Close but no cigar: “worked closely” claim is puffery

Posted on May 18, 2015 by rtushnet
Springbrook Software, Inc. v. Douglas County, 2015 WL
2248449, No. 13–cv–760 (W.D. Wis. May 13, 2015) (magistrate judge)
 
Springbrook sued Douglas County and the City of Superior for
breach of contract and related claims after they stopped paying fees owed under
a contract for Springbrook’s financial system software for local governments. Defendants
counterclaimed for misrepresentation, fraudulent inducement, false advertising,
breach of the covenant of good faith and fair dealing and unjust enrichment. The
magistrate judge granted Springbrook’s motion for summary judgment on the
breach of contract claim and got rid of the counterclaims except for the counterclaim
for breach of the duty of good faith and fair dealing.
 
Defendants issued a formal Request for Proposals seeking
bidders from qualified firms “to supply and install Financial System Software.”
Springbrook, meanwhile, was developing a one-page flyer to promote its work
specific to the needs of Wisconsin county highway departments, which it had
done with assistance from the Wisconsin Department of Transportation.
Springbrook’s product manager emailed Doug Meek at the state Department of
Transportation to ask if Meek “would object to [Springbrook] including verbiage
like ‘We worked closely with Doug Meek at the Wisconsin Department of
Transportation to ensure our software meets the needs of Wisconsin county
highway departments?’” Meek responded: “I don’t object to your referencing
working with me, but I don’t think that ‘working closely’ is accurate.” In
response to Meek’s request, the product manager replied that he would be happy
to share a draft document and would use Meek’s name only in a manner that Meek
approved.
 
However, Springbrook’s RFP response to the City included a one-page
ad, “Highway Department Solutions,” in which Springbrook stated that it had
“worked closely with the Wisconsin Department of Transportation to develop a
highway department solution that is fully compliant with state requirements.”  Springbrook won the contract, but the
relationship broke down and the defendants stopped paying, resulting in a
lawsuit.
 
The court found that defendants’ claim under the Wisconsin
Deceptive Trade Practices Act survived the economic loss doctrine, but failed
on other grounds.  Defendants alleged
that the “worked closely” claim was false, and provided affidavits from the
City and County finance directors declaring that the ad was the “tipping point
and the reason Springbrook was selected.”
 
First, the judge found this testimony “not specific enough
to create a genuine dispute on the element of causation,” since the only thing
Springbrook allegedly misrepresented was the closeness of its working
relationship with the Wisconsin DOT. “After all, Meek did not deny that he had
worked with Springbrook; he took issue only with the adverb ‘closely.’” Neither
affiant stated that she would have voted against awarding the bid to
Springbrook if she had been told simply that Springbrook had “worked with”
WisDOT, rather than “worked closely” with it.
 
Relatedly, “worked closely” was puffery.  “The adverb ‘closely’ is not a term of art
and it can mean different things to different people.” It expressed “only
Springbrook’s judgment as to the nature of the relationship, not a specific
fact that can be substantiated or refuted.” Even Meek has acknowledged that the
question was a matter of opinion by stating that “I would not characterize my involvement as ‘working
closely’ with Springbrook ….. [l]imited emails and phone calls answering
questions is not my definition of ‘working closely’” (emphasis added). This “difference
of opinion” wasn’t enough to constitute false advertising.
 
By contrast, Springbook’s representation that it had a
highway department solution that was “fully compliant” with state reporting
requirements arguably could have been substantiated or refuted, but the City
didn’t press its argument about this claim.
 

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Close but no cigar: "worked closely" claim is puffery

Posted on May 18, 2015 by rtushnet
Springbrook Software, Inc. v. Douglas County, 2015 WL 2248449, No. 13–cv–760 (W.D. Wis. May 13, 2015) (magistrate judge)
 
Springbrook sued Douglas County and the City of Superior for breach of contract and related claims after they stopped paying fees owed under a contract for Springbrook’s financial system software for local governments. Defendants counterclaimed for misrepresentation, fraudulent inducement, false advertising, breach of the covenant of good faith and fair dealing and unjust enrichment. The magistrate judge granted Springbrook’s motion for summary judgment on the breach of contract claim and got rid of the counterclaims except for the counterclaim for breach of the duty of good faith and fair dealing.
 
