Archive for the ‘Greenwashing’ category

In Eco-mark Examination USPTO Getting into Anti-Greenwashing

October 24th, 2014

A recent article in the the New York Law Journal caught my attention for an interesting development in examination of eco-mark applications in the U.S. Patent and Trademark Office (USPTO).  We’ve known for some time that marks containing terms such as “green,” “clean,” “eco-” or “enviro-” are very likely to be rejected as merely descriptive of environmentally friendly products or services.

In “Changing Climate for ‘Green’ Trademarks,” Robert Scheinfeld of the Baker Botts firm notes that the USPTO has very recently begun to reject eco-marks on the basis of deceptiveness.

This is almost the opposite of a descriptiveness rejection:  where a descriptive eco-mark immediately communicates to consumers the environmentally friendly nature of the goods or services, a deceptive eco-mark is one that signals environmentally friendly characteristics while the goods or services do not actually confer an environmental benefit.

The piece cites a 2013 decision by the USPTO Trademark Trial and Appeal Board (Board) as a case in point.  In re Kitaru Innovations Inc. involved an application to register the mark GREEN SEAL (shown above) for adhesive tape and tape dispensers.

The USPTO examining attorney refused registration on the ground that the mark was deceptively misdescriptive under Section 2(e)(1) of the Lanham Act and comprises deceptive matter under Section 2(a) in that it falsely and materially indicates that the applicant’s goods are environmentally friendly when, in fact, they are not.  The Board affirmed the refusal.

For deceptive misdescriptiveness under Section 2(e)(1), the Board’s starting point, by now a very familiar one, was that the word “‘green’ directly conveys information to potential consumers that the tape products are environmentally friendly.”

To be misdescriptive, a mark must be merely descriptive of a significant aspect of the goods which they could plausibly possess but in fact do not.  The Board concluded that the GREEN SEAL mark could be merely descriptive if the products were, indeed, green:

The two word composite term, “Green Seal,” would be merely descriptive if applicant’s goods were made of eco-friendly materials. Green would convey information about the environmental claims that the tape possessed, and a most important feature of adhesive tape or adhesive packaging tape is that it “seals,” or “tightly or completely closes or secures a thing.”  

Interestingly, but immaterial to the Board’s decision, the applicant made no claim that its products are eco-friendly.  Rather, the “Green Seal” mark is just one in a line of color-coded adhesive tape products that also includes “Black Seal,” “Blue Seal” and “Double Blue Seal.”

Nevertheless, the Board concluded that many of the affected consumers would be likely to believe that the term “Green” in the GREEN SEAL mark describes the adhesive tapes as being environmentally friendly.  The Board noted evidence of record showing that adhesive tape products in particular are increasingly the subject of environmentally friendly claims, and consumers would expect the applicant’s tape to be eco-friendly:

As seen above in the pages of blogs and advertisements from the Internet, an increasingly common feature of adhesive and packaging tape is that it is ecologically sound. Sometimes the focus is on how the tape deteriorates over time, and others times it has to do with the use of recycled materials. The term “Green” is frequently used to capture this idea. Accordingly, consumers encountering applicant’s mark with the term “Green” will likely understand the term in context to refer to the fact that this tape is an environmentally-friendly product.

To be deceptive matter under Section 2(a), the misdescription must be likely to affect the relevant consumers’ decision to purchase the products.  Here, the Board noted the “urgency” for consumers to recycle and purchase products made of recycled or biodegradable materials.  The evidence of record showed that there is a segment of purchasers that would be more inclined to buy eco-friendly adhesive tape products.

Accordingly, the Board concluded that the perceived green quality of the tape products would be likely to affect the purchasing decisions of relevant consumers:

The level of excitement on the part of consumers reflected above over the availability of environmentally friendly / green tape products demonstrates that this characteristic would be material to the decision of consumers to purchase applicant’s goods. Accordingly, we find on this record that such a misdescription is likely to affect the decision to purchase the goods, and the third and final prong of the Section 2(a) deceptiveness test has also been satisfied.

This is the first decision I’ve seen where an eco-mark was refused registration by the USPTO for being deceptively misdescriptive and/or deceptive matter.  It’s unclear whether or not this is actually a trend.  I plan to conduct some research on this topic and discuss my findings in this space.

