statements about patent license status can violate Lanham Act’s false advertising provisions

Au New Haven, LLC v. YKK Corp., No. 15-cv-3411-GHW-SN, 2019
WL 1437516 (S.D.N.Y. Mar. 31, 2019)
Au holds the patent to a water-resistant zipper, and YKK had
an exclusive “field of use” license that it allegedly exceeded, resulting in
this lawsuit for patent infringement, breach of the license agreement, deceptive
marketing under the Lanham Act, and deceptive practices under the Connecticut
Unfair Trade Practices Act.
In this summary judgment ruling, the court found that patent
invalidity was subject to disputes of material fact, as did infringement.
Breach of contract failed because the “the license only gives permission to
sell into the non-excluded markets and does not contain a corollary prohibition
of sale into the excluded markets,” though it would hold oral argument on the
question of whether the implied covenant of good faith and fair dealing implies
a covenant not to compete in a patent license. Au had the burden to “prove not
merely that it would have been better or more sensible to include such a
covenant, but rather that the particular unexpressed promise sought to be
enforced is in fact implicit in the agreement viewed as a whole.” “Given the
absence of an express promise by the licensee, and the protections otherwise
afforded to Plaintiffs by patent law in the United States and abroad, the Court
harbors serious doubts that Plaintiffs can meet that burden,” but the court
didn’t make a final ruling.
Lanham Act claims: There were triable issues on laches, a
fact-intensive issue. Au delayed filing suit for many years, but the parties also
made years-long efforts to come to agreement on a new license.
YKK argued that the challenged statements weren’t commercial
advertising. Though the challenged statements weren’t pure commercial speech,
that meant that a jury would have to address “factors such as whether the
communication is an advertisement, whether the communication makes reference to
a specific product, and whether the speaker has an economic motivation for the
communication.” The motivation in particular was a disputed material fact.  [I think the real issue is whether the
challenged statements were “commercial advertising or promotion,” a subset of
commercial speech.]
“The challenged statements, while not literally false, do
falsely imply that YKK had an unlimited license.”  YKK argued that implied falsity requires a
consumer survey, but intentional misleadingness can substitute for survey
evidence. A statement about YKK’s right to sell the zippers also  involved “an inherent or material quality of
the product.”
Connecticut Unfair Trade Practices Act: Not time-barred;
CUTPA has a three-year statute of limitations. The first allegedly misleading
statement was made in 2003, but Connecticut doesn’t “insulate standardized or
repeated unfair trade practices from challenge once they had been instituted for
three years.” So Au could reach back three years from before it sued, and some
of the statements were re-made within that period.

from Blogger

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