Imagine this scenario: you’re a toothpaste start-up with six employees. You’re about to launch your new brand into an oral care market dominated by consumer products giants like Procter & Gamble (“P&G”) (the maker of Crest and Oral B products), and a federal judge has just enjoined you from selling or shipping 100,000 units of your product. Game over, right? Maybe not. Hello Products LLC, a New Jersey-based recently found itself faced with this problem, but came up with a novel solution: give away the 100,000 unsellable-tubes of toothpaste for free.
While Hello wins major points for its creativity in the face of legal adversity, its actions can also serve as a reminder to plaintiffs and their counsel to pay careful attention to potential loopholes when crafting a proposed injunction order.
On January 31, 2014, P&G filed a complaint in the Southern District of New York against Hello Products, alleging claims for false and deceptive advertising under the Lanham Act arising from Hello’s use of the claim “99% Natural” on the labeling and in the advertising and promotional materials for its oral care products. P&G alleged that Hello’s toothpaste is largely comprised of chemically processed ingredients such as sodium fluoride, sodium laurel sulfate and sorbitol.
Several weeks later, the parties stipulated to a preliminary injunction (to which Hello apparently agreed in order to avoid expedited discovery), prohibiting Hello from disseminating any statement that its product is “99% Natural” in any new product labeling, advertising or other promotional or marketing materials, or from selling or shipping any of 100,000 existing packages of toothpaste that carried the offensive “99% Natural” claim, as of March 25, 2014. Hello was also prohibited from selling any product with the “99% Natural” label to wholesalers or distributors prior to March 25th effective date of the injunction.
But the injunction did not say anything about giving the remaining inventory away before March 25th. So, on March 21st, Hello turned a legal setback and potential PR disaster into a marketing event, handing out 100,000 tubes of toothpaste on the streets of Manhattan. According to an article on the WSJ Corporate Intelligence blog, Craig Dubitsky, Hello’s founder, gave credit to P&G for the PR stunt, saying: “Thanks P&G. They’re accelerating and amplifying our marketing efforts.”
Meanwhile, the lawsuit goes on. Hello filed a counterclaim against P&G, alleging that by filing its Lanham Act complaint, P&G breached a pre-litigation agreement between the parties in which Hello promised (among other things) to discontinue the use of “99% natural” claim on its product label, and in related advertising, in return for P&G’s agreement that Hello be allowed to exhaust its remaining inventory of products with the old label. P&G filed its answer on April 7th, essentially denying all allegations.