Defendants issued a formal Request for Proposals seeking bidders from qualified firms “to supply and install Financial System Software.” Springbrook, meanwhile, was developing a one-page flyer to promote its work specific to the needs of Wisconsin county highway departments, which it had done with assistance from the Wisconsin Department of Transportation. Springbrook’s product manager emailed Doug Meek at the state Department of Transportation to ask if Meek “would object to [Springbrook] including verbiage like ‘We worked closely with Doug Meek at the Wisconsin Department of Transportation to ensure our software meets the needs of Wisconsin county highway departments?’” Meek responded: “I don’t object to your referencing working with me, but I don’t think that ‘working closely’ is accurate.” In response to Meek’s request, the product manager replied that he would be happy to share a draft document and would use Meek’s name only in a manner that Meek approved.
 
However, Springbrook’s RFP response to the City included a one-page ad, “Highway Department Solutions,” in which Springbrook stated that it had “worked closely with the Wisconsin Department of Transportation to develop a highway department solution that is fully compliant with state requirements.”  Springbrook won the contract, but the relationship broke down and the defendants stopped paying, resulting in a lawsuit.
 
The court found that defendants’ claim under the Wisconsin Deceptive Trade Practices Act survived the economic loss doctrine, but failed on other grounds.  Defendants alleged that the “worked closely” claim was false, and provided affidavits from the City and County finance directors declaring that the ad was the “tipping point and the reason Springbrook was selected.”
 
First, the judge found this testimony “not specific enough to create a genuine dispute on the element of causation,” since the only thing Springbrook allegedly misrepresented was the closeness of its working relationship with the Wisconsin DOT. “After all, Meek did not deny that he had worked with Springbrook; he took issue only with the adverb ‘closely.’” Neither affiant stated that she would have voted against awarding the bid to Springbrook if she had been told simply that Springbrook had “worked with” WisDOT, rather than “worked closely” with it.
 
Relatedly, “worked closely” was puffery.  “The adverb ‘closely’ is not a term of art and it can mean different things to different people.” It expressed “only Springbrook’s judgment as to the nature of the relationship, not a specific fact that can be substantiated or refuted.” Even Meek has acknowledged that the question was a matter of opinion by stating that “I would not characterize my involvement as ‘working closely’ with Springbrook ….. [l]imited emails and phone calls answering questions is not my definition of ‘working closely’” (emphasis added). This “difference of opinion” wasn’t enough to constitute false advertising.
 
By contrast, Springbook’s representation that it had a highway department solution that was “fully compliant” with state reporting requirements arguably could have been substantiated or refuted, but the City didn’t press its argument about this claim.
 
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Reading list: James Grimmelmann on Lauren Willis

Posted on May 15, 2015 by rtushnet

Two great tastes that taste great together: The always-entertaining James Grimmelmann on the always-enlightening Lauren Willis:

Two decades ago, contract law ran headlong into online terms of service, looked around briefly in confusion, and announced that it needed to go take a nap. It has not been heard from since. In its place we have something that looks like contract law, and claims to be contract law, but is oddly ignorant of things that the real contract law would know. This usurper, part Martin Guerre and part pod person, is formalistic to a fault, obsessed with meaningless details, lazy beyond belief, and utterly devoid of human feeling.

