ENT 302 - Midterm 2

Volvo Case

Advertising firm and volvo were held liable because the advertising firm reinforced the roof of the Volvo and weakened the supports of the other cars so they could do it in one take (deceptive advertising - false)

Skechers toning shoes

no actual science to back up their claims

Dannon

to get the results consumers would have to eat it 3 times a day for 3 weeks. Claims were exaggerated

Kellogg’s cereal

breakfast versus not breakfast, exaggerated claims, illogical claims

LifeLock

product falls short, encourages consumers to abandon common sense and just pay

why are certain industries heavily regulated?

To protect emotional, unsophisticated, hard for consumers to verify, first time purchaser, inability to shop around, defers to advice of authority, trendy (Made in USA or green)

truth in advertising

based on “NET IMPRESSION OF THE AVERAGE CONSUMER” (cardiologists take our supplements). “Truth” can still be unfair, deceptive or misleading depending on consumer view. Of course false claims are also illegal. What is the overall take-away of the ad without deep thought and analysis?

commercial speech

is not “free speech” under the first amendment – limited by law.

express warranty

If you say it will do something specific, it must. 

Remedies for failed express warranty

Refund, replace, repair

substantiation of all express claims

scientific studies, surveys, test results

testimonials

still limited to truth and average consumer results – use disclaimers if individuals results are not the norm – “actual results may vary,” “results not typical”

puffing

(the opposite of an express claim) – opinion or statement not meant to be taken literally. Does not require substantiation. “World’s greatest cup of coffee” not a literal statement

Door to Door Selling

3-day recession rights because of no ability to shop around, emotional purchases

health related claims

are also subject to the FDA

How does the FTC become aware of problems in the marketplace?

1. Watching the market

2. complaints from consumers (usually state attorney generals are the first to get involved)

3. complaints from competitors trying to keep their industry legitimate

4. companies already in trouble who are required to submit future marketing materials. 

A settlement with the FTC

may include payment of a fine, notice to consumers, changes in claims at issue, agreement to no longer make false misleading deceptive or unfair claims, requirement to provide FTC with all future marketing materials.

fines collected by the FTC

are used for providing refunds to consumers who were harmed, and also to fund more enforcement efforts – more inspectors and inspections.

In order to patent your idea must be “novel, useful and non-obvious”

all 3, but “novel” (or new, original, never before discovered or invented) is the hardest requirement.  Patent examiners will search the “prior art” if they find it was already known, it can’t be patented.

US amended patent law to come in line with foreign practice to be able to enter the Patent Cooperation Treaty.

1. US has a one year grace period after publicly disclosing an inventive idea to file a patent.  The rest of the world required filing BEFORE disclosure. Provisional patent – squared differences in when to file, by allowing a simple filing of a coversheet with all engineering notes and details and then STILL GIVE YOU 1 YEAR to put it into the proper form of a patent and make a formal complete filing.  If you don’t file a provisional patent, and then disclose your invention publicly, you still have a 1 year grace period in the US to file your patent and have US patent rights, BUT you lost patentability rights internationally.  Internationally they believe if you make a public disclosure before filing, your disclosure becomes part of the “prior art” and you block yourself – your idea is no longer “novel”

 

2. Patent rights went from “first to invent” to “first inventor to file” – the rest of the world was ‘first to file.’  They accepted this compromise, meaning first to file, but only if filed by a bona fide inventor. The problem with first to file, is someone can get rights by stealing the invention of another and filing first.  US requires first filers to also be inventors.

 

3. Patent life - from 17 years after issue to 20 years after filing. (no more submarine patents) There is now an incentive to get through the process quickly so you have as much of the remaining 20 year patent life left to prosecute infringers.

Prior art

all that is known or published anywhere.  Means the invention is not novel.

Options when your patent idea is blocked

License or Buy

Wait to expire

Go foreign – go to market in any country where they don’t have a patent

Check maintenance fees – if not paid the patent expires early

Design around the patent (example - use different shape magnets, or axis instead of pockets)

Getting to market with little money

provisional patent only costs $110, and gives you a year to find financing or someone to pay you royalties under a license, and help pay for the patent. Always use a non-disclosure when trying to sell a patent pending idea.

Fencing in

patent the improvements (example television) then you get to stay in the market, and the original patent holder must work with you to license improvements from you.

Stack vs stack

having a lot of patents, so if someone sues you, you can sue them for something else

trade secrets and patents work together

1. Keeping your ideas under non-disclosure agreement will delay “public disclosure” until after you file, and keep international patent options available. 2. Keep your invention a trade secret (use Non-disclosure agreement) until after you see which parts of your idea receive a patent. That will mean you can keep any non-patentable parts of your idea as a trade secret.

licensing

limited permission to use IP within rules, generally for money or attribution.

