Plaintiff La Canada Ventures, Inc., is a health and beauty retailer offering cosmetic products. Defendant MDalgorithms is a company that offers computer software and app technology for education and advice about the treatment of acne. Both parties create and market skin and haircare products with the root mark “MD.”
Plaintiff brought this action against Defendant, advancing several claims related to trademark infringement and false advertising.
Plaintiff owns seven trademarks. Defendant creates and sells MDacne and MDhair, which are customizable skincare and haircare product kits. Plaintiff does not sell a product called MDacne but does have an acne skincare product that displays the mark “MD” on the packaging. Plaintiff avers that its customers nonetheless confuse the source of MDalgorithm’s products as coming from Plaintiff. Where a customer confuses the source of the junior user’s product as the senior user, that is known as “forward confusion.” Other types of confusion actionable under the Lanham Act include “reverse confusion,” which occurs when consumers approach the senior user, mistakenly believing they are dealing with the junior user, as well as the newly minted “initial interest confusion,” which occurs when customers are drawn to one party’s brand during their search for its competitor’s products, and the former “capitalizes on the goodwill associated with [the latter’s] mark.”
Defendant filed a motion to strike the opinion of Plaintiff’s expert, Richard Kostick. In his report, Kostick opined that (1) Plaintiff consistently followed best practice for effective digital marketing and (2) the sales and revenue generated by Plaintiff do not reflect the expected return from its digital marketing investment. Defendant challenged Kostick’s research methodologies as deficient and self-serving.
Marketing Expert Witness
Richard Kostick is the Founder and CEO of Purity Cosmetics (100% PURE) and has demonstrated expertise in leading and growing a successful cosmetics company with a strong focus on natural and organic beauty products. Under his leadership, Purity Cosmetics became a leader in prestige natural and organic beauty products. The flagship brand, 100% PURE, was committed to producing the purest and healthiest products while promoting environmental sustainability and improving the lives of both people and animals. With almost two decades of experience as the CEO of Purity Cosmetics, he gained extensive knowledge and expertise in the digital marketing strategies and tactics employed within the beauty industry. He employed this knowledge for the strategic decision-making that was instrumental in positioning Purity Cosmetics as a recognized brand in the market.
Discussion by the Court
There are several reasons why an expert’s proposed testimony may be excluded, including the expert’s lack of qualification, the inapplicability of the proposed testimony, and the unreliability of the proposed testimony. Defendant primarily contended that Kostick’s report and any associated testimony should be excluded because it is unreliable.
Kostick’s opinion that Plaintiff engaged in best practices for digital marketing
Plaintiff argued that Kostick’s methodology is adequately stated and that cross-examination, not exclusion, is the appropriate way for Defendant to attack his opinions.
The Court observed that none of the other four analytical steps enumerated in Kostick’s report provide any greater insight into his actual methods, making it impossible to test his results. Kostick described the steps of his analysis in only the most general of terms. For example, he stated in only four lines of text that he conducted a “website audit” using three tools: Google Search Console, Google Optimize, and GTMetrix. He did not state what he actually did with these tools. Further, while Kostick stated that the audit provided “valuable insights” and “potential areas for improvement,” he did not elaborate as to either.
Moreover, Kostick did not record his work. Kostick’s report might be admissible if its vagueness could be cured by complete contemporaneous notes and documentation because Defendant could use that documentation effectively to cross-examine him. The Court noted that no such documentation exists.
Kostick’s report simply states that he used GTMetrix to conduct his website audit. When asked at his deposition if he took any notes during that process, Kostick replied that he could not recall and that he provided Plaintiff with any notes he did write, but Plaintiff has not produced any notes regarding GTMetrix. Similarly, Kostick’s report states that he used Ubbersuggest to conduct keyword research, but he does not recall whether he preserved any results or data from his use of that program and no such documents have been produced by Plaintiff.
The Court held that Kostick’s report ran afoul of Rule 26 which requires that an expert’s report contain “the facts or data considered by the witness in forming” their opinions. “
Kostick’s opinion that Plaintiff did not achieve the expected return from its digital marketing investment
The Defendant moved to strike an additional opinion in Kostick’s report; specifically, that “a solid investment in digital marketing should result in a return of 2-5 times during the short term and more in lifetime value of the customer.” However, the Court held that the report did not provide any additional information about this claim or its basis. When asked during his deposition about the claim, Kostick confirmed that he had not cited a source and could not identify a potential source supporting this claim despite it being supposed common knowledge.
The ten blog posts and articles that Kostick had listed as “authoritative sources” to shed light on the potential returns from the kinds of marketing investments employed by the Plaintiff added nothing to support his report’s reliability. Since he had not provided citations for any of these ten sources, Kostick failed to make clear exactly what articles he was relying on. However, even a cursory search for these ten sources made clear that they were not from reliable peer-reviewed publications. Instead, Kostick had apparently cited industry magazines and blogs run by technology companies who were likely writing with incentives irrelevant here.
Held
The Court granted Defendant’s motion to strike and exclude the report and associated testimony of Richard Kostick.
Key Takeaway:
- Whether Kostick’s methodology is sound is unknowable because he does not state his methodology with sufficient specificity to satisfy even the very liberal standard under Daubert.
- Defendant challenged Kostick’s failure to document and disclose his methods. Basic documentation of an expert’s analytical process is not, as Plaintiff argues, merely additional information that Defendant would like to see, but rather an essential part of an expert report that cuts to the heart of whether the method “can be or has been tested.”
Case Details:
| Case Caption: | LA Canada Ventures, Inc. v. Mdalgorithms, Inc. |
| Docket Number: | 3:22cv7197 |
| Court: | United States District Court for the Northern District of California |
| Order Date: | August 02, 2024 |
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