (1) began calling it a “Unicorn Latte,”

Retailers and Other Food Importers Must Ensure Food They Import Meets U.S. Safety Standards

Requirements take effect today under the FDA’s new Foreign Supplier Verification Program (FSVP), which makes retailers and other businesses that import food into the United States responsible for verifying that the food has been produced in a manner that meets applicable U.S. safety standards.

FSVP is one of the seven foundational rules of the FDA’s Food Safety Modernization Act (FSMA), the most sweeping reform of our food safety laws in more than 70 years. It aims to ensure the U.S. food supply is safe by shifting the focus from responding to contamination to preventing it.

A central tenet of the FSVP is that the same preventive food safety standards should apply to all food consumed in the U.S., regardless of where the food is produced. The FSVP therefore requires that importers have a program in place to verify that their foreign suppliers are producing food in a manner that satisfies FSMA’s requirements for domestic food manufacturers, and also that the food is not adulterated or misbranded with respect to allergen labeling.

Importers must therefore establish and follow written procedures to ensure that they import foods only from foreign suppliers approved based on an evaluation of the risk posed by the imported food and the supplier’s performance or, when necessary on a temporary basis, from unapproved suppliers whose foods are subjected to adequate verification activities before being imported.

What the FSVP Requires

Importers are required to develop, maintain and follow an FSVP for non-exempt food imported into the United States. The

Arizona Employers Prepare to Implement New Paid Sick Time Law

After surviving a legal challenge rejected by the Arizona Supreme Court, Arizona’s $10 minimum wage enacted under Proposition 206 is already in effect, and the sick leave portion of the law takes effect in July. For many companies, this will require new paid time off and sick leave policies, or at least revisions to their existing policies.

With enactment of Proposition 206, Arizona joins other states with sick leave laws, including Illinois, California, Oregon, Washington, Massachusetts, Vermont, and Washington, D.C. As previously reported by the Retail Law blog, the Illinois law took effect in January 2017.

The Arizona law generally applies to all Arizona employees; it makes no distinction between salaried, hourly, full-time, part-time, temporary or seasonal employees. All employees must accrue one hour of paid sick time for every 30 hours worked.

Paid sick leave can be used for medical care of a mental or physical illness, injury or health condition of the employee or their children, spouse or registered domestic partner, parents, grandparents, grandchildren, siblings, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship. Paid sick leave cannot be used, however, to bond with a new child or for grief and recovery following a family member’s death.

Employers cannot ask the reason for taking paid sick leave unless three consecutive days off are requested, in which case they can request documentation that the leave was requested for permitted reasons.

For questions or more information

Avoid Potential Liability for Violating Laws Related to Email Marketing

Email is an important marketing tool for retailers, who should be aware of federal and state laws regulating its commercial use. Since its enactment in 2003, the Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act has attempted to curb the number of unwanted emails and impose some rules on a largely unregulated frontier. When followed, CAN-SPAM Act’s restrictions give email recipients some control over their inboxes and also maintain fairness in how emails present themselves. Failure to follow the CAN-SPAM Act can lead to penalties of up to $16,000 per violation.

In addition, thirty-seven states have laws regulating unsolicited email advertising. The majority of these state laws target commercial or fraudulent electronic mail.  Most state anti-spam laws prohibit using misleading information in the subject line of the message; misrepresenting or

FDA’s Delay in Implementing Calorie Labeling Law Leaves Fate Uncertain

May 12, 2017

Categories

The latest delay by the Food and Drug Administration (FDA) in implementing new calorie labeling rules gives restaurants and food retailers a little breathing room. Originally set for May 5, the agency pushed back the deadline a second time, now requiring compliance by May 2018.

Seven years ago, the menu labeling law was passed as Section 4205 of the Affordable Care Act (ACA), and the FDA has been working on the details ever since.  Its final rule requiring calorie labeling requires restaurants and “similar retail food establishments” (such as convenience stores, grocery stores, concession stands, and food takeout or delivery establishments) that are part of a chain of 20 or more locations and that sell substantially the same menu items to, among other things, post the following on menus and menu boards:

  • calorie information;
  • a succinct statement on suggested daily caloric intake; and
  • a statement that written nutrition information is available upon request (and provide such information, upon request).