Identifies source of good or service - 

Consumer protection function

trademark

infringement (trademark)

Likelihood of consumer confusion between marks

“Use” is required to maintain rights.

trademark

trademark

Typically a word or symbol but:

∙Sound (Harley Davidson, NBC)

∙Trade Dress (red border TIME mag)

trademark

Two ways to get trademark rights:

1. First use in commerce (common law – but geographically limited)

2. Federal registration with USPTO

trademark

US is a “first to use” jurisdiction, but first filer gets the presumption of rights and first user must challenge.

trademark

 

Must search to avoid infringement 

(USPTO and common law search) 

 

trademark

 

TM – use anytime to claim rights

® - Federally registered

 

trademark

 

Can’t register:

Confusingly similar to prior rights

Generic or descriptive words

Surnames (with exceptions)

Deceptive or misdescriptive

Name of living person w/out consent

 

trademarks

Best marks have an arbitrary or random association with the product, rather than purely descriptive name.

copyrights

The author’s expression as fixed in a tangible medium. DOES NOT PROTECT THE IDEA, only the author’s unique expression of the idea.

copyrights

Bundle of rights to display, perform, copy, distribute, make derivative works. “All Rights Reserved”

copyrights

Two ways to get rights – 1. Create something tangible (automatic rights under common law)

2. File with Library of Congress

copyrights

© (earliest date of creation) owner

copyright duration

Life of the Author plus 70 years. Corporation 95 after publication or 120 after creation.

Ballpark it at 100 years

work-made-for-hire (copyright)

Agreement Copyright owned by the employer.

fair use (copyright)

News, review or criticism, educational, parody, small portions.

public domain (copyright)

granted or expired

open source (copyright)

not public domain because there are rules of use. Owners rely on copyright laws to enforce rules of use. ShareAlike, GNUGPL, Creative Commons, Copyleft -ironic anti-copyright movement.

copyright

Rights are international (Berne Convention)

patents

PATENTS PROTECT NOVEL IDEAS

 

Gives a monopoly to “make, use and sell” the invention for 20 years after filing.

patents

One way to get rights: File with USPTO:

Must file within ONE YEAR after sale or public disclosure for rights in US.

patents

Must file BEFORE sale or public disclosure for international rights.

patents

Provisional Patent squares these two by filing skeleton patent BEFORE disclosure and have ONE YEAR to file full patent.

Patents

The idea must be 1. NOVEL (no “prior art”), 2. USEFUL and 3. NON-OBVIOUS to a person skilled in the area of invention.

But also consider: 4. Is the patent enforceable?  How will you sue infringers?

“prior art”

means anything that was ever know in the world. It blocks a patent.

A plastic package containing a new shower curtain is labeled “recyclable” without further elaboration.

Because the context of the claim does not make clear whether it refers to the plastic package or the shower curtain, the claim is deceptive if any part of either the package or the curtain, other than minor, incidental components, cannot be recycled.

A soft drink bottle is labeled “recycled.” The bottle is made entirely from recycled materials, but the bottle cap is not.

Because the bottle cap is a minor, incidental component of the package, the claim is not deceptive.

An area rug is labeled “50% more recycled content than before.” The manufacturer increased the recycled content of its rug from 2% recycled fiber to 3%.

Although the claim is technically true, it likely conveys the false impression that the manufacturer has increased significantly the use of recycled fiber.

A trash bag is labeled “recyclable” without qualification. Because trash bags ordinarily are not separated from other trash at the landfill or incinerator for recycling, they are highly unlikely to be used again for any purpose.

Even if the bag is technically capable of being recycled, the claim is deceptive since it asserts an environmental benefit where no meaningful benefit exists.

An advertiser notes that its glass bathroom tiles contain “20% more recycled content.” Depending on the context, the claim could be a comparison either to the advertiser’s immediately preceding product or to its competitors’ products.

The advertiser should have substantiation for both interpretations. Otherwise, the advertiser should make the basis for comparison clear, for example, by saying “20% more recycled content than our previous bathroom tiles.”

An advertiser claims that its packaging creates “less waste than the leading national brand.”

The advertiser implemented the source reduction several years ago and supported the claim by calculating the relative solid waste contributions of the two packages. The advertiser should have substantiation that the comparison remains accurate.

A product is advertised as “environmentally preferable.” This claim likely conveys that the product is environmentally superior to other products. Because it is highly unlikely that the marketer can substantiate the messages conveyed by this statement, this claim is deceptive.

The claim would not be deceptive if the marketer accompanied it with clear and prominent language limiting the environmental superiority representation to the particular attributes for which the marketer has substantiation, provided the advertisement’s context does not imply other deceptive claims. For example, the claim “Environmentally preferable: contains 50% recycled content compared to 20% for the leading brand” would not be deceptive.

The brand name “Eco-friendly” likely conveys that the product has far- reaching environmental benefits and may convey that the product has no negative environmental impact. Because it is highly unlikely that the marketer can substantiate these claims, the use of such a brand name is deceptive.

A claim, such as “Eco-friendly: made with recycled materials,” would not be deceptive if: (1) the statement “made with recycled materials” is clear and prominent; (2) the marketer can substantiate that the entire product or package, excluding minor, incidental components, is made from recycled material; (3) making the product with recycled materials makes the product  more environmentally beneficial overall; and (4) the advertisement’s context does not imply other deceptive claims.