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ascertainability defeats class but EULA doesn’t

Posted on May 15, 2015 by rtushnet
Perrine v. Sega of America, Inc., No. 13-cv-01962, 2015 WL
2227846 (N.D. Cal. May 12, 2015)
 
Gearbox developed and Sega produced the game “Aliens: Colonial
Marines,” “held out as the canon sequel to James Cameron’s 1986 film ‘Aliens.’”
 The named plaintiffs purchased
prerelease copies.  The complaint alleged
a bait-and-switch in which defendants developed a “non-retail but technically
superior version” of the game that featured, among other things, “advanced
artificial intelligence programming, certain gameplay sequences drawn from the
Aliens movie,” and “a highly advanced graphics engine (the ‘Demo Engine’),” and
presented this version and described it to the public as “actual gameplay.” The
retail version ultimately sold, however, allegedly “utilized different
programming altogether and a different—and much less advanced—graphics engine
(the ‘Retail Engine’).” Plaintiffs alleged the usual California claims.
 
The court adopted an ascertainability requirement for class
certification and held that plaintiffs failed it. Defining the class as pre-release
purchasers of the game would pose individualized questions of reliance.  A presumption of reliance “does not arise
when class members ‘were exposed to quite disparate information from various
representatives of the defendant.’” Limiting the class to people who saw an ad
wouldn’t work because the court didn’t want to rely on affidavits from putative
class members that they saw an ad.  (I
wonder if there’s anything to be said about distrust of consumers versus moves
towards voter ID.)  Here, the non-retail
version was allegedly advertised in a series of demonstrations and an ongoing
ad campaign. Many trailers and ads were released, and several pre-release
videos contained footage from only the final retail version.
 
The named plaintiff moving for certification could not
“answer … with any degree of certainty” a question regarding which videos he
saw before he preordered his copy of the game. Given the problems of subjective
memory at issue, self-identification through affidavits was impermissible. As
Judge Alsup noted, “[s]wearing ‘I smoked 146,000 Marlboro cigarettes’ is
categorically different from swearing ‘I have been to Paris, France,’ or ‘I am
Jewish,’ or even ‘I was within ten miles of the toxic explosion on the day it
happened,” and the “memory problem is compounded by incentives individuals
would have to associate with a successful class or dissociate from an
unsuccessful one.” (Interestingly enough, that importance-based claim is completely
inconsistent with what memory researchers say about memory.)
 
Certification was denied. 
Separately, in an attempt to get nationwide application of California
law, plaintiffs invoked Gearbox’s EULA, which had a California choice of law
provision incorporated by reference from Sega’s EULA. Gearbox’s EULA, though,
also has a mandatory arbitration provision and class action waiver.  The court found that this case fell outside
the scope of those provisions. As used in the EULA, “dispute” is defined to
mean “any dispute, claim, demand, action, proceeding, or other controversy
between you and Gearbox concerning the Licensed Works….” “Licensed Works” referred
to “the online features of Gearbox games and products.” 
 
Gearbox’s argument that “Licensed Works” included “Gearbox
games and products” failed because the EULA stated that “Gearbox may limit or
prohibit access to the Licensed Works in its discretion.” As the court noted, “[t]his
makes sense only if ‘Licensed Works’ means the online features, which Gearbox
could presumably control access to via log-in credentials, IP addresses, and
the like. It makes no sense at all if it refers to Gearbox games and products
already purchased and in the living rooms of consumers. Gearbox definitely does
not have the right to go into consumers’ homes and remove their copies.” So
Gearbox couldn’t win dismissal or judgment on the pleadings.

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Reading list: James Grimmelmann on Lauren Willis

Posted on May 15, 2015 by rtushnet

Two great tastes that taste great together: The always-entertaining James Grimmelmann on the always-enlightening Lauren Willis:

Two decades ago, contract law ran headlong into online terms of service, looked around briefly in confusion, and announced that it needed to go take a nap. It has not been heard from since. In its place we have something that looks like contract law, and claims to be contract law, but is oddly ignorant of things that the real contract law would know. This usurper, part Martin Guerre and part pod person, is formalistic to a fault, obsessed with meaningless details, lazy beyond belief, and utterly devoid of human feeling.

