RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0329p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
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INNOVATION VENTURES, LLC, d/b/a LIVING
Plaintiff-Appellant/Cross-Appellee, --
ESSENTIALS,
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Nos. 10-2353/2355
,
>
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v.
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Defendant-Appellee/Cross-Appellant. N-
N.V.E., INC.,
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 2:08-cv-11867—Lawrence P. Zatkoff, District Judge.
Argued: April 18, 2012
Decided and Filed: September 13, 2012
Before: BOGGS and GRIFFIN, Circuit Judges; BARZILAY, Judge.*
_________________
COUNSEL
ARGUED: Glen D. Nager, JONES DAY, Washington, D.C., for Appellant/Cross-
Appellee. Leigh C. Taggart, RADER, FISHMAN & GRAUER PLLC, Bloomfield Hills,
Michigan, for Appellee/ Cross-Appellant. ON BRIEF: Glen D. Nager, Eric E. Murphy,
JONES DAY, Washington, D.C., Mark A. Cantor, Phyllis Golden Morey, Marc Lorelli,
BROOKS KUSHMAN P.C., Southfield, Michigan, for Appellant/Cross-Appellee. Leigh
C. Taggart, R. Terrance Rader, Douglas P. LaLone, Linda Mettes, RADER, FISHMAN
& GRAUER PLLC, Bloomfield Hills, Michigan, for Appellee/ Cross-Appellant.
*
The Honorable Judith M. Barzilay, Senior Judge, United States Court of International Trade,
sitting by designation.
1
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 2
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OPINION
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BOGGS, Circuit Judge. This is a powerful appeal. Innovation Ventures, LLC,
d/b/a Living Essentials (LE), creator of the “5-hour ENERGY” energy shot, asserts that
N.V.E. Inc. (NVE), creator of the “6 Hour POWER” energy shot, infringed its
trademark, in violation of the Lanham Act. 15 U.S.C. § 1125(a). After LE obtained a
decision in its favor in another case against a different competitor, LE distributed a
“recall notice” stating that NVE’s “‘6 Hour’ energy shot” had been recalled. NVE
claims that the notice constituted false advertising in violation of the Lanham Act and
anti-competitive conduct in violation of the Sherman Act, 15 U.S.C. § 2. The district
court granted cross-motions for summary judgment, dismissing the three claims that are
now on appeal. It first found that a likelihood of confusion did not exist between “6
Hour POWER” and “5-hour ENERGY” and then held that the recall notice did not
constitute false advertising or a violation of the Sherman Act. We reverse the judgment
of the district court with respect to the trademark infringement and false advertising
claims and affirm the judgment with respect to the Sherman Act claims.
I
In September 2004, LE, a Michigan limited-liability company, began to test-
market “5-hour ENERGY,” an energy shot. The Patent and Trademark Office denied
LE’s 2004 application for registration of “5-hour ENERGY” as a trademark on the
grounds that the name was descriptive. Starting in June 2005, LE marketed “5-hour
ENERGY” in national drug-store chains, convenience stores, and retailers nationwide.
NVE, a New Jersey company, has been in the business of selling various diet,
stimulant, and other nutritional products since 1980 under its Stacker 2® mark. After
declaring bankruptcy in August 2005 due to numerous lawsuits resulting from products
containing ephedra, a substance banned by the FDA in 2004, NVE decided to enter the
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 3
energy-shot market. In March 2006, NVE introduced the “6 Hour POWER” energy shot.
The packaging of the two products is shown below.
The preceding facts are largely undisputed. The rest of the litigation is
complicated.
II
In May 2008, LE brought suit against NVE, claiming trademark infringement
under 15 U.S.C. § 1114, 15 U.S.C. § 1125(a), and state common law, asserting that a
likelihood of confusion existed between “5-hour ENERGY” and “6 Hour POWER.”
The district court declined to exercise supplemental jurisdiction and dismissed the
common-law claims. NVE had filed two cases against LE in district court in New
Jersey, also in May 2008, which were transferred to the Eastern District of Michigan and
consolidated with this litigation in December 2008. NVE alleged eight counterclaims,
primarily arising from a recall notice LE distributed: (1) violation of the
Anticybersquatting Consumer Protection Act; (2) false advertising, in violation of 15
U.S.C. § 1125(a); (3) “business and product disparagement”; (4) tortious inference with
contract; (5) tortious inference with business relations; (6) monopolization in violation
of the Sherman Act; (7) attempted monopolization; and (8) violation of the Michigan
Consumer Protection Act. LE and NVE filed cross-motions for summary judgment.
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The district court granted summary judgment in favor of NVE, finding that a
likelihood of confusion did not exist between “6 Hour POWER” and “5-hour
ENERGY.” The district court granted summary judgment in favor of LE on the nine
counterclaims. LE appeals the grant of summary judgment with respect to the
trademark-infringement claim. NVE appeals the grant of summary judgment with
respect to the false-advertising and Sherman Act claims.
III
A
A claim under 15 U.S.C. § 1125(a) presents a mixed question of fact and law.
Gen. Motors Corp. v. Lanard Toys, Inc., 468 F.3d 405, 412 (6th Cir. 2006). When a
district court grants summary judgment under § 1125(a), this court “appl[ies] an entirely
de novo standard of review” to both the district court’s review of the eight factors and
its likelihood-of-confusion finding. Daddy’s Junky Music Stores, Inc. v. Big Daddy’s
Family Music Ctr., 109 F.3d 275, 280 (6th Cir. 1997). “We therefore may affirm the
grant of summary judgment to defendant only if the record, when viewed in the light
most favorable to plaintiff, contains no genuine issue of material fact.” Ibid.