What is clear, though, is that the USPTO has made an initial foray into the subject of greenwashing and has at least begun to use deceptive misdescriptiveness and deceptive matter as tools for combating the problem.

Burning Ring of Fire: Greenwashing Case Alleging Fried Solar Panels to Move Forward

October 6th, 2014

In February, three individuals filed a proposed class action lawsuit against BP Solar and Home Depot accusing the solar panel maker and retailer of greenwashing in connection with certain solar panels (see the complaint here).

Plaintiffs Michael Allagas, Arthur Ray, and Brett Mohrman alleged that there is a latent defect in the junction box of the BP solar panels that causes the box to fail and results in a total loss of functionality of the solar panels.

Specifically, the plaintiffs allege that the defect in the junction box and solder joints between connecting cables makes the solder joint overheat, which causes electrical arcing that generates temperatures of 2000-3000 degrees.  According to the plaintiffs, the heat melts the junction box, burns the cables and solar panels, and shatters the glass cover of the panels.

The plaintiffs also alleged that BP’s advertising and marketing materials about the solar panels are false or misleading.

While the northern California federal court hearing the case previously dismissed some of the plaintiffs’ claims, a recent decision denied BP and Home Depot’s motion to dismiss the remaining claims.

The court found the pleadings sufficient to support plaintiffs’ express warranty claims for breach of the express defect and power warranties because they stated that a latent defect existed at the time the product was sold and that they relied upon BP Solar’s power warranty in purchasing the solar panels.

Similarly, the implied warranty claims were held to be sufficient because plaintiffs clearly alleged a latent defect in the solar panels that renders them unmerchantable and unfit for their intended use.

With respect to the advertising and marketing materials, the plaintiffs cited various sweeping representations made by BP Solar, including:

Promises that the solar panels will “drastically reduce or eliminate your electric bills . . . forever,” and will “increase the value of your home.”

A statement that “No other system can operate at a higher level of safety than those offered by BP Solar.”

BP Solar also made some specific representations about the output and life of the solar panels, including product data sheets warranting 80% power output for a 25-year period and a 90% power output for a 12-year period with a 5-year warranty of materials and workmanship.

The court held that plaintiffs’ claims under the Consumer Legal Remedies Act could go forward because the statements include “factual representations” that could be “likely to deceive a reasonable consumer.”  The court concluded:

A reasonable consumer could have relied on these statements as descriptions of the quality and power capabilities of the solar panels.

The court maintained the plaintiffs’ fraud claims because they allege that BP knew of and concealed the defect:

The amended complaint also alleges BP’s knowledge of the latent defect in the solar panels, BP’s concealment of the defect, particular instances when information regarding the defect and risk of fire could have been revealed, and the warranties all three plaintiffs relied upon that failed to include the concealed information.

The court also denied the defendants’ motion to strike the class allegations, but left the door open for BP and Home Depot to contest those upon a subsequent motion by the plaintiffs for class certification.

More Greenwashing 2.0: Another Biofuels Credit Fraud Scheme Exposed

July 21st, 2014

In previous posts (e.g., here and here), I’ve discussed cases of fraudulent renewable energy credits and other environmental crimes and argued they ought to be considered greenwashing.

A recent indictment is another case in point.  The U.S. Department of Justice (DOJ) recently announced that a federal grand jury in Houston, Texas indicted an individual for allegedly selling fraudulent renewable identification numbers (RINs).

The indictment alleges that an individual using the name Philip Joseph Rivkin operated and controlled several Houston-based fuel companies including Green Diesel LLC, Fuel Streamers Inc. and Petro Constructors LLC.

The defendant allegedly claimed that Green Diesel produced millions of gallons of biodiesel at its Houston facility then generated and sold about 45 million RINs based on the claim.  However, according to the indictment, Green Diesel did not actually produce any biodiesel at its facility.  The defendant allegedly made millions of dollars selling the fraudulent RINs.

This type of fraudulent activity undermines the policy goal of RINs – to ensure a certain level of renewable fuel in U.S. gasoline – by damaging the market for valid RINs and ultimately reducing the actual volume of biofuels in circulation.