The FDA has also issued an industry compliance guide on what types of foods and businesses are covered, what information must be provided, and the format.

Although a bill to repeal and replace the ACA has passed the House, it does not address Section 4205. And since Section 4205 is not related to taxes or revenue, it cannot be repealed through budget reconciliation.

The FDA’s delay in implementing the rule, however, indicates that its fate may be uncertain, particularly under a new FDA commissioner. Some think the

Ninth Circuit Revives Baby Food False Advertising Class Action

May 1, 2017

Categories

The Ninth Circuit has revived a proposed class action against Gerber, saying the mother who sued it for labeling its sugar-laden baby food as “natural” only had to prove the labels were misleading, not necessarily false. “Even technically correct labels can be misleading,” the panel wrote in an unpublished order reversing the district court’s dismissal of the putative class action.

In Bruton v. Gerber Food Products Co., Case No. 5:12-cv-02412-LHK, the plaintiff alleged that labels on certain Gerber baby food products included claims about nutrient and sugar content that were impermissible under Food and Drug Administration regulations incorporated into California law. She challenged the labels that describe the food as “excellent source,” “good source,” “as healthy as fresh,” “no added sugar” and “natural.” The products include a variety of snack foods that allegedly mislead consumers about being good sources of vitamins C and E, iron and zinc, and support “healthy growth and development.”

The district court denied class certification, and granted summary judgment for the company in 2013. The plaintiff appealed, and on Wednesday a three-judge Ninth Circuit panel reversed and remanded, with one judge dissenting in part and concurring in part. The panel held the district court erred when it held the class was not “ascertainable” and that there was a triable issue of fact as to whether the claims on Gerbert’s products in violation of FDA regulations were likely to mislead the public.

“Bruton’s theory of deception does not rely on proving that any of Gerber’s labels were

Businesses Beat Lawsuits Alleging Website Terms Violate New Jersey Law

Every retailer that does business in New Jersey needs to know about New Jersey’s Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”), which was passed in 1981 to protect the rights of consumers from allegedly deceptive practices in consumer contracts, warranties, notices and signs. Recently, however, the TCCWNA has been the basis of a flurry of pre-suit demand letters to retailers and class action lawsuits filed in state and federal courts in New Jersey.

The TCCWNA’s prohibition of the use of certain terms or disclaimers in warranties, consumer contracts, and other consumer-facing  materials  has been interpreted to include language typically used by retailers in their websites’ terms and conditions, rules of use, on social media, and in contracts – such as commonly used provisions seeking to hold the retailer harmless/limit liability, requiring the customer to assume risks, provisions waiving certain fees and costs, and cost-shifting language.  A general disclaimer directed to New Jersey residents has been deemed insufficient to satisfy the requirements of the statute.

However, businesses have had some recent success in defeating TCCWNA claims.  For example, in Palomino v. Facebook, Inc., No. 16-cv-04329-HSG, (N.D. Cal. Jan. 9, 2017), Facebook was successful in dismissing a putative class action against it alleging a violation of the TCCWNA based on the choice-of-law clause in its website’s terms of service.  Read further case analysis by clicking here.  

More recently, in Norris Hite v. Lush Internet, Inc., Case No. 16-1533 (D. N.J. March 22, 2017), Lush Internet, Inc. was successful in

Think Your Market Is Global? Then Global Consumer Regulators Likely Are Watching Your Business

April 14, 2017

Categories

 

Advances in internet technologies, global social media platforms, and inventory order management and shipping delivery systems have revolutionized our businesses. Shopping-at-home and catalog sales, markets most retailers never would have considered as recently as 20 years ago, are now vibrant. Your business now may have customers in many different countries. You should be aware of the growing collaboration among the consumer watchdogs across the world, because those regulators may well be aware of your business through consumer complaints.

econsumer.gov is a site sponsored by the International Consumer Protection and Enforcement Network (ICPEN) and supported by the U.S. Federal Trade Commission (FTC) as well as approximately 35 other countries’ consumer regulators. The site provides consumer education and publishes trends regarding consumer fraud complaints. As the tag line of the site reveals, it also is a portal for the collection of global consumer fraud complaints: “Report international scams online.” Among the tips the site offers consumers is to use social media to publicize complaints about business practices.

