Case in point, Georgia-based distributor of water filtration systems, iSpring Water Systems LLC, has been accused by the Federal Trade Commission (FTC) of making false claims that its products are made in the United States, when they are, in fact, made entirely in China. Astoundingly, this is not the first time iSpring has attempted to profit off of the American name, as the current mislabeling is actually a violation of a 2017 FTC order prohibiting iSpring from making unqualified “Made in USA” claims for its products.

As part of the FTC settlement, iSpring has agreed to pay a $110,000 civil penalty, admit that it, along with its company owner and officer Zhuangyong Chen and vice president Pearl Cai, made false claims that the water filtration systems it sells are “designed and crafted in USA,” among other claims, and to notify all impacted consumers.

Some might be surprised to learn that the rules regarding product origin claims are not so black and white, and are governed by both the FTC and the U.S. Customs Service. For example, where an imported product incorporates materials and/or processing from more than one country, Customs considers the country of origin to be the last country in which a “substantial transformation” took place. Thus, a product with parts from say Mexico or Canada, may, under certain circumstances, be marked “Made in USA.” The FTC offers some guidance in this regard; however, product marketers and distributors should speak to a qualified attorney prior to making country of origin claims; especially if that country is the United States.

Though not all are bad actors, many invention promotion companies (and consultants) have been accused of scamming individual inventors out of thousands of dollars; just ask those involved in a 2018 class action against InventHelp in the Southern District of New York (Zanotti et al v. Invention Submission Corporation et al).

The plaintiffs allege that InventHelp runs a “fraudulent invention promotion scam that has bilked thousands of aspiring inventors and entrepreneurs into paying millions of dollars” for services that were never intended to be provided. Specifically, named plaintiff Sherry Porter claims she paid InventHelp $9700 to market her LED pet collar. According to the lawsuit, InventHelp’s Pittsburgh headquarters contacted Porter and said a company called Abrams Gentile Entertainment was interested in licensing her invention. However, when investigators for Porter’s attorney went to the office of Abrams Gentile, it was vacant. The company didn’t exist.

Unfortunately for inventors, this is not the first promotion company to be accused of engaging in such fraudulent activity. In fact, due to prior lawsuits, the American Inventors Protection Act of 1999 (AIPA) was passed. This act requires that prior to signing an invention submission agreement with a promotion company, the firm must provide the following information:

1. The total number of inventions evaluated by the invention promoter for commercial potential in the past five years, as well as the number of those inventions that received positive evaluations, and the number of those inventions that received negative evaluations.

2. The total number of customers who have contracted with the invention promoter in the past five years, not including customers who have purchased trade show services, research, advertising, or other non-marketing services from the invention promoter, or who have defaulted in their payment to the invention promoter.

3. The total number of customers known by the invention promoter to have received a net financial profit as a direct result of the invention promotion services provided by such invention promoter.

4. The total number of customers known by the invention promoter to have received license agreements for their inventions as a direct result of the invention promotion services provided by such invention promoter.

5. The names and addresses of all previous invention promotion companies with which the invention promoter or its officers have collectively or individually been affiliated in the previous 10 years.

Upon reviewing these statistics from two companies, the numbers do not bode well for inventors. For example, promotion company Davison reported that the “total number of consumers in the last five years who made more money in royalties or sales proceeds than they paid to Davison, in total, under any and all agreements with Davison, is 15. This number includes people who first made a profit more than 5 years ago, if they continued to make additional profit during the past five years.”

InventHelp reported that “from 2015-2017, we signed Submission Agreements with 6,564 clients. As a result of our services, 166 clients have received license agreements for their products, and 49 clients have received more money than they paid us for these services.” For those doing the math, 0.7% of InventHelp clients made more money than they paid to InventHelp. The question also remains, how much more money did these inventors make to justify using such as service at such low odds of success?

There are also a host of consultants that charge monthly fees to participate in their inventing schools or to be coached through the inventing process. Some of these entities do not fit the definition of an invention promoter, and thus they are able to operate in a gray area that is not regulated by the AIPA.

Despite periodic enforcement activities and occasional legislation, the AIPA and the U.S. government do not do enough to protect independent inventors from fraud, misrepresentation and misleading statements about the success rate of so-called invention help companies.

