E-commerce was already booming when the pandemic struck, and now it feels ubiquitous. Consumers spent $861.12 billion online with U.S. retailers in 2020, up 44.0% from $598.02 billion in 2019, representing 21.3% of total retail sales last year compared with 15.8% the year prior.2 The statistics only underscore what we’re all witnessing — technology stocks appreciating rapidly, a steady drumbeat of brick-and-mortar retailer bankruptcies, shopping mall closings, conversion of massive properties to logistics centers, catch-up efforts by traditional retailers to offer online sales and curbside pickup, and our own increasingly online shopping habits. Even when the sale of goods and services are not executed online, brick-and-mortar sellers are nonetheless utilizing the internet like never before to reach potential customers, educate them about their products, and coax them into stores. Whatever the world looks like after the pandemic ends, these e-commerce gains are likely here to stay.
It has never been more important therefore for brand owners to monitor and protect their brands online. E-commerce is a counterfeiter’s paradise, as explained succinctly by the OECD, “E-commerce platforms represent ideal storefronts for counterfeits and provide powerful platform[s] for counterfeiters and pirates to engage large numbers of potential consumers.”3 Why is this? E-commerce enables counterfeiters to send cheap knockoffs, which garner high margins, to unwary purchasers across the globe with little risk of legal repercussions.4 The first obstacle to legal enforcement is the anonymity afforded by both the internet generally and e-commerce platforms specifically. ICANN’s interpretation of Europe’s GDPR privacy legislation has generated a blackout of Whois information, making it more difficult to identify the perpetrators behind many illicit webshops.5 Moreover, e-commerce platforms do not operate by the same “know your seller” obligations burdening brick-and-mortar retailers. Whereas a brick-and-mortar retailer could be found liable for selling a counterfeit product in its store, and therefore presumably conducts diligence on and obtains contractual protections from each of its sellers, e-commerce platforms are considered mere intermediaries connecting sellers with buyers, ignorant of and without liability for the nature or quality of the products transacted. As summarized by the U.S. Department of Homeland Security, “While the U.S. brick-and-mortar retail store economy has a well-developed regime for licensing, monitoring, and otherwise ensuring the protections of intellectual property rights (IPR), a comparable regime is largely non-existent for international e-commerce sellers.”6
Since the SARS-CoV-2 pandemic began, many companies have continued to develop antimicrobial products and devices to address health and safety concerns. Many of those companies are surprised to learn that the way in which they are marketing their products may subject them to regulation by EPA under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA).
Even before COVID-19 had turned each of us into an amateur epidemiologist, companies in nearly every industry had begun to recognize the magnetic appeal of health and wellness claims in consumer advertising. Marketers of everything from cleaning products to apparel to furniture to homes were suddenly making claims touting the health and wellness benefits of their products. It wasn’t just better, it was better for you and your family. It will surprise no one to learn that the pandemic year of 2020 only intensified this trend, as consumers focused as never before on the ways that their purchases might not only help them live better lives, but perhaps even keep them alive.
Predictably, competitors, regulators and the plaintiff’s bar have all taken notice of this trend, and moved aggressively in response. In 2020, for example, the BBB National Programs’ National Advertising Division (NAD), the nation’s premier forum for competitor initiated advertising challenges, recorded an extraordinary 50% uptick in challenges to health-related advertising. Similarly, the Federal Trade Commission (FTC), Food and Drug Administration (FDA), Environmental Protection Agency (EPA), and state regulators across the country have focused intense scrutiny on companies claiming to offer health benefits to consumers often desperate for help. It is natural to predict that class actions and Lanham Act activity will soon reflect these trends as well.