ICPEN suggests that companies have personnel monitoring social media and consider taking prompt action regarding complaints. Your PR and customer experience teams should be aware of this ICPEN recommendation. You should consider training and policies to address handling both on-line and social media complaints. Doing so will help keep customers returning to your business, will protect your brand reputation, and may help lower the risk of intervention by global regulators. For more detailed information about the types of information ICPEN and

Beware of Making Unsubstantiated Anti-Aging Claims

Manufacturers, distributors, and retailers often tout the anti-aging effects of certain cosmetics and nutritional supplements. Of course, the term “anti-aging” is not intended to literally mean that a product prevents aging. To the contrary, it is understood by both the industry and consumers as describing a product that is designed to mitigate, mask, or soften certain cosmetic indicators that come with age. These typically include wrinkles, discoloration, greying of the hair, or a loss of skin firmness.

Anti-aging litigation has proven popular with the plaintiffs’ bar. In the past five years, there have been at least 31 class action complaints filed alleging deceptive advertising of anti-aging products, and at least 10 enforcement actions brought by the Federal Trade Commission (FTC).

Often such putative class actions allege that advertising which touts a product’s anti-aging properties is deceptive and misleading to consumers. Typically, complaints over anti-aging claims lack affirmative evidence that a cosmetic product fails to produce the advertised effect. Rather, plaintiffs attempt to challenge the sufficiency of the advertiser’s substantiation for an anti-aging claim or, more recently, attempt to characterize an anti-aging product as an unregistered “drug,” for which FDA approval should have been obtained.

Marketers of cosmetic products should consider the following when reviewing their anti-aging claims, and their potential exposure to litigation:

  • Structure Claims to Focus on Consumer’s Perception.  Most cosmetic products are designed to conceal, mask, or mitigate the visual effects of aging, not to reverse the aging process itself. Consider drafting advertising language to make clear

Taking the Stress Out of Distress for Retailers

March 31, 2017

Categories

Despite the downturn in many retail sectors, retailers should not automatically adopt a “glass half empty approach” but instead view the impending cycle as creating opportunities for companies in both the U.S. and globally.

In recent months, a steady stream of analyst coverage has painted a bleak outlook for the retail industry. Between February and March 2017, BCBG Max Azria, Eastern Outfitters, hhgregg, Gander Mountain, and Gordmans were among the companies added to the long list of retailers to seek bankruptcy protection. In February 2017, Moody’s Investors Service reported that the number of distressed U.S. retailers has tripled since the 2008-2009 recession. With 19 companies currently in Moody’s Caa/Ca retail portfolio, industry analysts are forecasting this current distressed cycle will surpass the conditions that existed for the industry in 2008-2009. The continued growth of online retailers is expected to hasten that result.

For companies with healthier balance sheets, the current level of distress in the industry could present prospects for strategic acquisitions, to diversify, or expand domestically or globally. Likewise, retailers feeling the financial strains of the downturn may still have viable options to outlive competitors and capture market share of those less successful. In either case, to unlock these opportunities retailers would benefit from divorcing themselves of any apprehension associated with the notion of restructurings, distressed assets, or the U.S. Chapter 11 bankruptcy process.

Buyer’s Market

Flexible retailers with an understanding of the Chapter 11 sales process can compete for the same lucrative opportunities private equity funds have historically

Court Dismisses Website Accessibility Case as Violating Due Process, Since DOJ Still Has Not Issued Regulations

March 30, 2017

Categories

Recent court decisions from California and Florida may provide ammunition to retailers battling claims that their websites and mobile applications are inaccessible in violation of Title III of the Americans With Disabilities Act (the “ADA”). As we reported in a previous blog post, retailers and other businesses have faced a wave of such demand letters and lawsuits.  Most of these claims settled quickly and confidentially.