According to a spokesman for a biodiesel trade group quoted in this StarTribune article, the RIN scam has hurt the biofuels industry by making obligated parties more wary of purchasing the credits from biodiesel producers.

The fraud and resulting damage are recognizable when we view the putative RIN purchasers as green consumers, albeit commercial consumers instead of individuals, falling victim to false representations about the validity of renewable energy-based financial products.

In apparent recognition of the damage caused by fraudulent RINs, Biofuels Digest reported that the U.S. Environmental Protection Agency recently finalized additional regulations to ensure oversight of RIN generation and improve the RIN market.

As FTC Revises Rules for Fuel Economy Ads Green Guides Can Guide

May 8th, 2014

A piece published this week on Green Car Reports starts this way:

No one wants to buy a brand-new car, only to find out that its real-world fuel economy doesn’t match the numbers on the window sticker.

It struck me that this statement describes the plaintiffs in a number of greenwashing lawsuits filed (and covered in this space) over the last several years.  The suits against Ford, Hyundai and KiaToyota, and Honda are notable examples where the actual miles-per-gallon allegedly did not match the sticker and/or the advertising.

Turns out the Federal Trade Commission will be  revising its fuel-economy advertising guidelines and is seeking comments relating to ”information that helps marketers avoid deceptive or unfair claims,” among other things. Entitled the “Guide Concerning Fuel Economy Advertising for New Automobiles,” the guidelines were first issued in 1975.

One specific issue the FTC will consider is whether marketing material that makes a ”general fuel economy” claim should include a specific mile-per-gallon figure.  Another question is whether an ad that specifies the fuel-economy rating in one EPA category or lists a specific mpg rating without specifying the category is deceptive.

For anyone familiar with the FTC’s Green Guides, these questions will be very familiar.  The Guides for the Use of Environmental Marketing Claims were first published by the FTC in 1992 and have undergone at least three revisions, most recently in 2012.

The Green Guides states that claims of general environmental benefits are deceptive:

It is deceptive to misrepresent, directly or by implication, that a product, package or service offers a general environmental benefit.

Why?  Because, the guides explain:

Unqualified general environmental benefit claims are difficult to interpret and likely to convey a wide range of meanings.  In many cases, such claims likely convey that the product, package, or service has specific and far-reaching environmental benefits and may convey that the item or service has no negative environmental impact.  Because it is highly unlikely that marketers can substantiate all reasonable interpretations of these claims, marketers should not make unqualified general environmental benefit claims.

It would be logical, I think, to extend this rule and its rationale to general fuel economy claims.  Fuel economy ratings fall into different categories.  They can be broken down into city and highway driving, for example, and many factors, such as how the car is tested, can determine the results.

Also, the Green Guides provide that marketing statements about recycling, for example, must specify exactly what percentage and which element of the product (the product itself, the packaging, or both) is recyclable or made from recycled material.

This required granularity should lend itself to rules that marketing statements about fuel economy benefits need to specify, among other things, the EPA category being touted.

Of course it was inevitable that regulators in particular fields would contemplate promulgating or revising their rules to take into account deceptive environmental marketing claims.  They are fortunate to have the Green Guides to guide them.

 

 

The Top Green IP Stories of 2013

January 13th, 2014

Before we turn to new green IP issues as they unfold in 2014, here is a look back at some of the top stories from 2013.

 

No. 7:  Green Patent PR

Clean tech is competitive, and PR is one of the tools used to stand out in a competitive industry.  But who would have thought PR around green patents could be so prevalent and contentious?  After DuPont sued Heraeus for alleged infringement of a patent directed to solar paste, the chemical giant put out a press release about filing the suit and the problem of IP theft in clean tech.

Heraeus counterclaimed for unfair competition and later threatened a separate lawsuit over the press release.  DuPont then filed a declaratory judgment action asking an Oregon federal court to declare that the company’s press release and customer letters about its patent infringement suit against Heraeus do not violate unfair competition laws.