A marketer states that its packaging is now “Greener than our previous packaging.” The packaging weighs 15% less than previous packaging, but it is not recyclable nor has it been improved in any other material respect.

The claim is deceptive because reasonable consumers likely would interpret “Greener” in this context to mean that other significant environmental aspects of the packaging also are improved over previous packaging. A claim stating “Greener than our previous packaging” accompanied by clear and prominent language such as, “We’ve reduced the weight of our packaging by 15%,” would not be deceptive, provided that reducing the packaging’s weight makes the product more environmentally beneficial overall and the advertisement’s context does not imply other deceptive claims.

A marketer’s advertisement features a picture of a laser printer in a bird’s nest balancing on a tree branch, surrounded by a dense forest. In green type, the marketer states, “Buy our printer. Make a change.”

Although the advertisement does not expressly claim that the product has environmental benefits, the featured images, in combination with the text, likely convey that the product has far-reaching environmental benefits and may convey that the product has no negative environmental impact. Because it is highly unlikely that the marketer can substantiate these claims, this advertisement is deceptive.

A manufacturer’s website states, “Eco-smart gas-powered lawn mower with improved fuel efficiency!” The manufacturer increased the fuel efficiency by 1/10 of a percent.

Although the manufacturer’s claim that it has improved its fuel efficiency technically is true, it likely conveys the false impression that the manufacturer has significantly increased the mower’s fuel efficiency.

A marketer reduces the weight of its plastic beverage bottles. The bottles’ labels state: “Environmentally-friendly improvement. 25% less plastic than our previous packaging.” The plastic bottles are 25 percent lighter but otherwise are no different. The advertisement conveys that the bottles are more environmentally beneficial overall because of the source reduction.

To substantiate this claim, the marketer likely can analyze the impacts of the source reduction without evaluating environmental impacts throughout the packaging’s life cycle. If, however, manufacturing the new bottles significantly alters environmental attributes earlier or later in the bottles’ life cycle, i.e., manufacturing the bottles requires more energy or a different kind of plastic, then a more comprehensive analysis may be appropriate. 

vulnerable consumers

Unsophisticated

Uneducated

Inexperienced – never bought that type of thing before (house)

Emotional – emotional people, or an emotional purchase (Funeral**)

First time purchaser – (House, car, anything you don’t purchase often or is a complicated transaction)

Defers to advice of authority (health, real estate, investment advisor)

can’t shop around or compare (funeral sales, door-to-door sales)

** Funeral sales (funeral arrangement for a loved one are the perfect storm of all above)

advertising tactics the FTC watches

1. Being authoritative (presenting a professional or expert to tell consumers what to do)

2. Encourage consumers to abandon common sense and pay money instead

3. Can’t verify claims -  consumers rely on manufacturer info that can’t be easily verified when making a purchase

4. Pay money to make money – Investments franchises and business opportunities

5. Anything Trendy that consumers prefer – Made in USA and Environmental claims influence decisions

6. Consumers can’t retreat – Door to door sales – If you are at a store and don’t want to buy,you can leave.

where does the money to the FTC go?

When the FTC comes after a company they pay a fine and sign a Consent Decree (settlement) the money goes to 1. repay consumers who were scammed, and 2. to fund additional FTC enforcement efforts.  

Being authoritative (presenting a professional or expert to tell consumers what to do)

Saying something is “clinically proven” or “Scientifically Proven” with less than

            scientific controlled and reviewed and generally accepted studies,

Skechers – “studies” were by chiropractor who was married to Skechers marketing director ased on talking with his patients.   This is not an independent scientific study verifying weight loss claims

Encourage consumers to abandon common sense and pay money instead:

Lifelock – CEO published social security number as an ad gimmick (and identity was stolen 13 times)

Diet Claims – lose weight without working out – lose weight without changing diet.  FTC: real diet must include regular exercise and restricted calories, saying otherwise is a problem – no quick fix.

Can’t verify claims -  consumers rely on manufacturer info that can’t be easily verified when making a purchase

          

  Appliances – energy star ratings – how can you verify how much it costs to run a washer

            Jewelry – how do you know that quality of a stone or the gold content 10k? 14k?

            Fabric content – 100% cotton? People purchase based on fiber content but can’t verify

Pay money to make money – Investments franchises and business opportunities

Anytime you take money, promising and opportunity to make more money the FTC will be very aggressive to protect those who don’t have the skills to succeed, or don’t have the money to lose, access savings, inheritance or retirement, go into debt to make money $$

Anything Trendy that consumers prefer – Made in USA and Environmental claims influence decisions

           

Made in USA – was it all made here, or just assembled from imported parts?

Environmental – see Green Guides – if you claim environmental benefit you have to prove its better than similar products that did not claim the benefit

Consumers can’t retreat – Door to door sales – If you are at a store and don’t want to buy,you can leave. 

At your home you have nowhere to retreat, you are asked to consider a purchase you have not intended or investigated prior to the knock on the door, and you have no chance to shop around.  State laws give a 3 day right to cancel a contract (rescission right) to make up for the inability to retreat.