So with the undeniable power of these claims balanced alongside the risks of a misstep, how should brand messaging communicate the health and wellness benefits of a product in the “right” way? And what are the red flags to look for in the advertising of your competitors? Here are a few hints:
Identify the Claims. Advertisement and marketing claims are intended to communicate characteristics of a good or service designed to entice a purchase. Claims are present in all forms of branded communication, from TV commercials, to print ads, radio announcements, pop-up ads, and social media influencer posts. Keep in mind it isn’t just about what you are saying, but what can be implied from the images, graphics and pictures.So whether looking to substantiate your own claims, or to challenge the claims of a competitor, the first step is to systematically identify the statements that actually qualify as a “claim.” For many marketers this can seem daunting, but in fact this initial analysis involves asking just a simple question: what exactly are you promising? Claims are promises and comparisons presented as facts: you should buy this product because it will improve your memory. You should buy this chair because it will reduce your back pain. You should use this cleaning product because (unlike the products sold by our competitors) it does not contain toxic chemicals. Performance claims, superiority claims, comparative claims – all of them are, in the end, statements which are either true or false, accurate or misleading. And it isn’t enough to say “everybody knows X is true” – all claims must be substantiated before you make them. And remember, it isn’t just what you say directly: you can be held accountable for what your spokesperson or influencer says, too.
Substantiation. What kind of evidence would substantiate the claim? How much data is necessary? Do I need a clinical trial? Is my evidence enough?The simple answer is…it depends. The level of scientific evidence necessary to support a claim always depends on the claim that is being made. Moreover, specific regulatory requirements may apply depending on the claim. If the product claims to ‘sanitize,’ for example, then it is possible that EPA approval may be necessary or it must meet certain FDA requirements. Of course, if the product is not regulated, the standard may differ. This is where talking things through with your counsel is most critical: the same type of claim on a different kind of product may not be subject to the same requirements. In any event, the science must closely match the requirements of the claim language. Don’t let your claim outpace the science – anecdotes from happy customers, or enthusiasm for your product, can never substitute for systematic evidence.
Magic Language. We all love puffery – and we all think we know it when we see it. But, that isn’t always the case. Statements that are specific, quantifiable or purport to describe objective facts may not constitute puffery, regardless of how over the top the language may seem. Claims about the ‘safest’, ‘best’, ‘highest quality,’ can all require substantiation under certain circumstances. Perhaps it is just enough to merely offer the “finest” of all puffery….
Is this a Regulated Claim? Is it possible that the product “sanitizes”, has “antimicrobial” properties, or somehow prevents or reduces the likelihood of contracting COVID-19?These statements are important ones as they may transform the product from an ordinary consumer product to a regulated product. Sanitizing and antimicrobial properties may trigger EPA review and treatment or prevention of a disease may render a product a ‘drug’ regulated by the FDA. Of course, the FTC may also assert its authority particularly if these statements are disseminated on a product website or in other forms of advertisement. It is possible that the mere existence of these words invite enforcement activity.
Is this a Comparative Claim? The most, the best, the mostest, the bestest, the… mostest bestest? We all want to be on top, but sometimes that means a “head-to-head” comparison is necessary to substantiate the claim. Even then, it is necessary to understand that an unqualified comparison may trigger a greater level of substantiation because consumers may understand it to mean “as compared to all leading products nationwide.” Our advice: “Think before you compare” and determine the basis for your comparison – don’t just assume that everyone will understand it in the same way.
While health and wellness claims are subject to an increasingly intense level of scrutiny by competitors and regulators alike, there is little question that consumers want to know whether the products they buy are in alignment with the health and wellness goals they have set for themselves and their family. A well-crafted campaign supported by properly substantiated claims is not only a way to stay out of trouble, but a way of building deeper and more lasting engagement with educated consumers.
So you’re thinking about changing your company name, brand, or both. We usually like to allow at least a few months to identify the new name and initiate protection. To help you plan, here’s a high-level overview of significant steps in the process. Happy rebranding!
In February 2020, Faegre Baker Daniels and Drinker Biddle & Reath LLP combined to form one of the nation’s 50 largest law firms. Soon after the combination, Faegre Drinker shifted to a virtual work environment to protect our clients, colleagues and loved ones during the global COVID-19 pandemic. We nevertheless remained committed to the success of our clients in a challenging year, and focused on serving clients with our new firm’s combined capabilities.
