materiality/damages requirements continue to make false advertising harder to win than TM cases

TRUSTID, Inc. v. Next Caller, Inc., 2023 WL 2298748, 2022-1433
(Fed. Cir. Mar. 1, 2023)

of some district court proceedings here
. TRUSTID lost both patent
infringement and Lanham Act false advertising claims. I’ll only discuss the

TRUSTID developed a caller identification product known as
the Authenticator. Next Caller competed with its VeriCall. “Both products
detect fraudulent or ‘spoofed’ calls while authenticating those from a
business’s genuine callers…. TRUSTID advertised that use of the Authenticator
could lead to a 5–10 percent improvement in IVR containment rates, a measure of
callers who can have their issues resolved by the automated system without
having to speak to a live agent.”

Next Caller’s Head of Sales instructed his team to “jack
that stat or make up a number like 8%” for Next Caller’s product, so Next
Caller advertised VeriCall as providing a 10 percent increase in IVR
containment rates.

The jury found Next Caller’s 10 percent IVR containment
statements to be literally, and willfully, false, awarding $1.44 million in
damages, plus an additional $1.44 million in punitive damages, but the trial
court granted JMOL for want of evidence of deception, materiality, or damages.

Although TRUSTID argued that actual reliance wasn’t
required, only that a false statement be “likely to influence the purchasing
decision,” the Third Circuit requires that, for monetary damages, “there must
be a showing of some customer reliance on the false advertisement.” Either way,
there was insufficient evidence to support a finding of materiality because
“the only evidence for [ ] customers that addressed IVR containment suggested
that IVR containment was not important or relevant to their purchasing
decisions.” One customer purchased before the false statements; others
conducted their own tests or relied on referrals. Even if only likely impact
was required, there wasn’t evidence that customers were likely to be influenced
by the false statements after having performed their own independent testing of
the product or in deciding to purchase the product for implementation outside
of the IVR context. Although TRUSTID’s CEO testified that IVR containment is
“the single key metric for companies that use it,” there was no testimony from
a Next Caller customer that did use or consider using VeriCall for that

TRUSTID argued that it could get profit disgorgement anyway,
but that’s only for trademark infringement, because infringement constitutes “an
actual finding of injury.” [Narrator: it does not; neither materiality nor
injury are elements of the current infringement test, though the Federal
Circuit cited a 1957 case to support its conclusion, and that case was much
closer in time to the classic, limited concept of trademark infringement.]

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