Comparative advertising using P’s logo is nominative fair use

SolarEdge Technologies Inc. v. Enphase Energy, Inc., 2017 WL
3453378 17-cv-04047 (N.D. Cal. Aug. 11, 2017)
SolarEdge sued Enphase, a competitor in the business of
selling electronic components for solar panels (aka PV modules), for false
advertising and trademark infringement. 
SolarEdge’s primary products are components involved in the
“optimization of energy generated from solar panels.”  PV modules convert solar energy to direct
current, which then must be converted to alternating current to be delivered
through the power grid.  An “inverter” performs
this conversion. Traditionally, competitors in the industry have used multiple
solar panels connected to one or a small number of centralized inverters.
SolarEdge’s “power optimizers” are attached to each individual solar panel and
then connected to a simplified centralized inverter to aid in a more efficient
conversion from DC to AC. This practice is referred to as “module-level power
electronics” (MLPEs). Enphase instead uses “microinverter” technology, which
attaches a “small inverter at each solar panel,” also an MLPE.
MLPEs can come in two varieties: an embedded MLPE is
installed into the solar panel before it leaves the factory, thereby reducing
the time required to install a PV system at an end user’s location.  Non-embedded MLPEs are installed on-site.  SolarEdge alleged that it produced embedded
power optimizers, but that it was still known “primarily for its non-embedded
optimizers, as embedded technology is still not widely used in the PV
Enphase announced that it would be offering an embedded
version of its microinverters, the Enphase AC Module. Its ad campaign included
a video, “Enphase Energized AC Module vs. String+Optimizers,”  purporting “to depict a time-compressed video
comparison between the installation times for PV systems using comparable
SolarEdge and Enphase products.” On Enphase’s website, the video appeared with
the text “Stop wasting time installing optimizers—When compared to optimizers,
the Enphase AC Module cuts rooftop installation time in half. See for
yourself.” The video also featured a testimonial from an installer attesting to
the ease of installing an AC Module panel as compared to a non-embedded
SolarEdge power optimizer. The video ended displaying the conclusion that the
“Enphase Energized AC Module cuts installation time in half.” SolarEdge alleged
that the comparison was false because it tested the AC Module against SolarEdge’s
non-embedded optimizer, rather than the embedded version. The video also included
SolarEdge’s stylized logo, displayed throughout the video.
This motion for preliminary injunction hinged on whether the
claims at issue were literally false, given that the heading and the
introductory page of the video purports to compare the AC Module against
“string+optimizers” generally, and implied that SolarEdge didn’t produce an
embedded version. Enphase argued that the marketing campaign was directed at
experienced installers, who would immediately recognize the specifics of the
comparison; also, other statements on the website, such as “Stop wasting time
installing optimizers,” indicated no literal falsity because that statement
wouldn’t make sense if Enphase were comparing its embedded technology against
embedded optimizers. Also, nothing in the video suggested that Enphase is the
only producer of embedded MLPE technology. 
On this record, the court did not find likely success on the merits.
Trademark infringement: The court applied nominative fair
use and (rightly) found in favor of Enphase, despite the use of SolarEdge’s
stylized logo.  Under Ninth Circuit
precedent (to the extent it can be discerned), if a nominative use fails to
satisfy all three factors, “the district court may order defendants to modify
their use of the mark so that all three factors are satisfied,” but “it may not
enjoin nominative use of the mark altogether.”  In a useful reformulation, the court here
said: “while satisfying all the factors necessarily negates trademark
infringement liability, the failure to satisfy one of the factors does not
establish liability in and of itself.”  So NFU is only a replacement for the
multifactor test if the defendant succeeds; this is an important clarification
of Judge Kozinski’s muddling of the issue in Tabari.
This ues in a comparative ad satisfied all three factors,
and regardless SolarEdge didn’t make any arguments about how confusion over
sponsorship or endorsement by SolarEdge.

The court briefly addressed irreparable harm as well.  SolarEdge argued that it would suffer lost
sales if Enphase if the ad could be shown at an upcoming trade show, one of the
largest in the industry.  It also argued
that Enphase was unlikely to be able to pay damages here, given that it had
faced significant financial difficulties of late.  The court found “only a bare, threshold
showing” on irreparable harm—statements from a senior executive could be
evidence of irreparable harm, but the record lacked data supporting her
conclusions. Also, Enphase’s modification of the ads to clarify that the
comparison was to non-embedded, standalone optimizer systems minimized the
likelihood of irreparable harm, as did the court’s adoption of a fast schedule
for further proceedings on the case.

from Blogger

This entry was posted in Uncategorized and tagged , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s