The Lanham Act provides a private cause of action for violations of protected
trademark rights:
Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or
device, or any combination thereof . . . which—(A) is likely to cause
confusion, or to cause mistake, or to deceive as to the affiliation,
connection, or association of such person with another person, or as to
the origin, sponsorship, or approval of his or her goods, services, or
commercial activities by another person . . . shall be liable in a civil
action by any person who believes that he or she is or is likely to be
damaged by such act.
15 U.S.C. § 1125(a)(1)(A).
This court has adopted a two-step approach to consider claims under § 1125(a).
First, we determine “whether the [plaintiff’s] mark is protectable,” and second, “whether
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 5
there is a likelihood of confusion as a result of the would-be infringer’s use of the mark.”
See Tumblebus Inc. v. Cranmer, 399 F.3d 754, 761 (6th Cir. 2005).
B
The parties dispute whether the plaintiff’s mark is protectable—an issue the
district court did not address.
NVE argues that “LE has no common law trademark rights superior to NVE: it
failed to offer the evidence required to establish secondary meaning in any particular
geographic area before NVE’s first use of the accused mark in March 2006.” Appellee
Br. at 57. Specifically, asserting that “5-hour ENERGY” is only descriptive, NVE
claims that LE failed to show that the mark was distinctive. Further, NVE argues that
LE cannot prove that prior to March 2006—when “6 Hour Power” entered the
market—“5-hour ENERGY” had acquired secondary meaning. Burke-Parsons-Bowlby
Corp. v. Appalachian Log Homes, Inc., 871 F.2d 590, 595–96 (6th Cir. 1989).
1
First we consider whether LE waived this defense by not raising it in its initial
brief. NVE claims that LE “did not contest the Court’s ruling that the mark is
descriptive” rather than distinctive. Appellee Br. at 45. Thus, NVE argues in its leading
brief that any challenge with respect to the distinctiveness of the mark is waived. LE
counters that it is not raising a new argument but responding to the alternative basis for
affirmance advanced by NVE on appeal: “[w]hen an appellee raises in its answer brief
an alternative ground for affirmance, the appellant is entitled to respond in its reply
brief.” United States v. Brown, 348 F.3d 1200, 1213 (10th Cir. 2003). NVE replies that
this argument is inapposite, as arguments that “relate to the basis of the district court’s
ruling” are waived, even if responsive to arguments raised by appellee. Id. at 1210.
According to NVE, “LE’s new argument disputing descriptiveness not only relates to
a basis of the district court’s ruling but relates to one of the two pivotal factors.” We
read the district court’s discussion of distinctiveness differently.
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In consideration of the first of the eight factors in the test for likelihood of
confusion—the strength of the plaintiff’s mark—the district court found that, “[g]iven
the descriptive nature of Plaintiff’s mark, i.e., that it provides users with five hours of
energy, the mark itself has little strength.” District Ct. Op. at 21–22 (emphasis added).
Later, the district court concluded that, “[h]aving considered the above eight factors
together, the Court finds that no genuine issues of material fact are present regarding the
likelihood of confusion. Pivotal in the Court’s decision is the dissimilarity between the
marks, especially when combined with the descriptive nature of Plaintiff’s 5-hour
ENERGY mark.” Id. at 26 (emphasis added). NVE reads the district court opinion as
“explicitly identif[ying] the descriptive nature of 5-hour ENERGY as one of the two
most important factors underlying its decision.” NVE is correct about the district court’s
holding with respect to likelihood of confusion and strength of LE’s mark. However,
the district court was silent with respect to whether the mark was distinctive enough to
warrant protection under the Lanham Act.
The district court’s discussion of descriptiveness occurred in the context of
determining that there was no likelihood of confusion, not in deciding whether the
trademark was protectable. While distinctiveness was certainly “pivotal” for the former
test, it was not even mentioned for the latter test. The district court’s opinion did not
contain any analysis about whether the mark was protectable. LE would not have been
on notice that it needed to address in its initial brief an issue not even discussed by the
district court. Consequently, there is no waiver, and we find that LE properly responded
to the alternative basis for affirmance raised on appeal by NVE. We now turn to the
merits.
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 7
2
NVE claims that the term “5-hour ENERGY” is not a distinctive mark, but is a
descriptive mark.1 A descriptive mark, by itself, is not protectable. However, “[a]
merely descriptive term . . . can, by acquiring a secondary meaning, i.e., becoming
distinctive of the applicant’s goods . . . , become a valid trademark.” Induct-O-Matic
Corp. v. Inductotherm Corp., 747 F.2d 358, 362 (6th Cir. 1984) (internal quotation
marks omitted). LE counters that the “5-hour ENERGY” mark is not descriptive, but
rather is distinctive, due to the mark’s suggestiveness. Such a mark “suggests rather
than describes an ingredient or characteristic of the goods and requires the observer or
listener to use imagination and perception to determine the nature of the goods.” Id. at
362. “Suggestive . . . marks are inherently distinctive and are protectable so long as the
putative owner has actually used the mark.” Tumblebus, 399 F.3d at 761 (citing Two
Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992)). Because a suggestive mark
is inherently distinctive, it “can be protected without proof of a secondary meaning.”
Induct-O-Matic, 747 F.2d at 362–63.
The “5-hour ENERGY” mark could be characterized as merely descriptive, in
the sense that it simply describes a product that will give someone five hours of energy.
But that is not the end of such an inquiry. The first question one would ask is how would
the energy be transferred? Through food? Through drink? Through injections?
Through pills? Through exercise? Also, one would ask what kind of energy is the mark
referring to? Food energy (measured in Calories)? Electrical energy? Nuclear energy?
With some thought, one could arrive at the conclusion that the mark refers to an energy
shot. But it is not as straightforward as NVE suggests. Such cognitive inferences are
indicative of “suggestive” rather than descriptive marks.
