Press release touting preliminary injunction can found false advertising counterclaims

Zest Anchors, LLC v. Geryon Ventures, LLC, 2023 WL 2903668,
No. 22-CV-230 TWR (NLS) (S.D. Cal. Apr. 10, 2023)

Zest sued defendants for trademark/trade dress infringement,
alleging that defendants’ DESSLoc suite of denture attachment products
infringed the trademarks and trade dress of their Locator product suite. The
alleged trade dress was the insert colors and “distinctively-shaped” gold
abutments. Defendants had entered into a distribution agreement for its
allegedly infringing products with one of Zest’s former distribution partners,
ZimVie, under ZimVie’s OverdenSURE line.

The court partially granted the request for preliminary
injunctive relief on the trade dress claim. Zest issued a press release
announcing “a significant legal victory” that enjoined use of “the DESS
overdenture system that imitates Zest’s LOCATOR® product line while Zest
pursues its claims. The ruling helps to assure Zest customers, new and old,
that when they buy Zest LOCATOR® products they will receive the genuine
article.” The press release also stated that the order covered “infringing
products sold by ZimVie.” Etc.

ZimVie intervened and counterclaimed for declaratory
judgment of invalidity, cancellation fo the color marks registration,
declaratory judgment of noninfringement, false advertising under the Lanham Act
and California law, and tortious interference.

Lanham Act: ZimVie alleged three false and/or misleading
statements in the press release: (1) Defendants’ DESSLoc products “infringe”
Zest’s products, (2) ZimVie’s products “infringe” Zest’s products, and (3) the PI
applies to ZimVie.

Zest argued that the claim should be dismissed because there
was nothing false, misleading, or even factual in the statements, since “the
truth of Zest’s position ‘depends on the resolution of a disputed legal issue.’

The court disagreed. Though it found likely success on the
merits, “whether DESS—much less ZimVie—is actually infringing remains to be
determined.” Although Zest used the phrases “preliminarily” and “while Zest
pursues its claims,” reading the press release as a whole, the court couldn’t
conclude as a matter of law that no reasonable consumer could have been
deceived regarding the scope of the PI, and ZimVie alleged that several reports
and consumers understood the press release to mean that the Court had concluded
that ZimVie was acting unlawfully. It went beyond “legal opinions” by imputing
conclusions that had yet to be reached to the court; the limits of the court’s
opinion were “clear” enough to be factual.

However, California FAL claims failed because ZimVie sought
monetary damages, which are not authorized under the FAL. The FAL allows
restitution, but that “requires both that money or property have been lost by a
[claimant], on the one hand, and that it have been acquired by a
[counterclaimant], on the other.”

Intentional interference with prospective economic advantage
also survived.

Zest also argued that ZimVie’s state law claims were barred
by California’s anti-SLAPP statute. ZimVie responded that the commercial speech
exception applied. Zest argued that “the Press Release is a litigation update,
not comparative advertising, so it is not exempt from the Anti-SLAPP Statute.” But
the press release compared Zest’s “genuine article” to the “infringing products
sold by ZimVie” and “provides contact information and a website URL for readers
‘[t]o learn more about’ Zest’s products and how they ‘can help you exceed
patient expectations and grow your practice[.]’ ”

This was a close issue, but the press release was commercial
speech because it “did more than summarize Zest’s allegations or provide a
summary of this litigation.” Former licensees, such as ZimVie, “may not
challenge the licensor’s mark based upon facts which arose during the term of
the license,” although they “may challenge the validity of the mark if such
challenge is based upon facts which arose after the license expires.” ZimVie
alleged that the Trademark Office refused Zest’s trademark applications “for
the ‘standard’ Inserts (blue, pink, and clear) and the ‘extended range’ Inserts
(red, green, and orange) as they appeared packaged together in a set,” the court
had previously “observed the functionality of these Inserts,” and Zest issued
the press release touting the Locator product suite’s “well-known aesthetic
features.” Because these developments occurred after the termination of the
Distribution Agreement in September 2021, the court couldn’t find as a matter
of law that ZimVie was estopped at this stage in the proceedings.

from Blogger

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