False advertising claim based on patent threats fails to overcome high hurdles for such a claim

Globe Cotyarn Pvt. Ltd. v. Next Creations Holdings LLC, 2019
WL 498303, No. 18 Civ. 04208 (ER) (S.D.N.Y. Feb. 8, 2019)
Globe, a fabric manufacturer, sued a fabric patent holder,
AAVN, and its subsidiary, Next Creations, for falsely claiming that Globe had
sold infringing products. The court dismissed the complaint without prejudice. 
AAVN owns patents for the manufacture of high thread count
cotton-polyester blend fabric. In 2015, AAVN filed an ITC complaint alleging
that certain imported textiles violated a portion of one of its patents; it
settled with one respondent.  Another company,
AQT, filed a 2017 petition with the PTO to review two patents, later adding
another after the PTAB found that a trial was justified on the first two. The parties
Defendants allegedly contacted
a number of Globe’s customers and falsely accused Globe of selling infringing
materials. Globe alleged that this was done in bad faith: defendants allegedly never
inspected Globe’s product or its production facilities and thus could not have
known whether their patents were infringed.
Lanham Act claims: there wasn’t a sufficient allegation of
commercial advertising or promotion.
Globe didn’t identify the size of the relevant purchasing
public, but alleged only two messages to one customer and a third to another
customer, with even vaguer allegations about messages to other, unnamed, unnumbered
customers. “[T]hree messages sent to two customers in a marketplace of an
unidentified size are not sufficiently disseminated to the relevant purchasing
public to fall within the Lanham Act’s coverage.”
Separately, under Federal Circuit law, “[t]o prevail on an
unfair-competition claim under section 43(a) of the Lanham Act stemming from a
patentee’s marketplace activity in support of his patent, the claimant must
first establish that the activity was undertaken in bad faith.” This requires a
showing that the claims were “objectively baseless, meaning no reasonable
litigant could realistically expect to prevail in a dispute over infringement
of the patent” and that the claims were also subjectively made in bad
The court didn’t think that alleging that defendants claimed
infringement without having any idea how the allegedly infringing product was
made could satisfy that standard; doing so might show subjective bad faith, but
not objective baselessness. [I dunno; it seems to me that “having no reason to
think that the products were infringing” is kind of the definition of “baseless,”
not just for subjectivity but for an objective analysis.]  Globe also argued that the defendants asserted
a patent they knew was invalid. This too couldn’t show bad faith. The validity
of the patents was never finally determined; as far as we know, they’re still
Unfair competition, tortious interference, and deceptive
acts: under Federal Circuit precedent, “federal patent law preempts state-law
tort liability for a patentholder’s good faith conduct in communications
asserting infringement of its patent and warning about potential litigation.” Even
applying NY law alone, the court would reject the claims.  NY’s unfair competition law “closely
resembles” §43(a)(1)(B), so the absence of commercial advertising or promotion
doomed that claim too, as well as NY’s requirement of bad faith.  Disparagement: Globe failed to plead special
damages; the one named customer didn’t ever agree to purchase its product
anyway. Tortious interference: Again, Globe failed to do more than make
conclusory assertions about specific customers, and it also didn’t sufficiently
allege wrongful means.
Deceptive acts under N.Y. Gen. Bus. Law § 349: This wasn’t
consumer-directed harm, just a private dispute.

from Blogger http://bit.ly/2X3rtnp

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