1
We note that, in contrast with its position in this case, in other litigation NVE has asserted that
its own mark, “6 Hour POWER,” is an “inherently distinctive” mark. See Complaint at ¶ 12, N.V.E., Inc.
v. N2G Distrib., Inc. & Alpha Performance Labs, No. 2:08-cv-01824 (D.N.J. Apr. 14, 2008) (“The
6 HOUR POWER mark distinguishes NVE as the source of these products, is inherently distinctive, and
has also become distinctive through the acquisition of secondary meaning.” (emphasis added)).
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 8
The nature of the “5-hour ENERGY” mark “shares a closer kinship with those
marks previously designated as suggestive than those labeled merely descriptive because
of the degree of inferential reasoning necessary for a consumer to discern” that the “5-
hour ENERGY” mark relates to an energy shot. Tumblebus, 399 F.3d at 763. The
connection between “5-hour” and “ENERGY” is “not so obvious that a consumer seeing
[5-hour ENERGY] in isolation would know that the term refers to” an energy shot rather
than, for example, a battery for electronics, an exercise program, a backup generator, or
a snack for endurance sports. Ibid. Connecting the mark “5-hour ENERGY” with the
energy-shot product requires “imagination and perception to determine the nature of the
goods.” Induct-O-Matic, 747 F.2d at 362.
“The line between merely descriptive and suggestive marks is admittedly hazy
and can be difficult to discern.” Tumblebus, 399 F.3d at 763. However, we disagree
with NVE’s contention that the mark is not distinctive and thus not protectable. The “5-
hour ENERGY” mark is “suggestive.” We decline NVE’s request to affirm on an
alternate ground. Because the “5-hour ENERGY” mark is suggestive and thus
protectable, we next consider whether a triable issue of likelihood of confusion exists.
C
1
Whether a likelihood of confusion exists “is a mixed question of fact and law,”
but the ultimate determination of “whether a given set of foundational facts establishes
a likelihood of confusion is a legal conclusion.” Therma-Scan, Inc. v. Thermoscan, Inc.,
295 F.3d 623, 630–31 (6th Cir. 2002). To prevail on its trademark infringement claim,
plaintiff must show that defendant’s mark creates a likelihood of confusion regarding the
origin of the goods offered by plaintiff and defendant. Id. at 629. In determining
whether a likelihood of confusion exists, the Sixth Circuit considers the following
factors:
(1) the strength of the plaintiff’s mark, (2) the relatedness of the goods
or services offered by the plaintiff and the defendant, (3) the similarity
of the marks, (4) any evidence of actual confusion, (5) the marketing
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 9
channels used by the parties, (6) the probable degree of purchaser care
and sophistication, (7) the defendant’s intent in selecting its mark, and
(8) the likelihood of either party expanding its product line using the
marks.
Frisch’s Rests., Inc. v. Elby’s Big Boy of Steubenville, Inc., 670 F.2d 642, 648 (6th Cir.
1982). While not all of the factors are relevant in every case, “[t]he ultimate question
remains whether relevant consumers are likely to believe that the products or services
offered by the parties are affiliated in some way.” Therma-Scan, 295 F.3d at 630.
2
The district court found that factors two, five, and six weighed in favor of LE;
factors one, three, four, and seven weighed in favor of NVE; factor eight was not
applicable. “Pivotal in the Court’s decision [was] the dissimilarity between the marks,
especially when combined with the descriptive nature of Plaintiff’s 5-hour ENERGY
mark.” District Ct. Op. at 26. The court found that there was no “likelihood of
confusion merely because Defendant’s mark, like Plaintiff’s mark, describes the number
of hours of energy that it will provide, especially where one focuses on ‘ENERGY’ and
the other focuses on ‘POWER.’” Id. at 27. Specifically with respect to factor seven,
the district court found that LE failed to show that NVE adopted the “6 Hour POWER”
mark with the intent to cause confusion and derive benefit from the reputation or
goodwill of the plaintiff. “Defendant has presented credible evidence that it did not
choose the 6 Hour POWER mark to intentionally copy Plaintiff’s mark.” Id. at 26.
3
LE focuses most of its attention on the seventh Frisch’s factor—whether NVE
intentionally copied the “5-hour ENERGY” mark. The origin and inspiration of the
name “6 Hour POWER” is in dispute—the accounts of NVE President Robert
Occhifinto and former NVE Vice President Joe Palmeroni are in tension. On appeal, LE
argues that the court should not have credited the testimony of Occhifinto but rather
should have relied on the testimony of Palmeroni.
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 10
Occhifinto claimed that he chose the name “6 Hour POWER” for two reasons:
first, the effects of the caffeine in the shot last approximately six hours; and second, the
rhyming scheme of an earlier product named “TOWER OF POWER” led them to use
the term “POWER.” Even if NVE had previously used the term “TOWER OF POWER”
for energy pills, this seems to be a convenient coincidence.
Palmeroni had a different recollection. Palmeroni testified that in early
2005—prior to LE’s attempt to register “5-hour ENERGY”—Occhifinto directed a team
to begin investigating the energy-shot industry and determine whether it was a viable
market. Palmeroni discovered that “it was not a mature market at all, that it was a
growing market, and that looked like the next big thing.” During their market research,
Palmeroni admitted that the team focused on “5-hour ENERGY,” as it was “really the
only one that we took seriously.” Palmeroni stated in his deposition that LE’s sales
“were blowing up” and that NVE “needed to get [in] on this game or [it was] going to
get left behind.” NVE “started making mock-ups almost immediately.” Specifically,
with respect to choosing the name, he focused on having a shot that was better than a
shot that lasts only five hours—namely, six hours.