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ascertainability defeats class but EULA doesn’t

Posted on May 15, 2015 by rtushnet
Perrine v. Sega of America, Inc., No. 13-cv-01962, 2015 WL 2227846 (N.D. Cal. May 12, 2015)
 
Gearbox developed and Sega produced the game “Aliens: Colonial Marines,” “held out as the canon sequel to James Cameron’s 1986 film ‘Aliens.’”  The named plaintiffs purchased prerelease copies.  The complaint alleged a bait-and-switch in which defendants developed a “non-retail but technically superior version” of the game that featured, among other things, “advanced artificial intelligence programming, certain gameplay sequences drawn from the Aliens movie,” and “a highly advanced graphics engine (the ‘Demo Engine’),” and presented this version and described it to the public as “actual gameplay.” The retail version ultimately sold, however, allegedly “utilized different programming altogether and a different—and much less advanced—graphics engine (the ‘Retail Engine’).” Plaintiffs alleged the usual California claims.
 
The court adopted an ascertainability requirement for class certification and held that plaintiffs failed it. Defining the class as pre-release purchasers of the game would pose individualized questions of reliance.  A presumption of reliance “does not arise when class members ‘were exposed to quite disparate information from various representatives of the defendant.’” Limiting the class to people who saw an ad wouldn’t work because the court didn’t want to rely on affidavits from putative class members that they saw an ad.  (I wonder if there’s anything to be said about distrust of consumers versus moves towards voter ID.)  Here, the non-retail version was allegedly advertised in a series of demonstrations and an ongoing ad campaign. Many trailers and ads were released, and several pre-release videos contained footage from only the final retail version.
 
The named plaintiff moving for certification could not “answer … with any degree of certainty” a question regarding which videos he saw before he preordered his copy of the game. Given the problems of subjective memory at issue, self-identification through affidavits was impermissible. As Judge Alsup noted, “[s]wearing ‘I smoked 146,000 Marlboro cigarettes’ is categorically different from swearing ‘I have been to Paris, France,’ or ‘I am Jewish,’ or even ‘I was within ten miles of the toxic explosion on the day it happened,” and the “memory problem is compounded by incentives individuals would have to associate with a successful class or dissociate from an unsuccessful one.” (Interestingly enough, that importance-based claim is completely inconsistent with what memory researchers say about memory.)
 
Certification was denied.  Separately, in an attempt to get nationwide application of California law, plaintiffs invoked Gearbox’s EULA, which had a California choice of law provision incorporated by reference from Sega’s EULA. Gearbox’s EULA, though, also has a mandatory arbitration provision and class action waiver.  The court found that this case fell outside the scope of those provisions. As used in the EULA, “dispute” is defined to mean “any dispute, claim, demand, action, proceeding, or other controversy between you and Gearbox concerning the Licensed Works….” “Licensed Works” referred to “the online features of Gearbox games and products.” 
 
Gearbox’s argument that “Licensed Works” included “Gearbox games and products” failed because the EULA stated that “Gearbox may limit or prohibit access to the Licensed Works in its discretion.” As the court noted, “[t]his makes sense only if ‘Licensed Works’ means the online features, which Gearbox could presumably control access to via log-in credentials, IP addresses, and the like. It makes no sense at all if it refers to Gearbox games and products already purchased and in the living rooms of consumers. Gearbox definitely does not have the right to go into consumers’ homes and remove their copies.” So Gearbox couldn’t win dismissal or judgment on the pleadings.
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New Jersey court rejects ascertainabilty requirement for class actions

Posted on May 14, 2015 by rtushnet
Daniels v. Hollister Co., — A.3d —-, 2014 WL 8808428, No.
A–3629–13T3 (N.J. Super. Ct. App. Div. May 13, 2015)
 
Of interest
because it’s a state court within the Third Circuit rejecting that circuit’s
view of “ascertainability” in class actions. 
In fact, the court holds, ascertainability “must play no role in considering the certification
of a low-value consumer class action” (emphasis added).  This is a class action about gift cards.
 
In New Jersey, in the context of consumer transactions,
“class actions should be liberally allowed … under circumstances that would
make individual actions uneconomical to pursue.” This policy furthers the
creation of an “even playing field” for small claims.  In this case, “over $3,000,000 worth of $25
gift cards were voided,” and “numerosity, commonality, typicality, and adequacy
of representation” were concededly present.
 