My research indicates that clean tech companies engage in a substantial amount of PR around patent matters, with the clean tech industry generating the fifth highest number of patent-focused press releases.  DuPont’s disputed press release notwithstanding, the vast majority of clean tech industry press releases relate to patent prosecution.

 

No. 6:  Boston University Leads LED Lit

LED patent litigation continued to grow in 2013.  Leading the way this past year was the Trustees of Boston University, which sued dozens of defendants including AU Optronics, BlackBerry Corporation, Dell, Fujifilm, HTC, Eastman Kodak, Olympus, Sharp, and Sony.

The patent in these suits is U.S. Patent No. 5,686,738, entitled “Highly insulated monocrystalline gallium nitride thin films” and directed to gallium nitride semiconductor devices and methods of preparing highly insulating GaN single crystal films in a molecular beam epitaxial growth chamber.

 

No. 5:  Criminalizing Greenwashing 2.0

As discussed in this space, a new greenwashing paradigm has emerged where cases are brought by or on behalf of commercial consumers and involve B-to-B communications and misrepresentations (as opposed to advertising of consumer products directed to individual consumers).

In 2013 we began to see a new species of greenwashing 2.0 case:  criminal actions brought by governmental authorities for environmental crimes and fraud (see, e.g., here and here).

In one case a Colorado company called Executive Recycling and some of its officers were sentenced to imprisonment and fines for falsely representing that the company would dispose of all electronic waste (mostly cathode ray tubes) in an environmentally friendly manner in the United States when it instead sold the electronic waste it received to brokers for export overseas to China and other countries.

In another, the feds prosecuted companies for allegedly generating and selling fraudulent Renewable Energy Credits (RINs), and Cargill separately brought a civil action involving similar allegations.

 

No. 4:  Sinovel Faces Criminal Indictment in US

The AMSC- Sinovel copyright and trade secret dispute involving wind turbine control systems was big news in 2012, but legally speaking, mostly civil.

That changed in 2013 when the U.S. Department of Justice filed an indictment in federal court in Wisconsin alleging that Sinovel, two of its employees, and a former AMSC employee conspired to commit trade secret theft and criminal copyright infringement.

The indictment said the purpose of the alleged conspiracy was to illegally obtain proprietary source code, software, equipment designs and technical drawings relating to AMSC’s wind turbine control systems., thereby cheating AMSC out of more than $800,000,000.

 

No. 3:  Greenwashing Costs LED Maker $21 Million

In an indication of how seriously the American justice system may now be taking greenwashing, a Los Angeles federal court enjoined LED maker Lights of America (LOA) and ordered the company to pay $21,165,863.47.

This followed a decision holding that LOA violated Section 5 of the FTC Act by making false claims about LED lamps replacing certain wattage incandescent lamps and about the lifetime of the company’s LED lamps.

The case was brought by the FTC, America’s competition and consumer watchdog agency.  The FTC was to receive the $21 million, and the court directed the FTC to deposit the money into a redress fund to be used for consumer redress.

 

No 2:  Burgeoning Biofuels Battles

While The Gevo-Butamax litigation was a major story of 2012, notable both for its size and as the first foray of big oil into biofuels patent suits, biofuels patent litigation in general makes the 2013 list.

Not only did Gevo and Butamax continue their “patent war over who can make biobutanol,” with big decisions starting to come down, but Danish enzyme maker Novozymes also was active in the courts, Danisco scored a big summary judgment win against Novozymes, GreenShift expanded its ethanol production patent enforcement campaign, and Neste’s biodiesel patent suits changed direction with the court staying the suits pending reexamination of the asserted patents.

 

No. 1:  Solar Patent Surge

Since the start of green patent history (admittedly a very brief era in the cosmic scheme of things), as recorded by the Clean Energy Patent Growth Index (CEPGI), fuel cells dominated other technologies and perennially led the green patent rankings.

That changed in 2013.  In its first-quarter report the CEPGI noted that the 217 solar patents granted were just one behind fuel cells’ 218, “the smallest differential on record [suggesting] that Solar patents are poised to pass Fuel Cell patents.”

As predicted, the Q2 report showed solar patents beating out fuel cell patents for the first time, surging ahead with 246 solar patents granted in the second quarter, with fuel cell patents in second place at 209.