However, a California district court recently granted Dominos Pizza’s motion to dismiss under the primary jurisdiction doctrine, which allows courts to stay or dismiss lawsuits pending the resolution of an issue by a government agency. In Robles v. Dominos Pizza LLC, U.S. Dist. Ct. North Dist. Cal. Case No. CV 16-06599 SJO, the court held it would violate Domino’s due process rights to hold that its website violates the ADA, because the Department of Justice still has not promulgated regulations defining website accessibility – despite issuing a notice of proposed rulemaking back in 2010.

The court stated that the DOJ’s application of an industry standard, the Website Content Accessibility Guidelines 2.0 (WCAG 2.0), in statements of interest and consent decrees in other cases does not impose a legally binding standard on all public accommodations. It also noted that those consent decrees indicated flexibility to choose an appropriate auxiliary aid to communicate with disabled customers, and suggested that Domino’s provision of a telephone number for disabled customers may satisfy this obligation. Retailers that do not have an accessible website should therefore provide a toll-free

Give Me … “Separability!” Supreme Court Holds Cheerleading Uniform Designs Copyrightable

In an important copyright case for retailers, the Supreme Court, in Star Athletica, L.L.C. v. Varsity Brands, Inc., 580 U.S. (2017), resolved “widespread disagreement” among the circuits, and adopted a single test to determine the copyrightability of designs incorporated in “useful articles.” The Court held that “an artistic feature of the design of a useful article is eligible for copyright protection if the feature (1) can be perceived as a two- or three-dimensional work of art separate from the useful article and (2) would qualify as a protectable pictorial, graphic, or sculptural work either on its own or in some other medium if imagined separately from the useful article.” Applying that test to Varsity Brands’ cheerleading uniforms, the Court concluded that the “arrangement of colors, shapes, stripes, and chevrons on the surface of the cheerleading uniforms” are separable from the uniforms and eligible for copyright protection.

In Star Athletica, a producer of cheerleading uniforms sued a competitor for infringing copyrights in five cheerleading uniform designs, one example of which is shown below for reference, consisting primarily of “combinations, positionings, and arrangements of…chevrons, lines, curves, stripes,” and similar shapes, and color combinations. The U.S. District Court for the Western District of Tennessee granted summary judgment in the alleged infringer’s favor, finding that “the designs did not qualify as protectable pictorial, graphic or sculptural works” because they served the “‘utilitarian’ function of identifying the garments as ‘cheerleading uniforms’ and therefore could not be ‘physically or conceptually’ separated” from the uniform. The

“Made in USA” Claims Can Be Considered Deceptive Unless Substantiated

Although every product (unless excepted) that is imported into the United States must be marked with its country of origin pursuant to Section 304 of the Tariff Act of 1930, most products manufactured domestically are not required to list the United States as the country of origin. However, if manufacturers or retailers do choose to market their products as “Made in the USA,” these claims must be substantiated, or risk being considered deceptive under federal or state law.

On the federal level, the Federal Trade Commission has issued guidelines and considers representations that a product is “Made in the USA” to be deceptive, unless (1) “all or virtually all” of a product’s components are of U.S. origin, and (2) “all or virtually all” processing takes place in the United States.  Furthermore, the FTC considers phrases such as “Produced in the USA,” “Built in the USA,” or “Manufactured in the USA,” as conveying a near-identical meaning to “Made in the USA,” and applies the same standard.

The standards for “Made in the USA” claims may vary from state to state.  Under California law, for example, such labeling claims are allowed only “if all of the articles, units, or parts of the merchandise obtained from outside the United States constitute not more than 5 percent of the final wholesale value of the manufactured product.” Such labels are also allowed if the manufacturer makes a showing that it cannot produce or obtain a certain article, unit or part within the United States

Mitigate Consumer Litigation Risk by Watching the FTC: Five Good Reasons

March 8, 2017

Categories

2017 already has been, and surely will continue to be, a year of great change. Regulatory agencies are re-envisioning their mandates. Many have or soon will have new leadership. And advocacy groups for consumers are mobilized.

