Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA)

Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA), requires a deceptive act or unfair practice, causation and actual damages.  The purpose of the Act is to “protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce.  A deceptive practice is one that is likely to mislead consumers, whereas an unfair practice is one that “offends established public policy” and is “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”

Remedies under FDUTPA include declaratory relief, injunctive relief, and damages, including attorney fees.  With respect to damages, the Act provides that:

“In any action brought by a person who has suffered a loss as a result of a violation of this part, such person may recover actual damages, plus attorney’s fees and court costs as provided in s. 501.2105. However, damages, fees, or costs are not recoverable under this section against a retailer who has, in good faith, engaged in the dissemination of claims of a manufacturer or wholesaler without actual knowledge that it violated this section.” § 501.211(2)

“[T]he measure of actual damages is the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered according to the contract of the parties. [ … ] A notable exception to the rule may exist when the product is rendered valueless as a result of the defect-then the purchase price is the appropriate measure of actual damages.” Rollins, Inc. v. Heller, 454 So.2d 580, 585 (Fla. 3d DCA 1984) (quoting from Raye v. Fred Oakley Motors, Inc., 646 S.W.2d 288, 290 (Tex.App.1983)).

FDUTPA is based the Federal Trade Commission Act 15 U.S.C. § 45, and is often referred to as the “Little FTC Act”.  In creating the Act, the Florida Legislature intended “to afford due consideration and great weight to interpretations by federal courts and the Federal Trade Commission regarding definitions of unfair and deceptive practice.” The Florida Senate, Interim Project Report, 1 (2004).  Business Litigation in Florida §  20.1 (2014).

Protection under the Act applies to the “consumer”, which includes “individuals; children; business; firm; association; joint venture; partnership; estate; trust; business trust; syndicate; fiduciary; corporation; any commercial entity; or any other group or combination.”  Fla. Stat. § 501.203(7).

FDUTPA defines “trade or commerce” to include: advertising, soliciting, providing, offering, or distributing, whether by sale, rental, or otherwise, of any good or service, or any property, whether tangible or intangible, or any other article, commodity, or thing of value, wherever situated.  Fla. Stat. § 501.203(8).

In order to state a FDUTPA claim for damages, “a plaintiff must show not only that the conduct complained of was unfair, unconscionable, or deceptive, but also that it has suffered actual damages proximately caused by the unlawful conduct.”  Rollins, Inc. v. Butland, 951 So. 860, 869 (Fla. 2d DCA 2006).

Further, “when addressing a deceptive or unfair trade practice claim, the issue is not whether the plaintiff actually relied on the alleged practice, but whether the practice was likely to deceive a consumer acting reasonably in the same circumstances.”  Office of the AG, Dep’t of Legal Affairs v. Wyndham Int’l, 869 So. 2d 592 (Fla. 1st DCA 2004).

The Downfalls of Forming an LLC

A Limited Liability Partnership or LLC, is meant to be a simple, easy to form structure for a business.  It is a blend between a corporation and a partnership.  One of the largest benefits of an LLC is its ability to pass through income or losses to its owners.  This prevents what is called the double taxation of corporations – taxation at the corporate level and at the individual level upon distribution.  The owner(s) of the LLC can choose to be taxed as a sole proprietor, partnership, S corporation or a C corporation.  This structure also provides individual protection from the LLCs debts – i.e. the owner(s) are not liable for the LLCs debts.  There are exceptions to this, however.  If the owners of the LLC treat the LLC money like their own personal bank accounts, and use any income for non-LLC purposes, in a lawsuit the plaintiffs can attempt to “pierce the corporate veil” and go after the individual owners of the LLC personally.  Further, in Florida, a one-member LLC does not provide protection from individual liability to the owner.  That is why it is necessary to have more than a one-member LLC.

Issues arise, however, when bringing on partners and deciding how the LLC will be run.  How profits and losses will be distributed, and taxed, to the individual owners is a prime consideration.

Further, for start-up companies looking for venture capital, there is an even larger issue with the LLC format.  Any equity granted to workers, such as stock options, makes them technical partners in the LLC for tax purposes.  This means that they must be issued Schedule K-1 tax forms that disclose information about the LLC’s finances, which many employers would not want their employees to know.  The employee/partners would also be responsible under IRS rules for withholding their own quarterly taxes.

A further difficulty with an LLC that will be seeking venture capital is that venture capitalists (VCs) do not like this form of structure and will refuse to invest.  The reason is that VCs are structured as pass-through entities also, and they do not want the LLC’s income or losses passed on to their own limited partners, who could be taxed on this income when they would not otherwise have to pay.

While a corporation might have higher renewal fees, more paperwork, and double taxation, a business seeking venture capital might be wiser to start as a corporation.

 

 

How the Grinch Stole Christmas Copyright Fair Use – Cindy-Lou Who

Who’s Holiday! is a one-woman play written by Matthew Lombardo, which was running Off-Broadway.  It was billed as “the show Dr. Seuss doesn’t want you to see.”  The play is about a down and out 45-year-old Condy-Lou Who, who drinks and smokes “Who-hash, and is in recovery from dealing with her relationship with the Grinch, who she had killed, forcing her to spend time in prison.