Hollister argued that certifying the class violated due
process because it wouldn’t be able to test class members; absent class members
couldn’t opt out; and the preclusive effect of any judgment would be unknowable
and unenforceable.  But pre-certification
ascertainability wasn’t a condition for certification, as long as the contours
of the class were clearly defined. Ascertainability wasn’t a requirement of the
New Jersey cases, and “federal experimentation with the ascertainability
doctrine seems far from over and, indeed, this doctrinal wave may have broken
before ever cresting.”  Even the Third
Circuit seems unsettled on the issue. 
The concerns expressed by Judge Ambro’s dissent in Carrera (adopting the requirement) and Judge Rendell’s concurrence
in Byrd (limiting the requirement)
were more in tune with New Jersey class action policy.  The whole point of the class action mechanism
is to aggregate claims to make them easier to bring—or bringable at all. “[W]hen
the concept of ascertainability is applied inflexibly it becomes a device that
serves to burden or eliminate nascent class actions without providing any
societal benefit.”  The equitable roots
of the class action mechanism shouldn’t be overlooked.
 
Ascertainability was “particularly misguided when applied to
a case where any difficulties encountered in identifying class members are a
consequence of a defendant’s own acts or omissions.”  After all, if Hollister had obtained the
identities of consumers when giving out $25 gift cards, it wouldn’t have an
ascertainability problem.  Ultimately,
ascertainability didn’t help the fair and efficient administration of
justice.  “[T]he Third Circuit’s
experiences suggest the doctrine is practically unworkable in application and
is being exploited by defendants in unsuitable cases to evade liability.”
 
Even if ascertainability were relevant, it wouldn’t pose an
obstacle to class certification, but would only be a matter for claims
administration. Any future identification problems could be overcome with some
ingenuity.  Members in possession of
cancelled gift cards should probably not need to do anything other than present
the card.  Members who discarded a gift
card “because they were told that the cards expired or had been voided” “may
need to show more, perhaps through submission of an affidavit; it has not been
shown, however, how such a process unfairly hampers the defense.”
 
Though there were legitimate concerns about the preclusive
effect of a judgment when class membership is uncertain, those concerns were
outweighed by the benefits provided by class status, at least in low value
consumer class actions.

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New Jersey court rejects ascertainabilty requirement for class actions

Posted on May 14, 2015 by rtushnet
Daniels v. Hollister Co., — A.3d —-, 2014 WL 8808428, No. A–3629–13T3 (N.J. Super. Ct. App. Div. May 13, 2015)
 
Of interest because it’s a state court within the Third Circuit rejecting that circuit’s view of “ascertainability” in class actions.  In fact, the court holds, ascertainability “must play no role in considering the certification of a low-value consumer class action” (emphasis added).  This is a class action about gift cards.
 
In New Jersey, in the context of consumer transactions, “class actions should be liberally allowed … under circumstances that would make individual actions uneconomical to pursue.” This policy furthers the creation of an “even playing field” for small claims.  In this case, “over $3,000,000 worth of $25 gift cards were voided,” and “numerosity, commonality, typicality, and adequacy of representation” were concededly present.
 
Hollister argued that certifying the class violated due process because it wouldn’t be able to test class members; absent class members couldn’t opt out; and the preclusive effect of any judgment would be unknowable and unenforceable.  But pre-certification ascertainability wasn’t a condition for certification, as long as the contours of the class were clearly defined. Ascertainability wasn’t a requirement of the New Jersey cases, and “federal experimentation with the ascertainability doctrine seems far from over and, indeed, this doctrinal wave may have broken before ever cresting.”  Even the Third Circuit seems unsettled on the issue.  The concerns expressed by Judge Ambro’s dissent in Carrera (adopting the requirement) and Judge Rendell’s concurrence in Byrd (limiting the requirement) were more in tune with New Jersey class action policy.  The whole point of the class action mechanism is to aggregate claims to make them easier to bring—or bringable at all. “[W]hen the concept of ascertainability is applied inflexibly it becomes a device that serves to burden or eliminate nascent class actions without providing any societal benefit.”  The equitable roots of the class action mechanism shouldn’t be overlooked.
 
