Shenzhen Tange Li’an E-Commerce Co. v. Drone Whirl LLC, 2021
WL 3474007, No. 1:20-CV-00738-RP (W.D. Tex. Aug. 6, 2021) (R&R)
Shenzhen sought a declaratory judgment that a design patent
for a toy gnome figurine was unenforceable and invalid, given that defendant/counter-plaintiff
Tatiana Mironova allegedly purchased its stuffed gnome toys, then switched
manufacturers and obtained a patent for an identical ornamental design without
authorization. Mironova then allegedly filed intellectual property complaints
against its storefront on Amazon.com fraudulently claiming infringement of her
patent rights and copyrights. Amazon delisted Shenzhen’s products. Shenzen also
brought claims under Texas law for unfair competition, tortious interference
with existing business relationships, fraud, and business disparagement. (The
parties agreed to judgment on the pleadings holding a key patent invalid.
Nonetheless this is now a patent case.)
The defendants (collectively Drone Whirl) counterclaimed
that Shenzhen retaliated after Drone Whirl stopped buying gnome dolls from
Shenzhen by interfering with Drone Whirl’s business on Amazon.com. Shenzhen allegedly
placed orders without paying for them to “lock up” Drone Whirl’s gnome
inventory; bribed Shenzhen’s customers to submit bad reviews of Drone Whirl’s
products; and distributed pamphlets to its customers containing false or
misleading statements about Drone Whirl’s products. It counterclaimed for
unfair competition under the Lanham Act, as well as Texas common-law claims of
fraud, breach of contract, business disparagement, and tortious interference
with existing and prospective business relations.
In relevant part, the Shenzen pamphlet began:
We are aware that there are a number of companies who are
committing design infringements on our products. Producing versions of our
products and selling them on the internet, particularly AMAZON. Using our
products description, our pictures that we have taken of our own products even
our brand to falsely exploit our reputation, in order to make quick sales.
Then, they are manufacturing cheap imitations with the intent of selling them.
There are only 3 shops (shop name: ITOMTE, ITOMTE INC., Hi Gnome) that are
currently authorized to sell our products on AMAZON ….
Not discussed in the opinion, but relevant—the pamphlet
offers various incentives for reviews of competitors. Is this legitimate, either
under general advertising law, or Amazon policy?
Without discussion of the broader caselaw about legal claims, the
magistrate concluded that stating that a company engaged “design infringements”
to manufacture products that are “cheap imitations” of Shenzhen’s “authorized”
products were all “statements of fact that are capable of being proved false or
misleading.” Alleging that these statements disparaged Drone Whirl (not named,
but implicated) and that they were likely to confuse consumers was sufficient
for falsity/misleadingness, and alleging that the statements were in emails and
a pamphlet sent to customers was sufficient to allege commercial advertising/promotion.
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