1. Overview of R.J. Reynolds “337 Investigation”
On October 13, 2023, the U.S.-based R.J. Reynolds Tobacco Company and R.J. Reynolds Vapor Company (hereinafter referred to as “Reynolds”) filed a complaint with the U.S. International Trade Commission (hereinafter referred to as “Reynolds”) against 26 Chinese and American e-cigarette companies. The United States International Trade Commission (ITC) filed a “337 investigation” application, of which 13 were Chinese e-cigarette companies.
After the incident, our legal team Yang Aoyu, who has a 7-year education background in Anglo-American law and a doctorate in law from the University of California, conducted research based on the publicly available Reno “337 Investigation” application (the evidence was not disclosed).
As far as the “Section 337 investigation” in this case is concerned, it is necessary to prove the existence of unfair competition and industrial damage at the same time, and neither is required. We noticed that one of the reasons for the failure of the last “337 investigation” related to e-cigarettes was the failure to prove the existence of related industries in the United States.
R.J. Reynolds accused multiple Chinese brands of disposable e-cigarette products of unfair competition and unfair behavior in the import trade under Section 337 of the U.S. Tariff Act of 1930, and requested the ITC to issue a general exclusion order and permanent ban. To achieve its purpose of restricting all illegal disposable e-cigarettes from entering the United States. Generally speaking, the support for general exclusion orders in the US “337 investigation” cases we have seen is relatively rare.
Once the ITC makes an exclusion order or prohibition order, at least the defendant in this case will no longer be able to import the involved brand of e-cigarettes into the United States. Importing goods into the United States in violation of the law may constitute a crime of smuggling, with a maximum prison term of 20 years (18 U.S.C. §545 ), and hold the person in charge of the company accountable. This series of articles will discuss the application content of this “337 investigation”, the U.S. laws involved, and the specific accusations made by R.J. Reynolds. This article explains the causes of action for false advertising and publicity in this “337 Investigation”.
2. R.J. Reynolds accusations of false advertising and publicity
Reynolds alleged that the defendants violated the Lanham Act’s provisions regarding false and misleading advertising or promotion:
(1) Misleading and false statements that its disposable e-cigarettes are approved for sale or permitted to be sold by the FDA (for all defendants);
(2) Through the word “clear” on the packaging, it misleadingly and falsely expressed that its disposable e-cigarettes do not contain flavors (involving domestic corporate defendants)
(3) Use misleading and false source marks (for the R&M defendant), such as using cartoon images on products to make consumers mistakenly believe that the defendant’s products are connected with the rights holder of the cartoon image;
(4) False and misleading advertising or publicity causes damage to Renault.
3. False advertising and publicity under U.S. federal law
The Lanham Act (which is U.S. trademark law; there is no specific unfair competition law at the federal level) 15 U.S.C. §1125(a) stipulates that any person who uses in commercial advertising or publicity a false source identification, or a false or misleading State the nature, characteristics, quality and origin of the goods and bear civil liability to the person who caused the damage or is likely to cause the damage. (Any person who … uses … false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographical origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or likely is to be damaged by such act.)
4. A brief analysis of the accusations of false advertising and propaganda against Renault
First of all, regarding the accusation made by Reynolds that “the defendants misleadingly and falsely stated that its disposable e-cigarettes were approved for sale or allowed to be sold by the FDA”, the investigation application did not specify the specific misleading and false statements. If the relevant words are used If the meaning of a word is not clear, it means there are different understandings of the statement, and there is usually a lot of room for dispute. In addition, domestic enterprises can also provide objective evidence to prove that they have not made such statements or similar statements and that it is the behavior of U.S. dealers, and raise defenses such as that dealers should be held responsible for false and misleading advertising or promotional activities. The brand’s responsibility in this regard is heavier than that of the OEM. When the brand knows or should know the content of the advertisement or promotion, whether it restrains the dealer from making false or untrue publicity is also expected to be a controversial point in the division of responsibilities.
Secondly, R.J. Reynolds accusation that the e-cigarettes manufactured by domestic companies contain the word “clear” is a matter of literal interpretation. Reynolds believes that “clear” conveys to consumers that the product does not contain taste. However, the meaning of “clear” in English also includes no problem, flawless, pure, (taxes paid), etc. , the specific explanation in this context needs to be discussed based on the actual situation, and there is room for debate on Renault’s accusation.
Thirdly, although Renault’s accusation of false source identification is well-founded, Renault is not the right holder of the cartoon image and cannot prove the constitutive element of “damage” in 15 U.S.C. §1125(a).
Finally, R.J. Reynolds sent a reminder email to wholesalers and retailers on September 18, 2023. The title was likely to be expanded, and the content hinted to a certain extent that Renault’s Vuse Alto product had FDA approval (the product actually did not pass PMTA ), the email is suspected of exaggeration and misleading, and is also suspected of unfair competition. The Anglo-American legal system requires that the party seeking equitable relief must not have “unclean hands.” Renault’s actions to seek equitable relief such as general exclusion orders and permanent injunctions are inconsistent with the concept of traditional equity.
Regarding the accusations against the defendants in Renault’s “337 investigation” application that they violated the Prevention of All Cigarette Trafficking Act (PACT Act) and customs laws, please pay attention to subsequent articles.
