Arkansas Business Litigation Lawyer & Attorney : Allen Law Firm : Serving Little Rock, Fort Smith, North Little Rock

The Eastern District of Arkansas denied a motion to dismiss or transfer in Agri-Process Innovations, Inc. v. Greenline Industries, LLC, 2008 WL 4126909 (E.D. Ark. 9/4/08).

 

Agri-Process Innovations (API) designs and sells biodiesel plants. They worked on several projects with Greenline Industries, but after a falling out, API filed a lawsuit in Arkansas state court. Greenline responded by filing suit in California for trade secret misappropriation, false advertising, and declaration to establish copyright ownership.

 

The California court deferred to the Eastern District of Arkansas to determine which court is the appropriate form. Judge Miller found no red flags to depart from the first-filed rule, and the dispute will proceed in Arkansas.

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The District Court of Minnesota denied a preliminary injunction based on trade secret misappropriation and false advertising in Benefit Resource, Inc. v. Apprize Technology Solutions, Inc., 2008 WL 2080977 (D. Minn. 5/15/08).

 

BRI owns a software product called UBenefit. In 2005, BRI hired Apprize to market UBenefit. In 2007, Apprize developed a competing software called E.A.S.E. and hired away one of BRI's key employees. Apprize then terminated its relationship with BRI and sent an email to UBenefit users that UBenefit will begin reporting information to a Minnesota HMO. BRI then filed this lawsuit.

 

The court denied the preliminary injunction, focusing on BRI's failure to show likelihood of success. The crux of its trade secret claim was an inference that trade secrets had been misappropriated. The court did not find evidence to justify this inference. As to the false advertising claim, there was no evidence that future communications would be disseminated to UBenefit users.

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The District Court of Minnesota granted a preliminary injunction based on trademark infringement and false advertising in Fitger's On-The-Lake, LLC v. The Fitger Company, LLC, 2007 WL 4531502 (D. Minn. 12/19/07).

 

Fitger's has operated a brewery in Minnesota since the 1880's, and it holds a number of trademarks that have now become famous. The current location is a full resort spa complete with a hotel, restaurants and ample shopping. The defendant Douglas Donnelly claims he is related to August Fitger, the original brewmaster for Fitger's. Donnelly believes this entitles him to set up businesses using Fitger's trademarks and making false statements that his companies are the "official Fitger beer" operated "since 1881." He even filed fraudulent trademark applications with the USPTO.

 

Despite Donnelly's novel argument, ancestry cannot confer trademark rights. The court granted the preliminary injunction both on grounds of trademark infringement and false advertising.

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The Northern District of Iowa issued Rule 11 sanctions in Ideal Instruments, Inc. v. Rivard Instruments, Inc., 2007 WL 2710846 (N.D. Iowa 9/19/07). The court's decision to impose sanctions was previously posted 7/10/07. The court imposed sanctions of $50,000 in attorney's fees and $12,937.56 in expenses, to be paid jointly by Rivard Instruments and its counsel. Plaintiffs asked for a total of $180,893 in attorney's fees and expenses.

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The District Court of Minnesota granted a preliminary injunction in MSP Corp. v. Westech Instruments, Inc., 2007 WL 2253473 (D. Minn. 8/6/07).

 

MSP is a particle technology company that makes devices for various industries. In the pharmaceutical industry, an impactor is a device to measure and test medical inhalers. A consortium of 15 pharmaceutical companies (the "Consortium") hired MSP to design a new impactor. MSP created the next generation impactor. This impactor has a specific blue color and puzzle design, but MSP did not register the trademarks or trade dress. 

 

Westech Instruments began marketing its own impactor that it called "next generation." This impactor was also blue. Moreover, Westech made statements on its website that its impactor was sponsored by the Consortium. MSP brought suit for trademark infringement, false advertising, and trade dress infringement.

 

The court agreed with MSP on the trademark infringement and false advertising claims. However, the court found that MSP was unlikely to succeed on its trade dress claims. The court granted the preliminary injunction as to the trademark and false  advertising claims, requiring a $100,000 bond.

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The Northern District of Iowa imposed Rule 11 sanctions in Ideal Instruments, Inc. v. Rivard Instruments, Inc., 2007 WL 1953147 (N.D. Iowa 7/3/07). The denial of Rivard's motion for preliminary injunction was previously posted 4/12/07.