Some of the regulatory changes may favor retail businesses. But others may continue to bring increased scrutiny and require more transparency with consumers. What can retail businesses do to help mitigate their risk and understand the headwinds they may be facing?  One thing that may be helpful would be to monitor the Federal Trade Commission (FTC)’s website. Why? Five good reasons.

  • Consumers are going to the FTC website. You should know what your customers are learning.
  • The Consumer Information section of the site offers a breadth of information, including tabs for Money & Credit, Homes & Mortgages, Health & Fitness, Jobs & Making Money, and Privacy, Identity & Online Security. In addition, the website offers certain targeted at risk populations detailed information tailored to address their respective concerns. Older Adults and Military Families have their own tabs. As do advocate groups like Financial Educators, Consumer Advocates, and the NAACP.

    If the FTC is highlighting your business products, you should know. You should consider whether the FTC is indicating your products present consumers heightened risk. Even if, however, your business products are not specifically mentioned, there is benefit in seeing the consumer marketplace and your products through the regulators’ lens. Most important, by understanding that lens, you may be able to refine your

    Monitoring Employees’ Email and Internet Use Raises Legal Considerations

    March 3, 2017

    Categories

    Retailers should be aware that federal laws prohibit the interception of another’s electronic communications, but these same laws have multiple exceptions that generally allow employers to monitor employees’ email and internet use on employer-owned equipment or networks.

    As a result, under federal law, when retail employees use an organization’s telephone or computer system, monitoring their communications is broadly permissible, though there may be exceptions once the personal nature of a communication is determined. For example, under the National Labor Relations Act, employers cannot electronically spy on certain types of concerted activity by employees about the terms and conditions of employment.

    Although monitoring is broadly permitted under federal law, some states, including Connecticut and Delaware, require that employers notify employees that they may be monitored. Even in states that do not require notice, employers often choose to provide notice since employees who know they are being monitored are less likely to misuse corporate systems. It is good practice for a retailer to have employees sign a consent or acknowledgment that monitoring may occur and to inform them that personal calls may not be made from particular telephones.

    Employers may also monitor what an employee posts to social media. However, under some state laws employers cannot request that an employee provide his or her username and password to a social-media account in order for the employer to see content that was not published publicly. In 2016, sixteen states introduced or passed legislation prohibiting employers from requesting such information. This would include, for

    How to Avoid ADA Claims as Service Animals Increase in Popularity

    February 24, 2017

    Categories

    As retailers see an increasing number of customers seeking to bring animals into their stores, they should ensure that they have well-defined policies and train their employees concerning compliance with the ADA’s provisions regarding service animals. This is the third in a three-part series addressing ADA compliance. In earlier posts we addressed how to improve accessibility and reduce potential liability for premises barriers and website accessibility.

    Title III of the ADA prohibits discrimination against individuals “on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of any place of public accommodation,” which includes retail stores.

    Under regulations issued by the Department of Justice, service animals are dogs (or miniature horses, since some people are allergic to dogs) that are individually trained to do work or perform tasks for people with disabilities. Some state laws define service animals more broadly to include other types of animals as well. Service animals are working animals – not pets. Emotional support animals, whose sole function is to provide comfort or emotional support, do not qualify as service animals under the ADA.

    Retailers may ask customers two questions to determine if an animal qualifies as a service animal:

    (1) Is the animal required because of a disability?

    (2) What work or task has the animal been trained to perform?

    A retailer may not ask these questions, however, when it is readily apparent that the service animal is performing a task for a customer with

    The attorneys of Bryan Cave Leighton Paisner make this site available to you only for the educational purposes of imparting general information and a general understanding of the law. This site does not offer specific legal advice. Your use of this site does not create an attorney-client relationship between you and Bryan Cave LLP or any of its attorneys. Do not use this site as a substitute for specific legal advice from a licensed attorney. Much of the information on this site is based upon preliminary discussions in the absence of definitive advice or policy statements and therefore may change as soon as more definitive advice is available. Please review our full disclaimer.