Wednesday, January 19, 2011

Method of proving Lanham Act violation spurs counterclaim

VIP Products, LLC v. Kong Company LLC, 2011 WL 98992 (D. Ariz.)

VIP alleged infringement of its Tuffy trademark for pet products: Kong allegedly made false statements implying that Kong licensed the trademark from VIP. In particular, VIP alleged that Kong went to two big trade shows attended by retailers, distributors, and mass-market buyers, and its representatives used the terms “Tuffy,” “Tuffy product,” and “Tuffys” in false statements. Kong argued that VIP failed to plead that Kong had used the term in anything other than a descriptive sense, but the court found that VIP had sufficiently alleged confusing use of the term in connection with Kong’s own products.

VIP also claimed false advertising: Kong allegedly (1) falsely told industry participants that VIP “removed one layer of material from its TUFFY® toys because it had lost the patent,” (2) falsely labeled its new “ballistic toy” as “tiger tested” even though the toy has never been tested with tigers as has Tuffy’s dog toy, and (3) falsely stated that it licensed the mark from VIP.

Kong first argued that these statements weren’t “commercial advertising” sufficiently disseminated to the relevant purchasing public. Given the complaint’s allegations about the trade show, the complaint’s allegations were sufficient. “There is no dispute that the speech or packaging at issue is commercial in nature, nor that Plaintiff and Defendant are competitors. The issues that remain, including the breadth of dissemination and Defendant's purpose, are fact-intensive inquiries not suitable for resolution in a motion to dismiss.” In addition, VIP alleged falsity with respect to “services” without specifying what the services were, but the court let it slide, given the other facts alleged; Kong could determine the precise services at issue in discovery.

Kong also argued failure to plead with particularity under Rule 9(b). VIP argued that fraud wasn’t required for it to win, but in the 9th Circuit express allegations of fraud must be pled with particularity under Rule 9(b) regardless of whether fraud is an essential element of a claim. The complaint expressly alleged fraudulent misrepresentation. However, VIP pled with sufficient particularity for Kong to defend itself (though the court didn’t mention a specific “when” or “where” for the “tiger tested” statements).

Now here comes the part that caught my eye and reminded me why I love the Lanham Act; commercial litigation has infinite surprises up its sleeve.

Kong counterclaimed, among other things, for violations of the Maryland Wiretapping and Electronic Surveillance Act ("MWESA"), based on VIP’s alleged hiring of an investigator to record statements by Kong’s representative at one of the trade shows, which was in Maryland. Maryland permits recording where all parties consent; no case law suggests that unilateral consent is permissible. VIP argued that only Kong’s representative had standing to file a claim, but the court disagreed because of the agency relationship alleged. Thus, Kong could be treated as the “person” whose communication was intercepted. Motion to dismiss denied.

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