When asked if he believed that “the name 6 Hour Power was selected by N.V.E.
to trade off of the success and reputation of 5-Hour Energy,” he answered “[y]es.”2
Palmeroni’s testimony is not particularly helpful to LE and merely reflects that NVE
looked for ways to compete with “5 hour ENERGY,” not copy it. In fact, when
Palmeroni raised possible issues relating to likelihood of confusion between the
products, Occhifinto discussed ways to differentiate the products, e.g., using a different
color, to eliminate possible grounds of confusion. At a meeting prior to November 2005,
Palmeroni “brought up that there may be possible copyright issues with the product.”
After he raised the issue about possibly “confusing the consumer,” Occhifinto told him
“well, we’ll just change the color; it’s a color issue and that I should, you know, not try
to be a lawyer and try to be a salesman, which is what I was.”
2
NVE objected to this question during the deposition and asserts that it is an “inadmissible
leading question.” Appellee Br. at 50. We disagree.
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 11
NVE further challenges the reliability of Palmeroni’s testimony. First, NVE fired
Palmeroni on January 6, 2006, before it adopted the name “6 Hour POWER” in March
2006. Thus he was not involved with the final decision to select the name. However,
he had already been involved in discussing “5-hour ENERGY” for some time.
Additionally, Palmeroni and NVE are embroiled in other legal matters. In a case still
pending in United States District Court in New Jersey, Civil Action 2:06-cv-05455, NVE
is suing Palmeroni for receiving kickbacks from distributors of NVE’s products. Finally,
NVE alleges that Ozzy Torres, Esq., an “associate” of Palmeroni’s, “proposed a deal
where NVE would agree to drop its New Jersey case against Palmeroni in exchange for
Mr. Palmeroni’s favorable testimony at his upcoming deposition in this case.”
Apparently though, this was an offer NVE could refuse.
NVE moved to strike Palmeroni’s testimony, which it claimed constituted
perjury. The district court denied the motion as moot, finding that “the challenged
exhibits were not relevant to the Court’s disposition of Plaintiff’s motions for summary
judgment.” District Ct. Op. at 27–28.
In any event, Palmeroni’s testimony—even assuming it is accurate—is not very
helpful to LE. Palmeroni was no longer with the company when Occhifinto made the
decision to use the name “6 Hour POWER.” It seems that any discussion of “5-hour
ENERGY”at this early juncture focused on its large market share and the need to catch
up, rather than to copy it. His participation in the development of the product prior to
his departure shows, at best, that NVE sought to compete with LE, not to copy it. LE
cannot show that NVE possessed an intent to derive a benefit from “5-hour ENERGY.”
If anything, evidence exists that NVE had independent reasons for choosing its mark as
it attempted to compete with LE.
4
The only evidence, other than Palmeroni’s deposition, that LE provided to show
that NVE attempted to take advantage of the position of “5-hour ENERGY” as the first
entrant into the market is an email sent by Dirk Nieuwenhuis to Palmeroni, Arthur
Prindle, and Karen Finnochio (all employees of NVE) on November 10, 2005, with the
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 12
subject “Chaser Liquid Energy.” The email states: “Just a heads-up. Weren’t we going
to make a product like this for the c-stores [convenience stores]. I’ll find out how the
product is doing.” Attached to the message was a brochure for “5-hour ENERGY.”
However, this message simply reflected prior discussions to make a similar energy shot
for convenience stores and notes that further market research would be conducted.
D
This factually intensive issue is a close call and could, on a fair comparison of
the evidence to date, be decided either way. However, when the factors, as found by the
district court, were so evenly balanced—a 4 to 3 split, with the eighth factor not at issue
in this case—precedent counsels in favor of not granting summary judgment. The
district court said that it gave little weight to much of LE’s evidence, which included a
survey that used “highly leading questions,” evidence of confusion from “third party
witnesses,” and forty alleged instances of consumer confusion. This is the wrong
posture to take on summary judgment. Big Daddy’s, 109 F.3d at 280 (“We therefore
may affirm the grant of summary judgment to defendant only if the record, when viewed
in the light most favorable to plaintiff, contains no genuine issue of material fact.”); see
also Gen. Motors Corp. v. Keystone Auto. Indus., Inc., 453 F.3d 351, 359 (6th Cir. 2006)
(“These genuine disputes of material fact render summary judgment inappropriate, a
common disposition in evaluating likelihood of confusion.”); Levi Strauss & Co. v. Blue
Bell, Inc., 778 F.2d 1352, 1356 n.5 (9th Cir. 1985) (“[T]rial courts disfavor deciding
trademark cases in summary judgments because the ultimate issue is so inherently
factual.”). Summary judgment was improperly granted on this claim.
IV
A
NVE was not the only game in town that made energy shots with the name
“6 Hour.” LE was also involved in two totally separate cases with two energy-shot
producers other than NVE concerning products labeled “6 Hour Energy Shot” and
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 13
“6 Hour ENERGY!”. These other cases provide the foundation for NVE’s false
advertising claim.
1
N2G Distributing, Inc. (N2G) and Alpha Performance
Labs (Alpha) distributed “6 Hour Energy Shot,” a product
(pictured on the right) not made by NVE. In March 2008—in an
action totally separate from the suit between LE and NVE—LE
sued N2G and Alpha, asserting trademark and trade-dress
claims. The United States District Court for the Eastern District
of Michigan entered a preliminary injunction and recall order
enjoining the sale of “6 Hour Energy Shot” based on a trade-
dress claim; however, the court did not find that the name
infringed LE’s trademark. LE claims that the defendants issued the recall order only to
their customers and not to retailers who purchased the product from third parties. After
the recall had been completed, LE took it upon itself to send an additional recall notice,
dated May 29, 2008, to 110,000 convenience stores and truck stops and to place a notice
in retailer magazines.
The notice read:
RECALL OF “6 HOUR” SHOT ORDERED
Court orders immediate stop to manufacturing, distributing and sale of 6 Hour
Energy shot.
