“information and belief” isn’t enough to allege competitive injury in false advertising case

Brickstructures, Inc. v. Coaster Dynamix, Inc., 2017 WL
4310671, No. 16 CV 10969 (N.D. Ill. Sept. 28, 2017)
Brickstructures, a LEGO-structure-creating business, sued
Coaster for breach of contract, breach of fiduciary duty, and false advertising
under the Lanham Act. Given that the complaint’s allegations of diversity
jurisdiction were insufficient, the court looked at the Lanham Act claims.  Brickstructures’ founder conceived of the
idea of a brick-based roller coaster many years ago. He began by adapting a
piece from a model roller coaster kit sold by Coaster, which used glue and not
LEGOs, then reached out to Coaster to propose a possible partnership. The
parties agreed to collaborate and their joint venture began a small production
run of a brick-based roller coaster. After a thousand kits were made and sold,
Brickstructures alleged, Coaster remitted far less than Brickstructures was
due, and then stopped communicating.  Coaster
then launched a successful Kickstarter campaign for a nearly identical toy.
The allegedly false claims were that Coaster’s solo kit, the
Cyclone, was the first commercially available kit combining the leading block system
with the Coaster Dynamix track system, that it was the first brick-based roller
coaster of its kind and the first commercially available brick compatible
roller coaster construction toy, and that it was created by the Coaster Dynamix
team.

It didn’t matter that the parties weren’t direct
competitors, because of Lexmark.  However, what must be pleaded (and proven) is
that plaintiff suffered an injury to its sales or business reputation, and the
allegations of injury, all stated on information and belief, were too
conclusory and superficial to sustain this complaint under Twiqbal. “[W]here something is alleged which should be within a
plaintiff’s personal knowledge, an information and belief allegation thrusts
the complaint into the realm of speculation.” Reputational injury wasn’t outside
Brickstructures’ knowledge.  And without
an adequate allegation of injury, there was an Article III problem.  (Brickstructures definitely alleged a
contract-based injury, but it needed a Lanham Act-based one.) 

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