If you are an inventor, do yourself a favor and contact an IP attorney about your invention, and instruct them to run a patent search to determine the novelty of your idea. A reputable IP attorney will not try to sell you monthly subscription fees or con you out of thousands of dollars for an idea that may not be patentable. You will be in a much better position to determine how you should proceed with your idea (and your money).

Please email us if you have any questions or if you would like to receive a copy of the complaint against InventHelp.

Allstar is alleged to have violated multiple consumer protection laws by its deceptive advertising practices involving products including, among others: Snuggie, Perfect Bacon Bowl, Magic Mesh Door, Perfect Brownie Pan, and Cat’s Meow. According to the FTC complaint, consumers who purchased Allstar’ s products thought, for example, that they were getting two Snuggies for the low price of $19.95, but in reality, were charged processing-and-handling (P&H) fees for both items, bringing the total purchase price to $35.85. Further, customers were not given the option to decline the promotional buy-one-get-one-free (BOGO) offer.

With the multimillion dollar settlement and refund checks making national news, consumers and regulatory bodies may be on the lookout for similar marketing strategies by other leading marketers. To be sure, FTC law enforcement actions led to more than $6.4 billion in refunds for consumers during the one-year period from July 2016-June 2017. As such, marketers should be cognizant of what product offerings may raise red flags, particularly since consumer protection laws are typically broad generalizations rather than prohibitions on specific marketing strategies.

Accordingly, while some disclosures need to be more conspicuous than they once were, BOGO offers still generally have the green light. That being said, there are three main areas of concern: the use of the word “free” (especially with a modifier such as “absolutely”); P&H disclosures; and the ability to opt out of the free offer.

First, use of the word “free” could garner some unwanted attention and scrutiny from regulatory agencies. Even when the only cost for the additional item may be processing and handling, and the additional item is technically free, if the charges for P&H are as costly as the product itself, and nonrefundable if the product is returned, that offer would likely constitute deceptive advertising tactics. It is therefore recommended that distributors avoid BOGO offers with costly P&H charges. However, those who insist on a BOGO offer while still charging significant P&H fees should use alternative language to convey that the second item is “free.” Not so creatively, for example, “As a bonus, we will also send you this second [product]. Just pay an additional [amount] for processing and handling.”

To further steer clear of FTC scrutiny, P&H fees should be shown on the screenshot in the commercial (preferably stated in the script as well), on the website’s order page, and in a confirmation email to the consumer. According to compliance guidance provided by the New York Attorney General, the amount of any processing and handling or other fees (excluding taxes) is a material term that must be disclosed in an advertisement if the total amount of such fees exceeds the amount consumers would reasonably expect to pay for processing and handling. Expectations take into account the applicable shipping method for a product of similar price, size, and weight. Finally, a consumer should be provided with the option to opt out of the BOGO offer and be allowed to purchase a single item.

As laws can vary from state to state, be sure to consult with an attorney experienced in consumer protection regulations prior to launching a marketing campaign for a new product.

After speculation that it may be a ruse, on December 29th, General Mills officially announced the launch of its latest cereal, Lucky Charms Frosted Flakes.  Sugary cereal lovers everywhere rejoiced on social media as the news spread and the cereal began appearing on supermarket shelves.  Two classic childhood cereals combined…what’s not to love?  Well, we suspect Kellogg, Corp., the distributor of Frosted Flakes, is not feeling so GR-R-REAT about the latest breakfast sensation that is taking the internet by storm.

Frosted Flakes is probably one of the most iconic cereal brands in the US.  Most everyone can recognize the product from just a glance of the blue box baring the lovable Tony the Tiger, who first debuted back in 1952.  So, with such an established brand, how is it that General Mills can so blatantly use the name of a Kellogg product?  As it turns out, unlike “Kellogg’s Frosted Flakes,” “Frosted Flakes” is not a registered trademark in the cereal or breakfast food categories.  This is likely because the term “frosted flakes” is merely descriptive; that is to say, the words themselves describe exactly what the product is.  Descriptive names are generally not granted federal trademark protection.