Ascertainability was “particularly misguided when applied to a case where any difficulties encountered in identifying class members are a consequence of a defendant’s own acts or omissions.”  After all, if Hollister had obtained the identities of consumers when giving out $25 gift cards, it wouldn’t have an ascertainability problem.  Ultimately, ascertainability didn’t help the fair and efficient administration of justice.  “[T]he Third Circuit’s experiences suggest the doctrine is practically unworkable in application and is being exploited by defendants in unsuitable cases to evade liability.”
 
Even if ascertainability were relevant, it wouldn’t pose an obstacle to class certification, but would only be a matter for claims administration. Any future identification problems could be overcome with some ingenuity.  Members in possession of cancelled gift cards should probably not need to do anything other than present the card.  Members who discarded a gift card “because they were told that the cards expired or had been voided” “may need to show more, perhaps through submission of an affidavit; it has not been shown, however, how such a process unfairly hampers the defense.”
 
Though there were legitimate concerns about the preclusive effect of a judgment when class membership is uncertain, those concerns were outweighed by the benefits provided by class status, at least in low value consumer class actions.
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Prior proceedings: no confusion where defendant existed for 100 years

Posted on May 14, 2015 by rtushnet
Sovereign Military Hospitaller Order of Saint John v.
Florida Priory of the Knights Hospitallers of the Sovereign Order of Saint
John, 2014 WL 8804752, No. 09–81008–CIV (S.D. Fla. Aug. 19, 2014)
 
Westlaw just coughed this one up and I found it interesting
because of prior proceedings (okay, fine, pun intended).  The district court
initially found that the plaintiff had committed fraud on the PTO, and the
Eleventh Circuit reversed the cancellation of plaintiffs’ word marks (later amending
its opinion to deal with the admission
of historical testimony by a group leader who didn’t have personal knowledge
and wasn’t admitted as an expert, for those of you interested in
evidentiary issues).
 
On remand, the district court analyzed plaintiff’s likely
confusion claim against defendant and found it wanting.  Plaintiff had a design mark and four word
marks (Knights of Malta; Sovereign Military Hospitaller Order of St. John of Jerusalem
of Rhodes and of Malta; Hospitallers of John St. of Jerusalem; and Order of St.
John of Jerusalem).  It challenged
defendant’s design mark and word mark, Florida Priory of the Knights Hospitallers
of the Sovereign Order of Saint John of Jerusalem and Knights of Malta, the
Ecumenical Order. (Pictures are in my earlier post.)
 
Plaintiff’s design mark was an eight-pointed cross (commonly
known as a Maltese cross) on an unadorned shield, while defendant’s was a cross
on a shield, superimposed over a larger Maltese cross with an outline. A crown
is centered above the Maltese cross and shield. 
The court pointed out that the Maltese cross design “has existed in one
form or another for more than a thousand years.”  It was the insignia of Amalfi, Italy, “long
before the original Knights of Malta adopted the symbol,” and is still in use
there.  It “frequently appears in
portraiture, ceremony, and trade.” Defendant’s parent began using its mark in
the US as early as 1911, and defendant/those in privity with it used the mark continuously
in Canada and the United States, including New Jersey, Pennsylvania, Delaware,
Florida, Texas, North Carolina, South Carolina, the Rockies, Texas, and
Louisiana. By contrast, plaintiff’s US use in commerce began in 1926.  As a result, the marks weren’t arbitrary or
suggestive, given their widespread use, and they were weak.  (Note that the Abercrombie spectrum doesn’t work well for images, as the court
implicitly holds by just saying “not strong” rather than “descriptive.”) 
 