Dear Customer,
We are pleased to announce that we won a decision against a “6
Hour” energy shot that closely mimicked 5-Hour Energy®. The United
States District Court, in Case No. 08-CV-10983, issued a preliminary
injunction ordering the immediate recall of the “6 Hour” product, and
told its manufacturer to stop making, distributing and selling it.
If you have any of the “6 Hour” energy shots in your store(s) or
warehouse(s) contact the product’s manufacturer or your distributor to
return the product immediately.
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 14
DO NOT RETURN ANY 5-HOUR ENERGY®. It can be
difficult to tell 5-Hour Energy® apart from the “6 Hour” knockoff
product. If you have any questions, please call us at 248-960-1700 ext.
217.
We will vigorously protect the 5-Hour Energy® brand by
pursuing all legal avenues against anyone encroaching on it, or creating
confusion in the marketplace.
2
In April 2008, after LE sent this notice, BDI Marketing, Inc. (BDI)—which sold
a product called “6 Hour ENERGY!” (different from “6 Hour Energy Shot” and also not
made by NVE)—sued LE in the Eastern District of Michigan for false advertising (this
suit is also totally unrelated to the matters between LE and NVE). BDI moved for a
preliminary injunction, alleging that LE’s recall notice constituted false advertising, in
violation of Section 43 of the Lanham Act. Magistrate Judge Pepe recommended that
the injunction be granted. “Living Essentials did not win a decision against a ‘“6 Hour”
energy shot’ as stated in the press release, but rather won a decision against N2G’s use
of a[n] overall product image (i.e. - the label and bottle) that was confusingly similar to
Living Essentials’ overall product image.” Living Essentials v. BDI Mktg., No. 2:08-cv-
12711, 2008 U.S. Dist. LEXIS 116678, at *9–10 (E.D. Mich. Oct. 28, 2008). The
magistrate judge concluded that BDI demonstrated a likelihood of success on the merits
of its claim that the legal notice was misleading and had a tendency to deceive its
intended audience. Ibid. District Judge Rosen adopted the magistrate judge’s report and
recommendation and granted a preliminary injunction against LE: “Living Essentials
could easily have avoided any possibility of confusion by identifying the actual
manufacturer and product enjoined in its release.”
B
1
NVE asserts on appeal that the recall notice LE distributed constituted false
advertising. Section 1125(a) prohibits “[a]ny person [from] . . . us[ing] in commerce any
word, term, name, symbol, or device . . . which . . . in commercial advertising or promotion,
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 15
misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another
person’s goods, services, or commercial activities.” 15 U.S.C. § 1125(a)(1)(B). “Liability
arises if the commercial message or statement is either (1) literally false or (2) literally true or
ambiguous, but has the tendency to deceive consumers.” Novartis Consumer Health, Inc. v.
Johnson & Johnson-Merck Consumer Pharm. Co., 290 F.3d 578, 586 (3d Cir. 2002); see also
Castrol, Inc. v. Pennzoil Co., 987 F.2d 939, 943 (3d Cir. 1993) (holding that “a plaintiff must
prove either literal falsity or consumer confusion, but not both”).
NVE asserts that a jury could reasonably find that the notice: (1) was “literally false”;
or (2) was “misleading” and deceived the intended audience. See Balance Dynamics Corp.
v. Schmitt Indus., Inc., 204 F.3d 683, 695–96 (6th Cir. 2000). The former theory focuses on
the plain language of the notice, while the latter focuses on how the notice was perceived by
its intended audience. The district court in the proceedings below in this case found that the
notice was neither literally false nor misleading, disagreeing with the conclusion of the BDI
court. District Judge Zatkoff found that “Judge Rosen’s opinion and order adopting the Report
and Recommendation did not state that the legal notice was false; rather, Judge Rosen
concluded only that the legal notice was misleading.” District Ct. Op. at 11. Judge Zatkoff
further disagreed with Magistrate Judge Pepe’s conclusions in BDI:
[I]t is undisputed that Plaintiff was awarded injunctive relief against the
producer of an energy shot bearing the name “6-Hour,” as stated in the notice.
Stating that the decision was based on the use of an overall product image
would have, perhaps, provided more clarity, but the absence of the explanation
for the injunctive relief does not render the statement literally false.
Ibid. Parsing the language of the notice, Judge Zatkoff found that though the notice was
ambiguous—“it did not state which product had been recalled”— it was not deceiving. Id. at
13.
2
Where statements are literally true yet deceptive or too ambiguous to support a finding
of literal falsity, a violation can only be established by proof of actual deception. A plaintiff
relying on statements that are literally true yet misleading “cannot obtain relief by arguing how
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 16
consumers could react; it must show how consumers actually do react.” Sandoz Pharm. Corp.
v. Richardson–Vicks, Inc., 902 F.2d 222, 229 (3d Cir.1990). On the other hand, where
statements are literally false, a violation may be established without evidence that the
statements actually misled consumers. See, e.g., Johnson & Johnson, Inc. v. GAC Int’l, Inc.,
862 F.2d 975, 977 (2d Cir. 1988); PPX Enters., Inc. v. Audiofidelity Enters., Inc., 818 F.2d
266, 272 (2d Cir. 1987). Actual deception is presumed in such cases. See U–Haul Int’l, Inc.
v. Jartran, Inc., 793 F.2d 1034, 1040 (9th Cir. 1986). “A ‘literally false’ message may be
either explicit or ‘conveyed by necessary implication when, considering the advertisement in
its entirety, the audience would recognize the claim as readily as if it had been explicitly
stated.’” Novartis, 290 F.3d at 586–87 (quoting Clorox Co. v. Proctor & Gamble Commercial
Co., 228 F.3d 24, 35 (1st Cir. 2000)). “‘The greater the degree to which a message relies upon
the viewer or consumer to integrate its components and draw the apparent conclusion,
however, the less likely it is that a finding of literal falsity will be supported.’” Id. at 587.