Fortunately for Kellogg, it is not without some recourse should it wish to pursue legal action against General Mills.  Trade dress protects the appearance of a product or its packaging under federal and state unfair competition laws, even without formal registration (though registration is recommended).  In this case, rather than the traditional red Lucky Charms box, General Mills’ newest member of its cereal line is blue – strikingly similar to Kellogg’s Frosted Flakes box.   Kellogg therefore may have a good argument that consumers, seeing the words “frosted flakes” combined with the blue box, would be confused by the source of the product.

This is the second time in just a matter of months that Kellogg has been involved in some sort of cereal box controversy, and it will be interesting to see if and how it responds to General Mills’ actions.

If your company is launching a product or creating new ad content, be sure to hire counsel with experience with intellectual property protection laws.  Please email us if you have any questions or if you would like more information regarding the content above.

The Kellogg Company was the latest brand to be roasted by consumers for allegedly promoting racist stereotypes in a cereal box cartoon that displayed a lone brown janitor corn pop cleaning the floor of a shopping mall full of yellow corn pops who appeared to be enjoying themselves.  Consumers were quick to smear Kellogg for this supposed portrayal of race and status, but was it really warranted?  If you just glance at the cartoon, the yellow pops appear to be a bunch of ill-behaved, nude delinquents, with dilated pupils that lead us to question whether they were enjoying a different kind of “puff.” On the other hand, the brown corn pop is the only one who is being productive and wearing clothes.  He (she?) is also the only one actually smiling.  We liked the brown corn pop.  Obviously, not everyone felt the same, and we certainly understand how this cartoon could be considered offensive.

Similarly, Unilever came under attack for its ad that portrayed a black woman’s skin undergoing a transformation to a white woman following the use of Dove soap.  For many, this evoked a long-running racist allegory in soap advertising: a “dirty” black person cleansed into whiteness; so much so that Unilever removed the ad and issued extensive apologies.  However, the African American actress who appeared in the commercial supported it by saying that it was not racist, but rather, celebrated ethnic diversity.

While avoiding the use of imagery or notions generally known to be discriminatory is advisable, interpretation of an advertisement is subjective and thus, it is hard to please everyone.  Likewise, when it comes to marketing and labeling guidelines as defined by entities such as the FDA and FTC, there are black and white do’s and don’ts, as well as gray areas as to what can and cannot be said.

Product marketers and distributors may not be able to anticipate what may or may not be offensive in every scenario, nor can they please every consumer, but with the help of a knowledgeable attorney, they can ensure compliance with federal and state regulations.  If your company is launching a product or creating new ad content, be sure to hire counsel with experience in federal advertisement and consumer protection laws.

Please email us if you have any questions or if you would like more information regarding the content above.

According to the complaint, the defendants engaged in deceptive labeling practices by marketing the food as “natural” and containing “no artificial preservatives.” The ingredients at the center of the lawsuit are synthetic versions of vitamins B, C and K, as well as caramel color. Although not proven to be harmful, and present in animal and human foods, the ingredients are technically not “natural.”

The FDA regulates animal feed, including dog food. Although it has not defined the term “natural,” in human food labeling, the FDA considers “‘natural’ to mean that nothing artificial or synthetic (including all color additives regardless of source)” has been included or added to a food that “would not normally be expected to be in that food.” Further, according to an FTC publication, if companies market their products as “all natural” or “100% natural,” consumers have a right to believe they do not contain any artificial ingredients.

There has been much litigation in the last few years regarding use of the word “natural;” so much so that at the end of 2015, the FDA put out a call for comments on how to define the term. It received over 7000 responses! This probe by the FDA has had the effect of halting some, but not all, litigation. In fact, the judge presiding over a California class action lawsuit against Kraft Foods for using the term “natural cheese” to describe cheese containing artificial coloring, stated that FDA standards were not determinative of whether Kraft violated the relevant California laws; but rather, the issue is whether a reasonable consumer is likely to be deceived by the product’s packaging. The case is still pending.

These “natural” cases will be interesting to track, and it is not far-fetched to believe that if a definition is established by the FDA, the FTC and FDA may start barking up the trees of other companies engaged in similarly deceptive or misleading labeling practices.

Stay out of the dog house and treat yourself to a consultation with an attorney regarding product packaging.