Made in USA Labeling Rule

Labeling

 

Made in USA Labeling Rule

 

U.S. Origin Claims

 

Section 5 of the FTC Act

 

Consumer Law

 

Import

 

 

 

FTC Enforces New Made in USA Rule against Lithionics and Owner Steven Tartaglia for Falsely Labeling Foreign-Made Batteries as American

 

April 13, 2022

Republication

 

 

Order Requires Lithionics Battery LLC And Tartaglia To Pay Civil Penalty, Notify Consumers, and Stop Making Bogus Made in USA Claims.

The Federal Trade Commission (FTC) (…) used its authority under the Made in USA Labeling Rule, which took effect on Aug. 13, 2021, to bring a complaint against Lithionics Battery LLC and its owner, Steven Tartaglia for illegally misrepresenting that its lithium ion cells are made in the United States. The FTC’s complaint alleges that, since at least 2018, Lithionics has falsely labeled its battery products with an American flag image surrounded by the words “Made in U.S.A.,” often accompanied by the statement “Proudly Designed and Built in USA,” when these products are primarily made overseas. The Commission is asking the court to order Lithionics and Tartaglia to stop making deceptive Made in USA claims and pay a penalty for Lithionics’ past claims.

"As our country works to onshore production of lithium ion batteries, it’s critical that honest businesses have a chance to compete, and that consumers can buy American,” said Sam Levine, Director of the FTC’s Bureau of Consumer Protection. “Falsely labeling batteries as made in the United States is against the law, and the FTC is using its new Made in USA rule to make sure this misconduct comes with a price."

Florida-based Lithionics designs and sells battery products for recreational vehicles, amusement park rides, marine applications, and low-speed electric vehicles. Although the defendants have repeatedly represented that their battery, battery module, and battery management system products are all or virtually all made in the United States, in fact all Lithionics battery and battery module products incorporate imported lithium ion cells, and all Lithionics battery management systems incorporate significant imported components.

Photographs of products bearing this label and other Made in USA claims appeared on the company website, on its social media accounts, and in mail order catalogs, according to the complaint. YouTube videos featured Tartaglia and other employees printing Made in USA labels and putting them on Lithionics products. Lithionics published a chart in its marketing materials juxtaposing its own products with “imports,” and highlighting “advantages of Lithionics battery systems” over imported competing products. Lithionics also misrepresented in mail order catalogues that its products were made in the United States.

Under the Made in USA Labeling Rule, marketers are prohibited from labeling products as “Made in USA” unless the final assembly or processing, and all significant processing that goes into the products occur in the United States; and unless all or virtually all ingredients or components of the products are made and sourced in the United States. The rule also requires all “Made in USA” labels appearing in mail order catalogues to be truthful and non misleading.

The complaint also alleges that Tartaglia and Lithionics also violated Section 5 of the FTC Act since 2018 by misrepresenting that their goods are all or virtually all made in the United States.

Enforcement Action

The proposed order settling the FTC’s complaints against Lithionics and Tartaglia prohibit the conduct alleged in the complaint. Lithionics and Tartaglia must:

• Shut down bogus Made in USA claims.  Stop claiming that products are made in the United States unless they can show that the product’s final assembly or processing—and all significant processing—takes place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the United States.
• Pay civil penalties: Tartaglia and Lithionics must pay civil penalties of over $100,000, equal to three times Lithionics’ profits attributable to the illegal activity.

The FTC’s Enforcement Policy Statement on U.S. Origin Claims provides further guidance on making non-deceptive “Made in USA” claims. 

The Commission vote to authorize the staff to refer the complaint to the DOJ and to approve the proposed consent decree was 4-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Middle District of Florida.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Consent decrees have the force of law when approved and signed by the District Court judge.

 

Related Cases

Lithionics Battery, LLC, In the Matter of

 

 

 

 

 

OTR Wheel Engineering, Inc. v. West Worldwide Services, Inc., Docket No. 16-35897

Trademark: Designation of origin: Passing off: Reverse passing off: Trade dress: Confusion: Competition law: Consumer law: Packaging: Design: Copyright:

(…) OTR sells tires for industrial use. One of OTR’s products is a tire called the “Outrigger.” OTR obtained a registered trademark on the Outrigger name and a registered trade dress on the Outrigger tire tread design.

OTR Wheel and Samuel West are competitors in the business of selling industrial tires. West asked one of OTR’s suppliers to provide him with sample tires from OTR’s molds, and he asked the supplier to remove OTR’s identifying information from the tires. West wanted to use the tires to obtain business from one of OTR’s customers. OTR sued West, asserting various claims under the Lanham Act and state law.