(quoting United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1181 (8th Cir. 1998)).
3
The language of the recall notice teeters on the cusp between ambiguity and literal
falsity in two main respects—descriptive and grammatical.
First, the notice could be viewed as either ambiguous or false with respect to how the
product is named. Towards the top, the notice simply referred to “‘6 Hour’ Energy shot”—in
the notice “6 Hour” was in quotations, while “Energy shot” was not—without a prefatory
article. At no point does the notice identify the name of the recalled product, “6 Hour Energy
Shot.” Read broadly, this could be considered ambiguous, as it does not specify which product
was the subject of the recall; on further reflection, one could understand which products were
and were not recalled. Read narrowly, this could be literally false—only a product specifically
called “6 Hour Energy Shot” was recalled, not any energy shot whose name contained the
words “6 Hour.” The notice never referred to the product as “6 Hour Energy Shot” in one
complete phrase.
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 17
Only one product, “6 Hour Energy Shot,” and not other “6 Hour” products, such as
“6 Hour POWER,” were subject to the recall. At the time, there were several other energy
shots, in addition to NVE’s, with the phrase “6 Hour” in the title, such as “6 Hour Energy!”
(made by BDI) and “Extreme Energy Six Hour Shot” (made by Ener Formulations Ltd.).
None of these were recalled. Relatedly, LE wrote that it “w[o]n a decision against a ‘6 Hour’
energy shot.” This statement is not literally true—LE won a decision against N2G’s use of an
overall product image, i.e., the label and bottle, that was confusingly similar to LE’s overall
product image.
Second, the notice uses different prefatory words to introduce the recalled product. At
some points the notice uses an indefinite prefatory article, “a,” to refer to “a ‘6 Hour’ energy
shot,” suggesting that there may be more than one possible product at issue. At other points,
the notice uses the prefatory pronoun “any”: “If you have any of the ‘6 Hour’ energy shots
in your store(s) or warehouse(s) contact the product’s manufacturer”—whoever they may
be—“or your distributor to return the product immediately.” (emphasis added). By saying
“any” of the shots, the notice suggests that any shot bearing the name “6 Hour” was subject
to recall. Elsewhere, the notice uses the prefatory definite article “the”: “If you have any of
the ‘6 Hour’ energy shots in your store(s) or warehouse(s) contact the product’s manufacturer
or your distributor to return the product immediately.” (emphasis added). This definite article
suggests that there is only one specific product at issue, though the statement as a whole fails
to specify exactly what product.
Justice Kagan recently had the occasion to opine on the subtle difference between “not
an” and “not any”:
Truth be told, the answer to the general question “What does ‘not an’ mean?”
is “It depends”: The meaning of the phrase turns on its context. See Johnson
v. United States, 559 U.S. ____, ____, 130 S. Ct. 1265, 1270, 176 L. Ed. 2d 1
(2010) (“Ultimately, context determines meaning”). “Not an” sometimes means
“not any,” in the way Novo claims. If your spouse tells you he is late because
he “did not take a cab,” you will infer that he took no cab at all (but took the
bus instead). If your child admits that she “did not read a book all summer,”
you will surmise that she did not read any book (but went to the movies a lot).
And if a sports-fan friend bemoans that “the New York Mets do not have a
chance of winning the World Series,” you will gather that the team has no
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 18
chance whatsoever (because they have no hitting). But now stop a moment.
Suppose your spouse tells you that he got lost because he “did not make a
turn.” You would understand that he failed to make a particular turn, not that
he drove from the outset in a straight line. Suppose your child explains her
mediocre grade on a college exam by saying that she “did not read an assigned
text.” You would infer that she failed to read a specific book, not that she read
nothing at all on the syllabus. And suppose a lawyer friend laments that in her
last trial, she “did not prove an element of the offense.” You would grasp that
she is speaking not of all the elements, but of a particular one. The examples
could go on and on, but the point is simple enough: When it comes to the
meaning of “not an,” context matters.
Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 132 S. Ct. 1670, 1681 (2012). We answer
this query the same way our Circuit Justice did: “it depends.” And “it depends” cannot support
a claim of literal falseness. “[O]nly an unambiguous message can be literally false.” Novartis,
290 F.3d at 587. While it is a close question whether the notice is literally false, we canot say
that it is unambiguously so. However, we hold that a genuine dispute exists as to whether the
notice was misleading and tended to deceive its intended audience.
C
1
Focusing on how the notice would have impacted retailers, rather than consumers, the
district court excluded as inadmissible hearsay all evidence introduced by NVE to show that
“various unidentified retailers contacted them because they were confused by the legal notice.”
District Ct. Op. at 11–12. The district court observed that NVE submitted only one named
distributor who complained that he lost sales after the notice, “but given that the legal notice
was distributed to over 100,000 retailers nationwide, this hardly constitutes evidence that a
significant portion of the intended audience was actually deceived.” Id. at 12. The court held
that NVE “failed to establish, with admissible evidence, sufficient facts demonstrating that the
legal notice actually deceived a substantial portion of the intended audience.” Id. at 12–13.
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 19
2
NVE argues on appeal that the district court erroneously dismissed documentary and
testimonial evidence from NVE, distributors, and brokers showing confusion as to whether
NVE’s product, “6 Hour POWER,” had been recalled. Following the recall, NVE and its
distributors received a number of calls from convenience stores and truck stop retailers—the
very people that received the recall notice—who wanted to return “6 Hour POWER.” One
NVE employee stated that the notice caused a “huge nightmare” and the phones were
“blowing off the hook” with calls to return the product. NVE claimed that at least one sales
program—which involved a “road trip” to place corrugated display tops “all over New
Jersey”—“just died” after the recall notice.