However, plaintiff’s design mark was incontestable and thus “immune”
to a mere descriptiveness challenge, so the “type of mark” weighed in plaintiff’s
favor for the design mark. (This doesn’t make sense, but the Eleventh Circuit
lets incontestability make a weak mark stronger, so it’s not the district court’s
fault.)
 
Components of the word marks were also in widespread use.  “At least 20 charitable organizations can be
found on the Internet that use the terms ‘Saint John,’ ‘Knights,’ ‘Hospitallers,’
and ‘Knights of Malta’ in the names…. In addition to other Orders of St. John
operating in the United States, at least three United States groups and a Cuban
association share the nonexclusive license to use Plaintiff’s name.”  This made the word marks weak, except that the
second and third marks were incontestable and so “type of mark” weighed in
plaintiff’s favor.
 
Similarity of marks: the design marks were visually
dissimilar and easily distinguishable. 
The word marks were unmistakably similar.  “The addition of the ‘Florida Priory’ and ‘Ecumenical
Order’ language is insufficient to render the word marks dissimilar.”
 
Similarity of services: the parties both engaged in
charitable activities, favoring plaintiff. 
Similarity of trade channels and customers: Plaintiff claimed that
“[b]oth parties seek the participation of persons who are inclined to perform
charitable works or donate funds towards charitable works without regard to
religion.”  The court found both
similarities and differences in fundraising; plaintiff sought donations almost
exclusively from its members, but not entirely, and defendant did the same. “Application
of this factor … slightly favors Defendant’s organization, as Plaintiff directs
some of its fundraising efforts to governmental and Catholic sources in a
manner that Defendant does not, and Defendant’s parent has appeared on
television, whereas Plaintiff has not.” Similarity of advertising media and
communication: again there were similarities and differences, but plaintiff
presented no evidence that the parties’ advertising reached the same
individuals, thus favoring defendant.
 
Intent: Defendant preexisted plaintiff in the US, and thus
didn’t have a bad intent.  Its parent
even added “Ecumenical Order” to its unregistered word mark “to avoid any
accusation that it was purposefully attempting to trade on Plaintiff’s name.”
 
Actual confusion: Here was the killer.  When plaintiff first attempted to register
its marks, the examiner found defendant’s parent.  At that point, plaintiff argued that defendant’s
mark, “Sovereign Order of Saint John of Jerusalem” wasn’t confusingly similar
to “Sovereign Order of Malta.” The plaintiff also distinguished itself as a “charitable
organization” as opposed to defendant’s parent’s “membership organization.” The
plaintiff’s previous position on lack of confusion “lends support to a finding
of absence of actual confusion.” Likewise, the oath about exclusive use
executed by plaintiff’s counsel as part of its registration, while not
constituting fraud on the PTO, showed that there was no confusion.  That oath said that, to the best of counsel’s
knowledge, no one else had the right to use a confusingly similar mark. “Either
Plaintiff was aware that Defendant’s parent existed but did not believe that
the marks were confusingly similar, or Plaintiff was unaware that Defendant’s
parent existed. Either scenario leads to a finding of absence of actual
confusion.”
 
Plaintiff’s evidence of lack of confusion was
insufficient.  Plaintiffs submitted a
letter from King Michael of Romania (!) in which the King wrote that he has
“always considered the Sovereign Military order of Malta as the only
institution which is subject to international law in this field, and the only
repository of the noble and ancient traditions begun in the 11th Century.” “King
Michael is not located in the United States, nor is he a consumer,” and the
letter didn’t indicate confusion anyway.  Defendant also solicited a donation from an
individual who then contacted the Order of Malta’s American Association, but
she was the cousin of Plaintiff’s American Association licensee’s president. There
was no testimony that she was a donor or that she was confused about which
entity was which. Her email showed that she immediately recognized the
difference between “this group and your Order of Malta….” She even recalled
seeing their separate and distinct presence in her worldwide travels.
 
The court concluded that confusion was unlikely: the most
important factors, the type of mark and the absence of actual confusion (given
100 years in which to find some!), weighed in defendant’s favor.
 