According to CEPGI, “Solar patents’ quarterly win makes clear that innovation in this sector continues at a rapid pace despite the failures and consolidations of solar firms across that board that dominate cleantech media reports.”

 

Correction:  The e-alerts for the previous post announcing the opening of Green Patent Law indicated that they were sent from my old email address.  I think that problem has been corrected.  My new email address is elane@greenpatentlaw.com. 

 

 

 

 

Does Use of a Certification Mark Constitute an Express Warranty?

November 26th, 2013

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Unlike ordinary trademarks, which indicate the commercial source of a product, certification marks communicate to the consumer that the products to which they are affixed meet certain manufacturing or quality standards.

One question that flows from this quality communication function is whether a manufacturer that affixes a certification mark to a product, by doing so, expressly warrants that the product meets the standards signaled by the certification mark.

This legal issue has begun to split the courts in the context of the Energy Star certification program for energy efficient appliances.  In the last year or so, an Ohio federal court dismissed a plaintiff’s express warranty claim based on affixation of the ENERGY STAR logo to a washing machine while a California federal court allowed a similar claim involving refrigerators to move forward.

The defendant was Whirlpool in both cases.  In the Ohio case, Savett v Whirlpool Corporation, the defendant moved to dismiss all of plaintiff’s claims, including a breach of express warranty.

The court granted Whirlpool’s motion on that claim because it found the ENERGY STAR logo does not in itself affirm any fact or promise:

[T]he Court finds that plaintiff fails to allege the existence of an express warranty because use of the ENERGY STAR logo is not an “affirmation of fact or promise” as alleged in this case . . . . the logo itself contains no assertion of fact or promise.  Unlike traditional express warranties where unambiguous promises or factual assertions are made, which are clearly understood on their own footing, any meaning conveyed by the logo requires independent knowledge.

The court also noted the lack of any precedent “in which a logo has . . . been held to constitute an express warranty.”

Contrast that with Dei Rossi v. Whirlpool Corporation, decided by the U.S. District Court for the Eastern District of California.  This case, discussed in a recent post, came out the other way.

The California court denied Whirlpool’s motion to dismiss the express warranty claim, holding that it was satisfied by affixation of the ENERGY STAR certification mark to the refrigerators.  This act by Whirlpool conferred a specific and express warranty because it communicated that the products met the Energy Star requirements:

Although Defendant alleges that this logo does not confer a specific and express warranty, Defendant does not provide any reason for affixing this logo to the product other than to signify that the product meets the Energy Star specifications.  Simply put, the Court cannot fathom any other reason for affixing the logo in such a manner. . . if Defendant’s intention was simply to signify that the product was energy efficient, it could have done so without affixing the Energy Star certification logo.  Thus, the Court finds that affixing this logo to the product satisfies the definition of an express warranty . . .

The court further found that the Plaintiffs adequately pleaded the exact terms of the warranty because the complaint noted that the Energy Star certification required the refrigerators to be at least 20% more efficient than minimum standard models.

Which is the better answer to this legal conundrum?  We may find some guidance by attempting to reconcile the conflicting results in these two cases.

It should be noted initially that we can’t reconcile these decisions based on any differences in the express warranty statutes in Ohio and California; the salient provision in each state is identical:

Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

One key factual difference is that the Ohio plaintiff apparently did not see the ENERGY STAR logo on the product or understand its meaning.  The Ohio court noted this in footnote 8 of its decision, stating it is notable that “plaintiff does not allege that he saw or understood any purported meaning of the logo.”

The California court did in fact distinguish its decision, at least in part, on this basis:

[U]nlike the plaintiff in Savett, in the instant case Plaintiffs have alleged that they independently understood the meaning of the logo and relied on it in deciding to purchase the products.

Ultimately, however, where a court comes out on this issue seems to depend on whether it attaches more importance to the motive of the manufacturer or the motive of the consumer.  That is, the California court found the manufacturer’s intention in affixing the ENERGY STAR logo to the product was to communicate that it meets the Energy Star specifications.

The Ohio court, by contrast, seemed swayed by the knowledge and purpose of the consumer, noting that “any meaning conveyed by the logo requires independent knowledge,” which the plaintiff in the suit notably lacked.

