Which Pizza has better ingredients and who is allowed to say so?
Our two cases are Lanham Act court of appeals cases. The first, Pizza Hut, Inc. v. Papa John’s Int’l., 227 F.3d 489 (5th Cir 2000) (here), from the Fifth Circuit in 2000, relates to Pizza Hut’s claim the Papa John’s advertising using the phrase “Better Ingredients. Better Pizza” was false and misleading under section 43(a) of the Lanham Act. The other case, Ayla, LLC v. Alya Skin Pty. Ltd. (here) is from the Ninth Circuit this year. The case relates to personal ju- risdiction over an Australian company selling cosmetics to United States consumers.
As of 2000, Pizza Hut was the largest pizza chain in the United States. Papa John’s was in third place. Papa John’s has a trademark registration for “Better Ingredients. Better Pizza.” In 1998, Papa John’s advertised consumer taste tests of its pizza, which it claims it won over Pizza Hut. Those ads succeeded. Papa John’s next advertised the superiority of its sauce and dough. Its sauce contained “fresh, vine-ripened tomatoes,” but Pizza Hut used remanufactured tomato paste. Papa John’s also advertised its “clear filtered water,” while Pizza Hut used “whatever comes out of the tap.” Papa John’s ad- vertised its yeast had “several days to work its magic,” while “some folks” use “frozen dough or dough made the same day.” “Better Ingredients. Better Pizza.” punctuated its comparisons.
The jury found the sauce and dough claim were “false or misleading and deceptive or likely to deceive consumers.”
Section 43(a) (15 U.S.C. § 1125) of the Lanham Act provides:
Any person who … in commercial advertising or promotion, misrepresents the nature, characteristics, quality, or geographic origin of his or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act.
Citing Fifth Circuit precedent, the court stated:
A prima facie case of false advertising under section 43(a) requires the plaintiff to establish:
- A false or misleading statement of fact about a product;
- Such statement either deceived, or had the capacity to deceive a substantial segment of potential consumers;
- The deception is material, in that it is likely to influence the consumer’s pur- chasing decision;
- The product is in interstate commerce; and
- The plaintiff has been or is likely to be injured as a result of the statement at issue.
To prevail, “a plaintiff must demonstrate that the commercial advertisement or promo- tion is either literally false, or that [if the advertisement is not literally false,] it is likely to mislead and confuse consumers.” A plaintiff also must “introduce evidence of the state- ment’s impact on consumers, referred to as materiality.”
Next, the court discussed non-actionable puffery. Puffery can be “(1) an exaggerated, blustering, and boasting statement upon which no reasonable buyer would be justified in relying; or (2) a general claim of superiority over comparable products that is so vague that it can be understood as nothing more than a mere expression of opinion.”
The jury found for Pizza Hut, and the district court enjoined Papa John’s use of “Better Ingredients. Better Pizza.” Pending appeal, the court of appeals stayed the injunction.
On the merits, the court of appeals upheld the finding that the ads were false and mis- leading because Papa John’s comparison ads “gave objective, quantifiable, and fact- specific meaning to the slogan. The court of appeals accepted the jury verdict, but found no evidence of materiality.
We find simply no evidence, survey or otherwise, to support the district court’s conclusion that the advertisements that the jury found misleading … somehow had become encoded in the minds of consumers such that the mention of the slogan reflectively brought to mind the misleading state- ments conveyed by the sauce and dough ads.
Therefore, the lower court’s decision was reversed.
Ayla v. Alya – Can trademark jurisdiction be found for overseas activities?
The next case is Ayla, LLC v. Alya Skin Pty. Ltd. 11 F.4th 972 (9th Cir 2021) (here): Ayla is in San Francisco; Alya Skin is in Australia. The issue was whether Alya Skin could be sued for trademark infringement in the United States. Less than 10% of its world-wide sales were to the United States. It had no retail stores here, and its products were not in retail stores. Those factors argued against ju- risdiction, but it had a contract with a logistic company in Idaho for shipments outside Australia and New Zealand. It applied to register its mark at the USPTO and told cus- tomers its products were approved by the U.S. FDA.
The court concentrated on jurisdiction in the United States instead of in California. Citing FED. R. CIV. P. 4(k)(2), it stated, “Personal jurisdiction is proper under Rule 4(k)(2) when (1) the action arises under federal law, (2) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction, and (3) the court’s exercise of jurisdiction com- ports with due process.”
“Under Rule 4(k)(2), the due process analysis “is nearly identical to traditional personal jurisdiction analysis … [but] rather than considering contacts between [the defendant] and the forum state, we consider contacts with the nation as a whole.”
Applying the rule, the court held:
Specific jurisdiction exists over nonresident Alya Skin (1) if the company performed some act or consummated some transaction by which it purposefully directed its activit[ies] toward the United States or purposefully availed itself of the privilege of conducting business in the United States, (2) if Ayla’s Lanham Act and unfair competition claims arise out of or result from Alya Skin’s forum-related activities, and (3) if the exercise of jurisdiction is reasonable.
The court ruled Alya Skin “purposefully availed” itself of doing business in the United States because it committed an intentional act, potential trademark infringement aimed
at the United States causing plaintiff harm. But the Ninth Circuit requires “something more” and found it through “marketing, sales, and operations reflect significant focus on the United States.” Another important fact: advertising on Instagram, “Attention USA Babes.” The Idaho fulfilment center also was important as was the FDA approval. The court also found jurisdiction in the United States would not be unreasonable.
Therefore, it reversed the district court’s dismissal and found jurisdiction. Note the cite to F.4th.
We will discuss these cases on October 25, 2021 via Teams and in-person for those wishing to attend. All are welcome to attend. To join the discussion, please RSVP via email to elisham @ socalip.com (remove the spaces, which have been inserted to thwart spammers) by ten am the day of the program to obtain a video conference link. The State Bar of California approves this activity for one hour of CLE credit.