Furthermore, the prior use defense overrode the
incontestability of plaintiff’s incontestable marks. Under 15 U.S.C. §
1115(b)(5) and (6), “the record is clear that Defendant’s Order, or its
predecessors in privity with it, have used the name ‘Knights of Malta’ and a
Maltese cross in commerce since 1908 and thereafter incorporated in New Jersey
in 1911.”  Plaintiff argued that there
was no privity because there was no evidence that the earlier entities used the
marks in connection with charitable or fundraising services, as opposed to
corporate or club membership names. But the parties stipulated from the outset
that both organizations are charities, and there was no evidence supporting
plaintiff’s claim.  Given the nearly 100
years of activity before plaintiff’s registration, defendant could continue to
use its marks in parts of the US where it had been active.  (The court is less than clear about whether
this means defendant’s potential expansion is blocked, but I’d say given the
lack of confusion defendant wins even in areas where it previously didn’t
exist.)

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No need to name competitor if context does

Posted on May 14, 2015 by rtushnet
Champion Laboratories, Inc. v. Central Illinois
Manufacturing Co., 2015 WL 2208198,  No.
14 CV 9754 (N.D. Ill. May 8, 2015)
 
The parties are the leading manufacturers and suppliers of
fuel dispensing filters in the United States. “Fuel dispensing filters are
incorporated in fuel dispensing equipment, such as gas pumps, and they are
designed to remove particulate contaminants from petroleum and other fuels
before being dispensed into a vehicle.” Champion (which makes PetroClear)
alleged false advertising by Central Illinois (Cim-Tek and Bio-Tek).  The key difference between the parties’
filters is composition: Champion’s are made from cellulose, while Central
Illinois primarily makes filters from microglass.
 

With respect to the first challenged claim, “Return to Full
Flow,” Central Illinois ran an ad touting three comparative advantages of
Cim–Tek ethanol filters against “competitor’s filters.” It stated: “Cim–Tek
ethanol filters reduce the flow of fuel if phase separation [contamination] is
detected and will not return to full flow as with competitor’s filters.”  Central Illinois argued that there were no
representations about Champion’s filters in the ad, but instead the ad referred
to “other filters that do not return to full flow.”  But an ad need not name a competitor to be
false. Champion avoided dismissal because it pled that the parties were the
leading suppliers; that they sold more than half the filters in the US; and
that they sold to the same customers. 
Though the market may be less concentrated than a two-party market, “many
customers deciding on which filter to purchase are choosing between the two
options: Cim–Tek or PetroClear.”  Thus,
when Central Illinois used the word “competitor” and touted the benefits of
microglass elsewhere in the ad, customers might infer a reference to
PetroClear, especially since the ad used the singular and not the plural to
refer to “competitor,” thus suggesting a comparison with the leading product
and not with one of the 25 other competitors with smaller market shares.
 

Similarly, other claims were potentially false because they
touted test results that Champion plausibly alleged weren’t industry accepted
and didn’t correctly validate the performance or strength of a filter.  Also, Central Illinois issued a white paper
claiming that customers “Save 20% to 50% by using Bio–Tek Dispenser Filters.”
The white paper included a table that compared the total costs of buying and
replacing two filters with model numbers: (1) “Cellulose (Paper) 70015
(400–10)” and (2) “Bio–Tek 400BMG–10 (Microglass), 70104,” favoring the
latter.  Both model numbers referred to
filters made by Central Illinois.  Champion
could proceed on a misleadingness theory. 
“The table states only the model number and not the brand name of the
cellulose filter, and a reasonable customer may not understand Defendant to be
comparing two of its own products,” especially given that Champion pled that
the defining difference between the parties’ products was their
composition.  Further, the white paper
had a blown up notation on the side stating that “competitors” use cellulose
filters.  The court analyzed similar
comparisons to “cellulose filters” in other ads similarly, despite Central
Illinois’ argument that it was comparing its microglass filters to its own
cellulose filters.

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