Choon's Design, LLC v. ContextLogic, Inc.

Background

Choon's Design, LLC alleged that ContextLogic Inc., doing business as Wish, operated a retail website and smartphone application featuring products from third-party merchants. Choon's Design alleged that Wish was more than a passive platform because it imported, shipped, and stored many products, charged merchants a fee for each sale, and used a “Verified by Wish” badge on products. According to the complaint, Wish represented that products with the badge had been inspected and were high quality, while also maintaining policies against counterfeit products.

The complaint alleged that counterfeit products nevertheless received the badge, including a product identified as a Rainbow Loom product. Choon's Design asserted claims under Section 43(a)(1)(A) of the Lanham Act for false association or false designation of origin, under Section 43(a)(1)(B) for false advertising, and under California’s Unfair Competition Law.

False-association claim

The court rejected ContextLogic’s argument that Choon's Design failed to give fair notice because it called the claim “false association” rather than “false designation of origin.” The court treated those terms as referring to the same general type of claim under Section 43(a)(1)(A).

The court also concluded that the plain language of Section 43(a) did not require use of a trademark to state a claim and that the “Verified by Wish” badge could potentially be actionable as a designation under the statute. But Choon's Design still had to allege that the badge was likely to cause confusion, mistake, or deception about sponsorship, affiliation, or the origin of the goods or person involved. The court found the allegations insufficient because they generally asserted confusion about affiliation, connection, association, origin, sponsorship, or approval without facts supporting those assertions. The court also found no allegations supporting the suggestion that the badge falsely affiliated Wish with Choon's Design or its products, or supporting liability for the vendor’s conduct.

The court therefore dismissed the false-association claim with leave to amend.

False-advertising claim

The court held that Federal Rule of Civil Procedure 9(b), which requires fraud or mistake to be pleaded with particularity, applied to the false-advertising claim. It found that the complaint alleged knowing and intentional conduct and therefore sounded in fraud, even though Choon's Design argued that it did not claim every product with a “Verified by Wish” badge was inauthentic.

The court identified several pleading deficiencies. Choon's Design did not specifically allege that the badge itself was false. The complaint suggested that the badge caused consumers to believe products were authentic and that some products were counterfeit, but it did not state with sufficient detail that Wish’s verification was inadequate or nonexistent. It also did not explain why statements about product quality plausibly amounted to a representation of authenticity, and it lacked sufficient details about when and where the relevant representations were made.

The court dismissed the false-advertising claim with leave to amend.

Unfair-competition claim

The court likewise applied Rule 9(b) to the California Unfair Competition Law claim because it was based on allegedly deceptive advertising and alleged violations of underlying laws. The court found that Choon's Design had not pleaded the circumstances of the alleged fraud or mistake with the required particularity. The court dismissed the UCL claim with leave to amend. In a footnote, the court also stated that an unjust-enrichment claim failed because it was derivative of the other claims, although the main discussion identifies three causes of action.

Motion to strike and disposition

ContextLogic separately asked the court to strike Choon's Design’s class allegations, screenshots, and customer complaints. The court declined to strike the class allegations at that stage, reasoning that determining whether other entities owned valid marks and whether products infringed those marks would likely involve individualized issues. It also found that the screenshots and other materials were not extraneous and provided context for the allegations, so it declined to strike them.

The court granted ContextLogic’s motion to dismiss the First Amended Complaint with leave to amend. Any amended complaint had to be filed within 28 days of the order, and Choon's Design could not add new causes of action.