Kesters Merchandising Display International, Inc. v.
SurfaceQuest, Inc., — F.4th —-, 2026 WL 35198, No. 24-3112 (10th Cir. Jan.
6, 2026)

SurfaceQuest allegedly marketed its products with
photographs of its competitor Kesters’ competing product. Kesters sells “a
lightweight, seamless material used in architectural products” called
MicroLite, while SurfaceQuest mainly sells “architectural film that goes on
surfaces like MicroLite.” Indeed, around 2014, the parties jointly marketed
MicroLite samples wrapped in SurfaceQuest film. In connection with that, Kesters
supplied SurfaceQuest with products, specification guides, and photographs of
Kesters’ products. SurfaceQuest then applied its film to the products.

However, two years later, “SurfaceQuest decided to sell and
market its own lightweight beam wrapped in SurfaceQuest film. These marketing
efforts included advertisements using photographs of MicroLite.” Kesters
alleged that SurfaceQuest “published a video characterizing MicroLite as
SurfaceQuest’s product,” “published images from a grocery store renovation and
misrepresented them as depicting SurfaceQuest products,” “placed a SurfaceQuest
sticker on a MicroLite binder and falsely represented to a Kesters customer
that SurfaceQuest had manufactured MicroLite,” “put a SurfaceQuest sticker on a
MicroLite sample and falsely told Kesters customers that SurfaceQuest had
invented MicroLite,” and “allowed a SurfaceQuest dealer to advertise with an
image of MicroLite.”

Kesters lost its Lanham Act claim because “injury isn’t
presumed and the plaintiff has not presented evidence of an actual injury.”

Kesters had the burden of showing injury: either a direct
diversion of sales or a loss of goodwill. The court of appeals reasoned that a presumption
of injury exists when the plaintiff proves material falsity and the “plaintiff
and defendant are the only two significant participants in a market or
submarket.” But, even presuming literal falsity, Kesters failed to create a
genuine dispute of material fact regarding the presence of a limited market.

“[A] market is sparsely populated only when the other
participants are insignificant. Otherwise, the court can’t assume that the
plaintiff’s lost sales would go to the defendant.”  SurfaceQuest showed the existence of multiple
competitors. Kesters had a competing affidavit, but it only offered it in support
of its own summary judgment motion, not in opposition to SurfaceQuest’s summary
judgment motion, and it only offered the affidavit too late—in a reply brief.

Dipping its toes into antitrust reasoning (always a
dangerous move), the court of appeals reasoned that even considering the
affidavit wouldn’t have helped. “To determine the scope of the market, we
examine ‘cross-elasticity of demand,’ which measures the substitutability of
products.” The affidavit didn’t address cross-elasticity of demand, only
similarities between the products made by Kesters and SurfaceQuest. “But these
similarities didn’t necessarily affect the ability to substitute products,” and
“a single market may include companies making dissimilar products.”

Evidence of actual injury was also insufficient. Kesters
argued that it lost a bid for work on a grocery store’s health markets, but
there was no evidence that SurfaceQuest obtained those projects or that the
store had seen SurfaceQuest’s marketing materials, whether directly from SurfaceQuest
or otherwise. Thus, the district court couldn’t reasonably infer a causal
connection between SurfaceQuest’s false advertising and Kesters’ loss of the
bid.

from Blogger http://tushnet.blogspot.com/2026/01/false-advertisings-injury-requirement.html