NVE’s Michelle Canzone stated that she received “phone calls from brokers and
customers and faxes of this legal notice sent to us and that’s when the nightmare began. . . .
[I]nitially, we started getting faxes and inquiries from our customer base, and then the phone
calls just started pouring in from all little mom and pop shops all over the United States, you
know, asking if they should pull our product.” JR Merlau, Vice-President at Novelty, Inc., a
distributor of “6 Hour POWER,” testified: “[T]his notice was confusing to the marketplace.
It caused a lot of issues within our customers. We had to send out notices to our customers to
advise them that none of the products we were selling was subject to this recall.” Jim Green,
Vice-President of Purchasing/Marketing for wholesaler Liberty USA, was “immediately
inundated with calls from customers that were confused” and “wanted to return NVE’s
6 HOUR [sic] POWER.”
Karen McClellan was the Category Buyer responsible for energy shots at CoreMark,
which distributes to more than 29,000 convenience stores nationwide. On June 16, 2008, she
sent a notice to all United States division buyers to warn against spreading e-mails containing
the recall and creating “panic.” Asked about the last sentence of her notice—“I hope this
clears up the confusion that this letter has created”—Ms. McClellan testified: “I was confused
by the letter. . . . I had to read it thoroughly a few times and then I had to talk to Rise [Meguiar,
LE’s Sales Vice President,] and several other people to ask them exactly what it is about so
I knew specifically.” Still experiencing problems over a month later, on July 22, 2008, Ms.
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McClellan emailed LE for “help” to clear up continuing questions about returning “6 Hour
POWER.” Customers were calling with “questions” about sending back “perfectly good
Stacker 2 6 Hour Power” because “the customer thinks it is this other stuff.”
3
The district court, citing an opinion from the Southern District of Ohio, stated that
NVE’s proffered evidence of confusion constituted hearsay. See Interactive Prods. Corp. v.
A2Z Mobile Office Solutions, Inc., 195 F. Supp. 2d 1024, 1033 (S.D. Ohio 2001) (“[T]he only
evidence of deception are the hearsay statements of a customer . . . who told Comeaux that two
of his customers were confused by the Announcement. Defendants argue correctly that the
hearsay statements of [the] customer are inadmissible and, therefore, do not create a genuine
issue of fact on deception.”). The district court’s reliance on A2Z was misplaced.
First, the strict application of the rules of evidence to a claim that depends on showing
customer confusion places too heavy a burden on NVE. Should we expect a sworn statement
or affidavit from a retailer who calls into a distributor and claims to have been confused?
Second, the phone calls were not relied on to show the content of the conversations, but rather
were introduced merely to show that the conversations occurred and the state of mind of the
declarants. Fed. R. Evid. 803(3). The fact that so many people called NVE immediately after
receiving the notice at the very least raises a genuine issue of material fact as to whether a
significant portion of the recipients were misled.
Relatedly, on appeal LE characterizes these phone calls as “non-actionable customer
inquiries.” The phone calls at issue were not mere inquiries, such as the inquisitive letter at
issue in Balance Dynamics. 204 F.3d at 694. To the contrary, many distributors called to stop
buying “6 Hour POWER” after the notice was issued. NVE claims that after the recall, its
sales growth for “6 Hour POWER dropped from 13.7% to 1.1%.” NVE’s damages expert
estimated that NVE lost $3.4 million in sales as a result of the recall notice. A jury could find
that these were not just inquiries; they were calls that resulted in lost sales. All of these calls
evidence a belief that “6 Hour POWER” had been recalled. Had the callers lacked such a
mistaken belief, such phone calls would not have occurred.
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 21
NVE sent out its first corrective notice to its distributor base on June 11, 2008, and sent
another directly to convenience stores on September 15, 2008. Further, a number of
distributors sent out their own corrective notices so retailers would not think “6 Hour
POWER” had been recalled. NVE does not introduce evidence about these corrective notices
for the truth of the matters asserted therein but rather to provide circumstantial evidence that
some retailers believed that there was in fact a recall on “any of the ‘6 Hour’ shots in your
store,” including “6 Hour POWER,” and that NVE took actions to alleviate these concerns.
There is more than enough evidence to survive summary judgment. Whether the evidence
shows that the retailers were “tricked into believing an untruth about” “6 Hour POWER” is
an issue for trial. See Am. Council of Certified Podiatric Physicians & Surgeons v. Am. Bd.
of Podiatric Surgery, Inc., 185 F.3d 606, 617 (6th Cir. 1999) (Podiatric I).
V
A
NVE further argues that LE violated Section 2 of the Sherman Act, 15 U.S.C. § 2, by:
(1) asserting a fraudulently obtained supplemental trademark registration; (2) falsely
advertising in connection with the legal notice; (3) offering incentives to retailers for superior
product placement; (4) requesting that its retailers sell its product at the exclusion of other
energy-shot products; and (5) registering the “6hourpower.com” and “sixhourpower.com”
internet domain names. The district court recognized that all of NVE’s alleged damages for
these claims were connected to the recall notice and nothing else. It thus found that claims
one, three, four, and five failed because of a lack of damages.
On appeal, NVE claims that the recall notice was part of a broader “anticompetitive
scheme.” NVE concedes that “[w]hile NVE did not pursue damages specific to those other
substantial anticompetitive acts [claims 1, 3, 4, and 5], the Legal Notice was part and parcel
of LE’s entire scheme of anticompetitive conduct.” In his deposition, NVE’s damages expert,
Carl Degen, stated: “[I]t’s my opinion that the result of the letter was a loss of 3.4 million
dollars . . . My damages calculation of 3.4 million is all of the losses suffered by [Defendant]
as a result of the letter.” Degen’s expert report similarly states that his quantification of
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 22
damages was limited to those that occurred after June 14, 2008—roughly when the recall
notice was distributed.3 We agree with the district court that because NVE specified damages
resulting only from the recall notice, we should consider only the anti-competitive effects of
the recall notice. All other issues are waived.
