Thursday, February 09, 2012

Manufacturer and reseller compete, but Lanham Act claim still fails

InCompass IT, Inc. v. Dell, Inc., 2012 WL 383960 (D. Minn.)
There are some misappropriation/trade secret claims here, but I’m just covering the false advertising bit.  InCompass tried to negotiate a deal with Dell to be a sales partner, selling Dell products, but the deal went bad.  The court held that InCompass failed to state a Lanham Act claim.  The complaint alleged that Dell made false statements about its partner program to prospective resellers like InCompass, that InCompass shared confidential client information with Dell in reliance on those statements, and that Dell’s direct sales team then stole that information.  That’s not a Lanham Act claim, though it might well give rise to other tort liability if proven.  InCompass didn’t allege a competitive injury—an injury in competing for consumers caused by false statements to those consumers.  The Lanham Act was not designed to protect consumers (which was InCompass’s role in receiving the allegedly false statements here), but rather to protect sellers. 
The parties did compete in the sale of computers; the court specifically rejected Dell’s argument to the contrary.  Though Dell sells Dell products directly to consumers and InCompass is a reseller, they are in competition to sell Dell computers to the same customers; many manufacturers sell directly to consumers online and also use resellers, and they’re obviously in competition for the end users.  But the allegedly false ads weren’t promoting computers; rather, they promoted the partner program, and InCompass doesn’t compete with Dell to offer such programs.
Separately, InCompass didn’t identify any factual statements in the ads that were specific and measurable and capable of being falsified.  The statements were vague, such as “We'll support your sales opportunities so that you can protect your business” and “We're there when and where you need us.”
The Minnesota Deceptive Trade Practices Act claim also failed, because it provides for injunctive relief to those “likely to be damaged.” This means plaintiffs must allege future irreparable harm.  The complaint provided no reason to believe that InCompass would be harmed by the deceptive trade practices in the future, since InCompass knows better now and won’t be fooled again.

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