This month marks not only the first year of Faegre Drinker, but also the inaugural year of TCAM Today – Faegre Drinker’s blog covering all things trademark, copyright, advertising and media. In 2020, Faegre Drinker’s team of more than 30 T-CAM professionals shared their insight on topics ranging from social media influencers to trademark trolls.
Amidst public criticism and pressure from corporate sponsors, many well-known brands are taking a hard look at their trademarks and choosing to move in a new direction. These changes are impacting brands in various industries from sports teams, like the currently unnamed Washington NFL team, to retailers, like Trader Joe’s. While appeasing the call for change, an unfortunate consequence with which these brand owners must deal are trademark trolls.
Intellectual property rights holders are constantly seeking creative ways to protect their brands, including preventing counterfeit products from entering the marketplace. There are the traditional methods – such as federal trademark registration with the United States Patent and Trademark Office – that are well-known to most companies. However, many companies are less familiar with the high-value, low-cost enforcement tools available through a Customs Recordation filing with United States Customs and Border Protection.
United States Customs and Border Protection (CBP) can be a vital partner in your company’s efforts to enforce its trademarks and copyrights, and to stop counterfeit imports. Intellectual property enforcement is currently a “Priority Trade Issue” for CBP, and the increased focus on such enforcement is highly beneficial to companies who can then leverage CBP’s database and workforce to identify and stop counterfeit product imports. CBP uses the information contained in its database of recorded trademarks and copyrights in order to target and seize imports of counterfeit and pirated goods at various U.S. ports of entry. In FY 2019, CBP seized more than 27,000 shipments containing counterfeit goods, enforcing over 18,500 active recordations1. Notably, CBP rarely takes action to detain or seize goods displaying trademarks or copyrights that are not recorded; therefore, it is critical to include CBP recordation as part of your enforcement strategy.
The global COVID-19 crisis has created dynamic shifts in how businesses source and sell goods and services. Whether those shifts are temporary or will solidify into more permanent structures ushering in a “new normal” era of consumerism, remains to be seen. As I write this, it is the weekend after Memorial Day 2020. Just yesterday, my home state of Virginia commenced phase I of a graduated reopening of the state economy, while last weekend’s headlines focused on widespread defiance of stay-at-home orders and social distancing guidelines as the U.S. death toll climbed towards 100,000 (a milestone it has now passed). It is clear that there are limits to our willingness to stay home, and that bodes well for the survival of some brick-and-mortar retailers. But brick-and-mortar retail and business in general may look significantly different in a post-pandemic world. The companies emerging stronger will likely be those that use this time to rethink who they are, what they do, and how they do it — and the ways in which they convey that message to consumers.
In a world where social media influencers can wield more power over consumers than network media buys, the Federal Trade Commission’s (FTC) Endorsement Guides felt increasingly like a relic from an earlier era. While not wholly ineffective, the FTC’s formal guidance to businesses on the use of endorsements and testimonials in advertising was still a policy with roots in the limited media environment of the 1970s, the decade when the Guides originated. There were no Instagram influencers, no sponsored posts, and no hashtags in 1980, when the Guides were finally enacted, and even cable television was in its infancy. And despite important and well-intentioned 2009 amendments crafted during the early days of social media, so much has happened in the intervening years that the Guides never seemed fully engaged with the radical implications of a marketing environment where blurring the lines between advertising and reality is more often a feature rather than a bug.
Companies in 2020 must comply with more data privacy laws than ever before. Effective on January 1, the California Consumer Privacy Act (CCPA) contains the most complex data privacy compliance requirements in U.S. history. Some other states have their own requirements, and more states are following suit; many are considering data protection laws while their legislatures are in session.
Compliance with the CCPA and other relevant privacy laws and industry standards involves much more than a brief privacy law update and presents multiple opportunities for customer engagement. Consider using those opportunities to enhance your relationship with your customers. How companies handle consumer data has already become one way in which consumers evaluate whether to do or continue doing business with a particular company. Poorly handled data privacy issues quickly create negative customer experiences, online reviews, and bad press. Differentiate your company by handling customer data — and customer relationships — with intentionality and care.
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