 

Ideal moved for Rule 11 sanctions, and, in a thorough opinion, the court reluctantly imposed sanctions. Rivard based its motion for preliminary injunction on the expert testimony of Dr. Hoff. Ideal conducted several depositions of Dr. Hoff, and it became obvious that Dr. Hoff's test results were incredible. The court found that any reasonable inquiry would have revealed the inaccuracies in his tests.

 

Ideal also relied on a metallurgical expert whose testimony was provided to supplement Dr. Hoff's testimony. The court was troubled by this testimony but did not find it so utterly lacking any merit as that of Dr. Hoff. Therefore, the court awarded sanctions in the amount of: (1) all Ideal's reasonable fees and costs through February 2, 2007; and (2) half Ideal's reasonable fees and costs after February 2, 2007.

 

The sanctions were awarded against Ideal, its primary counsel and its local counsel. The court expressed its regret in the ruling: "The court cannot adequately express its disappointment that it has been necessary to impose sanctions upon any party or attorney appearing before it."

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The District Court of Minnesota denied a motion to transfer in EcoWater Systems, LLC v. Hague Quality Water Int'l, 2007 WL 1725761 (D. Minn. 6/13/07).

 

EcoWater filed this false advertising lawsuit against Hague. Hague filed a motion to dismiss, or alternatively, to transfer the case to Ohio. Its main argument was that it did not have sufficient contacts in Minnesota to grant jurisdiction to Minnesota courts.

 

The court quickly dismissed these arguments. Deposition transcripts of Hague's 30(b)(6) witnesses demonstrated significant contacts with Minnesota, and the allegedly false statements were transmitted to Minnesota consumers.

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The Eastern District of Missouri granted a motion to remand in American Ass'n of Orthodontists v. Yellow Book USA, Inc., 2007 WL 1687259 (E.D. Mo. 6/8/07). This is the second round of litigation between these parties. In the first case, the AAO's false advertising claims were dismissed for lack of standing (previously posted 1/10/07).

 

The AAO has once again sued Yellow Book for listing dentists under the heading "Dentists-Orthodontists." This time, the AAO brought a state court claim alleging violation of Missouri deceptive advertising statutes. The state court removed the case to federal court on the basis of diversity of citizenship jurisdiction, although the AAO primarily seeks an injunction.

 

The district court remanded the case because Yellow Book's calculations of the value of the injunction were too speculative. The court noted that Yellow Book has a motion to dismiss pending, which must be taken up by the state court on remand. The case will likely be dismissed on grounds of claim preclusion and issue preclusion. It serves as a great example to include state law claims in federal intellectual property lawsuits.

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The Eastern District of Missouri denied a request for expedited discovery in Interface Security Systems, LLC v. May, 2007 WL 1300394 (E.D. Mo. 5/2/07).

 

Interface filed a lawsuit claiming false advertising but did not move for a preliminary injunction. Interface filed a motion for expedited discovery, stating it would move for a preliminary injunction and that expedited discovery would assist that motion.  This was a strange request that essentially shows Interface has not incurred irreparable harm, which is the hallmark of preliminary injunctive relief. The court denied the request for expedited discovery and could not resist an illustrative commentary:

This is most analogous to the famous character of Wimpy from an episode of the Popeye cartoon series . . . To satisfy his addiction Wimpy was always willing to "gladly pay you Tuesday for a hamburger today." It was a special group which yielded to his melodic chant. This Court opts not to be a member of a special group today.

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The Northern District of Iowa denied a preliminary injunction in Ideal Instruments, Inc. v. Rivard Instruments, Inc. 2007 WL 915174 (N.D. Iowa 3/28/07).

 

The case began as a patent infringement suit when Ideal sued Rivard, claiming infringement of its patent for a detectable heavy duty needle. In the livestock industry, a "detectable" needles prevent broken needles that are occasionally left in livestock from making their way through the food processing system.

 

In an interesting defense, Rivard filed a counterclaim for false advertising, claiming that Ideal's needles are not detectable as advertised, and sought a preliminary injunction. This claim was based on an admission by Ideal that some of its needles were made with a non-detectable alloy. Ideal had corrected the problem, and there was no evidence that a needle had found its way into a consumer's food. The court found Rivard failed to establish likelihood of success or irreparable harm and denied the preliminary injunction.

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The Western District of Arkansas denied a temporary restraining order based on false advertising and trademark infringement in Trott's WoodProducts, Inc. v. American Cabinet Doors & More, Inc., 2007 WL 625920 (W.D. Ark. 2/27/07).