(…) The primary issue before us is whether West can be found liable for reverse passing off under the Lanham Act. (…) (False Designation of Origin: Reverse Passing Off) (…) Pursuant to the Supreme Court’s opinion in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), a claim for reverse passing off cannot be brought to prevent the copying of intellectual property. We conclude that West did not simply copy OTR’s intellectual property but passed off genuine OTR products as his own, so we affirm the judgment holding him liable for reverse passing off ((…) The jury could therefore conclude that the development tires were taken from part of an anticipated OTR (Solideal) order and were genuine OTR products, not just copies).

(…) The panel affirmed the district court’s rejection of a proposed jury instruction asserting a claim for infringement of an unregistered trade dress. The panel explained that a registered claim converts to an unregistered claim if the registration is invalidated; thus, a plaintiff does not need to separately plead the identical unregistered claim. But where the unregistered claim would cover something more than the registered claim, a plaintiff must put a defendant on notice of such through the pleadings.

The Lanham Act prohibits conduct that would confuse consumers as to the origin, sponsorship, or approval of goods or services. See Slep-Tone Entm’t Corp. v. Wired for Sound Karaoke & DJ Servs., LLC, 845 F.3d 1246, 1249 (9th Cir. 2017); see also TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 28 (2001). To prevent consumer confusion, the Act allows the producers of goods and services to enforce trademark rights. 15 U.S.C. §§ 1114, 1125(a); see also Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205, 209–10 (2000). A trademark is “any word, name, symbol, or device. . . used or intended to be used to identify and distinguish goods from those manufactured or sold by others and to indicate the source of the goods.” 15 U.S.C. § 1127. In addition, the Lanham Act protects more than words and symbols. It also protects a product’s “trade dress,” which includes the packaging, dressing, and design of a product. TrafFix Devices, 532 U.S. at 28; Wal-Mart, 529 U.S. at 209.

Section 43(a) of the Lanham Act prohibits a person from using “in commerce any word, term, name, symbol, or device. . . which . . . is likely to cause confusion . . . as to the origin. . . of his or her goods.” 15 U.S.C. § 1125(a). The term “origin” in section 43(a) lends itself to two causes of action for “passing off” based on false designation of origin: passing off and reverse passing off. “Passing off . . . occurs when a producer misrepresents his own goods or services as someone else’s. ‘Reverse passing off,’ as its name implies, is the opposite: The producer misrepresents someone else’s goods or services as his own.” Dastar, 539 U.S. at 27 n.1.

(…) In Dastar, the Supreme Court explained that the term “origin” in section 43 “refers to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.” Id. at 37. Thus, a reverse passing off claim cannot be brought to prevent the copying of intellectual property. Copying is dealt with through the copyright and patent laws, not through trademark law. Id. At 33–34.

(…) To prove a claim under section 43(a), a plaintiff must establish a likelihood of consumer confusion. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 780 (1992). Thus, in order to prevail on its claim for reverse passing off, OTR was required to prove that consumers would likely be confused as to the origin of Outrigger tires that had their identifying information removed. The likelihood of confusion inquiry “generally considers whether a reasonably prudent consumer in the marketplace is likely to be confused as to the origin or source of the goods or services.” Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190, 1209 (9^th Cir.2012). Thus, the jury had to determine whether a hypothetical consumer would likely be confused. Evidence of actual confusion was not required. Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1151 (9th Cir. 2011). The jury was shown pictures of an OTR production tire and the West development tire. Comparing the two tires, a reasonable jury could conclude that consumers would be confused by tires that lack the identifying information.

(U.S. Court of Appeals for the Ninth Circuit, July 24, 2018, OTR Wheel Engineering, Inc. v. West Worldwide Services, Inc., Docket No. 16-35897, J. Clifton)

1 ) Trade dress : terme juridique qui se rapporte à des caractéristiques de l'aspect visuel d'un produit ou de son emballage, donnant une indication de l'origine du produit aux consommateurs. Trade dress peut être enregistré, comme une marque (ici une partie du design d’un pneu).

2 ) Les bases légales des actions en violation du droit à la marque. Le Lanham Act ne protège pas que la marque comprise comme combinaison de mots et de symboles. Il protège aussi le « trade dress » du produit, notion qui inclut le « packaging », le « dressing » et le design du produit.

3 ) Un exemple de « reverse passing off ». Notions et bases légales de « passing off » et de « reverse passing off » : ces concepts juridiques visent à combattre la confusion portant sur l’origine d’un produit.

4 ) Notion de confusion du consommateur.

5 ) Si dans la procédure en violation du droit à la marque l’enregistrement de celle-ci est déclaré invalide, la procédure peut se poursuivre, la marque dont la violation est alléguée n’étant plus considérée comme enregistrée. Le demandeur ne pourra cependant faire valoir que les allégués et les moyens de droit qui découlent de ses mémoires.