competitor lacks Lanham Act standing absent allegations of why it in particular would be harmed by false advertising

Blue Star Press, LLC v. Blasko, No. 17-CA-111-OLG, 2018 WL
1904835 (W.D. Tex. Mar. 6, 2018) (magistrate judge R&R)
The parties make adult coloring books, typically marketed as
a means of relieving stress but proving stressful in this litigation. Blue Star
began successfully publishing adult coloring books in 2015, then began working
with defendants Reagan and Sada Lewis to create Christian-inspired coloring
books. However, Reagan allegedly secretly agreed to work on competing adult
coloring book publishing with his friend, defendant Sean Blasko, agreeting “to
fraudulently steal coloring book opportunities and sales from Blue Star, often
misappropriating Blue Star’s own Trade Secrets/Confidential Information to do
so.”  Blasko counterclaimed, alleging
that Reagan Lewis in fact stole trade secrets from him, including confidential
methods for “determining keyword search terms and online marketing and advertising,”
and for “obtaining sponsored ads on Amazon for books” with less “need for
‘good’ keyword search terms.”
The court found that Blasko’s counterclaim stated a claim
under the FDTSA.  Blue Star argued that
misappropriation had to be made with actual or constructive
knowledge, but Lewis was Blue Star’s employee at the time of the alleged
misappropriation. Blasko plausibly alleged that Lewis was acting within the
scope of his employment at Blue Star, and thus that Blue Star was vicariously
liable, a type of liability the court determined was available under the
FDTSA.  Even assuming, as Blue Star
argued, that Lewis’s secret relationship with Blasko was in violation of his
employment agreement with Blue Star, and that, had Blue Star known about it,
Lewis would have immediately been fired, agency/responsibility for Lewis’s acts
was a factual issue.
Blue Star did better against Lanham Act and state false
advertising-related counterclaims. Blasko alleged that Blue Star misled
consumers into believing that Blue Star had the lawful right to republish the
artwork in its books; misled consumers by passing its books off as books
published by their competitors; misrepresented that one or more of Blue Star’s
books were “NEW & EXPANDED”; and misrepresented that Blue Star’s artwork is
“all hand-drawn” and drawn “by independent artists” in Texas for Blue Star.
Lexmark’s
causation requirement had bite here, despite the fact that the parties directly
compete.  The court indicated that “Blasko
might have demonstrated the needed causal connection by alleging, for example,
that some of Blue Star’s claimed ‘knock-off’ publications mimicked Blasko
publications or that, unlike Blue Star’s publications, Blasko’s publications
actually were hand-drawn, created by independent artists, or created by local
or Texas artists.” But Blasko instead only conclusorily alleged harm.  Direct competition wasn’t enough; Blasko didn’t
allege how any of Blue Star’s alleged conduct took away from Blasko’s market
share, as opposed to that of other competitors.  Nor was it sufficient to allege that Blue Star
could sell at lower prices for higher margins and with less cost because Blue
Star does not pay for the proper licensing fees that Blasko pays, “including
for books containing the same themes and images such as the parties’ Dia de los
Muertos books.” The injury to Blasko could have resulted from any number of
other reasons—potential harm isn’t enough for standing.

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