 

Trott's took pictures of its cabinets to use in promotional materials. American Cabinet acquired these pictures from one of Trott's former employees and used the photographs in their own sales brochures. Trott's claimed false advertising and trademark infringement but failed to assert a claim for copyright infringement.

 

The court found no false advertising claim because there was no evidence consumers were deceived by the photographs. In fact, only a trained professional can distinguish the cabinets of one company from another. The court also found the cabinets themselves were generic and could not qualify for trademark protection. The court easily denied the TRO.

 

Trott's had the right idea but brought the wrong claims. The photographs are copyrightable, and Trott's likely would have been successful had it registered copyrights and asserted copyright infringement.

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The District Court of Minnesota granted a preliminary injunction on false advertising claims in Medtox Scientific, Inc. v. Tamarac Medical, Inc., 2007 WL 37793 (D. Minn. 1/4/07).

 

Esca Tech has a current patent application pending for towel and soap products for removing led from the skin. Esca Tech granted Defendant Tamarac the exclusive license to use and sell these products. Medtox is a laboratory testing company that sometimes uses the products covered in the patent application.

 

Even though no patent has issued, Tamarac made representations to customers that it was the only company that had the rights to use the products because of the patent application. The court found these statements were false because the application itself did not grant any rights to Tamarac, and the court granted a preliminary injunction for Medtox.

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The District Court of Minnesota held Solvay's false advertising claim was not barred by laches in Solvay Pharmaceuticals, Inc. v. Global Pharmaceuticals, 419 F.Supp.2d 1133 (D. Minn. 2006).

 

Solvay sold pancreatic enzyme supplements, which are used to treat cystic fibrosis patients. Global offered its supplements as a generic equivalent or a generic alternative to Solvay's products, which Solvay claims were false statements. Global raised its laches defense claiming undue delay and prejudice because Solvay learned of Global's products in late 1988 but did not file suit until 2003.

 

The court rejected the laches defense because Solvay brought suit within the 5-year limitations period, spent that time testing Global's products, and Global did not suffer prejudice from Solvay's actions.

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The Eighth Circuit did not take sides on a circuit split on false advertising standing in American Ass'n of Orthodontists v. Yellow Book USA, 434 F.3d 1100 (8th Cir. 2006). The AAO is a national trade organization of orthodontists. They sued Yellow Book for false advertising because Yellow Book lists general dentists under the heading "Dentists-Orthodontists."

 

The circuits are split as to the proper test for standing for a false advertising claim: (1) some circuits hold only a competitor may have false advertising standing; (2) other circuits apply a more flexible multi-factor tests that permits noncompetitor standing. The Eighth Circuit noted the split but declined to select a test because the AAO would fail to establish standing under either test.

 

One of the tests presented by the Eighth Circuit was crafted by Justice Alito in a pair of decisions: Joint Stock Society v. UDV North America, Inc., 266 F.3d 164 (3rd Cir. 2001) and Conte Bros. Automotive, Inc. v. Quaker State Slick-50, Inc., 165 F.3d 221 (3rd Cir. 1998). This test has been adopted in the Fifth Circuit and recently by the Northern District of Georgia in a suit involving McDonald's.

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False advertising is controlled by the Lanham Act, which provides a cause of action when the defendant:  

in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods services, or commercial activities.

See 15 U.S.C. § 1125(a)(1)(B). Note that this is a provision for commercial harm; consumers do not have standing under this provision.

 

A five-factor test is used to establish false advertising: (1) a false statement of fact about the defendant's own product or another's product; (2) the statement actually deceived or has the tendency  to deceive a substantial segment of the defendant's audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement. See American Italian Pasta Co. v. New World Pasta Co., 371 F.3d 387 (8th Cir. 2004).

 

False advertising comes in two forms: (1) literally false factual commercial claims; and (2) literally true or ambiguous factual claims which implicitly convey a false impression, are misleading in context, or are likely to deceive consumers. Id.

 

Puffery is an exception and consists of: (1) exaggerated statements of bluster or boast upon which no reasonable consumer would rely; and (2) vague or highly subjective claims of product superiority, including bald assertions of superiority. Id.

 

Arkansas False Advertising Law: Arkansas does not have a false advertising statute comparable to this provision of the Lanham Act.

 

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