The copyright owners of How the Grinch Stole Christmas!, Dr. Seuss Enterprises L.P., sent out a number of cease and desist letters to Mr. Lombardo claiming that his play violated the copyrights of Dr. Seuss Enterprises L.P.  Lomabardo sued in the Southern District of New York for a Declaratory Judgment that his play did not infringe their copyrights.  Dr. Seuss Enterprises L.P. counterclaimed claiming copyright infringement, trademark dilution, and unfair competition.

The judge in the case, Alvin Hellerstein, dismissed Dr. Seuss Enterprises L.P.’s infringement claims on the basis of Fair Use.  The judge claimed that it was fair use as Lombardo was making a parody of How the Grinch Stole Christmas!  The judge claimed that Who’s Holiday! changed the “utopic” and “cheery” tone of How the Grinch Stole Christmas! to something quite different, given the recovering demeanor of Cindy-Lou Who.

According to the judge “The play’s coarseness and vulgarity lampoons ‘Grinch’ by highlighting the ridiculousness of the utopian society depicted in the original work: society is not good and sweet, but course, vulgar and disappointing.”  Further, “The play would not make sense without evoking the style and message of ‘Grinch’, for which there would be no object of the parody.”  According to the judge, “Whether the play’s parody of ‘Grinch’ is effective, or in good taste, is irrelevant.”

According to the judge, the public interest in this free expression outweighs any interest in preventing consumer confusion.  Thus, the work is a fair use.

Dr. Seuss Enterprises L.P. has filed an appeal.

THE KRUSTY KRAB TRADEMARK Restaurant Services Infringement

In Viacom International Inc. v. IJR Capital Investments, LLC, the Southern District of Texas upheld Viacom’s claim of infringement against a company that filed a federal trademark application for THE KRUSTY KRAB and intended to open a restaurant under this name.  THE KRUSTY KRAB is a fictional restaurant featured on the children’s cartoon SpongeBob Square Pants.

Even though Viacom had not registered the name THE KRUSTY KRAB, the District Court granted summary judgment on the likelihood of confusion claim in its favor under the Lanham Act.  The Court found that Viacom had common law trademark rights in the trademark due to extensive use and advertising of the mark, noting that SpongeBob’s likely reaction to its decision would likely have been “Aw, tarter sauce!”

The Court first looked at whether the mark was inherently distinctive or had acquired distinctiveness in the minds of the consuming public.  The court found that the mark had acquired distinctiveness through its use in the television show, movie, and through advertising and marketing on products.

The Court next looked at whether there was likely to be confusion between IJR’s mark and Viacom’s mark.  The Court looked at the likelihood of confusion factors:  1) the strength of Viacom’s THE KRUSTY KRAB mark; 2) the similarity between the marks; 3) the similarity of the products or services; 4) the likely consumers of the goods or services; 5) the channels of trade (where the products or services are sold); 6) whether or not IJR had a bad faith intent in attempting to register and use the mark (whether it was aware of SpongeBob and THE KRUSTY KRAB); 7) whether there had been actual confusion (IJR’s mark had not yet been used); 8) the sophistication of potential consumers of the goods and services of the mark.

The Court found that 17 years of use of the mark, extensive advertising and marketing, and the unique spelling of the mark all created a likelihood of confusion in the marketplace.

To add to its claim, Viacom produced evidence from a consumer survey which, interestingly, found that 30% of consumers associated THE KRUSTY KRAB with Viacom.

As Viacom had not yet used the trademark, the Court did not hear its claims on trademark dilution, where Viacom would have had to show that they have a famous mark and that the use by IJR was likely to dilute the fame of the mark.

Trademark Parody and Copyright Fair Use

The Second Circuit affirmed a district court ruling granting summary judgment to My Other Bag, Inc., owner of MY OTHER BAG, against Louis Vuitton.  My Other Bag are handbags that on one side show pictures of famous handbags, such as those of Louis Vuitton, and on the other side had the words “My Other Bag”.  Louis Vuitton had sued My Other Bag, Inc. for trademark infringement, dilution by blurring, and copyright infringement.

The lower court held that My Other Bag’s use was parody stating “MOB’s use of Louis Vuitton’s marks in service of what is an obvious attempt at humor is not likely to cause confusion or the blurring of the distinctiveness of Louis Vuitton’s marks; if anything, it is likely only to enforce and enhance the distinctiveness and notoriety of the famous brand”.  The court also rejected the copyright claim on the basis of fair use.

The Second Circuit affirmed that the MOB marks were parodies.  The higher court stated “a parody must convey two simultaneous – and contradictory – messages that it is the original, but also that it is not the original and is instead a parody.”  The court distinguished this case from other cases, such as STARBUCKS v. CHARBUCKS, where CHARBUCKS was used to identify a type of coffee that would compete with STARBUCKS at the same level and quality.

With respect to the copyright claim, the court held that MOB was a transformative and non-infringing use as the bags were a “new expression and message.”