To be sure, there are a number of other causes of action consumers can bring against manufacturers that don’t satisfy green certification standards as advertised.  Nevertheless, I’m sure we’ll see more case law on this issue as green certification marks continue to proliferate and influence the purchasing decisions of environmentally conscious consumers.

Whirlpool Fridge Decision Provides Guidance for Future Certification Mark Greenwash Cases

November 16th, 2013

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I’ve written before about the important role of certification marks in green branding, and a recent California district court decision involving the Energy Star certification highlights their continued significance.

The Energy Star program seeks to aid investment in energy efficient products by providing information that consumers and investors can use to research and compare green product or project choices. 

The U.S. Environmental Protection Agency (EPA) works with the U.S. Department of Energy and manufacturers to award the ENERGY STAR certification to products that meet particular energy savings standards.

Named plaintiffs Kyle Dei Rossi and Mark Linthicum brought a class action lawsuit against Whirlpool for selling refrigerators bearing the Energy Star logo that were later determined not to comply with the Energy Star requirements and were disqualified from the program.

The complaint, filed in the Eastern District of California, alleged that Whirlpool’s misrepresentations that the refrigerators met the Energy Star guidelines was a breach of the products’ express warranty and implied warranty of merchantability, a violation of the federal Magnuson-Moss Warranty Act, the California Consumer Legal Remedies Act (CLRA), California Unfair Competition Law (UCL), and California False Advertising Law.

Whirlpool moved to dismiss the complaint, and a recent court decision granting the motion in part and denying it in part provides helpful guidance on which causes of action effectively support greenwashing claims in connection with certification mark abuse.

Perhaps the most significant portion of the decision is the court’s holding that the express warranty claim was satisfied by affixation of the Energy Star certification mark to the refrigerators.  This act by Whirlpool conferred a specific and express warranty because it communicated that the products met the Energy Star requirements:

Although Defendant alleges that this logo does not confer a specific and express warranty, Defendant does not provide any reason for affixing this logo to the product other than to signify that the product meets the Energy Star specifications.  Simply put, the Court cannot fathom any other reason for affixing the logo in such a manner. . . if Defendant’s intention was simply to signify that the product was energy efficient, it could have done so without affixing the Energy Star certification logo.  Thus, the Court finds that affixing this logo to the product satisfies the definition of an express warranty . . .

The court further found that the Plaintiffs adequately pleaded the exact terms of the warranty because the complaint noted that the Energy Star certification required the refrigerators to be at least 20% more efficient than minimum standard models.

Whirlpool did succeed, however, in convincing the court that the breach of implied warranty of merchantability claim should be dismissed.  There, the test is whether the refrigerator could serve its ordinary purpose, and there was no allegation that the refrigerators at issue failed to properly refrigerate. 

The federal Magnuson-Moss Warranty Act requires the plaintiff to show that the performance of the product was guaranteed over a specific time period.  The court dismissed this claim because the Energy Star logo does not in itself express or denote a time period.

The court allowed Plaintiffs’ California CLRA claim to go forward because the complaint alleged that Whirlpool knowingly mislabeled the refrigerators and therefore may have either intentionally misrepresented the energy efficiency of the products or intentionally labeled them with information it had not verified as accurate.

The UCL claim also survived the motion to dismiss for the same reason, i.e., that the allegation of knowingly mislabeling the products could support a claim under the fraudulent acts or promises prong of the UCL.  In addition, the failure to meet the Energy Star standards meets the law’s unfair practice prong.

Finally, the court denied Whirlpool’s motion as to Plaintiffs’ California state false advertising claim.  The court held that the numerous pages of Energy Star advertisements used by Whirlpool cited in the complaint and the specific instances described in which Dei Rossi and Linthicum saw the Energy Star logo on the inside of refrigerator products at retail stores sufficed to support the claim.

Lawyers selecting and pleading various federal, state, and common law claims in greenwashing cases, particular those involving certification mark abuse, would be wise to read this decision.