B
Section 2 of the Sherman Act provides:
Every person who shall monopolize, or attempt to monopolize, or combine or
conspire with any other person or persons, to monopolize any part of the trade
or commerce among the several States, or with foreign nations, shall be
deemed guilty of a felony, and, on conviction thereof, shall be punished by fine
not exceeding $100,000,000 if a corporation, or, if any other person,
$1,000,000, or by imprisonment not exceeding 10 years, or by both said
punishments, in the discretion of the court.
15 U.S.C. § 2. “Section 4 of the Clayton Act permits a private suit for violations of § 2 and
the recovery of treble damages to those who succeed on their claims under the Sherman Act.”
J.B.D.L. Corp. v. Wyeth-Ayerst Labs., Inc., 485 F.3d 880, 887 (6th Cir. 2007) (citing 15 U.S.C.
§ 15). A successful claim under Section 2 of the Sherman Act requires a two-part showing:
“(1) the possession of monopoly power in a relevant market; and (2) the willful acquisition,
maintenance, or use of that power by anti-competitive or exclusionary means as opposed to
‘growth or development resulting from a superior product, business acumen, or historic
accident.’” Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 782 (6th Cir. 2002)
(quoting Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 595–96 (1985)).
“In addition, in this circuit, an antitrust [claimant] must show that (1) the alleged violation
tended to reduce competition overall and (2) the [claimant’s] injury was a consequence of the
resulting diminished competition.” J.B.D.L. Corp., 485 F.3d at 887.
3
Degen stated: “My calculations do not quantify NVE’s loss prior to June 14, 2008, and because
Living Essential’s cybersquatting and exclusionary practices occurred both before and after June 14, 2008,
my calculations of NVE’s harm subsequent to June 14, 2008 represent a lower bound for this period. These
damages quantify NVE’s harm since June 14, 2008 due to its claim under False Designation of Origin of
Products, False Advertising and False Description and Representation (Count II); Business and Product
Disparagement (Count III); Tortious Interference with Contractual Relationship (Count IV); Tortious
Interference with Business Relationships (Count V); Violation of the Sherman Act - Monopolization
(Count VI); Violation of the Sherman Act - Attempted Monopolization (Count VII); and Violation of
Michigan Consumer Protection Act (Count VIII).”
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 23
Moreover, the claimant “bears the burden of showing that the alleged violation was a
material cause of its injury, a substantial factor in the occurrence of damage or that the
violation was the proximate cause of the damage.” Conwood, 290 F.3d at 788. “The [alleged
perpetrator’s] actions need not be the sole proximate cause of any alleged injuries, but ‘must
be proved as a matter of fact and with a fair degree of certainty.’” J.B.D.L. Corp., 485 F.3d
at 887 (quoting Ezzo’s Invs., Inc. v. Royal Beauty Supply, Inc., 243 F.3d 980, 990 (6th Cir.
2001)). “To survive summary judgment [a claimant] must allege facts sufficient for a jury to
find that the defendant acquired, maintained, or attempted to acquire a monopoly through
actions harmful to competition.” See Am. Council of Certified Podiatric Physicians &
Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 323 F.3d 366, 370 (6th Cir. 2003) (Podiatric
II).
C
The district court found that NVE pleaded only the distribution of the recall notice as
a material cause of antitrust injury. To rebut the “presumption that [an advertisement] had a
de minimis effect on competition,” a claimant must demonstrate that “(1) the advertising was
clearly false, and (2) it would be difficult or costly for the [claimant] to counter the false
advertising.” Id. at 370–71. Because the district court concluded that the legal notice was not
false, it concluded that NVE “failed to rebut the presumption that the legal notice had a de
minimus [sic] effect on competition” and granted summary judgment with respect to the
antitrust claims.
D
This court has held that “even false advertising would not damage competition and
hence be a violation of the Sherman Act unless it was so difficult for the plaintiff to counter
that it could potentially exclude competition. Monopoly power is the power to exclude
competition or control prices.” Podiatric II , 323 F.3d at 372 (citing U.S. v. E.I. du Pont de
Nemours & Co., 351 U.S. 377, 391 (1956)). Isolated business torts, such as falsely
disparaging another’s product, do not typically rise to the level of a Section 2 violation unless
there is a harm to competition itself. Conwood, 290 F.3d at 783. As the Supreme Court has
Nos. 10-2353/2355 Innovation Ventures v. N.V.E. Page 24
emphasized, the Sherman Act protects competition, not competitors. Spectrum Sports, Inc.
v. McQuillan, 506 U.S. 447, 458 (1993) (“The law directs itself not against conduct which is
competitive, even severely so, but against conduct which unfairly tends to destroy competition
itself.”); cf. Houser v. Fox Theatres Mgmt. Corp., 845 F.2d 1225, 1230–31 (3d Cir. 1988)
(rejecting a Section 2 claim regarding defendant’s disparagement of plaintiff’s box office
potential because defendant’s conduct was “consistent with legitimate competitive conduct”).
“There can be no harm to competition, such as the exclusion of competitors, when the
victims of false advertising are easily able to counter it.” Podiatric II, 323 F.3d at 372. After
the notice was distributed, even if it contained “clearly false” information, it was relatively
simple for NVE to counter it by sending notices that “6 Hour POWER” had not been recalled.
In fact, NVE and a number of its distributors sent such notices to retailers. This is sufficient
to defeat the antitrust claim.
VI
The judgment of the district court is REVERSED in part and AFFIRMED in part, and
this action is REMANDED for further proceedings not inconsistent with this opinion.