Court Enjoins LED Greenwashing; Orders Lighting Co. to Pay $21 Million for Consumer Redress

October 11th, 2013

 

A previous post discussed a recent court decision giving the U.S. Federal Trade Commission (FTC) a big win and holding that Lights of America (LOA) violated Section 5 of the FTC Act by making false claims about LED lamps replacing certain wattage incandescent lamps and about the lifetime of the company’s LED lamps.

At issue were LOA’s ”replacement” claims and “lifetime” claims.  The replacement claims stated that certain LED lamps replace 20-, 40-, and 45-watt incandescent light bulbs and indicated that the lamps produce the lumen equivalent of each compared incandescent.

The lifetime claims included statements by LOA that certain lamps last six, seven, ten, and even fifteen times longer than 2,000 hour incandescent bulbs, for a maximum claimed 30,000 hours of life. 

The court found both LOA’s “replaces watts” claims and its LED lifetime claims false and unsubstantiated and constituted violations of Section 5(a) of the FTC Act.

The court has now issued a Final Judgment and Order imposing an injunction that prohibits LOA from making any misrepresentations about its LED products relating to four categories of product features:

(1) Light output or brightness in lumens;

(2) Light output equivalency to incandescent or any general service lamp;

(3) Lifetime of the product; or

(4) Energy costs, energy savings, energy consumption, or energy-related efficacy.

If LOA is to make any such claims they must be backed up by “competent and reliable evidence that substantiates that the representation is true.”

The decision also includes a substantial monetary judgment, ordering LOA to pay the FTC $21,165,863.47.  This is the amount the court determined represented the injury to consumers or LOA’s unjust enrichment resulting from its violations of the FTC Act.

The court directed the FTC to deposit the money into a redress fund to be used for consumer redress, and if not practicable or there are funds left over, to use the remaining money for equitable relief reasonably related to LOA’s deceptive practices.

Any money left after that, the court said, will be deposited to the U.S. Treasury as disgorgement, which could come in handy should Congress fail to raise the debt ceiling next week and the government default on its debt obligations.

Greenwashing 2.0 Published

October 7th, 2013

I’m pleased to announce that my article – Greenwashing 2.0 - was published at the end of September in the Columbia Journal of Environmental Law (CJEL).  The current issue of CJEL can be found here.

In this piece, I argue that discussions of greenwashing are unduly restricted to cases in which an individual consumer, a class of consumers, or a consumer watchdog such as the FTC challenges a company making false or misleading green B-to-C claims about its products or services.

To put greenwashing in its proper context I think we should consider a wider range of cases, some of which are not immediately recognizable as instances of greenwashing.  More particularly, new paradigm greenwashing actions are brought by or on behalf of commercial consumers and involve B-to-B communications and representations.

Examples are breach of contract cases involving wind resource estimates and cogeneration equipment (see, e.g., here and here), eco-mark infringement suits over environmental compliance software and counterfeit solar panels (see, e.g., here and here), and civil and criminal fraud cases brought by governmental authorities for environmental crimes and sale of invalid renewable fuel credits (see, e.g., here and here).

From this broader vantage point, and keeping in mind the definition of greenwashing – making false or misleading claims about purportedly environmentally friendly products, services, or practices – I argue that we will be able to recognize, observe and understand the full scope of the greenwashing problem.

CJEL does not include abstracts in its articles, so I’m pasting my abstract in here:

For over forty years, environmental awareness and concerns about the environmental impact of products, services, and business practices have influenced consumer decision-making, corporate advertising, and marketing strategies.  As the purchasing power of green consumers has grown, the instances of marketers making false or misleading advertising claims about environmental benefits—“greenwashing”—have multiplied from an occasional irritant to a ubiquitous practice with major ramifications for the struggle to mitigate climate change.  Throughout, the paradigm for investigating, studying, and combating greenwashing has been to focus on claims by companies engaged in marketing consumer products to individual consumers and the effects of those claims on consumers. That was justifiable because, until fairly recently, nearly all instances of greenwashing involved such scenarios, and the vast majority of greenwashing legal actions were brought by or on behalf of individual green consumers.  But that view of greenwashing has become antiquated and is too narrow to account for greenwashing activity today.  Now that we are in the midst of the first sustained clean tech revolution, there is greatly increased commerce in green technologies, much of which is business-to-business.  The clean tech boom has given rise to a spate of lawsuits involving alleged false and deceptive representations about the genuineness, reliability, and efficiency of green technology equipment and related services.  The limited historical view of the traditional greenwashing paradigm misses this new species of cases entirely, perpetuating a significant greenwashing “blind spot” and leading to a gross underestimation of the scope and impact of greenwashing activity today.  This article argues that we need a new paradigm that takes a broader view of the phenomenon of greenwashing.  Specifically, we should look beyond the traditional paradigm of greenwashing, which is limited to deceptive marketing of consumer products to individual consumers, and contemplate a wider variety of cases that include representations made to green commercial consumers and legal actions brought by and on behalf of commercial consumers.  By changing the greenwashing paradigm in this way and defining it more expansively to reflect the commercial realities of the clean tech revolution, we will eliminate the blind spot and provide the broader vantage point necessary to identify and understand new instances of greenwashing.

 

In LED Greenwashing Case Court Unplugs Lights of America

October 3rd, 2013

A previous post discussed an action brought by the U.S. Federal Trade Commission (FTC) against Lights of America (LOA), charging the California LED lamp maker of violating the FTC Act by making false or unsubstantiated advertising claims about its products.

In a recent decision, a Los Angeles federal court held that LOA violated Section 5 of the FTC Act by making false claims about LED lamps replacing certain wattage incandescent lamps and about the lifetime of the company’s LED lamps.

Section 5(a) of the FTC Act prohibits “unfair or deceptive acts or practices in or affecting commerce.”

At issue were LOA’s ”replacement” claims, which stated that certain LED lamps replace 20-, 40-, and 45-watt incandescent light bulbs and indicated that the lamps produce the lumen equivalent of each compared incandescent.

The court found that none of lumen output readings for the LED lamps at issue equaled the typical lumen output range for any of the compared incandescents.  In fact, the measured lumen outputs of LOA’s best performing products were significantly lower than each incandescent:

Even the lamp with the highest measured lumen output . . . provides only 48% of the highest point in the range of typical lumen output [of a 45-watt incandescent], and 80% of the lowest point in the range of the typical lumen output.

The lamp with the highest measured lumen output . . . provides only 23% of the highest point in the range of typical lumen output [of a 40-watt incandescent], and 36% of the lowest point in the range of typical lumen output.

The lamp with the highest measured lumen output . . . provides only 39% of the highest point in the range of typical lumen output [of a 40-watt incandescent], and 20% of the lowest point in the range of typical lumen output.

Thus, the court found LOA’s “replaces watts” claims false and unsubstantiated and constituted a violation of Section 5(a) of the FTC Act.

The lifetime claims at issue included statements by LOA that certain lamps last six, seven, ten, and even fifteen times longer than 2,000 hour incandescent bulbs, for a maximum claimed 30,000 hours of life. 

The court used as the standard for measuring the lifetime of an LED lamp something called “L70,” which is the point at which the light output of an LED lamp diminishes to 70% of its original light output.

Here the issue was partly lack of substantiation as the court found that LOA had no life test data for some of its LED lamps prior to February 2008. 

Subsequent testing failed to support LOA’s 30,000 hour life claim or its later 20,000 claims:

None of the lamps tested by LOA maintained lumen output above L70 during the period tested.  All had reached the end of life under L70 during . . . less than 7,000 hours of testing. 

The court therefore held the lifetime claims false:

LOA’s substantiation does not support its 30,000 or 20,000 hour lifetime claims.  Rather, the documents and data LOA relies upon show that none of the LEDs or Lifetime Lamps tested would last beyond a few thousand hours.

The false lifetime claims also constituted a violation of Section 5(a) of the FTC Act.

The court found injunctive relief warranted as well as restitution and disgorgement of LOA’s gross revenues from the deceptively advertised products, and requested the FTC to submit a proposed judgment for the court to consider.

The monetary penalty for LOA could be quite severe.  According to the court’s decision, the company’s total gross sales for all of its LED lamps that it falsely and deceptively advertised through April 2011 equals $21,165,863.47.